The stolen pensions myth

The stolen pensions myth

The idea that the Age Pension is an entitlement earned through a lifetime of contribution to the community is common in Australia. One source of contribution is tax. According to a 2018 survey, around a third of voters see the Age Pension as a repayment of tax rather than a safety net for people who have not saved enough for their own retirement.[12] Politicians and commentators have often endorsed this view. For example, in 1982 former Social Services Minister William Wentworth argued that retirees should be entitled to a non-means tested pension because their taxes had been invested in productive infrastructure such as schools, roads, ports and telephone networks.[13] These kinds of claims are opinions about what retirees are morally entitled to. This paper does not attempt to take sides in that debate.

The stolen pensions myth goes beyond claims of moral entitlement. Rather than just asserting that today’s retirees have earned a pension through their past contributions to the community, the myth attempts to strengthen this claim with a misleading account of legal and administrative history.

Most versions of the myth claim the Chifley Labor Government set up the National Welfare Fund to accumulate funds that would later be used to pay Age Pensions. The money for the fund would come from the Social Services Contribution and enable the Government to abolish the means test as well as increase the pension rate. The myth goes on to claim that governments have ‘stolen’ the contributions that were meant to accumulate in the National Welfare Fund. As a letter published in the Burdekin Advocate put it:

Let’s get the facts straight. Pensioners are already being robbed of their actual pension entitlements by a succession of governments that have plundered the age pension funds that were collected as part of the National Welfare Fund begun by the Ben Chifley Government. Robert Menzies as Opposition Leader at the time insisted the funds raised by a levy of 7.5 per cent be held in a separate trust fund.[14]

In another telling of the myth the anonymous writer argues that the ‘theft’ of retirement savings from the National Welfare Fund is part of a larger plan by government that ends with the privatisation of the income support system and the suspension of the Age Pension:

Considerable public relations investment prepares Aussies for this event; generally in the form of proselytising the myth that the younger generation is being stuck with the burden of financing pensions for the ageing baby boomers. The reality could not be more different. This is the story of a different kind of privatisation… outright theft on a multi-billion dollar scale; the appropriation of an entire age pension scheme. We don’t even know where the money went.

The history of the Age Pension Fund is not-well-known and it goes back to 1945, when Prime Minister Ben Chifley became aware of grinding poverty amongst the elderly. He was shocked, and a referendum was put to the people of Australia; and the outcome was a welfare fund contributed to by every Aussie worker, at a rate of 7.5% of gross income (at the time, in Australia and New Zealand, one and sixpence in the pound). This was a fund that was very specifically owned by the workers and declared as such; a fund in which government could not interfere; and from which it could not even borrow. Money could only be paid out as an indexed and non-means tested pension upon retirement at age 65 (60 for women).

To ensure the public was reminded of its investment, and so no government could interfere with the Fund, the amount appeared at the top of every income tax form and was calculated before income tax. Actuaries have calculated that this fund should currently be yielding at $6000 per year more than the current age pension.[15]

The writer goes on to claim that subsequent governments took the money invested in the fund and ‘imposed means testing; on worker’s own savings’.[16]

Part of the point of these stories is to differentiate the Age Pension from ‘welfare’ payments like JobSeeker and to refute what Hale calls ‘the disingenuous line that younger workers are paying tax to support pensioners’.[17]

Most versions of the myth include a chronology that begins with the creation of the National Welfare Fund by the Curtin Labor Government in the 1940s and ends with the Hawke Labor Government’s abolition of the fund in 1985.[18] Some, like Hale’s, include references to the relevant Acts of Parliament. While some of the material in these chronologies is accurate, it is woven into a larger narrative that is misleading.