Transcript - ABC 891 - Two Chrisses - 1 Feb 2010

SUBJECTS: Superannuation; retirement age

(greetings omitted)

Spence DENNY: There seems to be this encouragement where we might phase into retirement sometime between the ages of 60 and 75. I don't know if someone necessarily working towards retirement is going to be the most productive person in the workplace, anyway...

Christopher SCHACHT: Well, as Tony said...unlike him, I'm one of the Baby Boomers, I was born one year after the Second World War and you can't ignore the fact there is a bulge in the population that are now 63, 64 this year and I think that it's inevitable, whether we like it or not, that there's going to be more flexibility. People should not, cannot be forced to go on working but we do have to have a retirement plan and those who do want to work and can be productive and many who want to will be...that they don't get penalised for continuing on...with their work in a balance between what they're eligible in pension or superannuation. But I think it's inevitable with the increasing age and lifespan of people...one should remember in Bismark way back 100 years ago in Germany who set 65 as the retiring age because at that time most people in the working class never got to 65 so there was no need to pay a pension. Now most of us, thank goodness, go well past 65.

DENNY: And then draw a pension for thirty years!

SCHACHT: Well that's the reason why there's going to have to be flexibility and there's going to have to be, again, a look at do we increase the compulsory Superannuation levy so that when people do retire, at around 65 after paying into their Super Fund for 40-odd years, they have a decent retirement allowence, drawing a pension out of their Super fund rather than calling on the Government to pay the old-age pension.

DENNY: Christopher Pyne?

Christopher PYNE: Well I agree with Chris Schacht...

DENNY: ...that's not supposed to happen, I was told there would be conflict here!

PYNE: No, there's no conflict...yet. It'll come. There will need to be a lot of people who will work beyond the usual retirement age and that's a fact of a number of issues and that people so much more healthy than they were 30 or 50 years ago. People are living a lot longer but also that they are living a lot healthier. A lot of people don't want to retire. When the previous Government was in power, we did a number of things, for example we abolished the compulsory retirement age for company directors, which was a small change but helped a number of people. We also, of course, introduced a bonus for people who were going to draw a pension at some point. The longer that they put off drawing that pension, the greater their pension could be the longer they worked in the work force and that was a very popular move. And we did a lot of reforms to superannuation to make that attractive and every Government, whether it's Labor or Liberal, is going to have to have very substantial policies that will encourage people to put money aside for their retirement but also to work longer if they wish to do so. And, of course, a lot of people are extremely healthy well into their 70s and are quite happy to keep working. Quite frankly, I don't want to lose those people from the workforce in many instances because they bring real skills and most importantly wisdom that age gives people.

DENNY: Hello, Michael. Michael's from Glandore.

Caller MICHAEL: Look, it's very interesting commentary, two politicians talking about our nation's capacity to sustain retirement going forward. Just wondering how this applies to politicians and the sort of retirement benefits they recieve?

DENNY: Chris Schacht?

SCHACHT: Well...you go first, Pyney...

PYNE: Thanks...well I don't see any reason why politicians should prematurely retire any more than the rest of the workforce. I'm only 42, Michael, so I'm not about to contemplate retirement. Of course, John Howard served as Prime Minister well into his late 60s because he was making a useful contribution. In terms of our retirement benefits, well I'm never one to talk about the emoluments of MPs. I didn't go into politics for the remuneration, I went into politics because I think it's a tremendous way to serve the public and to work for others. Of course, C1 is in retirement as a politician. I wouldn't say he had hung up his boots and wasn't doing anything constructive but I'll let him speak for himself.

SCHACHT: Well, I'm a retired politician. Compulsory retirement as I had been re-elected in the Senate in the election of 2002 and therefore I was eligible after 15 years as a Member of Parliament as Minister...by any definition for ordinary Australians, a very well-paid pension which I have for life and it's indexed. Many people will say that is better than what most people get other than if you're a retired Banker or Chief Executive of a major company or something. I continue to do other things and therefore any other income I get, my income is taxed as it should be. I think the debate about Parliamentary benefits and pensions...the argument is, as Chris Pyne would know, that at the end of this year, he's gonna be up for re-election and his career could come to a...very sudden end...I hope, as a Labor person...

PYNE: Shhh! I'm shuddering!

SCHACHT: ...as I did in 2002. But I think there is an argument , which I have never stepped away from, that when, through no fault of your own in many cases the political pendulum swings, there should be adjustment and there should be consideration in the pension. For Parliamentarians, now, I have to say, back a few years ago, John Howard and Mark Latham reached agreements to change benefits for Members of Parliament, or Parliamentary Pension, which in some ways now is less than what I would be getting. That was part of the public debate. I just want to say that it's not unreasonable that there should be consideration for Members of Parliament who have had their career suddenly ended, or have served for a period of time. Most Members of Parliament don't serve longer than about 15 years or 20 years...

DENNY: So is 15 years the cutoff date? Is that the date when you qualify?

SCHACHT: If you lose your seat through losing an election after 9 years, you're eligible for the minimum pension. If you retire voluntarily you've got to do twelve to fifteen years and of course the longer you have served the more paid in.

PYNE: The average length of service is only about 7½ to 8 years. The impression of a great number of politicians out there on the bench is actually quite misplaced. The vast majority of people who serve in the Parliament never receive the pension. If the average is 7 ½ and you've got to be there 9 years to get it, it means there's a lot of people who aren't getting to 7 ½ years...

SCHACHT: ...can I just go back? I think the really important issue for all Australians, you've heard it on the radio today, long-term, do we need to have a higher level of compulsory superannuation going from 9% going up? And I think, whether I like it or not, there will be a payment mixed between employers, the Federal Government and the worker. I think that 9% is now too low and I think that we're gonna have to face up to the fact that it's gonna go up to 12-15% over the next decade.

PYNE: Well that actually opens up a whole new debate over who that impost will be on. I'm not sure if small business or business in particular would be able to wear that impost in their business. The cost of living increases, rises in prices and all that are causing mortgagees and small business owners great concern.

DENNY: I'm not all that sure how long the compulsory superannuation has been part of the salary package...it wasn't that long ago that you worked, you retired, you got a pension. So it seems to have come in by stealth that the Super contribution became part of the salary package...

SCHACHT: That is true, that is absolutely true and that is income forgone, where you are getting per week or per month as a wage earner or a salary earner but what the aim was that after you retire after 40 years, the pension was close to what your average wage was at the time of retirement. Therefore people would live comfortably with choice in their retirement etcetera rather than dragging on the national budget for an old age pension and I think that this is an unavoidable debate. Chris is right, how much more you have to pay? Let's say you go up another 5-6%...another 1-2%...a third and a third and a third over time is sustainable and whether or not we like it, it's gonna have to be sustainable.

DENNY: Hello, Maria.

Caller MARIA: In the business that I work for, which I won't mention, if you earn an hourly wage, therefore you're not full-time, are paid by an hourly wage, that Super contribution of 9% is paid by the employer. If you're unfortunate enough to be in management it's taken out of your salary, which is your take-home pay. There's inequity in that and I'm wondering how that loophole can happen? When you break down my salary it's not much more than a part-time person, I'm being penalised by taking that 9% out of my take-home pay where other workers are not.

SCHACHT: Well as I take it, the 9% is not all paid for by the employee...

PYNE: ...it's a co-contribution scheme...

SCHACHT: ...I'm not sure on the detail between a permanent employee and a part-time employee...someone on a core contract or an hourly rate...as I always understood it, no matter what rate you were paid, hourly contract or permanent, there was a contribution from you going in as part of that 9%...

DENNY: ...and that raises the issue of the impact on people who work part-time or a casual contract. They have multiple jobs over their life, which makes accumulating a decent super a very difficult task...

SCHACHT: ...there has been along discussion. We've got to make sure that when people change jobs, the money they paid is completely transferable and is not lost. There are figures around that there is a lot of superannuation money, bits and pieces people haven't got hold of...

DENNY: ...just out there...

SCHACHT: ...just out there and we do have to tidy that up so people's contributions are never lost.

DENNY: James is on the phone, hello James.

Caller JAMES: I'm a 55 year old, I've retired from my previous profession, but I don't want to stop work. I don't want to think like that. We don't want the pressure we were under, we don't want to work 5 days a week and we want a bit more flexibility with leave. But having said that we own our own homes, our kids are financially independent, the money would largely be going into hobby-type things, in my case restoring old cars or travelling...other people might be State Bowling or caravanning...

DENNY: ...55 is a bit young to retire, isn't it?

Caller James: Well I think 75 is possibly young to retire if you're living an urban lifestyle. Those of us who have worked hard wonder what it's all about but we don't want to stop. I think the Government may need to step in and restructure work cultures so that people like us can be catered for. I'm working at the moment but there's quite a bit less flexibility and it's quite a bit of fun and I look forward to a long weekend and perhaps going interstate and enjoying it.

PYNE: Sounds like you're having a great time, James...sounds like The Life of Riely...

SCHACHT: Well can I just say, the one thing James should acknowledge. Even though he's having a good time going off on holidays, travelling, or doing things in his hobby, he's still adding to the economy. He's still spending money and even if, you say, you're on holiday...you're still spending which helps in the tourist industry, helps in the hospitality industry that helps employ people. So when people retire on a good pension, they spend a good whack of it, which goes back into the economy...

PYNE: ...which James is working part-time as well so we're not losing his skills from the workforce...

SCHACHT: ...I think the points that you raised, well I don't think there'll be much of an argument between the two major parties. What flexibility is needed between the two parties like James does in a part-time way but actually fits into the Australian lifestyle.

DENNY: Hello, Trisha.

Caller TRISHA: I'm Generation X, who are being encouraged to work until I'm 75 and I'll probably be well enough to do that. That's fine but it's just interesting that the entire culture would say that my father worked 5 days a week, worked 9-5, he got to come home and see his family. My husband can't as he works odd hours because that's the kind of job he can get and there's this situation where a group of Baby Boomers want to work part-time and a group of Generation X which also want flexibility with work and I guess, to me, that is a positive thing and surely if we can get the two groups to flexibly work together then business gets the hours that it needs. As a Generation X person, I might actually get to see my children sometimes, which is just fabulous so everything works although I will be the type of person who works til 75 but I don't at this point see it as a problem

DENNY: So you're really thinking closely about the whole work-life balance issue, aren't you?

Caller TRISHA: Well I don't have a choice. I have children and I've got extended family and I'm watching my friends and their children who are entering into the workforce and I guess that's the only issue...and finding full-time work and I guess the flexibility is thrust upon us. There are no full-time jobs. You don't take people on full-time anymore, you patch 2 or 3 jobs together so...

DENNY: Is that a certain profession though, Trisha?

Caller TRISHA: Well, people and friends in the computing industries and I guess maybe factory working and unskilled work is set maybe but if you've for anything you patch your hours together working for a bunch of different employers. You just need to be switched on to where your Super's gone and everything that's going on to get full-time work.

SCHACHT: She makes a very good point, Patricia, I don't' think you'll be working full-time at 75...if you led a productive life through your 20s, 30s and 40s, I imagine you'll have a choice about how much you work from your late 50s onwards and I think that's something we all support and no matter what the system is, the pressure to ensure that family balance...lifestyle with family is not adversely affected and I think there are a number of positives with part-time work...with your family.

PYNE: This is the sort of issue you'll find in many families of 30s-45 year olds who are really facing important pressures at home. Cost of living is going up, inflation is above the band the Reserve Bank regards as reasonable under the terms of core inflation...interest rates are going up, they may well go up again tomorrow. We'll find out at 2.30 tomorrow afternoon but they have gone up in the last 3 meetings of the Reserve Bank Board. This is putting pressure on families and I'm in the exact position of Trisha where I'm balancing my family, mortgage, four children, three of them going to school and you have to make a lot of choices and one of those choices you unfortunately make is that you have time to spend with your family if you want to. We need to ease the squeeze on families into the future and we don't need to put more taxes on them which will cause them to have even less take-home pay in Superannuation. If we increase the contribution of super from someone they're taking even less home to be able to use to raise their family so you've really got to think about the whole gamut of pressures on families...rising electricity prices, rising school fees. Even in public schools the fees have gone up by 6% in the last year so Patricia is in the same position a number of families of Sturt are in. That's why we have to think about those kinds of people before we put new taxes on families.

DENNY: And that's why I think that your generation and my generation...possibly his generation too...will be working longer because we'll be helping our children buy a house! Kim at West Beach has been waiting patiently on the line.

Caller KIM: When they say politicians get a generous superannuation because their career's been cut short, what about women because our careers are often interrupted with child rearing and I'm one of the old nurses around and I'm 53, fortunately I've got myself a day job. As we get older we can't do the shift work and the night shifts like we used to and there's a bottleneck for nurses trying to get into more reasonable hours-type jobs.

DENNY: I think this is a big issue, the number of nurses and trying to get young people into the nursing profession and nurses are working well into their 50s and 60s and it's a physically demanding job.

SCHACHT: All I can say is I have absolute sympathy for anyone who's a nurse and the hours they put in...it's an absolutely essential service and if we didn't have nurses society would be pulled apart and in terrible strife. I think that this issue of women who leave to have a family, they have their career interrupted and when they go back 3-4 years later, find themselves a bit behind the 8-ball in terms of promotion...it's something that's been around for quite a while and over the last 30-40 years as more women in the workforce and how women can go back after having their children for 2 or 3 years without penalty to their career is an issue that is being debated and will be more debated because we cannot afford to lose that skill and wipe them out because they choose to go off and have a family.

(ends)