The super industry could prepare for the ageing population by pushing government to consider a two-tiered approach to the system in order to relieve future strain on the budget, a senior public servant said today.
At the SMSF Association’s Thought Leadership breakfast in Melbourne, South Australian Department of State Development chief executive and an architect of compulsory superannuation Dr Don Russell said the industry had to take an active stance on Australia’s ageing population.
“We, as an industry, have been focusing on the accumulation phase and I think the industry itself needs to become active in the case about ageing,” Russell said.
“The reality is the balances in superannuation are not big enough and cannot cover longevity risks.
“I think if we change the view about super for covering the first 20 years, there’s scope to do that in a way that actually provides significant savings to the budget.”
Russell put forward the idea of a super system where private provisions would help Australians to get to their 60s through to their 80s, after which the government would pick up the cost of continuing support.
“Should we be looking at it as a super system that provides extra support and extra remuneration for a fixed time?” he said.
“If we embrace this as a continuing contribution that superannuation is here to make, which is 20 years for people who leave active employment, then you provide scope for the government to run a two-tiered pension.
“You [could] have a lower pension conceivably from ages 65 to 85, and then the government provides a higher pension.”
Further, he highlighted the need for the industry to speak as a whole in order to garner support and achieve change.
“The industry has been unable to speak with one voice,” he said, adding it had used political process to try and strengthen parts of its competitive position, which had discredited the industry in the eyes of many people.
“I suspect that at the moment we’ve got to the point where I’m not sure that many people are listening anymore and that’s a real danger to the industry itself.”
