The case for a universal age pension

If you suspect that neoliberal capitalist governments, including the Australian government, act as kleptocracies for the richest 1% and the large corporations, you have good reason to. Whether you look at their tax system, the various privatisation or part-privatisation schemes they are forcing on the public, the “user-pays” drives or the publicly subsidised private insurance scams, you can see how the public is being forced to subsidise the profits of powerful corporations and the super-rich. The gap between the rich and poor keeps widening while public services are being cut back more and more every year. It is the same story with the age pension. With the misguided support of the Greens, Tony Abbott's coalition government has begun to cut back on entitlements to the age pension. The latest $2.4 billion age pension cut will hurt thousands of retired or retiring workers. Coalition and Labor governments have been driving a campaign to force more workers to rely in retirement on compulsory savings through superannuation instead of the public pension. They say this will take pressure off public welfare spending and give workers a more comfortable income in retirement. But for many workers this is turning out to be a chimera. Half the population retiring in the years through to 2055 will not have enough income to achieve a comfortable retirement according to a submission by Industry Super Australia to the Tax Review. On average, it pointed out, 63% of single women will fall below a “comfortable retirement standard” (just over half of average male weekly earnings), as will 50% of single men and 45% of couples. Superannuation tax concessions in 2013-14 cost about $39 billion and are expected to rise to $50.7 billion in 2016-17, overtaking expenditure on the age pension, according to the progressive think tank, the Australia Institute. However, the overwhelming benefit of these superannuation tax concessions goes to the rich. The poorest 60% of income earners get only 27.2% of these tax concessions while the highest 10% get 31.8%. In addition, banks, insurance companies, accountants and investment advisers have made fat profits from the publicly subsidised compulsory superannuation system. The $1.9 trillion now built up in super funds has been used by the profit-making ventures of large corporations, including mining companies and the big banks. Retiring workers have been left in the lurch. They also bear the risk for the catastrophic losses that can be made in the speculative jungle that is modern finance capitalism. As we saw in the Global Financial Crisis, the big banks get bailed out and the finance sector CEOs run away with their fat bonuses while the little people pay. The Australia Institute crunched the numbers and found that abolishing tax concessions and creating a universal public (non-means-tested) age pension can deliver a better outcome for retired workers into the future. It found that the single pension could be lifted from 30% of male total average weekly earnings to 37.5% (and a consequent lift in the rates for couples) for 30% less than is spent on the age pension and superannuation tax concessions now. Clearly, there is room to further raise the age pension to a more adequate level. Does our advocacy of a universal age pension mean we think that the super-rich need to be subsidised in their retirement? Not if there is a progressive income tax system that covers all income. Sure, rich people would have the right to the age pension — just as their children have a right to free public schooling — but in practice, progressive taxation will cancel out public subsidies to really high income earners in retirement. A universal age pension system operates in New Zealand, a poorer country than Australia, so it can and should be implemented here. It should be part of the policy of any party that claims to stand for a more just, equitable and cooperative society.