5 years ago
ADDRESS TO THE ASFA NSW STATE FORUM
CHRIS BOWEN MP
I acknowledge the traditional owners of the land on which we meet, the Gadigal people of the Eora nation, and acknowledge elders past, present and emerging.
We thank them for the stewardship of our land over 40,000 years.
ASFA as an apolitical body continues to be an organisation that lives up to its values – that is to advocate not on behalf of any particular interest but on behalf of fund members.
Of course, superannuation has received its fair share of attention in the first few months of this year. This is no bad thing.
Any system more than 25 years old is in need of review to ensure it is fit for purpose, that challenges no one could have reasonably foreseen are been dealt with and necessary improvements are being made.
But it’s important at the same time not to lose sight of the strengths of our system. It remains a remarkable achievement.
A system that is already taking pressure off the aged pension and will do so even more as it matures, providing capital to growing businesses around Australia and importantly giving people a dignified retirement.
Our superannuation system is one of the key reasons why we have one of the most sustainable age pension systems in the world, with expenditure on the age pension costing the Commonwealth Budget just 3% GDP, and despite an ageing population this is expected to grow to around just 3½% GDP by 2055.
Australia now has the third largest private pensions industry in the world (in terms of assets) after the USA and the United Kingdom.
And according to a Willis Towers Watson report, as at end 2017 Australia is home to 17 of the world's largest 300 pension funds.
By 2020, it’s likely our superannuation savings pool will be over $3 trillion and by 2025, over $4 trillion.
This is a solid base for us to build on.
Today I want to talk about Labor’s approach to some of the key issues to superannuation.
First, adequacy.
Some history is important here.
Compulsory retirement savings started in Australia in the 1980s culminating in the introduction of more universal compulsory contributions in the form of the Superannuation Guarantee in 1992.
Legislation to support the introduction of the SG passed the Parliament in 1992, with the rate to progressively increase to reach 9 per cent by July 2002[1].
The Liberals opposed it vigorously.
In 1995 Treasurer Ralph Willis outlined the Keating Government’s proposal to further increase superannuation contributions to 15 per cent by 2002 (a 12 percent base and matching 3 percent co-contribution).
It was interestingly enough, at a conference like this, an ASFA Conference that the then Shadow Treasurer Costello very clearly articulated his party’s commitment to supporting the proposed increases on the same schedule.
So in 1995, we were on our way to achieving what most people saw as needed, a 12 percent superannuation contribution that was bipartisan which when fully mature would see people finish their careers with enough money to last through their retirement.
But of course it didn’t quite work out like that.
In one of its first acts the Howard Government reneged on its commitment to achieve the 12 percent superannuation contribution by 2002.
The superannuation guarantee remained at 9 percent right up until the Rudd Government re-focused the scheme to achieve the initial desired goal of getting to 12 percent.
I was superannuation minister when Labor restored the superannuation guarantee schedule to reach 12 percent by 2020 as well as introducing better transparency and choice for members through My Super and Superstream.
Again in 2013 there was a change of government.
And again, more delays. Not just one, but two.
With the rate currently stuck at 9.5 per cent, it’s now not due to get to 12 percent until 2025, a full 23 years behind schedule. And every day of it, the fault of the Liberal party of Australia.
At the time of the last delay CEO of ASFA at the time Pauline Vamos said "The reality is, at the present SG rate of 9.5 per cent, most people will not build up enough super to provide them with adequate financial security when they finish working”.
This delay has come at a great cost to the nation.
And at a great cost to people retiring today.
New analysis undertaken by Industry Super shows that a full time earner who was 40 in 1993 and who is aged 65 today is retiring with almost $96,000 (or 40%) less in superannuation savings because of the Coalition’s failure to increase super contributions in line with proposals outlined by the Keating Government in its last term.
Nearly a $100,000 less in savings for people entering retirement today had the proposed superannuation timetable been delivered.
With people aged 65 years or older now the fastest growing cohort in our community, this delay is now having real impacts on the retirement living standards of hundreds of thousands of retirees.
This is why we will now brook no further delays.
I fear that despite whatever they say now, the Liberals will find an excuse for further delay as they always do.
Now I’d like to turn to a two areas in particular that have received hardly any attention in the political debate, areas that will be Labor’s top priorities when it comes to superannuation: making super work for women and dealing with superannuation theft.
It is completely unacceptable for there to be such a big retirement income gap between Australia’s men and women in 2019.
The gender pay gap compounds through a woman’s working life and is worsened by maternity leave and other career breaks for family purposes.
Women retire (on average) with median superannuation balances that are just $36,000 compared to $110,000 for men. Two in five retired single women live poverty.
And we call superannuation universal. But it isn’t. Our lowest paid workers (who also are typically women) don’t get any superannuation.
You have to earn more than $450 a month in a particular job to receive any superannuation at all.
Some of our most vulnerable workers are working multiple casual or part time jobs earning less than the threshold and eventually retiring with nothing in superannuation.
It’s why Labor has been on the front foot on these matters.
We’ll ensure women get paid the superannuation guarantee on Paid Parental Leave and Dad and Partner Pay payments and we’ll also gradually abolish the $450 a month threshold.
This isn’t a panacea, but it’s a step in the right direction.
These measures alone will see a mother that has two kids in her late 20s with an extra $24,000 in today’s dollars when she retires.
In my electorate office, I see too many people who come to me for help when they realise their employer has not been paying their superannuation. Often it’s too late to help them.
Nearly $3 billion each year is lost from superannuation accounts from employers who decide the law doesn’t apply to them. This is nothing short of theft.
It also puts those businesses doing the right thing and meeting their obligations at a competitive disadvantage.
This is why Labor will change the law to include a right to superannuation within the National Employment Standards, which will give all employees the power to pursue their unpaid superannuation through the Fair Work Commission or Federal Court.
Finally, I want to turn to a very important issue in the superannuation system, namely fund underperformance.
The Productivity Commission report “Superannuation: Assessing Efficiency and Competitiveness” and more recently the Royal Commission both identified some real problems with chronically underperforming funds.
Shifting the dial even by a few basis points can have huge ramifications for people when they retire due to compounding over a working life, which makes getting people into better performing funds paramount.
The PC highlighted the real implications for fund members, pointing out that a typical full time worker in an underperforming fund in the bottom quartile over their lifetime would end up with 54% or a massive $660,000 less in retirement compared to if they had experienced top quartile fund returns.
Right now there is a bill in the Parliament which would require super funds to report on their performance compared to similar products.
Labor amended this bill in the Senate to make the outcomes test tougher, make director penalties higher and make APRA’s powers stronger.
Millions of Australians are being ripped off by underperforming accounts and we want to force these funds to report on their performance and lift their game.
The Government – preferring politics over policy – opposed our amendments, and has failed to bring the bill back to the House of Representatives for a vote.
Unfortunately, the Liberal Government has spent too much of its energy on its ideological war on Industry super funds.
Such faction fights within superannuation garner very little attention from me.
Whilst Industry Super funds generally outperform the average (as confirmed by the Productivity Commission), I am focused on member outcomes.
If a fund is consistently underperforming it will receive no sympathy and will be dealt with by a Shorten Labor Government, regardless of which part of the superannuation system it comes from.
Conclusion
So thanks for inviting me to be here today.
I hope I’ve been able to make it clear that when it comes to superannuation, there’s only one party that has its best interests in mind.
The Government has repeatedly delayed getting the superannuation guarantee to 12%, Labor is committed to doing so on the current schedule.
I hope I’ve been able to reinforce the Labor party’s commitment to improving member outcomes, dealing with broader issues around fund performance and to more specific problems like lifting women’s super.
Superannuation is one of Labor’s greatest achievements. Refurbishing it to make it fit for the future will be an important part of the governing agenda of Bill Shorten and Labor.
We believe in super, and want to make it better.
History is with us and not with the other side of politics when it comes to growing and enhancing our superannuation savings pool.
I’ve enjoyed my engagement with ASFA on these matters, and my door will be open to continue that interaction, should I return as Federal Treasurer in what is likely to be around 51 days’ time.
Thank you.
ENDS
We thank them for the stewardship of our land over 40,000 years.
ASFA as an apolitical body continues to be an organisation that lives up to its values – that is to advocate not on behalf of any particular interest but on behalf of fund members.
Of course, superannuation has received its fair share of attention in the first few months of this year. This is no bad thing.
Any system more than 25 years old is in need of review to ensure it is fit for purpose, that challenges no one could have reasonably foreseen are been dealt with and necessary improvements are being made.
But it’s important at the same time not to lose sight of the strengths of our system. It remains a remarkable achievement.
A system that is already taking pressure off the aged pension and will do so even more as it matures, providing capital to growing businesses around Australia and importantly giving people a dignified retirement.
Our superannuation system is one of the key reasons why we have one of the most sustainable age pension systems in the world, with expenditure on the age pension costing the Commonwealth Budget just 3% GDP, and despite an ageing population this is expected to grow to around just 3½% GDP by 2055.
Australia now has the third largest private pensions industry in the world (in terms of assets) after the USA and the United Kingdom.
And according to a Willis Towers Watson report, as at end 2017 Australia is home to 17 of the world's largest 300 pension funds.
By 2020, it’s likely our superannuation savings pool will be over $3 trillion and by 2025, over $4 trillion.
This is a solid base for us to build on.
Today I want to talk about Labor’s approach to some of the key issues to superannuation.
First, adequacy.
Some history is important here.
Compulsory retirement savings started in Australia in the 1980s culminating in the introduction of more universal compulsory contributions in the form of the Superannuation Guarantee in 1992.
Legislation to support the introduction of the SG passed the Parliament in 1992, with the rate to progressively increase to reach 9 per cent by July 2002[1].
The Liberals opposed it vigorously.
In 1995 Treasurer Ralph Willis outlined the Keating Government’s proposal to further increase superannuation contributions to 15 per cent by 2002 (a 12 percent base and matching 3 percent co-contribution).
It was interestingly enough, at a conference like this, an ASFA Conference that the then Shadow Treasurer Costello very clearly articulated his party’s commitment to supporting the proposed increases on the same schedule.
So in 1995, we were on our way to achieving what most people saw as needed, a 12 percent superannuation contribution that was bipartisan which when fully mature would see people finish their careers with enough money to last through their retirement.
But of course it didn’t quite work out like that.
In one of its first acts the Howard Government reneged on its commitment to achieve the 12 percent superannuation contribution by 2002.
The superannuation guarantee remained at 9 percent right up until the Rudd Government re-focused the scheme to achieve the initial desired goal of getting to 12 percent.
I was superannuation minister when Labor restored the superannuation guarantee schedule to reach 12 percent by 2020 as well as introducing better transparency and choice for members through My Super and Superstream.
Again in 2013 there was a change of government.
And again, more delays. Not just one, but two.
With the rate currently stuck at 9.5 per cent, it’s now not due to get to 12 percent until 2025, a full 23 years behind schedule. And every day of it, the fault of the Liberal party of Australia.
At the time of the last delay CEO of ASFA at the time Pauline Vamos said "The reality is, at the present SG rate of 9.5 per cent, most people will not build up enough super to provide them with adequate financial security when they finish working”.
This delay has come at a great cost to the nation.
And at a great cost to people retiring today.
New analysis undertaken by Industry Super shows that a full time earner who was 40 in 1993 and who is aged 65 today is retiring with almost $96,000 (or 40%) less in superannuation savings because of the Coalition’s failure to increase super contributions in line with proposals outlined by the Keating Government in its last term.
Nearly a $100,000 less in savings for people entering retirement today had the proposed superannuation timetable been delivered.
With people aged 65 years or older now the fastest growing cohort in our community, this delay is now having real impacts on the retirement living standards of hundreds of thousands of retirees.
This is why we will now brook no further delays.
I fear that despite whatever they say now, the Liberals will find an excuse for further delay as they always do.
Now I’d like to turn to a two areas in particular that have received hardly any attention in the political debate, areas that will be Labor’s top priorities when it comes to superannuation: making super work for women and dealing with superannuation theft.
It is completely unacceptable for there to be such a big retirement income gap between Australia’s men and women in 2019.
The gender pay gap compounds through a woman’s working life and is worsened by maternity leave and other career breaks for family purposes.
Women retire (on average) with median superannuation balances that are just $36,000 compared to $110,000 for men. Two in five retired single women live poverty.
And we call superannuation universal. But it isn’t. Our lowest paid workers (who also are typically women) don’t get any superannuation.
You have to earn more than $450 a month in a particular job to receive any superannuation at all.
Some of our most vulnerable workers are working multiple casual or part time jobs earning less than the threshold and eventually retiring with nothing in superannuation.
It’s why Labor has been on the front foot on these matters.
We’ll ensure women get paid the superannuation guarantee on Paid Parental Leave and Dad and Partner Pay payments and we’ll also gradually abolish the $450 a month threshold.
This isn’t a panacea, but it’s a step in the right direction.
These measures alone will see a mother that has two kids in her late 20s with an extra $24,000 in today’s dollars when she retires.
In my electorate office, I see too many people who come to me for help when they realise their employer has not been paying their superannuation. Often it’s too late to help them.
Nearly $3 billion each year is lost from superannuation accounts from employers who decide the law doesn’t apply to them. This is nothing short of theft.
It also puts those businesses doing the right thing and meeting their obligations at a competitive disadvantage.
This is why Labor will change the law to include a right to superannuation within the National Employment Standards, which will give all employees the power to pursue their unpaid superannuation through the Fair Work Commission or Federal Court.
Finally, I want to turn to a very important issue in the superannuation system, namely fund underperformance.
The Productivity Commission report “Superannuation: Assessing Efficiency and Competitiveness” and more recently the Royal Commission both identified some real problems with chronically underperforming funds.
Shifting the dial even by a few basis points can have huge ramifications for people when they retire due to compounding over a working life, which makes getting people into better performing funds paramount.
The PC highlighted the real implications for fund members, pointing out that a typical full time worker in an underperforming fund in the bottom quartile over their lifetime would end up with 54% or a massive $660,000 less in retirement compared to if they had experienced top quartile fund returns.
Right now there is a bill in the Parliament which would require super funds to report on their performance compared to similar products.
Labor amended this bill in the Senate to make the outcomes test tougher, make director penalties higher and make APRA’s powers stronger.
Millions of Australians are being ripped off by underperforming accounts and we want to force these funds to report on their performance and lift their game.
The Government – preferring politics over policy – opposed our amendments, and has failed to bring the bill back to the House of Representatives for a vote.
Unfortunately, the Liberal Government has spent too much of its energy on its ideological war on Industry super funds.
Such faction fights within superannuation garner very little attention from me.
Whilst Industry Super funds generally outperform the average (as confirmed by the Productivity Commission), I am focused on member outcomes.
If a fund is consistently underperforming it will receive no sympathy and will be dealt with by a Shorten Labor Government, regardless of which part of the superannuation system it comes from.
Conclusion
So thanks for inviting me to be here today.
I hope I’ve been able to make it clear that when it comes to superannuation, there’s only one party that has its best interests in mind.
The Government has repeatedly delayed getting the superannuation guarantee to 12%, Labor is committed to doing so on the current schedule.
I hope I’ve been able to reinforce the Labor party’s commitment to improving member outcomes, dealing with broader issues around fund performance and to more specific problems like lifting women’s super.
Superannuation is one of Labor’s greatest achievements. Refurbishing it to make it fit for the future will be an important part of the governing agenda of Bill Shorten and Labor.
We believe in super, and want to make it better.
History is with us and not with the other side of politics when it comes to growing and enhancing our superannuation savings pool.
I’ve enjoyed my engagement with ASFA on these matters, and my door will be open to continue that interaction, should I return as Federal Treasurer in what is likely to be around 51 days’ time.
Thank you.
ENDS