Defend and extend age pension system

April 30, 2015
A rally for pensioner rights in Melbourne in 2010.

Australia's age pension system is under attack from the federal government and right-wing, neoliberal forces. The whole community, current and future retirees, needs to mobilise to defend and extend the age pension system and change the superannuation system to more adequately meet the needs of working people.

The age pension in Australia dates back to 1909. It was established as a non-contributory scheme, largely as a result of the demands of unions and community pressure.

The latest assault on the rights of age pensioners, most of whom are retired workers and their spouses, is the proposal by the right-wing think tank the Centre for Independent Studies (CIS) to include the family home in the pension assets test. CIS suggests asset-testing the home, and "encouraging" retirees to borrow against it in order to receive the pension. CIS says this could cut the national pension cost to the federal treasury by $14.5 billion.

CIS believes such changes would force 70% of full pensioners onto the part pension and between 24% (singles) and 32% (couples) off the part pension altogether.

This plan has been roundly condemned by pensioner organisations and other social welfare groups. Amelia Christie, Combined Pensioners and Superannuants Association (CPSA) Manager, Research and Advocacy, said in a statement on April 27: "The suggestion by the Centre for Independent Studies that the family home should be included in the pension asset test and be reverse mortgaged for an income stream would cost pensioners dearly."

"Forcing pensioners to take out reverse mortgages in order to put food on the table is both heartless and poor policy."

"Inbuilt into the pension system is the assumption that people own their own homes. The rate of pension is not enough to be able to live easily in the private rental market, an increasing reality for many pensioners.

“The report is correct in stating that non-homeowners are worse off that those who have been able to purchase a home. The solution to this, however, is not to penalise homeowners but rather to tackle housing affordability and increase Rent Assistance."

Moreover, the CIS scheme would badly affect age pensioners when they become older and more frail. If retirees borrow up to 80% of their home's value, they will have little left to buy into an aged-care facility when they can no longer live in their own home. With an aging population, more people will require assisted living in an aged-care facility, but the centre's proposal would make it almost impossible for most retirees to access this care.

The CIS plan will also mean that parents whose only asset is their home will have little to leave to their children, thus ensuring that the rich get richer and the poor stay poor.

The CIS proposal is another threat to the pension system, and backs up the government's plan to slash pensions over time by indexing payments to the Consumer Price Index (CPI), rather than the generally higher Average Weekly Earnings (AWE).

In a statement released on April 2 by the CPSA, Christie said: "Tightening the higher end of the pension asset test, while retaining the exclusion of the family home, is a much more sensible move than targeting all pensioners, including those whose only source of income is the pension.

"The federal government [2014] budget proposal to reduce pensions by $80 per week within 10 years through indexing pensions to the CPI is a poorly thought-out policy that will hit full rate pensioners with no additional income or assets hardest and push them into poverty.

"A more sound policy move would be to reign in the inequitable tax concessions that the wealthy receive through the superannuation system. Australians do not need to be subsidising the most well off to the tune of $5.2 billion per year."

Cutting back on the huge tax concessions available to high-income earners through superannuation, negative gearing of investment properties and other rorts needs to be part of a new, progressive tax regime, which taxes the rich, not the poor. Big companies and the rich should pay the bulk of all tax in an equitable, socially just system

Prime Minister Tony Abbott and Treasurer Joe Hockey have justified all their attacks on public health, education, and social welfare launched in the 2014 horror budget on the grounds of a largely-manufactured "debt crisis". After the massive community opposition to the budget last year, many of these harsh measures have so far been blocked, and the government has been forced to retreat — in words at least — in the lead-up to the May 2015 budget.

However, the government's basic strategy of making working people and the poor pay for the growing crisis of Australian capitalism, while rewarding big corporations and the wealthy, remains in place. Reducing the rate of indexation of pensions is one policy that has not yet been dropped, and must be totally rejected by the community.

The current superannuation system emerged from the Bob Hawke-Paul Keating government's prices and incomes accord of the 1980s and 1990s. It is essentially based on foregone wages, compulsorily retained for retirement. It has many flaws, including high management fees and dubious investment practices.

In the longer term, Socialist Alliance policy is that: "An adequate national retirement pension should replace workplace and voluntary superannuation. All would enjoy this entitlement, commensurate with their individual needs and social responsibilities."

"Socialist Alliance says welfare payments for those in need are a right. We call for a guaranteed independent income for all at a living wage, and a welfare system capable of providing to each according to their level of need."

[Jim McIlroy is an age pensioner and member of the Socialist Alliance.]

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