Former prime minister Paul Keating, who crafted the superannuation system, has called for a longevity levy to support Australians aged 80 to 100 years old.
Mr Keating has proposed a Commonwealth insurance scheme that would guarantee people income support, aged care and accommodation when they reach the octogenarian stage of life.
Australians are living much longer and the superannuation pool “can never be big enough to sustain you till your 90s,” he said.
“We can’t try and pretend that like a piece of Indian rubber, we can stretch the accumulation from 65 to 95,” he told ABC TV.
What happens? One person dies earlier, but their work and savings subsidises other people who last into their late 90s.
At the moment superannuation lump sums will have expired by the time people reach 80, forcing them to survive on the pension.
He said under the scheme he envisaged the savings of people who died early would subsidise those who lasted into their 90s.
“It’s a classic insurance thing. It’s like the houses in the street, you pay your insurance, but only one house burns down,” he said.
“What happens? One person dies earlier, but their work and savings subsidises other people who last into their late 90s.
“So it’s a classic model for an insurance scheme, but it’s got to be done in the 80-to-100 cohort while we continue to build the (super) accumulations between 60 and 80.”
The former Labor leader said the issue required different thinking to anything that had been done by the former Labor government or the Coalition.
He said the first step would be to ensure the rate of superannuation rises from 9 per cent to 12 per cent.
“Kevin Rudd and Wayne Swan did kick super from 9 to 12 per cent,” he said, adding: “And I’m hoping that Joe Hockey and Tony Abbott will after their two-year interregnum move on to 12.”
Mr Keating also had some unflattering things to say about the department which he headed when treasurer under Bob Hawke.
He said Treasury never liked the idea of compulsory superannuation.
“The Treasury’s a great department of state, but it has not a scintilla of imagination,” Mr Keating said.
“If you asked them to have established our existing scheme, they opposed it all along the way.
“Yet they believe people will just fork out for the pension and live on a lower, less valuable age pension as they go to their 80s and their 90s with geriatric care, geriatric assistance, hospitalisation and all the rest.
“It’s not going to happen. We’re going to have to provide for it now.”