By Olivia Long

First, the good news. We are living longer, healthier lives. That is the only conclusion to draw from the evidence contained in the 2015 Intergenerational Report (IGR), handed down by Federal Treasurer Joe Hockey.

For example, by 2054-55 there will seven million Australians aged between 65 to 84, compared with around 3.1 million in 2015, and that 5% of the population will be aged over 85.

On the life expectancy front, from birth it is projected to increase from 91.5 years in 2015 to 95.1 years in 2055 for males, and from 93.6 years in 2015 to 96.6 years for females.  Further life expectancy at age 70 is projected to increase from 16.9 years in 2015 to 21.3 years in 2055 for males, and from 19.3 years in 2015 to 23.1 years for females.

It’s a rosy picture. Until, of course, you pose the next obvious question – how are we going to fund all these people living in retirement? Then the news is not so good. In fact, it’s downright scary.

Why? Because at the very time the overwhelming evidence suggests we need to be doing more to ensure people are self-sufficient in retirement, we have never seemed to be so ambivalent about our compulsory superannuation system.

When the system was legislated for in 1992, it was considered one of the most significant social and economic policies introduced in this country. For the first time, every employee was going to be entitled to superannuation. No longer was superannuation to be the preserve of the public sector and private sector management.

The carrot to get people to forgo income now, to fund their future retirement, was to be tax concessions.

Back then it seemed everyone was onboard, especially when the Coalition signed up to the system in the run-up to the 1996 election.

But today, when the evidence of the need for compulsory superannuation has never been more compelling, we seemed to be plagued by self-doubt about its social and economic merit.

Let’s be clear about one thing: compulsory superannuation was established with the sole purpose to provide income streams for people to fund their retirement; there was no mention of first homebuyer schemes or further education.

What is skewering the debate is that despite the fact we have now had compulsory superannuation for more than 20 years, most people are still reliant on the age pension. In other words, the argument that superannuation savings would replace the need for the pension, based on what’s happened to date, is flawed.

But that’s not an argument against compulsory superannuation; all that demonstrates is that we haven’t implemented the right policies to encourage a lesser dependence on the age pension. Indeed, I would argue this simply highlights the need for people to retire on higher balances (lifting the concessional caps for people later in their working lives is an obvious example) so they do have the opportunity to be more self- sufficient inretirement.

It can be done. Interestingly, the SMSF sector is showing what can be achieved in this area with more than 90% of retirees in the draw-down phase taking their savings via an income.

There are other measures that can be considered. The IGR’s call for increased participation by older workers has obvious merit. If this happens and more people opt to work past the retiring age, we need to ensure that the superannuation system allows these workers the opportunity to keep saving through superannuation.

The industry, too, has been slow to develop appropriate financial products to encourage people to take an income option as opposed to a lump sum.

None of these problems is insurmountable. But to address them in any meaningful way we first need to re-establish, across the political divide, a bipartisan commitment to the primary purpose of superannuation – to fund people’s retirement.