The savings under Australia’s superannuation system will not be able to sustain retirees as more people live well into their 80s and 90s, Paul Keating has said.

The former prime minister, who crafted the system, has said a national insurance scheme would help fund people who outlive their savings.

“We have no policy here in Australia for the 80 to 100 cohort,” Keating said at a super fund forum organised by Visy Industries and Fairfax Media in Sydney on Tuesday.

“I don’t believe that it should be left to superannuation. I think it should be a national insurance scheme. Only the commonwealth can insure across generations.”

The total saved in the superannuation system has grown to $2.6tn worth of assets since the scheme was started in the 1990s.

It is equivalent to 144% of Australia’s nominal gross domestic product but it is feared it will not be enough to cover the living expenses of Australia’s ageing population, leaving them reliant on the aged pension once their super runs out. Keating warned this would likely be the case even if compulsory contributions were increased from the current 9.5% of earnings to 12%, as is planned by 2021.

“When the superannuation system was designed 32 years ago, people retired at about 65 or 66 and died at 81,” Keating said.

“We are now living nine years longer. Accumulation at 9.5% of average weekly earnings can’t be stretched out to cover that longevity. We have no policy here in Australia for the 80 to 100 category.”

He suggested a commonwealth insurance scheme could be designed so that fund members who died early would pay for those who lived longer, covering the extended cost of health and housing provision for the elderly.

“This is where I think in a real national family, the government puts their arm around them, the community puts their arm around them, and carries them through the rest of their life.”

Ian Yates, chief executive of the Council on the Ageing, said it was good to have the debate on provision for elderly people. But adding extra costs to the federal budget to be paid by existing taxpayers who are paying mortgages and raising children may not be a good option.

“Raising the contribution to 12% mainly benefits high-income earners,” he said. “The alternative is to improve the outcome of super funds. For example, increasing the rate of return on funds by 0.5% would bring a significant benefit to lower and middle-income earners.”