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Wednesday, 8 April 1998
Page: 2913

Ms MACKLIN (11:47 AM) —On the face of it, this Social Security and Veterans' Affairs Legislation Amendment (Pension Bonus Scheme) Bill 1998 that we are now debating appears to be a savings measure. According to the financial impact statement contained in the explanatory memorandum to the bill, the government will save over $101 million over the next four years by implementing the changes in this bill.

The intention is that these savings will be achieved by providing an incentive, in the form of a lump sum bonus, for people of age pension age to defer retiring and claiming the pension for up to five years. The lump sump will be equivalent to between 9.4 per cent and 47 per cent of the pension that the person would have otherwise received, depending on the length of the period over which they defer retirement. A single person who defers retirement for the full five years and who would be entitled to a full age pension—I think those two things need to be remembered by those pensioners considering this move—after that period would receive a tax free bonus of $21,661 based on current pension rates.

In a press release of May last year, the Minister for Social Security (Senator Newman) said:

This measure offers people who would otherwise retire and take up the Age Pension an incentive to keep working for up to five years, reducing the ratio of retired people to working people and increasing the financial wellbeing of older Australians.

The opposition has very serious doubts about this proposal. We considered it and abandoned it when we were in government and this is one of the reasons that we will be referring this bill to a committee in the Senate.

One of the biggest problems we had is that many people who have the option of deferring their retirement will, in any event, do so. These people now stand to get a windfall gain for doing what they would have done. This appears to have been recognised by the Minister for Veterans' Affairs (Mr Bruce Scott). In a press release of 13 May last year, he said:

A significant number of veterans and war widows already delay their retirement to beyond age service pension age.

He went on:

They will now receive a generous incentive payment for doing so.

The second problem we have is that it is not at all clear that this is a savings measure. In the 1997-98 Social Security portfolio budget statements, it says:

The size of the bonus was designed to be revenue neutral in terms of program outlays over the medium term, although this measure will provide savings over the first few years of operation.

That is, the government will appear to be saving money until the time comes to pay out all these substantial bonuses. As I said, I understand that Labor while in government received advice that this proposal may even involve a net cost over the longer term.

A third concern is that the numbers likely to be affected by the scheme, and the financial impact, also appear to be very unclear. The budget statements estimated that an average of 35,000 people a year would participate during the first three years of operation. This estimate was substantially revised within a very short space of time so that the government indicated in the Senate estimates committee of June 1997 that fewer than 3,000 people would be likely to take up the scheme in 1998-99, with that number steadily increasing to a little over 16,000 over the next four years.

They were two estimates, 35,000 and 16,000, but by August 1997 these figures had been revised again. In the Senate estimates committee of that month, August 1997, the government said that over 3,500 people would participate in this year, 1998-99, increasing to just under 20,000 in the following four years. As everyone would realise, 20,000 is a lot fewer than 35,000. So the government is introducing this scheme which apparently, if you can believe the latest numbers that have been given to a Senate estimates committee, will see maybe 20,000 people benefit.

However, strangely enough, the anticipated savings have not changed so dramatically. According to the budget statements, the net savings over the first four years of operation were supposed to be $87.2 million. This is compared to an estimate of $101 million in the explanatory memorandum. We seem to have a myriad of figures. It is not at all clear who is going to benefit, or how much it is going to cost. It is incumbent on the government to set out what the long-term costs of this scheme will be.

What is clear is that a great many people will be excluded from this scheme on the basis that they will not be entitled to an age pension at the end of the deferment period. That is why so few people will benefit from the scheme, because at the end of the deferment period you have to be entitled to the age pension. One would expect this, given that many people of retirement age who have the option of continuing in employment beyond that age would have a greater superannuation entitlement or may have increased their assets.

I want to draw the attention of members to some relevant information about the retirement characteristics of the population. I am quoting here from a research paper by the Association of Superannuation Funds of Australia which sets out the actual age of retirement for men and women. This was done in 1997. In fact, you see that the vast majority of people retire well before age pension age.

I do not know whether the government will allow this to be tabled, but I think that the table that I have before me might well inform other members. We have nearly 11 per cent of men retiring before they are 45 and 49 per cent of women retiring before they are 45. In the next 10-year period, in the 45 to 54 age bracket, 17 per cent of men and 20 per cent of women are retiring.

This is the critical period. In the 10 years when people are aged between 55 to 65 we see 57.8 per cent of men retiring and just under 10 per cent of women retiring. Therefore, the vast majority of working people have retired well before age pension age. Well before the age of 65, we have the vast majority of people retiring.

Beyond pension age, we in fact have only 3.1 per cent of men retiring and, interestingly enough, a larger proportion of women, a bit over five per cent. So it is not surprising that very few people are going to benefit from this scheme, because the vast majority of people have retired, particularly in the 10 years before age pension age. As I said, I seek leave to have this table incorporated in Hansard.

Leave granted.

The table read as follows

Table 1: Retirees by Age of Retirement

Men (per cent)

Women (per cent)

Less than 45 years



45 years to 54 years



55 years to Pension Age



Pension Age



Beyond Pension Age



Never had Full Time Job



Don't know






Note: * corresponds to 10,000—40,000 cases

** corresponds to less than 10,000 cases

Ms MACKLIN —It will also be the case that other people who continue to work beyond age pension age will be entitled to a reduced rate of age pension on the basis of their more modest superannuation investment and assets. However, the pension bonus they might expect to receive—and hence the incentive for participation in the scheme—will correspondingly be reduced. In short, the scheme will only operate as a real incentive to those who have little by way of superannuation entitlements or other income generating investments, who have relatively few assets and who would not have deferred retirement if not for the introduction of the scheme.

I have to say that it is another one of this government's mickey mouse schemes. It will not benefit many people at all, mostly because the vast majority of people have already retired. Alternatively, those who have not retired will have superannuation which will put them outside the purview of this scheme. So it is not surprising that we see the government progressively cutting the number of people who will benefit from this scheme. As I said, the latest figure that has been presented to Senate estimates suggests that it is around 20,000 people.

The reasons why so many people retire early are also important. Once we look at the reasons, we understand why it will be the case that so few of them will be able to benefit from this scheme. Eighty-one per cent of men and 64 per cent of women who retired early actually did so for reasons beyond their control—employment problems, health problems and compulsory retirement policies. Health problems are particularly significant. Employment reasons, such as a loss of employment, the inability to obtain full-time work and the ability to receive an early retirement package are also very significant. Reaching retirement age these days is a significant factor only for that small group of people who actually remain in the work force beyond pension age. They are the facts.

The incentive proposed by this scheme will not encourage people to remain in the work force when they are in fact unable to continue working for reasons which they cannot control. This is a very significant point. If one of the main reasons that people do not continue working is that they are basically pushed out of the work force, no amount of incentive for individual workers post age pension age will have much effect.

If the government were serious about giving people a chance to stay at work, particularly post age 55 when so many people retire, it would need to target both employer attitudes and the labour market conditions for older workers. But there is nothing in this bill and nothing in the actions taken previously by this government that point to anything in that direction.

In fact what we have seen from this government is a major change to the social security arrangements which forces workers over the age of 55 to leave the work force. The situation introduced by the government is that if you have been on unemployment benefits for more than nine months and you have some superannuation, you basically have to use up your superannuation before you will get any further help from the government. These people will not get help to find another job, and they are effectively being told by this government, `That is the end of you. Get out of the way.'

That is really what this government is all about when it comes to older workers. It is not doing anything whatsoever. There is no employment program and no specific assistance to get these older workers back into a job. We in fact see these workers over the age of 55 and, if only these members would go out and speak to these workers, they would know how distressed they are by this change to social security that this government pushed through the parliament last year. They feel that this Howard government has thrown them onto the scrap heap. They do feel that you have moved the goalposts. They thought they were going to be able to stay in employment and keep contributing to their superannuation until they were 65 and ready to retire.

But, of course, that is not what this government has done. What they have done is move the goalposts and said to people, `If you are over the age of 55 and you lose your job and you have some superannuation, not only will we not help you to get another job, we will force you to use up your superannuation.' They are the facts of what this government has done to older workers.

Even if you are a bit younger and you lose your job, like the 1,400 waterside workers that lost their jobs today, if you are like that—

Mr Billson —Mr Deputy Speaker, I rise on a point of order. The member for Jagajaga has given us 10 minutes of vitriol. Could she at least vaguely relate some of the vitriol to the bill?

Mr DEPUTY SPEAKER (Mr Mossfield) —Order! There is no point of order. The member for Jagajaga.

Ms MACKLIN —Thank you, Mr Deputy Speaker. It is very significant, given that we are talking about trying to encourage workers over the age of 65 to stay in the work force by a mickey mouse pension bonus scheme, that we look at a few things that lead up to whether or not people have any opportunity to get a job under this government.

If you are over 55, you get thrown on the scrap heap by this government and forced to use up your superannuation. If you are under 55 and you lose your job and you have got some retrenchment pay that has been built up because you have annual leave entitlements and other redundancy payments, what this government says to you is, `You are not going to get any help until you are down to your last $2,500.' That is what this government is saying to Australian workers. You now have to be down to your last $2,500 before you will get any help from this government to get another job.

What do we have from the government? We have them saying to people, `You get down to your last $2,500 before we will help you get a job, but if you are over 65 and you are on a pension'—which on the latest government estimates is about 20,000 people—`we will operate a mickey mouse scheme for you. We will operate a mickey mouse scheme for those 20,000 people who might be eligible'—of course, given the numbers have changed so often, we have really no idea how many people will be eligible—`we will give those people a bit of a chance. But for those workers who lose their jobs who have redundancy payouts, you get down to your last $2,500 before this government will give you any help.' They are the facts. That is what the Social Security Act says now. If you are over 55 and you lose your job, you too will have to go and use up your superannuation before you will get any help to find another job.

Members opposite think it is a joke. That is what they think.

Mr Billson —No, we think you are the joke.

Mr Entsch —You are the joke.


Ms MACKLIN —They think it is a joke. As I said, Mr Deputy Speaker, they should go out and speak to these workers and their families who know full well who has moved the goalposts and which government it is that has made workers so much worse off in this country. They will not believe at the next election the promise that John Howard made to them before the last election which was that no worker would be worse off. Every worker who has lost their job under this government is worse off and every worker knows that and they will remind you at the ballot box.