The age pension in Australia

I have been reading comments online lately with individuals trying to influence people by stating the age pension in Australia is not welfare but an earned right. Instead, these people argue the pension was administered using the tax paid by your employment and invested in public infrastructure paying dividends for your retirement pension - wrong.

These people argue the system has been poorly managed and now there is no money left for pensioners; this is unfortunately a total fabrication and possibly repeated by people pushing nationalistic agendas. The aged pension is a safety net for those who are not able to support their own retirements and is means tested - that is income and asset tested.

The pension system also has to be read in conjunction with the introduction of universal superannuation in Australia in the early 1990s known as the Superannuation Guarantee Levy. The superannuation scheme was supported in lieu of pay rises and paid by your employer on your behalf into a designated superannuation account. As such, we funded our future retirements by offsetting current pay rises for future retirement savings. 

This formed part of the Prices and Incomes Accord of the Hawke government where pay demands were moderated for improvements in the social wage. The elements of the social wage included improved public health provisions, increased unemployment and pension benefits, tax cuts and eventually superannuation. Naturally, the social wage included tax payers supporting those who were not in paid employment. 

So the age pension was introduced in Australia in 1901, although a number of schemes were in use by several of the former British colonies. As Australians, we know 1901 as the year of federation where the six British colonies joined together to become the Commonwealth of Australia - a nation was created. So, the age pension was pretty much around when the nation was formed although it took nearly a decade for payments to begin. 

The pension system, once adapted had residency clauses attached that were reduced from 25 years to 20 years in the early stages. The current rules require Australian residency for 10 years with a period of at least 5 years with no break in residency. Originally, the pension was paid to men from age 65 onwards and women from age 60; currently both men and women must be at least 65 with the age requirement climbing to 67 for people born after 1957.

The pension was financed from general revenue right from the beginning and still is to this day and not investment returns from infrastructure as has been claimed. There was, and still is no taxation paid requirement, a portion of your tax is not placed in a separate retirement account as occurs in other nations. As such, a person living in Australia who has never worked a day of paid employment in their life or paid tax still draws a pension upon meeting age requirements. 

Likewise, a person who has paid taxes their whole working life who has built up assets above asset test limits does not qualify for the age pension receiving nothing instead funding their own retirement. There is partial public funding for retirees with a part-pension paid based on assets and income to supplement self-funded retirees.

However, current government policy to limit superannuation payments during your working life and benefit total limits have been imposed to the detriment of those willing to support their own retirements in a short-term thinking.