Myra Hamilton retire incomes policy sem...

JUST DESERTS?

RETIREMENT INCOMES POLICY AND THE

TRANSFORMATION OF SOCIAL RIGHTS IN AUSTRALIATRANSFORMATION OF SOCIAL RIGHTS IN AUSTRALIA

Myra Hamilton

Brotherhood of St Laurence Seminar Series

INTRODUCTION

� In this presentation I will:

� Challenge the concept of ‘privatisation’ of pensions as it applies to

Australia

� Look to the history of Australia’s retirement incomes system to

provide us with an explanation

� Focus on the tension in the system in the twentieth century

between objectives of meeting need and rewarding deservingness

� Reveal the policy legacies of this tension

THE PROBLEM: THE PRIVATISATION OF PENSIONS

� Focus on self-provision

� Greater emphasis on occupational and private pensions

� Tax concessions on occupational and private pensions

� Shift from defined benefit to defined contribution� Shift from defined benefit to defined contribution

� Extension of the working life

� Reduction in the value and legitimacy of state pensions

THE PROBLEM: CONTEMPORARY REFORM OF

PENSIONS IN AUSTRALIA

� Focus on self-provision

� Mandated occupational superannuation

� Tax concessions on occupational and voluntary savings

� Shift from defined benefit to defined contribution� Shift from defined benefit to defined contribution

� Extension of the working life

� More recently, the valorisation of the self-sufficient citizen

“Australians fundamentally desire self reliance – it is the hallmark of a society

built upon the aspirations of generations of pioneers, migrants, self sufficient

indigenous Australians and all their descendents. At a time when Australia’s descendents. At a time when Australia’s

population is ageing, this virtue – building personal self reliance in retirement – will vitally contribute to Australia’s ongoing

national prosperity”

(Howard Coalition Government, 2001, A Better Superannuation System)

THE PROBLEM: IS IT “PRIVATISATION”?

� Occupational superannuation is mandated by the state

� Savings are heavily subsidised by the state

� Increases to age pension means test limits and decreases to taper rates

� Increasing proportion of people with entitlement to age pension

� Government is encouraging higher income earners to apply for the

state pensionstate pension

� Eligibility for part pension currently cuts out at:

� Homeowners:

� Individuals: $686 000 in excess of the family home

� Couples: $821 000 in excess of the family home

� Non homeowners

� Individuals: $1 018 000

� Couples: $1 153 000

THE PROBLEM: TWO DIFFERENT STORIES

� Public policy discourse:

� Promoting self-reliance

� Reducing state expenditure

� Evidence:� Evidence:

� ‘Self-reliance’ is heavily government assisted

� Tax concessions and increased means test limits are increasing

state expenditure

� State age pension has been strengthened

THE ANSWER

� Lies in the legacy of Australia’s retirement incomes policy history

� Particularly, the tension in its design between three principles:

� Meeting need

� Rewarding deservingness

� Limiting cost

THE HISTORY: POVERTY IN OLD AGE AND THE

EMERGENCE OF THE DESERVING CITIZEN

� Calls for an age pension emerged from recognition of need

� Unmet need not enough to provide foundation of a social right

� Deservingness became crucial in rationale for age pension

� Deservingness-as-character� Deservingness-as-character

� Deservingness-as-thrift

� Deservingness-as-contribution

� Deservingness and need became dual narratives underpinning age

pension

“[a]n old-age pension is a right which every man and woman at the age of 60 can claim at the hands of

the state they have served … We do not want anything in the nature of outdoor relief, or in the form of a dole. We are not dealing with the poor

people in the asylums at Liverpool or Parramatta. We are dealing with men and women outside who walk with the elastic tread of free people, and have walk with the elastic tread of free people, and have

a right to come to the State they have so well served and claim this pension just the same as a

soldier or a sailor would”

(E W O’Sullivan, 1897, NSW Legislative Assembly)

THE HISTORY: A QUALIFIED SOCIAL RIGHT: THE

TENSION BETWEEN DESERVINGNESS AND NEED

� The tension resulted in access to the age pension being qualified by

deservingness and need

� Deservingness-as-character enshrined in moral provisions, excluding those who:

� Deserted their spouse

� Inmates of asylums or charitable institutions

� Deliberately deprived themselves of property

� Were not of ‘good character’

� Convicted of alcohol consumption or other offences carrying prison

sentences

� Deservingness-as-contribution only legislatively enshrined in exclusionary

clauses:

� Those resident in Australia less than 25 years

� “Aliens” and “Asiatics” born outside Australia

� Some groups of Aboriginal Australians



“…[t]he honourable

member would not

say that because

kittens are born in a kittens are born in a

stable they become

horses”

Sir Littleton E Groom, 1901, Commonwealth Parliament



� Deservingness-as-thrift proved more difficult

� Most effective method to make payment free of means test

� But cost constraints precluded this

� A means test was attached to the age pension

� BUT the means test meant that the most thrifty were excluded from � BUT the means test meant that the most thrifty were excluded from

eligibility.

� This created a situation in which:

� The deservingness clauses often excluded the most ‘needy’; and

� The means tests often excluded those perceived to be most

deserving

THE HISTORY: TOWARDS A UNIVERSAL SOCIAL RIGHT

THE EARLY YEARS

� Need

� Incremental increases to means test limits

� Exemption of family home from assets test� Exemption of family home from assets test

� Deservingness

� Residency requirements relaxed

� “Aliens” now eligible upon naturalisation


THE POST WWII YEARS

� Need

� Increases to income and assets test limits

� Introduction of taper rates

� Pledge to phase out means test� Pledge to phase out means test

� Deservingness

� Good character clause applied less rigidly

� Provisions about drunkenness/imprisonment omitted


THE 1970S AND 1980S

� Need

� Removal of the means test for those 70+

� Further liberalisation of income and assets tests

� Deservingness� Deservingness

� References to good character removed from the Act

� Desertion provision removed

� Residency requirements relaxed

SUPERANNUATION, SELF PROVISION AND THE “NEW”

DESERVING CITIZEN

� Introduction in 1992 of compulsory superannuation

� Provided a free-of means test method of funding retirement

� Method of rewarding thrift outside of the state pension system

� Tax concessions (which reward thrift without increasing means test limits on age pension)

� Other measures such as the Commonwealth Seniors Health Card… � Other measures such as the Commonwealth Seniors Health Card…

“in recognition of self-funded retirees’ efforts to save during their working lives”

(Howard Coalition Government Department of Treasury, 2004)

� Deservingness-as-thrift increasingly associated with individual savings

� But this is not “privatisation” because the super is mandated and heavily subsidised by the state

SUPERANNUATION, SELF PROVISION AND THE “NEW”

DESERVING CITIZEN

� BUT emphasis on superannuation accompanied by the expansion of age pension coverage

� Howard Government made significant increases to the income and assets free areas in order to

make:

“the age pension more accessible to self-funded retirees and improve incentives for

self-provision in retirement”


� And halved the taper rate for the assets test in order to provide a:

“better government pension deal for people with savings”


WHAT DOES THE HISTORY TELL US?

� Deservingness in Australia has become increasingly focussed on thrift

� The result has been greater emphasis on private saving, supported

through tax concessions

� This has not undermined the public age pension, rather the age

pension has been used to buttress private savings

� The shift is more subtle, complex and contradictory than ‘privatisation’

� These complexities emerged from the legacy of the now long-lasting

tension between rewarding deservingness and meeting need within the

constraints of cost

RETIREMENT INCOMES AND THE FUTURE: LEGACIES

AND OPPORTUNITIES

THE AGE PENSION

� Fulfils the objectives of rewarding thrift and meeting need

� Reducing the means test limit could save money that could be

redirected to improving pension adequacy for those in the most need

� This course of action is being inhibited by what has become the ‘first

order’ goal of rewarding thrift


AND OPPORTUNITIES

SUPERANNUATION

� We could experiment with the role of superannuation in Australia’s

retirement income infrastructure

� It currently rewards thrift but does not meet need� It currently rewards thrift but does not meet need

� Government has considerable potential in regulating occupational

pensions to improve access of those in need

� We should begin to explore options like compensating for certain

periods of workforce absence


AND OPPORTUNITIES

SUPERANNUATION

� What might a superannuation system that meets need look like?

� How could we compensate for periods of workforce absence?

� What kinds of periods would be compensated?

� Parents on maternity leave?� Parents on maternity leave?

� Parents or carers with dependent children under 6?

� People caring for 20 hours a week or more?

� People involved in Work For the Dole programs?

� At what rate would people be compensated?

� A percentage of the pension or benefit?

� A percentage of the minimum wage?

CONCLUSIONS

� We need to stop thinking about superannuation as “private”

� What is ostensibly ‘self-sufficiency’ is in fact heavily government-

assisted

Once we acknowledge this reality:� Once we acknowledge this reality:

� Inequalities in the structure of the system become clearer

� We can start to rethink the future of superannuation in Australia

Contact details

Myra Hamilton

Social Policy Research Centre

[email protected]

(02) 9835 5504

Myra Hamilton retire incomes policy sem...

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