Framing principles

In the context of Australia’s ageing population, the Government’s overarching objective is to keep people in work, and paying taxes, longer—rather than receiving the Age Pension—and to support people into self-funded retirement. While not in itself a framing principle, this sets the background for the Inquiry.

In defining the new policy settings in the form of specific framing principles for the Inquiry, assistance may be derived from both the international and domestic arenas.^[17] The ALRC considers that six interlinking principles are strongly evident:

• participation;
• independence;
• self-agency;
• system stability;
• system coherence; and
• fairness.

Participation

‘Participation’ reflects the Australian Government’s ‘Social Inclusion Agenda’:

The Australian Government’s vision of a socially inclusive society is one in which all Australians feel valued and have the opportunity to participate fully in the life of our society.^[18]

The ‘Social Inclusion Principles’ emphasise that ‘maximum participation in economic, social and community life is a defining characteristic of an inclusive society’. Achieving this involves policies and programs supporting people to actively participate in the workforce and in communities.^[19]

The principle of participation may be particularly relevant for disadvantaged older persons. Workforce participation can increase financial and social wellbeing, and reduce the significant risk of social exclusion, for this cohort.^[20] As noted by the Brotherhood of St Laurence, workforce participation can provide ‘income, the capacity to build retirement savings, a sense of purpose and a connection with the community’.^[21]

Independence

The principle of ‘independence’ is related to the above principle of participation: ‘supporting people to take independent decisions and to negotiate priorities through participation’ is critical to ‘capacity building’.^[22]

Independence also embodies the idea of a person being able to determine when and at what pace to withdraw from work.^[23] National Seniors Australia submitted that while multiple factors affect decisions about work—such as health, income and caring responsibilities—‘artificial barriers based on age should not be amongst them’.^[24] The ability to make decisions about work is also about choice—a principle encompassed by independence. The Australian Council of Trade Unions has stressed that choices for older persons need to be ‘real choices’ about ‘when, where and how they work’.^[25]

Another way choice can play a role is in terms of older people choosing to contribute to society by volunteering. There is a policy tension within the Terms of Reference between paid work and ‘other productive work’ that is unpaid, though valuable. This tension was demonstrated in the submission by the Returned & Services League of Australia Ltd:

Achieving the overarching government objective of keeping people in work and paying taxes longer will inevitably impact on the number of Australians who, after retirement, work long hours as volunteers for no reward for the overall good of the nation. It is not unreasonable to postulate that if Australia’s volunteers ceased to give so generously of their time, expertise and effort, the nation would be very much the poorer not least because of the increase this would pose on the public purse.^[26]

Again, choice can be a crucial element here: choice about the time and pace at which to withdraw from paid work, and choice about using the time around paid work—or after withdrawal from paid work—to contribute productively in other ways.

Self-agency

‘Self-agency’ was a key principle identified in the ALRC’s Inquiry into family violence and Commonwealth laws. An individual’s right to make decisions about matters affecting him or her should be respected.^[27] The principle of self-agency is one that underpins the idea of ‘independence’ and of ‘participation’, as considered above. Like the principle of independence, self-agency encompasses choice. Self-agency also embodies the importance of being treated with dignity and respect, as reflected in the National Statement on Social Inclusion.^[28]

System stability

The principle of ‘system stability’ is particularly relevant in areas like superannuation. The Super System Review panel stated that:

Superannuation is a large and complex system with an increasingly important social and macroeconomic dimension. It must be regulated and administered coherently and rule changes, including to taxation rules, should be made sparingly and in a way that engenders member confidence.^[29]

Stakeholders in this Inquiry noted the consequences of a lack of stability. National Seniors Australia, for example, submitted that if the Government wishes to encourage effective planning for later life, this is ‘only possible in a predictable and stable environment’. It gave the example of repeated changes to superannuation, which ‘erode community confidence in the superannuation system and encourage more Australians to minimise, rather than maximise, their superannuation savings’—a matter they submitted ‘will ultimately be to the detriment of the whole community’.^[30]

While system stability has particular relevance in the retirement income context, it is also an important principle more generally. As noted by the Australian Chamber of Commerce and Industry (ACCI):

Many Commonwealth programs impinge on planning decisions, particularly where there are marginal differences between the financial benefits of working and not working. This in turn affects continuity of employment and flexibility options. Both employers and employees require reasonable stability for productive employment arrangements to endure.^[31]

Other related principles are ‘coherence’ and ‘fairness’, which may be seen as aspects of a stable system, but also go further. They concern how the system operates in terms of impact on those affected and more broadly within the Australian community.

System coherence

The Tax Review identified ‘system coherence’ as a priority in its review of the retirement income system, by which was meant system consistency, simplicity and transparency for individuals.^[32]

A number of stakeholders in this Inquiry expressed concerns about the lack of consistency, simplicity or transparency.^[33] Stakeholders identified complexity, in particular, as a cause of disengagement in paid work. ACCI, for example, stated that the complexity and wide array of laws that may affect an older person’s decision to remain or re-enter the workforce ‘can often tip the balance against a decision to continue working’.^[34]

Accessible information is another aspect of system coherence. Its lack was identified as an element of complexity, leading to poor understanding of various rules and entitlements. COTA Australia pointed to a number of examples across the various areas of the Inquiry, saying that ‘more effort needs to be put into providing easy to understand, clear and concise information’.^[35] Where there is a lack of understanding, ‘myths’ may arise, leading people to decide not to undertake paid work for fear of losing certain benefits.^[36]

Fairness

‘Fairness’ can be a consequence of coherence, consistency and the stability of the relevant systems involved. It can also reflect a commitment to a fair distribution of national resources and a balancing of responsibility between individuals and government. The Tax Review panel advocated that the ‘three-pillar architecture’ of Australia’s retirement income system:

should be founded on the presumption that the responsibility for providing for retirement is shared between government and individuals.

Governments should provide for minimum and essential needs and facilitate self-provision. Each of these goals should be pursued in an equitable and targeted way.^[37]

A further aspect is fairness between generations—that is, ‘intergenerational equity’. Issues important to intergenerational equity include the management of public debt and the funding of pension schemes.^[38] Consistency may be considered an important component of intergenerational equity—persons of working age may accept the tax burden of supporting the retirement incomes of others because they anticipate similar support when they become older.

In considering fairness, the ALRC has had regard to the ‘gendered difference in ageing’.^[39] The Older Women’s Network New South Wales Inc (OWN) stated that ‘good policy and legal protection’ requires an understanding that ‘ageing is experienced differently according to gender’. It submitted that ‘unlike most men, most women accumulate poverty over their lifetime’.^[40] Similarly, the Brotherhood of St Laurence described the compounding factors that place women over age 65—particularly single women—‘at risk of having fewer assets and lower income’. These include fewer years of wealth building than men, lower savings in superannuation funds, and less superannuation coverage.^[41]

Another issue relevant to fairness that can affect older persons is discrimination. In its submission, the Diversity Council of Australia referred to a finding of its 2010 survey that age discrimination was ‘the most commonly reported type of discrimination’.^[42] The intersection of age and sex discrimination is a particular issue affecting older women. The Diversity Council’s survey indicated that ‘women were more likely than men to feel they had been discriminated against because of their age’.^[43] The Government of South Australia also commented on this ‘double discrimination’ based on gender and age, noting that ‘stereotypes and assumptions prevent older women from being selected for jobs or from being considered for training and promotional opportunities’.^[44]