Paul Keating’s plan comes to fruition after 34 years

The man who came up with the 12 per cent superannuation guarantee that will flow to millions of workers from July 1, Paul Keating, has likened the private pension system to a binding force between all Australians.

But the former treasurer and prime minister has given a subtle hint to Jim Chalmers that his planned changes to the tax arrangements on super accounts with more than $3 million will affect far more people than the government is claiming.

The super guarantee levy has increased half a percentage point every year since 2022, reaching 12 per cent with the 2025-26 financial year.

Keating was instrumental in the first step towards universal superannuation, when in 1985 the ACTU sought to have 3 per cent of industrial workers’ wages go into retirement savings funds run jointly by union and employer groups.

Six years later, when he had moved to the backbench after his first failed leadership challenge against then-prime minister Bob Hawke, Keating first outlined what would become the country’s retirement savings system.

He said retirement needed to be based on both the age pension and privately funded superannuation, nominating 12 per cent as the contribution from workers towards their retirement income.

At the time, he hoped the 12 per cent would be in place by 2000, noting that at such a level it would provide a retirement income that would be “the difference between a full, active life and a life governed by budgetary exigencies and the vagaries of politics”.

Keating on Monday said the superannuation system had now matured with the 12 per cent guarantee, delivering Australia the fourth-largest retirement accumulation in the world at $4.1 trillion, which is 150 per cent of GDP.

The Reserve Bank has estimated super will reach $8 trillion by 2035, when Australia will have the second-largest retirement base in the world, behind only the United States.