Your Age Pension fact check

Was mandatory superannuation really introduced to replace the Age Pension, as Assistant Treasurer Kelly O’Dwyer has claimed? The ABC decided to investigate.

The statement was made by Ms O’Dwyer on the ABC Insiders TV program when she said that ” (the) whole objective behind the superannuation system” is for people to be able to live on their superannuation savings without recourse to the age pension …When it was set up all those years ago in 1993, it was set up to be an alternative to the age pension so that people didn’t have to rely upon the age(d) pension or even the part pension.”

The full ABC Fact Check is well worth the read, but the salient points are:

  • Superannuation as we know it (i.e. compulsory occupational superannuation) came into law in 1992, not 1993.
  • It was intended to be a supplement to the Age Pension, not to replace it, according to Bob Hawke who said the pension would ‘always be there for those who need it’.
  • Paul Keating, whose government passed the legislation further stated, “Such a scheme would maintain the age and service pensions as the foundation of equity and adequacy in retirement income arrangements”.
  • But the governments of the day did not sell the policy as a way to get people off the pension and instead said that most people would still get at least a part pension.

The final ABC Fact Check verdict on the claim that super was set up to replace the Age Pension?


Opinion: Stop the Age Pension spin

It’s about time we dismantled the spin around super and pensions. So thank God for the ABC putting a few facts on the table.

Our ‘ageing crisis’ and the need for Australians to work harder and save more for retirement is a constant theme in Canberra. If not one minister, then another will take a swipe at the ‘burden’ of our ageing population and the need to rescue future generations from the obligation to finance old buggers who seem to be living on forever.

One popular theme of this spin is that the Age Pension is unaffordable and that virtuous citizens will try harder to save more in super thus alleviating the need for younger people to fund them.

This is a misleading argument and a highly dangerous political ploy which pits generations against each other for no good reason. The fact, according to successive Intergenerational Reports (IGRs), is that the Age Pension, when expressed as a percentage of GDP, is not increasing very much at all. A faster growing cost, due to overtake the Age Pension, is the revenue foregone through tax concessions on superannuation which largely favour the top 20 per cent of households. So the actual cost of the Age Pension is not nearly as threatening as we have been led to believe.

Superannuation, as noted by the extensive investigation carried out by ABC Fact Check, was introduced as a third pillar of retirement – a supplement to the Age Pension (note, not a replacement) and private savings. As the superannuation system is still relatively immature, most baby boomers who are currently transitioning to retirement have had insufficient time to build a nest egg which will fund their next 30 or so years, without the support of a full or part pension.

This is entirely in line with the expectations of the government which introduced mandatory super (again fully documented by the ABC).

So to suggest that superannuation should replace the pension is simply rubbish. But I doubt it’s merely loose scholarship that made Ms O’Dwyer suggest this is the case. It’s far closer to an ongoing political revisionism that suggests we should all pick up the entire risk for our old age and fully fund our own retirements, regardless of our educational, occupational and general socio-economic status. It is simply not good enough to applaud the self-funded when many have had such a massive free kick from tax concessions unavailable to those who earn less. The current system is far from perfect – ask the self-employed, those who can’t get back into the job market, and women with a fragmented work history. We have an Age Pension for good reason – when it was introduced in 1908 it was described as a ‘reward for service’. So it is, and so it should remain.

What do you think? Do you agree with Kelly O’Dwyer that super should replace the need for an Age Pension? Or do you believe that the pension should remain as a pillar of retirement income?

Written by Kaye Fallick