The Revolution that Faltered: Two Decades of Reform of Australia's Retirement Income System

The revolution that faltered:

Two decades of reform

of Australia’s

retirement income system

Allan Borowski

La Trobe University, Melbourne

In the 1980s, Australia’s retirement income system

became the subject of ongoing reform. A number of

the reform objectives were quite revolutionary but some

remain much further from realization than was expected,

with major consequences for future retirees. In this sense,

Australia’s retirement income revolution has faltered.

This paper (1) outlines the main features of Australia’s

retirement income system prior to the 1980s, (2) presents

the reform objectives and explains the sense in which they

were “revolutionary”, (3) describes some of the major

changes, their achievements, and how and why a number

remain further from realization than expected, (4) considers

two more recent objectives and (5) outlines the challenges

that remain.

For the past two de cades, Aus tra lia’s re tire ment in come sys tem has been

sub ject to a pro cess of on go ing re form. The main ob jec tives of the re form

pro cess emerged dur ing its early days in the 1980s. A num ber of these ob jec -

tives were quite rev o lu tion ary within the Aus tra lian con text. While there is

no doubt that there have been ma jor changes in the ar chi tec ture of Aus tra -

lia’s re tire ment in come sys tem, some of these ob jec tives re main much fur -

ther from be ing re al ized than was ex pected in the early, “hal cyon” days of

the re form pro cess, with ma jor con se quences for fu ture re tir ees. In this

sense, Aus tra lia’s re tire ment in come rev o lu tion, though far from hav ing

fizzled out, may certainly be described as having faltered.

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Allan Borowski, PhD, is Pro fes sor, School of So cial Work and So cial Pol icy, and a mem ber ofthe School’s Dis abil ity and Age ing Re search Group, La Trobe Uni ver sity, Mel bourne, Vic to ria,

Aus tra lia 3086. Email: [email protected]

Australia’s retirement income systemprior to the 1980s

A descriptor fre quently in voked by stu dents of the wel fare state is the no -

tion of the “pil lar”. Pil lars ex am ine

who pays for and who pro vides the range of social ben e fits and cash trans fers

that com prise the non-mar ket income of house holds at dif fer ent stages of the life

course. Their dis tinc tive ways of pack ag ing income from alter na tive pub lic and

pri vate sources thus pro vide the key differentia with respect to pil lars (Rein,

1999, p. 2).

The market pillar

The role of the mar ket pil lar in pro vid ing re tire ment in comes prior to the

1980s was very lim ited, de spite the fact that pri vate pen sion plans — gen er -

ally known as oc cu pa tional su per an nu a tion schemes — have a long his tory

in Aus tra lia. The first for mal su per an nu a tion scheme was es tab lished in

1862 by the Bank of New South Wales, 13 years be fore the first com pany pri -

vate pen sion plan was es tab lished in the United States by the Amer i can

Express Com pany. The in tro duc tion of fed eral in come tax a tion un der the

1915 In come Tax As sess ment Act pro vided for the tax de duct ibil ity of em -

ployer con tri bu tions made on be half of em ploy ees and the ex emp tion of

superannuation fund earn ings from tax a tion, and thereby en cour aged the

growth of su per an nu a tion schemes. Over the years, this tax treat ment of

superannuation rep re sented a grow ing cost to the fed eral gov ern ment in

terms of forgone rev e nue (or tax ex pen di tures). Nev er the less, very lim ited

growth in su per an nu a tion cov er age oc curred prior to the Sec ond World

War. Cov ered work ers were largely confined to white-collar civil servants

and em ploy ees of financial institutions and large manufacturing firms.

Su per an nu a tion cov er age ex panded af ter the war but stood at only

32 per cent in 1972. Five years later cov er age had climbed to 42 per cent but

by the early 1980s it had reached only 45 per cent (Borowski, Schulz and

Whiteford, 1987). The su per an nu a tion schemes that cov ered these work ers

were over whelm ingly of the de fined benefit variety.

The lim ited role played by oc cu pa tional su per an nu a tion in pro vid ing a

re tire ment in come was not only at trib ut able to the nar row cov er age of the

workforce. There were two other fac tors at play. The first of these was that,

be cause of the ab sence of pres er va tion re quire ments, su per an nu a tion ben -

efits were paid not only at re tire ment but also at any time a worker changed

jobs. This of ten re sulted in the dis si pa tion of ben e fits dur ing a work ing life -

time, leav ing rel a tively lit tle for re tire ment. The sec ond fac tor was that ben -

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The rev o lu tion that fal tered: Two de cades of re form of Aus tra lia’s re tire ment in come system

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e fits, which were usu ally paid in lump sum form, were rarely used to pur -

chase an an nu ity (or pri vate pen sion). This is be cause the 1915 In come Tax

As sess ment Act pro vided for the full tax a tion of ben e fits re ceived in the

form of an in come stream but in cluded only 5 per cent of a lump sum ben e fit

in the in di vid ual’s tax able in come in the year in which the ben e fit was paid.

Since the top mar ginal tax rate was 60 per cent, the max i mum tax paid on a

lump sum was a mere 3 per cent of the to tal. Thus, what was os ten si bly a

mar ket mech a nism for pro tect ing cov ered work ers against the risk of a loss

of in come due to re tire ment actually functioned as something more akin to

a concessionally taxed severance pay device.

The public pillar

Given this sit u a tion, it was the pub lic pil lar of the Age Pen sion that served

as the pri mary source of in come for the el derly pop u la tion.1 The in come-

and as sets-tested Age Pen sion is one of many means-tested (or “cat e gor i -

cal”) programmes of an ex ten sive sys tem of in come sup port for peo ple with

in suf fi cient in come. Its pri mary role was to pro vide a min i mum sub sis tence

in come that was sup ple men tary to any per sonal sav ings older peo ple may

have ac cu mu lated them selves (the third pil lar). Leg is lated by the Al fred

Deakin gov ern ment in 1908 and in tro duced in 1909, the Age Pen sion was

available to men at age 65 and women at age 60.

The Age Pen sion was grad u ally lib er al ized over the years. In 1920, 32 per

cent of peo ple qual i fy ing on the grounds of age re ceived the Age Pen sion. In

1970, this fig ure was 70 per cent. By the late 1960s, means were as sessed on

the ba sis of in come plus a pro por tion of count able as sets aside from the

home, which has al ways been as sets-test-ex empt. A ben e fit re duc tion (or

mar ginal tax) rate of 100 per cent ap plied to each dol lar of in come be yond a

permissible income threshold.



The rev o lu tion that fal tered: Two de cades of re form of Aus tra lia’s re tire ment in come sys tem

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1. Aus tra lia has never had a pay-as-you-go social insur ance scheme to pro tect work ers against

the loss of income due to retire ment or other risks, although the idea has been enter tained in

the past. For exam ple, leg is la tion (the Health and Pen sions Insur ance Act) was passed in 1938but never imple mented because of the out break of the Sec ond World War. Fur ther, the Han -

cock National Super an nu a tion Com mit tee of Inquiry estab lished by the Labor gov ern ment

under Gough Whitlam (1972-75) rec om mended the intro duc tion of a national super an nu a tionscheme based on a social insur ance approach. It reported in 1976 by which time a Lib eral (con -

ser va tive) gov ern ment led by Malcolm Fra ser had been elected to office.Today the Age Pen sion for a sin gle pen sioner is equiv a lent to 25 per cent of aver age weekly

earn ings (AWE). His tor i cally, the Age Pen sion has fluc tu ated between 20 and 25 per cent of

AWE but for the past 30 years suc ces sive gov ern ments have main tained it at around 25 per cent of AWE (Whiteford and Bond, 2000). This level was finally pre scribed under leg is la tion passed

in 1997. It pro vides among the high est min i mum old-age incomes in the indus trial world (Sass,

2004, p. 4).

A marked lib er al iza tion pro cess be gan in 1969 with a de crease in the ben -

e fit re duc tion rate to 50 per cent by the then con ser va tive Lib eral-Coun try

party co ali tion gov ern ment. Sev eral years later, in 1973, the means test for

pen sion ers 75 years of age and over was abol ished by the Whitlam La bor

gov ern ment. The age at which the means test ceased to ap ply was fur ther

re duced to 70 years in 1975. An other ma jor lib er al iza tion took place in 1976

when the Fra ser Lib eral gov ern ment abol ished the as sets test com po nent of

the means test, i.e., Age Pen sion el i gi bil ity was as sessed only on the ba sis of

in come and took no cog ni zance of cap i tal.

In con se quence of these changes, by mid-1978 the Age Pen sion cov ered

over three-quar ters of the pop u la tion of pen sion able age. If one adds re cip i -

ents of Ser vice Pen sion (avail able to vet er ans of the armed forces five years

ear lier than the Age Pen sion) then this os ten si bly se lec tive in come sup port

pro vi sion had ef fec tively be come a demogrant scheme cov er ing about

90 per cent of people of eligible age (Department of Social Security, 1984;

Whiteford and Bond, 2000).

How ever, in that year, fu ture in creases in the Age Pen sion for those aged

70 or over were made sub ject to an in comes test. This change marked the

beginning of what would even tu ally be come a fun da men tal shift in the

widely ac cepted un der stand ing of the role of the Age Pension.

The objectives of Australia’s “new”retirement income system

While the seeds of change as far as the Age Pen sion is con cerned were sown

with the 1978 change, the re shap ing of Aus tra lia’s re tire ment in come sys -

tem be gan in ear nest with the elec tion of a La bor gov ern ment un der Prime

Min is ter Bob Hawke in 1983. The prime mover was the Trea surer, Paul

Keating, who even tu ally re placed Hawke as Prime Min is ter in December

1991.

The fol low ing six ob jec tives for Aus tra lia’s re tire ment in come sys tem

emerged with the un fold ing of the re form process:

• to en hance the role played by the mar ket pil lar in pro vid ing in come

for re tired work ers through ex pand ing oc cu pa tional su per an nu a tion cover -

age;

• to im prove the cov er age of the mar ket pil lar with a view to en hanc ing

the ad e quacy of su per an nu a tion-pro vided re tire ment in comes for fu ture

re tir ees whose re tire ment in come ex pec ta tions will be higher than those of

past retirees;

• to con tain the pub lic sub ven tion of the mar ket pil lar through the tax con -

ces sions en joyed by su per an nu a tion schemes;



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• to en hance the role played by the mar ket pil lar as an in come stream

through out the re tire ment years;

• to re duce re li ance on the pub lic pil lar — the Age Pen sion — as a source of

re tire ment in come through tight en ing el i gi bil ity;

• to in crease house hold and na tional sav ings and, in turn, in vest ment.

More re cently, two fur ther ob jec tives have be come ev i dent, al beit not of

the same rev o lu tion ary or der as the first six:

• to strengthen per sonal sav ings for all Aus tra lians, whether in the work -

force or not;

• to strengthen the in cen tives for de lay ing re tire ment.

The first group of ob jec tives, on the face of it at least, ap pear to be quite

sim ple, straight for ward and un con tro ver sial. How ever, within the Aus tra -

lian con text they mostly rep re sent a grand de par ture from the ob jec tives —

to the ex tent that they were dis cern ible — of the re tire ment in come sys tem

be fore the early 1980s. In deed, they are so pro foundly dif fer ent that they

and the changes they have shaped have been de scribed as “rev o lu tion ary”

in Thomas Kuhn’s (1970) sense of this term, in volv ing a para dig matic shift

in which the roles of the pil lars of Aus tra lia’s re tire ment in come sys tem

have been turned on their heads (Borowski, 1987; Olsberg, 1994, 1995 and

1997).

The Age Pension: From social assistanceto a social right, and back again

The Age Pen sion was ini tially con ceived of as a so cial as sis tance pro -

gramme for needy older per sons. Over the years, how ever, the loos en ing of

el i gi bil ity had in creased cov er age to the point that the no tion of Age Pen -

sion en ti tle ment as a so cial right had be come pro gres sively en trenched in

the pub lic imag i na tion.

This so cial right was seen to rest on the in di vid ual’s so cial con tri bu tion

as a worker and tax payer dur ing the work ing years. The 1978 change, the

one that made fu ture in creases in the Age Pen sion for those aged 70 and

over sub ject to an in come test, broadly co in cided with the some what be -

lated pub lic rec og ni tion of pop u la tion age ing and its im pli ca tions for the

long-term costs of the Age Pen sion (Howe, 1981). This pub lic rec og ni tion,

to gether with the im me di ate bud get ary pres sures aris ing from eco nomic

recession, led the La bor gov ern ment in May 1983 to make the base pen sion

for those aged 70 and over sub ject to an in comes test. As a result of the 1978

and 1983 changes, by mid-1983 pen sion cov er age had declined by 4 per -

cent age points rel a tive to the 1978 peak (De part ment of Social Se cu rity,

1984).




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And in 1984 an as sets test was re in tro duced — just eight years af ter its

com plete ab o li tion. These and sub se quent tightenings of Age Pen sion el i gi -

bil ity marked a fun da men tal shift in the so cial con struc tion of the Age Pen -

sion from a demogrant ben efit claimed as a so cial right to, in creas ingly, a

selective pro vi sion based on eco nomic need. In other words, the tightenings

of el i gi bil ity sought to bring the Age Pen sion back full cir cle to what it had

orig i nally been in tended to be at its out set at the be gin ning of the twen ti eth

cen tury: a re sid ual so cial as sis tance programme for needy older persons.

Occupational superannuation:Articulating its role and legitimating

the illegitimate

With re gard to oc cu pa tional su per an nu a tion, the ob jec tives for this pil lar

were rev o lu tion ary in two re spects. One, they rep re sented a first real at -

tempt to ar tic u late a role for su per an nu a tion. Su per an nu a tion had played

such a mi nor role in pro vid ing a re tire ment in come that Dixon and Fos ter

(1982), for ex am ple, won dered why a sys tem of oc cu pa tional su per an nu a -

tion ex isted at all. They were also at a loss to explain how policy toward it

had evolved.

But sec ond, and more im por tantly, the ob jec tives of strength en ing the

mar ket pil lar re flected an ac knowl edge ment by gov ern ment that it was

now le git i mate to do what had pre vi ously been il le git i mate, namely to in -

ter vene with a view to en sur ing higher lev els of earn ings re place ment for

mid dle- and high-in come earn ers even though do ing so would con trib ute

to per pet u at ing into re tire ment the in come in equal i ties that gov ern ments

usually try to mitigate (Forward, 1983).

The pur suit of the first group of ob jec tives has been far from res o lute. In -

deed, Aus tra lian gov ern ments have pur sued them while si mul ta neously

in tro duc ing mea sures that have com pro mised the pos si bil ity of re al iz ing

some of them.

Thus, like many other rev o lu tions in pub lic pol icy, in im por tant re spects

this one has fallen short of what was hoped for in the early stages of the re -

form pro cess. Fur ther, by vir tue of the na ture and fre quency of changes to

Aus tra lia’s re tire ment in come sys tem, it has be come a “mar vel of com pli ca -

tion” (Sass, 2004, p. 12) re quir ing con sid er able expertise to understand and

negotiate it.

And while the most marked changes have fo cused on the mar ket and

pub lic pil lars, re cent years have wit nessed oth ers that have fo cused on the

role of the third pil lar of per sonal sav ings and in cen tives de signed to en -

cour age work ers to de lay retirement.



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In pursuit of the objectives

Enhancing the role of the market pillar:The expansion in superannuation coverage

A ma jor ob jec tive driv ing the re forms that be gan in the 1980s was the ex -

pan sion in oc cu pa tional su per an nu a tion over age. Ac cord ing to Myles and

Pearson (2001), a dis tin guish ing fea ture of pen sion re form ob served “with

un canny reg u lar ity” (p. 306) around the world has been the uti li za tion of a

corporatist so cial con tract in volv ing or ga nized la bour and em ploy ers’ as so -

ci a tions as the po lit i cal mech a nism for re de sign ing pen sion pol i cies. In Aus -

tra lia’s case, how ever, the so cial con tract was formed be tween or ga nized la -

bour and the na tional gov ern ment. In deed, the sin gle great est im pe tus to

the ex pan sion of cov er age was the elec tion of a La bor gov ern ment in 1983

and the sub se quent in tro duc tion of the Su per an nu a tion Guar an tee (SG).

The SG arose out of the 1986 national wage case under Australia’s then cen -

tral ized wage-fixing system.

On the eve of the 1983 fed eral elec tion, the Aus tra lian Coun cil of Trade

Un ions (ACTU), for which im proved su per an nu a tion had long been an

issue, en tered into a so cial con tract (the Prices and In comes Ac cord) with

the Aus tra lian La bor party. Un der this con tract, the ACTU un der took to re -

strict fu ture claims for na tional wage in creases to move ments in the con -

sumer price in dex and im prove ments in na tional la bour pro duc tiv ity in or -

der to help com bat in fla tion and re vive the share of na tional in come go ing

to prof its (Man ning, 2005). In the wake of the elec tion, the ACTU there fore

di rected its en er gies to wards im prove ments in non-wage ben e fits and

work ing con di tions, the so-called “so cial wage”. In the 1986 na tional wage

case the ACTU, spurred on by the es tab lish ment of the Build ing Un ions’ Su -

per an nu a tion Scheme a few years ear lier, claimed with the sup port of the

gov ern ment a 3 per cent wage-equiv a lent (about $A 12 a week on av er age)

em ployer su per an nu a tion con tri bu tion for em ploy ees cov ered un der na -

tional stan dard la bour con tracts (known as in dus trial “awards”). This claim

was made in lieu of an ac tual wage in crease based on pro duc tiv ity im prove -

ments.

The Ar bi tra tion Com mis sion en dorsed a pro cess (sub se quently af firmed

by the High Court (Sass, 2004, p. 7)) of em ployer-em ployee ne go ti a tions

with a view to reach ing con sent agree ments on new or im proved su per an -

nu a tion based on “award su per an nu a tion” (the 3 per cent wage equiv a -

lent). The en su ing ne go ti a tions re sulted in cov er age in creas ing to around

70 per cent of all em ploy ees by the end of the 1980s (Borowski, 1991). Leg is -

la tion passed in the same year, the Oc cu pa tional Su per an nu a tion Stan dards




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Act, re quired that the sav ings ac cu mu lated in su per an nu a tion funds be

both por ta ble and pre served un til age 55.2

Award su per an nu a tion, how ever, ex cluded work ers who were not cov -

ered by in dus trial awards. Fur ther, many em ploy ers ei ther re sisted un ion

ef forts to ini ti ate ne go ti a tions on su per an nu a tion or failed to com ply with

award su per an nu a tion where the con sent agree ments had been ap proved

by the Ar bi tra tion Com mis sion. Great dif fi culty was ex pe ri enced in po lic -

ing the pay ment of con tri bu tions, par tic u larly among small em ploy ers

(Olsberg, 1995). Con se quently, the gov ern ment aban doned the col lec tive

bar gain ing strat egy for ex pand ing su per an nu a tion cov er age and, in stead,

man dated cov er age. It did so un der pres sure from the ACTU and, ac cord -

ing to Olsberg (1997), as part of a broader gov ern ment pol icy to por tray

itself as pro mot ing greater reliance on market forces and an economic

liberalist approach to macroeconomic management.

Un der the Su per an nu a tion Guar an tee (SG) Charge Act of 1992, all em -

ploy ers not al ready do ing so were re quired, as of 1 July that year, to pay a

min i mum of 3 per cent of an em ployee’s sal ary into a su per an nu a tion fund.

The level of man da tory em ployer con tri bu tions un der the SG has pro gres -

sively in creased since then. It reached 9 per cent in 2002, where it re mains.3

As a re sult of the SG, to day close to 90 per cent of all work ers — al most all

full-time work ers and three-quar ters of part-time work ers — have some su -

per an nu a tion cov er age in what is a self-funded sys tem (Stan ford, 2003;

ASFA, 2004a). Since 1990, self-em ployed work ers and un cov ered em ploy -

ees have been al lowed to make tax-de duct ible con tri bu tions, within age-

based lim its, to su per an nu a tion funds. Those most likely to be un cov ered

are peo ple with low in comes, namely those who are ei ther out side the

workforce or in uncovered low-wage employment.

Cov er age expan sion and super an nu a tion fund assets. The cov er age data

indi cate that Aus tra lia has been very suc cess ful in enhanc ing the role of the

mar ket pil lar in terms of expand ing occu pa tional cov er age. The expan sion

in cov er age has resulted in a huge growth in the assets of super an nu a tion

funds and a new mix of fund types.

In 1985 fund as sets stood at $A 40 bil lion; ten years later, $A 228 bil lion.

Today, the value of the mon eys held in 25.6 mil lion ac counts (about three

per worker) is $A 565 bil lion ($A 1 = US$ 0.76 = €0.60 approx.).



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2. In 1992 the Keating Labor gov ern ment leg is lated to grad u ally increase the pres er va tion agefrom 55 (if born before 1960) to 60 by 2024. Thus, the pres er va tion age is now between 55 and

60 years of age depend ing on the indi vid ual’s date of birth.

3. Because of a 15 per cent con tri bu tions tax (dis cussed later in this paper), the man da tory 9 per

cent SG con tri bu tion is effec tively a net con tri bu tion of 7.65 per cent.

There are about 2,000 large su per an nu a tion funds in Aus tra lia, de spite a

pro cess of ra tio nal iza tion and con sol i da tion that has been in train for a

num ber of years. Of these, the 245 re tail funds (typ i cally man aged by life in -

sur ance com pa nies and other fi nan cial in sti tu tions) hold the larg est share of

to tal su per an nu a tion as sets (34 per cent). There are a fur ther 105 in dus try

funds that draw mem bers from un re lated em ploy ers across a sin gle in dus -

try. These ac count for 11 per cent of to tal su per an nu a tion sav ings, while

almost 1,600 cor po rate (sin gle- and multiemployer) funds hold a fur ther

10 per cent. Sixty-five pub lic sec tor funds hold 20 per cent of all su per an nu -

a tion sav ings. The re main ing su per an nu a tion as sets (22 per cent) are held in

281,000 small, self-man aged, “do-it-yourself” funds with fewer than five

members (APRA, 2004).

Cov er age expan sion and the growth in defined con tri bu tion plans. But the

expan sion in cov er age is just one dimen sion of enhanc ing the mar ket pil lar.

The expan sion has been accom pa nied by other, less pos i tive devel op ments,

most nota bly the height ened finan cial risk borne by mem bers of super an nu -

a tion funds owing to the marked shift from defined ben e fit to defined con -

tri bu tion or accu mu la tion funds and regulatory shortcomings.

As noted above, prior to the ma jor re forms of the su per an nu a tion sys tem

that be gan in the 1980s, most su per an nu a tion funds pro vided de fined ben -

efits (al beit paid in lump sum form). How ever, as su per an nu a tion cov er age

has grown, there has been a large ex pan sion of de fined con tri bu tion or ac -

cu mu la tion-type funds. In deed, to day only about 10 per cent of all pri vate

sec tor funds pro vide de fined ben e fits, and these funds cover less than 4 per

cent of all pri vate sec tor work ers (APRA, 2004). De fined ben e fit funds are

more highly rep re sented in the pub lic sec tor. The fac tors that have con trib -

uted to the dom i nance of de fined con tri bu tion funds in clude (1) their sim -

plic ity un der award su per an nu a tion and SG ar range ments, (2) the fact that

both award and SG su per an nu a tion ar range ments were de fined in terms of

earn ings-re lated con tri bu tion lev els rather than ben e fit lev els and (3) a de -

sire on the part of em ploy ers to shift the in vest ment risk onto their em -

ployees (APRA, 1996). The risks borne by the mem bers of the now per va -

sive ac cu mu la tion funds are many.4

For ex am ple, un der de fined con tri bu tion schemes, work ers are the ones

who must carry the risk of sav ing ei ther too much or too lit tle for re tire ment.

Thus, whereas de fined ben e fit plans “make clear the out comes of the sys -

tem in terms of what the re tire ment in come sys tem is try ing to do, [namely]

to re place lost earn ings” (Di a mond, 2001, p. 77), un der de fined con tri bu tion




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4. See Schulz and Borowski (in press) for a detailed anal y sis of these risks.

plans “the con tri bu tion re quired to fi nance a given re tire ment pen sion

changes when ever wage rates and in vest ment re turns change” (Myles and

Pierson, 2001, p. 324). In deed, in the first few years of the new mil len nium,

most Aus tra lian funds had neg li gi ble or neg a tive re turns ow ing to the poor

per for mance of the eq ui ties (share) mar ket in which about two-thirds of to -

tal Aus tra lian su per an nu a tion as sets are in vested (Stan ford, 2003). In ter est -

ingly, in dus try funds, which are non-profit and have much lower man age -

ment and other fees, have con sis tently pro duced better in vest ment re turns

than the re tail funds. Other risks borne by work ers un der de fined con tri bu -

tion plans in clude the ero sion of savings through high management fees,

superannuation fund fraud and mismanagement, and inflation.

Reg u la tion. An impor tant means for reduc ing the risk borne by cov ered

work ers is the reg u la tion of super an nu a tion funds. Aus tra lia’s super an nu a -

tion indus try was sub stan tially self-reg u lated before the mid-1980s. The

pub lic reg u la tory pro vi sions largely related to the tax a tion of super an nu a -

tion under the 1915 Income Tax Assess ment Act. For tu nately, the expan sion

of super an nu a tion cov er age and the growth in defined con tri bu tion funds

have been accom pa nied by major reforms in the reg u la tory frame work to

pro tect work ers’ super an nu a tion sav ings. Thus, in 1987 the Insur ance and

Super an nu a tion Com mis sion was estab lished as a spe cific indus try reg u la -

tor. Fur ther reg u la tory leg is la tion was passed in 1993 (the Super an nu a tion

Indus try (Super vi sion) Act). And in 1998 the Aus tra lian Pru den tial Reg u la -

tion Author ity was estab lished as a sin gle reg u la tor for the finance indus try.

But options for still fur ther reform con tinue to be can vassed (see, for exam -

ple, SWG, 2002). This is because “the abil ity of super an nu a tion reg u la tions

to ensure the secu rity and ade quacy of retirement incomes is unclear”

(Bateman, 2003, p. 126) despite the marked improvement in the regulatory

regime.

The improvement in coverage:Enhancing retirement income adequacy

An other goal for Aus tra lia’s re tire ment in come sys tem that emerged with

the un fold ing of the re form pro cess was to en hance the ad e quacy of su per -

an nu a tion-pro vided in comes for fu ture re tir ees, whose ex pec ta tions will be

higher than those of their predecessors.

For most of the twen ti eth cen tury, the ma jor source of in come in re tire -

ment for most Aus tra lians was the Age Pen sion. Con se quently, what con -

sti tutes an ad e quate re tire ment in come was an is sue con structed solely in

pov erty al le vi a tion terms. As re cently as the 1980s, the no tion that an ad -



54

equate re tire ment in come is one that al lows re tir ees to main tain ac cus tomed

preretirement liv ing stan dards was an alien one in Aus tra lia (Borowski,

1984; Borowski, Schulz and Whiteford, 1987). How ever, by the early 1990s it

was be gin ning to take hold.5 To day there is a broad con sen sus that an ad -

equate re tire ment in come is one that, for a per son on av er age earn ings, re -

places about 60-65 per cent of gross preretirement earn ings (Com mon -

wealth of Aus tra lia, 2002a). This ad e quacy stan dard was re cently en dorsed

by the then Leader of the La bor op po si tion, Mark Latham, who, dur ing the

cam paign lead ing up to the 2004 fed eral elec tion, ad vo cated a retirement

income goal of “65 [per cent] at [age] 65” for the non-poor.

Al though the man da tory em ployer-paid SG con tri bu tions have been a

re tire ment sav ings boon for large num bers of work ers, it is quite ev i dent

that a con tri bu tion of 9 per cent over a work ing life time is al most cer tain not

to yield a re tire ment in come of “65 at 65” for a per son on av er age earn ings

over a work ing life time.6 In deed, at the time that man da tory su per an nu a -

tion was in tro duced, the gov ern ment con sid ered that the 9 per cent con tri -

bu tion rate was not nec es sar ily the fi nal fig ure: the need for a com ple men -

tary man da tory em ployee con tri bu tion, with an ul ti mate tar get of a com -

bined man da tory em ployer-em ployee con tri bu tion of be tween 12 and

15 per cent, and pos si bly even 18 per cent, was dis cussed (War ren, 2004,

p. 172). A few years later, in 1995, the La bor gov ern ment pro posed to in -

crease su per an nu a tion con tri bu tions to 15 per cent by 2002 by means of a

3 per cent gov ern ment co-con tri bu tion to match an em ployee con tri bu tion

of 3 per cent (Com mon wealth of Aus tra lia, 2002a). Al though there is less

agree ment about the pre cise level of su per an nu a tion con tri bu tions re quired

to fill the ad e quacy gap than there is about what con sti tutes an ad e quate re -

tire ment in come, for mer Prime Min is ter Keating (Hughes, 2005) and ma jor

stake holders (such as the ACTU and the su per an nu a tion in dus try) con tinue

to ad vo cate rais ing the SG by a fur ther 6 per cent to 15 per cent through ad -

di tional em ployer, em ployee and/or gov ern ment con tri bu tions. Nev er the -

less, there is noth ing to sug gest that the cur rent gov ern ment has fur ther

plans to move be yond the cur rent man da tory em ployer con tri bu tion level

of 9 per cent in view of con cerns about the impacts of higher employer SG




55

5. For exam ple, in 1992 the Sen ate Select Com mit tee on Super an nu a tion observed that future

retir ees would require a stan dard of liv ing con sis tent with that expe ri enced while work ing(Com mon wealth of Aus tra lia, 1992, p. 7). This Com mit tee was first estab lished in 1991 and was

finally wound down in mid-2004.

6. A sub mis sion by the Trea sury to the Sen ate Select Com mit tee on Super an nu a tion esti matedthat the SG in con junc tion with the Age Pen sion would pro vide a replace ment rate for an indi -

vid ual on median earn ings of just over 70 per cent after 30 years (Com mon wealth of Aus tra lia,

2002a, p. 23).

contributions on labour costs and hence employment, and employee con tri -

bu tions on the disposable incomes of low-paid workers.

The gov ern ment, how ever, has taken some ad hoc mea sures to en hance

re tire ment in come ad e quacy. For ex am ple, with a view to en cour ag ing

greater sav ings for re tire ment by low-in come earn ers be yond the em -

ployer-paid 9 per cent SG, the gov ern ment in tro duced a co-con tri bu tion

scheme ef fec tive from 1 July 2003. Through the end of June 2004 the gov ern -

ment matched, on a dol lar-for-dol lar ba sis up to $A 1,000, the vol un tary su -

per an nu a tion con tri bu tions made by peo ple earn ing up to $A 27,500. (This

is equiv a lent to 56 per cent of av er age an nual earn ings for the year ended

30 June 2004 of $A 48,948 (Par lia ment of Aus tra lia, 2004).) For those with

higher earn ings, the max i mum co-con tri bu tion fell by 8 cents for each dol lar

of ad di tional in come un til it phased out com pletely at $A 40,000 (about

82 per cent of av er age an nual earn ings). From July 2004 the gov ern ment

co-con tri bu tion was in creased to $A 1.50 for each dol lar con trib uted by a

worker up to a max i mum of $A 1,500 for peo ple earn ing up to $28,000.

Above this amount, the max i mum co-con tri bu tion is re duced by 5 cents in

each dol lar of in come to phase out com pletely at $A 58,000. While un ques -

tion ably an at trac tive scheme, it is pre mised on low-in come earn ers hav ing

the fi nan cial where withal to make the after-tax contribution required to

qualify for the government’s co-contribution payment.

Containing public subvention of the market pillar:The tax treatment of superannuation

A third ob jec tive of the re form pro cess was to con tain the pub lic sub ven tion

as so ci ated with the tax con ces sions en joyed by su per an nu a tion schemes.

Al though the in ad e quacy of pro jected re tire ment in comes is due mainly

to the low level of con tri bu tions, there are other fac tors at play here too. One

of these is the tax treat ment of su per an nu a tion. Su per an nu a tion in Aus tra -

lia is sub ject to a unique tax re gime by in ter na tional stan dards. This re gime

has sought both to en cour age sav ing for re tire ment in the form of su per an -

nu a tion and, at the same time, to con tain the pub lic sub ven tion as so ci ated

with su per an nu a tion tax in cen tives. A ma jor ef fect of the tax re gime has

been to very se ri ously com pro mise one of the ob jec tives of the re form pro -

cess be gun in the 1980s, namely to en hance the ad e quacy of the retirement

incomes provided by means of superannuation.

As noted in the dis cus sion above on Aus tra lia’s pre-1980s re tire ment in -

come sys tem, em ployer su per an nu a tion con tri bu tions were tax de duct ible

and lump sum pay ments were very lightly taxed. Lump sums re ceived on

re tire ment played a mi nor role in pro vid ing a re tire ment in come. These



56

sums were typ i cally small and were of ten ei ther dis si pated by early re tir ees

prior to reach ing Age Pen sion el i gi bil ity age or in vested in ways that did

not ob vi ate Age Pen sion el i gi bil ity. This phe nom e non of ben e fit ing from

tax-sub si dized su per an nu a tion and yet still re ceiv ing a tax payer-funded

Age Pen sion is col lo qui ally known as “dou ble dip ping”.7

In 1984 the gov ern ment in tro duced in creases in the tax on su per an nu a -

tion lump sum ben e fits aris ing from any entitlements ac crued af ter 1 July

1983. These new taxes were: (1) a flat rate of 30 per cent on lump sums taken

be fore age 55, and (2) a rate of 15 per cent on the first $A 55,000 taken af ter

age 55 with the bal ance taxed at 30 per cent. Lump sums used to pur chase a

pri vate pen sion were to tally ex empted from tax a tion, al though the pri vate

pen sion’s in come stream would be sub ject to in come tax. In 1988, fur ther tax

changes were an nounced. A 15 per cent tax on all con tri bu tions and su per -

an nu a tion fund earn ings was im posed. With re gard to lump sum ben e fits

linked to post-1983 em ploy ment, a tax-free thresh old of $A 60,000 (reg u -

larly ad justed up wards since then) for those who pre serve their lump sums

un til at least age 55 was in tro duced, be yond which a 15 per cent flat rate of

tax was ap plied. And in 1996 a fourth layer of tax a tion was in tro duced un -

der which em ployer su per an nu a tion con tri bu tions made for high-in come

earners can face a further surcharge of close to 15 per cent.

These taxes, in tended to re coup or re duce some of the size able forgone

rev e nues (the tax ex pen di tures) as so ci ated with su per an nu a tion tax con ces -

sions, have gen er ated enor mous rev e nues (cur rently $A 5.8 bil lion (ASFA,

2004b) or 3.3 per cent of the to tal). (In view of the con tin ued growth in these

rev e nues on the one hand and the in creas ing pro por tion that su per an nu a -

tion tax ex pen di tures rep re sent of all tax ex pen di tures (56 per cent in

2003/04 (War ren, 2004, p. 177)) on the other, it is not sur pris ing that the

federal gov ern ment has be come in creas ingly loath to forgo this rev e nue

source.) But they have also re sulted in very sub stan tial re duc tions in the

value of the ben e fits that would oth er wise have ac crued to re tir ees from

their su per an nu a tion sav ings. In deed, the cu mu la tive ef fect of these taxes

and their role in erod ing the value of re tire ment ben e fits, to gether with the

poor in vest ment re turns of some su per an nu a tion funds, have, for some,

substantially diminished the attractiveness of superannuation as an in vest -

ment.

In some what grudg ing rec og ni tion of the im pact of these taxes on the

level of su per an nu a tion sav ings that in di vid u als (or, more spe cif i cally,




57

7. One strat egy to pre vent dou ble-dip ping would be to bring the super an nu a tion pres er va tion age and the Age Pen sion eli gi bil ity age into align ment. The pres er va tion age has been

increased to 60 for those born after 1 July 1964. In War ren’s (2004) view, a push to fur ther

increase it and align it with the Age Pen sion eli gi bil ity age is inev i ta ble.

high-in come earn ers) are able to ac cu mu late, in 2004 the gov ern ment an -

nounced de creases in the su per an nu a tion sur charge (the fourth layer of su -

per an nu a tion tax a tion) from its max i mum of 14.5 per cent, to 12.5 per cent

from July 2004 and to 10 per cent by mid-2005. Sim i larly loath to forgo the

su per an nu a tion tax “bounty” should it be elected to of fice in the 2004 fed -

eral elec tion, the La bor op po si tion had pro posed in its elec toral cam paign to

cut the con tri bu tions tax by a mere 2 per cent to 13 per cent (Weekes, 2004).

In ad di tion to en cour ag ing re tire ment sav ings and seek ing to re coup or

re duce forgone rev e nue, the su per an nu a tion tax re gime seeks, on eq uity

grounds, to limit the amount that can be in vested in su per an nu a tion and

taxed at concessional rates. The gov ern ment has capped the level of tax-

advantaged ben efits it con sid ers rea son able for a re tiree. On 1 July 1994

it in tro duced in dexed flat-dol lar Rea son able Ben efit Lim its (RBL). Any

amount re ceived above the RBL is taxed at the max i mum per sonal mar ginal

tax rate, which is cur rently 48.5 per cent. For the 2003/04 fi nan cial year the

rea son able ben efit limit for a lump sum was $A 588,056. How ever, where

at least 50 per cent of the to tal ben efit was used to pur chase an an nu ity (pri -

vate pen sion), the RBL was twice this amount ($A 1,176,106).

From lump sum to income stream?

The changes in the tax treat ment of su per an nu a tion were not only an i mated

by the gov ern ment’s de sire to re duce the pub lic sub ven tion of su per an nu a -

tion. They also sought to re dress the sit u a tion of the more gen er ous tax

treat ment of lump sums rel a tive to pri vate pen sions and thereby make the

lat ter, which pro vide an in come stream through out re tire ment, more at trac -

tive. The change in the tax treat ment of lump sums, the two-tiered RBL, a

15 per cent pen sion tax off set avail able to those aged 55 years and over who

draw in come from a pri vate pen sion, and the gen er ous treat ment of com -

ply ing an nu ities un der the Age Pen sion’s means test (the ex emp tion un der

the as set test of 100 per cent was only re cently re duced to 50 per cent) all

seek to pro vide an in cen tive for the pur chase of an in come stream. And to

the ex tent that su per an nu a tion is pre served un til re tire ment and pro vides

an in come stream through out the retirement years, it would also obviate the

need for an Age Pension.

De spite the tax and other in cen tives to take re tire ment in come in pen sion

or in come stream form rather than as a lump sum, the gov ern ment’s ef forts

to en cour age re tir ees to pur chase pri vate pen sions with their lump sums

have met with lit tle suc cess. To day, two de cades into the re form pro cess,

three-quar ters of all re tir ees opt for lump sum pay ments (Com mon wealth

of Aus tra lia, 2003).



58

There are sev eral rea sons for this. One is that life time an nu ities in par tic -

u lar pro vide low re turns. They also en tail a loss of cap i tal to the es tate upon

death. (Cap i tal guar an tees are usu ally less than life ex pec tancy.) Fur ther,

the com par a tively small sums of ac cu mu lated re tire ment ben e fits may be

in suf fi cient to pur chase a pri vate pen sion that pro vides a rea son able in -

come stream. Thus, re cent fig ures in di cate that the av er age su per an nu a tion

bal ance of 50-69-year-olds is just $A 83,000 while av er age house hold re tire -

ment sav ings where at least one 50-69-year-old is still work ing are just

$A 170,000. Given that lump sums are of ten used, in part at least, to re tire

debt upon re tire ment, the bal ances avail able to pur chase a pri vate pen sion

may be still smaller than these fig ures sug gest (AMP Fi nan cial Ser vices,

2004). And be cause lump sum ben e fits of this or der would at tract rel a tively

little taxation, the tax disincentive to take a lump sum payment remains

small.

Nev er the less, policymakers con tinue to sup port the no tion that su per an -

nu a tion lump sum pay ments should be used to pro vide a source of in come

through out the re tire ment years. The Sen ate Se lect Com mit tee on Su per an -

nu a tion rec om mended in 2003 that the gov ern ment, at some fu ture time,

should man date the use of a pro por tion of su per an nu a tion sav ings for the

pur chase of ei ther a life time or term-cer tain an nu ity or pen sion on re tire -

ment (Com mon wealth of Aus tra lia, 2003). Fu ture re tir ees who will have

had a lon ger pe riod to ac cu mu late su per an nu a tion sav ings can be ex pected

to be better placed fi nan cially to pur chase a pri vate pen sion that pro vides a

more ad e quate in come stream. Even so, the sort of com pul sion rec om -

mended by the Se lect Com mit tee may be necessary to bring about a mean -

ing ful shift from lump sums to income streams.

Reducing reliance on the public pillar:The age pension in retreat?

A fifth ob jec tive of the re form pro cess was to re duce re li ance on the pub lic

pil lar — the Age Pen sion — as a source of re tire ment in come through

higher in comes pro vided by su per an nu a tion on the one hand and re strict -

ing ac cess to the Age Pen sion by tight en ing el i gi bil ity on the other.

A re cent ex am ple of the tight en ing of Age Pen sion el i gi bil ity was the rais -

ing of the el i gi bil ity age for women from 60 to 60.5 years in 1995. It is now

62.5 years and by 2014 will have in creased to 65 years, the el i gi bil ity age for

men. As the Aus tra lian econ omy has been very buoy ant for well over a de -

cade, the cur rent state of the econ omy is not a fac tor driv ing ef forts to con -

strain fur ther Age Pen sion el i gi bil ity. How ever, the im pli ca tions of pop u la -

tion age ing for height ened lev els of fu ture pub lic ex pen di ture con tinue to




59

weigh heavily on the minds of policymakers. The cur rent (May 2005) Lib -

eral gov ern ment sub scribes to the pes si mis tic out look con cern ing the im -

pact of age ing on pub lic ex pen di tures most re cently por trayed by the Inter -

generational re port (Com mon wealth of Aus tra lia, 2002b) and the Pro duc tiv -

ity Com mis sion (2004). Ac cord ing to the for mer, “de mo graphic spend ing”

by the Com mon wealth gov ern ment is pro jected to rise from 13.9 per cent of

GDP in 2000 to 19.2 per cent by 2041. De spite the con sid er able doubt that

the eco nomic im pacts of pop u la tion age ing on the pub lic purse will be as

dire as these fig ures sug gest (see, for ex am ple, Dowrick and Mc Don ald,

2002), the government remains strongly committed to reducing the take-up

rate of the Age Pension.

Af ter two de cades of re form, the Age Pen sion to day re mains the ma jor

source of re tire ment in come for most Aus tra lians. About 80 per cent of the

el derly pop u la tion cur rently re ceive the Age Pen sion or the Ser vice Pen sion

(Tesfaghiorghis, 2002; De part ment of Fam ily and Com mu nity Ser vices,

2003). Of those, two-thirds re ceive a full pen sion and one-third re ceive a

part pen sion. This level of take-up should not come as a great sur prise given

that the su per an nu a tion sys tem still has a long way to go to reach mat u ra -

tion. But pro jec tions of the fu ture pat tern of age pen sion en ti tle ment in di -

cate that the take-up rate will be sub stan tially higher than was ex pected in

the early years of the re tire ment in come re form pro cess. Thus, the Eco nomic

Plan ning Ad vi sory Coun cil (Tulpule, 1992) ex pected that per haps only

20 per cent of the el derly pop u la tion would be el i gi ble for the Age Pen sion

af ter 30 years, by which time the ef fects of the SG would have been felt. Yet

it has been re cently es ti mated that over an even lon ger pro jec tion pe riod —

by 2050 — the pro por tion of older peo ple re ceiv ing the age pen sion will

have fallen by only 5 per cent age points to 75 per cent. How ever, the bal ance

be tween full and part pen sion re cip i ents will have re versed it self, with

two-thirds re ceiv ing a part pen sion and one-third a full pen sion (Com mon -

wealth of Aus tra lia, 2002a). It should also be borne in mind that de spite this

ex pected fu ture de cline in the take-up rate and the shift in the mix be tween

full and part pen sions, there will still be a large in crease in Age Pen sion ex -

pen di ture be cause of pop u la tion age ing. Clearly, Paul Keating’s ob jec tive of

re plac ing the Age Pen sion as the stan dard form of re tire ment in come for fu -

ture re tir ees (Olsberg, 1994) will only have been partially realized, further

underscoring the importance of substantially increased superannuation.

Increased savings

A fi nal ob jec tive of the re form pro cess was to in crease house hold sav ings

and, in turn, na tional in vest ment. The in tro duc tion of man da tory su per an -



60

nu a tion con tri bu tions has meant that vir tu ally all Aus tra lian work ers now

hold grow ing sums in one or more su per an nu a tion fund ac counts. The scale

of these sav ings is re flected in the size of su per an nu a tion fund assets

discussed earlier in this paper.

In ter est ingly, how ever, de spite the in tro duc tion of the SG, the house hold

sav ings rate in Aus tra lia has con tin ued the down ward trend that be gan

about 30 years ago. It is now less than zero. The rea sons are com plex. Suf fice

it to note that they do not lie in the SG scheme it self (War ren, 2004; Manning,

2005).

“Children” of the revolution

In 1996 a Lib eral gov ern ment was elected un der Prime Min is ter John

Howard. This gov ern ment has broadly pur sued the ob jec tives de scribed in

this pa per. How ever, it has also sought to strengthen the third pil lar of per -

sonal sav ings, but not just for work ers. It has also at tempted to pro vide in -

cen tives for de lay ing re tire ment as a fur ther means of con tain ing the cost of

the Age Pension.

Sev eral re cent ini tia tives il lus trate the Howard gov ern ment’s at tempts to

strengthen the third pil lar of per sonal sav ings. For ex am ple, since July 1999

there has been pro vi sion for an 18 per cent tax re bate on su per an nu a tion

con tri bu tions of up to $A 3000 a year made on be half of an un em ployed or

low-in come spouse (earn ing less than $A 13,800). And from July 2004 any -

one aged be tween 18 and 65 — not just those who are em ployed — can,

within age-based lim its, con trib ute to a su per an nu a tion fund and re ceive a

tax de duc tion. In deed, even early re tir ees who want to top up their su per an -

nu a tion but do not wish to re turn to the workforce can now con tinue to

make su per an nu a tion con tri bu tions up un til age 65 and claim the first

$A 5000 and then 75 per cent of the rest up to the age-based limit as a tax

deduction. What is in ter est ing about these ini tia tives is that they rep re sent

a wear ing away of the re la tion ship be tween work and su per an nu a tion — a

move away from re tire ment sav ing to long-term saving for other purposes,

albeit within the superannuation system.

One of the gov ern ment’s ini tia tives to en cour age peo ple to de lay re tire -

ment is the Pen sion Bo nus Scheme. In tro duced in 1998, this scheme awards

a max i mum tax-free lump sum bo nus of $A 28,363 to peo ple who de fer

claim ing the Age Pen sion and go on work ing for up to five years be yond

pen sion age. They must be el i gi ble for the Age Pen sion to re ceive the bo nus.

Cur rently only 20 per cent of peo ple over Age Pen sion age who are still

work ing are reg is tered for the scheme. In 2003/04, the av er age bonus was

$A 11,324 (Fenech, 2004).




61

In Feb ru ary 2004, the Trea surer, Pe ter Costello, an nounced changes that,

from July 2005, would give peo ple ac cess to su per an nu a tion at or be yond

their pres er va tion age with out hav ing to leave the workforce, pro vided that

su per an nu a tion is taken as a pri vate pen sion in come stream and not a lump

sum. While the de tails of how this will ac tu ally work re main to be an -

nounced, it has been pro moted as an ini tia tive that would be par tic u larly

suited to work ers who wish to re duce their work ing hours and sup ple ment

their earned in come with superannuation pension income.

Conclusion

A re cent study that sought to as sess the “vul ner a bil ity” of 12 in dus tri al ized

coun tries to ris ing old-age de pend ency costs ranked Aus tra lia least vul ner -

a ble ac cord ing to an age ing vul ner a bil ity in dex. This was be cause of, among

other mea sures, its lower pro jected age de pend ency ra tio, com par a tively

low-cost Age Pen sion and the fact that su per an nu a tion ben e fits will reach

11 per cent of gross do mes tic prod uct by 2040, far ex ceed ing the level of any

of the other coun tries (Jack son and Howe, 2003). In light of find ings such as

these, prom i nent ob serv ers (e.g. Har ris, 2004) have held up Aus tra lia’s re -

tire ment in come strat egy of man dat ing su per an nu a tion and roll ing back

pub lic in come sup port in the form of the Age Pen sion as wor thy of em u la -

tion by oth ers. But even as sum ing that the as sump tions and anal y ses un -

der pin ning the de vel op ment of such mea sures as the age ing vul ner a bil ity

in dex are cor rect, this pa per has sought to show that, af ter two de cades of

re form, the changes in Aus tra lia’s re tire ment in come sys tem ei ther have not

realized or cannot expect to realize some of the revolutionary objectives that

were expected of them.

To be sure, the re form pro cess is con tin u ing. The most re cent ex am ple of

this is the pas sage in June 2004 of “choice-of-fund” leg is la tion that al lows,

from mid-2005, em ploy ees to choose the fund into which their SG de fined

con tri bu tions will be de pos ited. This leg is la tion also pro vides for im prove -

ments in dis clo sure re gard ing su per an nu a tion funds’ fee re gimes. But ma -

jor chal lenges re main to be tack led. These in clude, for ex am ple, ex tend ing

su per an nu a tion cov er age to the small pro por tion of the workforce that re -

mains un cov ered, rais ing the man da tory SG con tri bu tion to lev els that will

pro duce an ad e quate re tire ment in come in the fu ture, sub stan tially re duc -

ing and sim pli fy ing the su per an nu a tion “tax bite” that so se ri ously com pro -

mises the re al iza tion of the ad e quacy ob jec tive, guar an tee ing the safety of

re tire ment sav ings held in the now per va sive ac cu mu la tion-type su per an -

nu a tion funds, en sur ing that su per an nu a tion is ac tu ally used as a means of

fund ing an in come stream through out the re tire ment years and, as a re sult



62

of all of these, re duc ing still fur ther the fu ture take-up rate of the Age Pen -

sion. In sum, if Aus tra lia’s re tire ment in come sys tem is to be truly worthy

of emulation, then more zealous fidelity to “revolutionary doctrine” — the

objectives of the reform process — will be necessary.

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The Revolution that Faltered: Two Decades of Reform of Australia's Retirement Income System

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