Ex-union boss backs super choice

Former ACTU secretary Bill Kelty has backed member choice for superannuation funds putting his views at odds with most industry funds which have publicly campaigned for years against choice.

Speaking in Melbourne last night the former peak union group head says superannuation fund members want choice as their fund balances have grown.

“When people only had a few hundred dollars in their funds, they didn’t want a lot of choice. But now their funds have grown, people want choice,” Kelty says.

He argues that if people are presented with choice, they will exercise the option.

“If people invest in superannuation, they will want to have the capacity to make more choices. What we will have to do is give people guidance and support to make those choices,” he says.

Kelty says industry funds will eventually become big agents in promoting choice. “If people offer members good products, then we cannot stand in the way,” he says.

Kelty is predicting the industry funds will grow. The two of which he is a trustee, Australian Retirement Fund and Superannuation Trust of Australia, will have $20 billion of assets in 10 years time.

The funds will need to be this size as more people retire at 55 years of age.

“In 2030, I find it impossible to believe people will be in work for 40 years,” he says.

“The majority of people by then will have been in a multiple number of jobs and the labour market will be tougher, so there will be pressure on people to pay for an independent retirement system.”

Kelty admits the system will have to be made fairer that so people are not forgotten and spend their retirement in poverty.

To pay for a stronger superannuation system, Kelty believes 15 per cent statutory contributions are essential, but accepts this may take some time to achieve.

He points out the time it has taken to increase contributions from 3 per cent, when the present superannuation system was started, to 9 per cent today.

“I think a figure between 12 to 15 per cent will be achieved in the next decade as part of a policy to fund the retirement plans of the next generation,” he says.

While workers will probably accept increased contributions, Kelty warns governments must stop fiddling with the taxation of superannuation.

“We must underpin superannuation by not having the tax laws changed continually so people can be confident in what they will get at 65,” he says.

“Superannuation is the savings of the nation and I think superannuation will be the measure of this country’s economic maturity. If we get the (superannuation) model correct, we will have the finest retirement system in the world.”