Paul Keating, the architect of Australia’s $4.4 trillion superannuation system, is pushing to merge parts of Centrelink with the private retirement savings sector. The radical proposal would mark the biggest shake-up of the age pension in decades.
The former prime minister thinks the super industry should have more direct involvement in the systems surrounding the age pension, to consolidate the system and reduce confusion among older Aussies. The change could also increase uptake of the pension and allow people to access benefits they may have ignored.
“You’ve got to fill in 45 pages to get a pension – 45 pages – and then you have to work out what to do with it all,” Keating said, according to the Australian Financial Review.
“Whereas, what we could do is have the super funds build it all.”
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Keating noted the aged pension liability for the government was just 2 per cent of gross domestic product and was expected to fall further.
That’s compared to the OECD average of 9 per cent of GDP, and countries like Italy where it is as high as 11 per cent.
This means super and the age pension are at a “crossover point”, and there’s more responsibility on super funds than the government to move customers through the retirement phase.
“This is a big opportunity that the prime minister and I talked about yesterday,” Keating said.
“The technology is there, and we could essentially have one retirement system that is used centrally in super.”
Keating said merging super with Centrelink could reduce confusion among older Aussies. · Source: Getty
Australia is on the verge of a “silver tsunami”, with more than 2.5 million Aussies expected to reach retirement over the next decade.
ASIC estimates two in five super fund trustees will have more than half of their members in retirement by 2045.
By 2033, UBS predicts that the super sector will see more money withdrawn via pension payments and lump sums than contributed to funds. This will shift the focus from saving to spending super.
Co-operation between Centrelink and super welcomed
Cbus chairman and former Treasurer Wayne Swan has backed closer ties between super funds and Centrelink, but declined to comment on whether he would support the two being merged.
“We can always achieve greater co-operation between funds and Centrelink on behalf of members who are part pensioner and part-superannuant,” Swan told The Australian.
“The step that we would welcome is as close a co-operation as we possibly can have.”
The Association of Superannuation Funds of Australia (ASFA) said a framework to connect the age pension, super and private savings would make the system easier to navigate.
“We support better communication between superannuation and the age pension system to help simplify retirement and help retirees make well-informed decisions about their spending,” ASFA CEO Mary Delahunty told The Australian.
“Distributing the age pension may not be the missing link to simplification. The focus right now should be on long-promised reforms to expand access to financial advice through super.”
Opposition assistant treasury spokesperson Kevin Hogan said he was cautious of any proposal that could “blur the line” between people’s private super savings and the taxpayer-funded age pension.
Super funds under microscope
Super funds are currently under pressure to develop retirement products and deliver better guidance to older Aussies approaching or in retirement.
In 2022, the government introduced new rules to force trustees to design and implement retirement income strategies for their members.
But in November, a report by ASIC and APRA found the gap was widening between trustees actively promoting better retirement outcomes for their members and those that were not. It said “far too many” were making only “incremental improvements”.
“Unless action is taken, particularly by those falling behind, the quality of support provided to members approaching or in retirement, and the outcomes delivered to members in retirement will be impacted,” the report said.
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