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The Parliament of the Commonwealth of Australia

SENA TE ST ANDING COMMITTEE ON SOCIAL WELFARE

Report on a Reference on the Introduction of a National Superannuation Scheme

March 1978

Brought up and ordered to be printed 14March 1978

Parliamentary Paper No. 6/1978

THE SENATE

STANDING COMMITTEE ON SOCIAL WELFARE

Report on

A REFERENCE ON THE INTRODUCTION OF

A NATIONAL SUPERANNUATION SCHEME

March 1978

MEMBERS OF THE COMMITTEE

Senator Peter Baume (New South Wales), Senator w.w.c. Brown (Victoria) Senator D.J. Grimes (Tasmania) Senator J.I. Melzer (Victoria) Senator T.J. Tehan (Victoria) Senator M.S. Walters

Secretary

R.G. Thomson, The Senate, Parliament House, Canberra.

(Tasmania)

Chairman

NATIONAL SUPERANNUATION SCHEME

On 7 April 1971 the Senate referred to the Standing

Committee on Health and Welfare:

The introduction of a national superannuation scheme and the methods of financing and operating such a scheme.

On 7 June 1973 that Committee informed the Senate that a

National Superannuation Committee of Inquiry with similar terms of reference had been established, and that, unless

the Senate directed otherwise, the Senate Committee would not

proceed with the reference but would reconsider this view

following receipt of the report of the committee of inquiry. The Standing Committee on Social Welfare, which was established

by resolution of the Senate on 2 March 1976 to replace the

Standing Committee on Health and Welfare, decided to retain

the reference and to stand by the earlier decision.

Members of the National Superannuation Committee of

Inquiry were Professor Keith Hancock (Chairman), Mr K.J. Hedley and Mr R.G. McCrossin. An interim report was presented

by Professor Hancock in June 1974. The final report was in

two parts. Part 1, entitled National Superannuation Scheme

for Australia (Parliamentary Paper No. 155 of 1976), was presented in the Parliament on 3 June 1976. Part 2, entitled

Occupational Superannuation in Australia (Parliamentary Paper No. 70 of 1977), was presented on 30 March 1977.

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In both parts Mr Hedley presented a minority report. In part 1 the majority recommended a compulsory contributory scheme, whereas the minority report recommended continued

evolution of the existing flat-rate non-contributory scheme .

The main recommendations of the majority in part 1 are

outlined at pages 6 and 7 as follows:

II. THE MAIN RECOMMENDATIONS

1.9 The National Superannuation Scheme recommended in this report will, if adopted, supersede the present age pension. From the inception of the Scheme, national superannuation pensions will be paid to all persons aged 65 or over and other benefits within the Scheme will become available. The liability to pay national

superannuation contributions will commence at the same time. In this section, we describe brie£ly the principal provisions of the Scheme. Various details and qualifications.· are omitted. A full description of the Scheme is provided in Chapters 4 and 5.

Pensions

1.10 The national superannuation pension due to any person will be the sum of three components: (1) a universal pension; (2) a purchased pension; and

(3) supplementation.

The universal pension will be identical for all pensioners and equal to about 25 per cent of AWE. Purchased pensions

will depend upon past contributions and will therefore differ between pensioners. Supplementation will be paid, on a tapered basis, to all persons with purchased pensions below 40 per cent of the universal pension and will ensure a minimum total pension equal to about 30 per cent of AWE.

1. Average weekly earnings per employed male unit.

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1.11 The age pension currently payable, on a means-tested basis, to females aged 60-64 will be phased out over an eight-year period beginning in 1980. Women aged bel ow 65 who are eligible for pensions between the inception of the Scheme and the end of the phasing-out period will receive

the universal pension (subject to means test).

Ancillary Benefits

1.12 Additional benefits will be payable as follows:

(1) A dependent spouse's allowance, equal to the universal pension, will be paid in respect of the spouse of a pensioner if the spouse is below age 65.

(2) An allowance will be paid to a pensioner with dependent children. The allowance will be 20 per cent of the universal pension for each dependent child. (3) A pensioner living alone will be eligible for a

living alone allowance equal to 15 per cent of the universal pension. (4) A pensioner living alone with one or more dependent children will be eligible for an additional

guardian's allowance equal to 10 per cent of the universal pension (15 per cent if any child is aged below 6 or is an invalid requiring full-time care). These ancillary benefits will initially be subject to means

test to avoid anomalies in relation to other social welfare benefits. We recommend, however, that the means test be removed at the earliest opportunity.

Death Benefits

1.13 Modest benefits will be payable upon the deaths of persons aged 19 or more. The benefits contain contributory and non-contributory components. Both components are age related, yielding maximum benefits at ages of death when

the needs of surviving dependents are typically highest.

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The approach recommended in the minority report is summarised

at page 122 in these terms:

The Preferred Approach

11. At this time of ferment in the consideration of

social security programs, their relative priorities and integration, and their relationship with the personal income tax system, I consider that national age pension planning should be broadly based to cover three aspects:

(i) a universal pension for all from age 65,

irrespective of sex, marital status, workforce status, housing arrangements, wealth or income to provide a basic level of security; (ii) a selective supplement, ideally based on needs

(which could include the consideration of housing, sharing of household expenses and any special circumstances) but directly or indirectly based on income if this were more expedient for harmonisation with other social welfare arrangements and the personal income tax system; encouragement to voluntary savings for

old age by way of personal savings, especially those of a contractual nature, througlt normal long-term investment media (including home purchase) and fair occupational pension plans for workforce members (including self-employed).

12. There would be no specific contributions under such a preferred approach .••

In part 2 the majority, at page viii, summarised their views as follows:

The Committee sees the role of occupational superannuation as complementary to that of national pensions. National pensions should provide retirement income for the whole of the population aged 65 or more. They will be more adequate if provided through the National Superannuation Scheme than otherwise. The additional benefits derived from occupational superannuation

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schemes will enable a section of the community to avoid reductions in living standards after retirement; they will also support options, such as retirement before age 65 and benefits received as lump sums, which are not contained in

the National Superannuation Scheme.

The need for alterations to occupational superannuation schemes is related partially, but not wholly, to the prospective extension of national pensions. If free-of­ means-test age pensions for persons aged 65 or more are

provided through the National Superannuation Scheme, occupational schemes may need to be modified:

(1) to avoid over provision of benefits, (2) to permit changes in the form of benefits, and

(3) to avoid excessive contributions.

The minority view was expressed at page 131 as follows:

The main tenor of Part Two of this dissenting report is that the continued evolution of the Australian flat rate non-contributory age pension system will not have any traumatic effect upon existing occupational superannuation

schemes. The latter may reasonably be expected to continue to adapt to change arising out of this as well as many other factors affecting their operation, and there should be no adverse effects on capital formation in Australia.

The advent of National Superannuation in the form proposed in this report will not necessitate any special action in regard to the treatment of entitlements under existing superannuation schemes or for the regulation of private sector funds.

The issues were thoroughly canvassed in the inquiry, which

extended over some four years. Two basically differing schemes were recommended. The matter was referred to the Income

Security Review for advice and no doubt it could be examined by the proposed new Social welfare Policy Secretariat in the Department of Social Security.

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In all the circumstances the Standing Committee on Social Welfare believes that an inquiry under these terms of reference

now would merely duplicate the work of the National Superannuation

Committee of Inquiry. Accordingly, we report to the Senate that

we have decided not to proceed with this reference.

The Senate, Canberra. March 1978

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Peter Baume Chairman