The Federal Labor Government's reforms to superannuation will help make Australia a better country to live - and retire in - writes Assistant Secretary Bill Shorten.
TWENTY YEARS AGO the Keating Labor government introduced one of the great economic reforms: 9 per cent superannuation for every worker.
It is an idea that keeps on giving. By putting some money into superannuation we build up our capacity to have lifetime income security; comfort and financial wellbeing after working life, not just during it.
The more of our own money we have in retirement, the less we will have to rely on the age pension.
We are living longer than ever before. There are three million Australians over 65 today, but by 2050 there'll be 8.1 million of us.
Today there are 50 of us in work for every 10 of us in retirement. By 2050, there will only be 27.
It's estimated the average Australian needs about 70 per cent of their accustomed income to live comfortably once they retire. But most of us will outlive our savings.
What does that mean?
If Parliament does not increase the 9 per cent superannuation rate up to 12 per cent, many of us will run slap-bang out of money and we're not going to like it. There also won't be enough taxpayers in the system to sustainably pay for all those aged pension payments.
We need to get our heads around these facts. And do something about it.
The Gillard government is increasing the compulsory rate to 12 per cent and that's an excellent idea. But we also want to make super more efficient.
We want to reduce the level of fees and charges you pay, because every dollar you pay in fees is a dollar you can't spend in retirement. Our Stronger Super reforms mean a 30-year-old worker on full-time average wages can expect up to $40,000 extra when they retire at 65.
The problem is most superannuation funds charge you fees as if you take a regular, active interest in how your money is invested.
So rather than allow super funds to charge for a Rolls Royce service when all you really want is a Commodore, we are introducing a new, low-cost and simple default superannuation product called "MySuper".
MySuper means that if you accept the super fund your employer nominates, then you will automatically be put in a fund that won't rip you off.
We are also improving how your super fund is managed. The average cost of each super fund transaction is around $35. That's way too much. So we are going to fix the problem by helping funds manage your money better.
Another problem is the average person has three accounts each and some of them are just small amounts of money sitting there getting eaten away by fees. So we are going to automatically roll over all your accounts into your current account - unless you tell your super fund you don't want to.
Superannuation, like Medicare, the minimum wage, the age pension and a national disability insurance scheme, makes Australia a better country to live in.
Delivering these latest reforms helps set Australia up for the future.
Originally published in the Daily Telegraph.