Framing principles

1.36 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. As noted by the Brotherhood of St Laurence, removing barriers to mature age workforce participation will assist in ‘ensuring continuing economic growth and will help to ameliorate the financial costs associated with an ageing population’.^[40] While not in itself a framing principle, this sets the background for the Inquiry.

1.37 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.^[41] The ALRC considers that six interlinking principles are strongly evident: participation; independence; self-agency; system stability; system coherence; and fairness. Stakeholders strongly supported this approach. For example, the Australian Industry Group commented that ‘these are valid considerations relating to the contribution of mature aged workers to the workforce and the Australian economy more broadly’.^[42] Similarly, the National Welfare Rights Network stated that the principles provide

a sound platform for the consideration of Commonwealth legislation that may enhance or limit mature age Australians’ participation in the workforce or other productive work (paid or unpaid).^[43]

1.38 Some stakeholders also suggested refinement of, or addition to, these framing principles, as discussed below.

Participation

1.39 ‘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.^[44]

1.40 The principle of ‘participation’ has a number of elements. The Social Inclusion Agenda emphasises the opportunity of all Australians to

Learn by participating in education and training;

Work by participating in employment, in voluntary work and in family and caring;

Engage by connecting with people and using their local community’s resources; and

Have a voice so that they can influence decisions that affect them.^[45]

1.41 The ‘Social Inclusion Principles’ emphasise that ‘maximum participation in economic, social and community life is a defining characteristic of an inclusive society’:

Achieving this outcome for all Australians means delivering policies and programs which support people to learn and strengthen their ability to participate actively in the labour market and in their communities.^[46]

1.42 The value of workforce participation to disadvantaged older persons was emphasised by the Brotherhood of St Laurence:

work provides income, the capacity to build retirement savings, a sense of purpose and a connection with the community. Participation in paid work can increase both financial and social wellbeing, and so reduce the significant risk that people over 65 have of being socially excluded.^[47]

1.43 The Association of Independent Retirees Ltd noted that a person’s workforce participation, and the kinds of choices he or she will make about participation, vary within the wide age range covered by this Inquiry—‘from 45 through 65 into retirement’.

Work to gain income to support an individual and/or family is an imperative between the ages of 45 and retirement; Government support can be an exception. After retirement, participation in paid work becomes one of the options for an individual to participate in the life of society to achieve a fulfilling retirement. The incentive to work is one of a number of competing retirement priorities and is often not the sole imperative driving financial wellbeing. The priority given to work depends on the need to supplement savings, eligibility to access Age Pension support, individual and family interests, and to some extent habit.^[48]

Independence

1.44 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’.^[49]

1.45 Independence also embodies the idea of being able to determine when and at what pace withdrawal from work takes place.^[50] Independence also involves having access to appropriate training to support work participation.

1.46 Two stakeholders suggested that the element of choice should be a specific framing principle of itself.^[51] The Government of South Australia commented that,

While this is partially contained within the concept of ‘independence’, it is worthy of inclusion on its own merits. Older people should have choices about how much they work, it they want to work at all, or whether they involve themselves in ‘service to the community’ through volunteering.^[52]

1.47 National Seniors Australia submitted that

Multiple factors will come into play for each person as they make decisions about work and retirement, eg health, income, caring responsibilities, but artificial barriers based on age should not be amongst them. Irrespective of age, each person should feel they can make the choice about whether or not they work.^[53]

1.48 The Government of South Australia also highlighted that continued workforce participation may not be an option for some older persons, and they require other choices to be available. It considered this particularly pertinent to those ‘in physically demanding occupations’, who

may experience physical discomfort or health concerns, which do not qualify them for a disability pension and, with proposed changes to restrict access to Superannuation, that individual would have no financial choice other than to keep working. Suggested changes to the existing support systems (such as raising the Superannuation preservation age) could have the inadvertent consequence of severely limiting individuals’ choices about how they spend their later years. On this basis, the South Australian Government contends that deliberations should also be informed by how suggested changes will impact upon individuals’ choices.^[54]

1.49 On a related theme, the Australian Council of Trade Unions (ACTU) stressed that choices for older persons needed to be ‘real choices’—about ‘when, where and how they work’. The ACTU pointed to the prevalence of casual employment as undermining ‘meaningful and satisfying’ participation in employment:

Not only is casual and ad hoc employment a source of financial and social insecurity, it is also synonymous with weaker rights and entitlements, poorer career development opportunities and lower job satisfaction. The growth of casual employment has been significant over the past few decades, increasing from 15.8% in 1984 to around 27.7% in 2004. In many cases, casual and insecure employment can lead to social exclusion, rather than social inclusion, by denying workers the chance to participate in the workforce in a meaningful way. This is a particular issue for mature aged workers, who may wish to work more flexible hours but should not have to trade their job security for additional flexibility.^[55]

1.50 Another way choice can play a role is in terms of older people choosing to contribute to society by volunteering. The ALRC recognises that 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 (RSL). It emphasised the negative effect that encouraging or pushing older people into paid work may have on the capacity of their members to volunteer:

The annual economic and social benefit to Australian society of the work of the tens of thousands of RSL volunteers is enormous. These citizens, some in their 90s, give back to the Australian community far more than they receive—and they do it selflessly and without fanfare. They and the volunteers in the many other charitable and like organisations form that part of the ageing Australian population whose ongoing efforts are an exemplar of giving. 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.^[56]

1.51 The ALRC considers that 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

1.52 The principle of ‘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.^[57] 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 also encompasses choice. The ACTU again emphasised ‘meaningful choice’ for older workers in this context—about when and if to retire, ‘as well as the work that they are asked to perform prior to retirement’. It noted that workers in insecure employment are often denied such meaningful choice.^[58]

1.53 Self-agency also embodies the importance of being treated with dignity and respect, as reflected in the National Statement on Social Inclusion.^[59] In its submission, the National Welfare Rights Network emphasised the importance of the values of ‘the inherent dignity and respect due to each person’.^[60]

System stability

1.54 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.^[61]

1.55 Concerns about the pace of change in the area of superannuation were also noted in the Tax Review.^[62] Stakeholders in this Inquiry repeated these concerns and 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. Policy volatility can lead to consumer disenchantment and disengagement.^[63]

1.56 National Seniors Australia 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’. It quoted one of its members:

I am sick and tired of Governments being able to ‘play’ with superannuation especially for us over 50s or more still for the over 55s as it is so close to our retirement where we need certainty.^[64]

1.57 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.^[65]

1.58 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

1.59 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.^[66] A number of stakeholders expressed concerns about the lack of consistency, simplicity or transparency. For example, one considered the following should be a framing principle in the Inquiry: ‘easy to understand—and less of—paperwork!’^[67]

1.60 Complexity, in particular, was identified 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’.^[68]

1.61 The Australian Institute of Superannuation Trustees (AIST) also made the connection between complexity and disengagement, arguing that laws and regulations have become ‘so convoluted that it is arguably a significant reason why the general public is “disengaged” with superannuation’.

It is possible that participants are not so much disengaged as utterly confused. The numerous age-based limits within superannuation cause considerable confusion and are difficult to navigate, before consideration of the penalties for breaching them.^[69]

1.62 With specific reference to these age-based limits in superannuation laws, AIST submitted that:

The complexity of understanding different amounts relative to different ages and that these can then be applied across financial years makes it a veritable minefield. Any process that looks to simplify the system is, in principle, applauded.^[70]

1.63 A further example of complexity, prompting a plea by Olderworkers for ‘a simpler way’, was the fortnightly reporting regime of Centrelink. It noted that ‘[m]any older people want to participate in the workforce, but just find [this regime] an enormous barrier and won’t engage because of it’.^[71] Another stakeholder addressed the difficulties posed by various aspects of the social security system, stating: ‘there should be a simpler and easier to understand format’ and the ‘system should be more transparent’ and less complicated.^[72]

1.64 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 (COTA) 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’.^[73] 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. AIST provided as an example misunderstanding about the interaction of the Age Pension and the income and assets tests, suggesting that

Perhaps better communication of how the Age Pension interacts with these tests could help encourage people back to work as they may realise that they can earn a certain amount of income before their Age Pension is affected.^[74]

Fairness

1.65 ‘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.

Individuals should save or insure during their working lives to provide resources in their retirement. Inevitably under this approach, retirement outcomes will differ for different people, depending on the extent to which they can and do make self-provision.^[75]

1.66 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.^[76] 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. AIST submitted that, while mature age participation is important, ‘any significant changes to age based limits must be weighed against the cost to society in terms of intergenerational equity, loss of confidence in a system that appears to be changing frequently and affordability’.^[77]

1.67 Stakeholders suggested other dimensions to fairness. COTA suggested that ‘equity’ be included.^[78] Another stakeholder suggested including ‘adequacy and security of income’.^[79]

1.68 In considering fairness, the ALRC has noted the ‘gendered difference in ageing’^[80] and the effects of discrimination. The Older Women’s Network New South Wales Inc (OWN) stated that ‘good policy and legal protection’ require an understanding that ‘ageing is experienced differently according to gender’.

The differences between older men and older women are stark. To paraphrase the Australian Human Rights Commission (Cerise et al, 2009) unlike most men, most women accumulate poverty over their lifetime.^[81]

1.69 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 factors include fewer years of wealth building than men, lower savings in superannuation funds, and less superannuation coverage. It cited research indicating that

the single female Age Pensioner is the most disadvantaged, with three-quarters in the bottom half of the income range. Women in the pre-retirement age group (55–64) also had much smaller superannuation savings—62% have less than $20,000 in superannuation, with only a few years left to save before retirement.

It noted that older women particularly ‘have much to gain by continuing to engage in paid work through middle and older age’, where practicable.^[82]

1.70 Two stakeholders raised issues of age and sex discrimination—and its intersection.^[83] The Diversity Council of Australia drew attention to its 2010 survey, which found that age discrimination was ‘the most commonly reported type of discrimination and that women were more likely than men to feel they had been discriminated against because of their age (15% vs 12%)’. It also cited research indicating that

middle-aged women attempting to enter the paid workforce after raising children are often rejected on the ground of either ‘lack of experience’ or being ‘overqualified’ when in fact age is the actual determining factor. These women also experience pressure to appear young and attractive and the combination of age and gender interact to create a subclass of highly vulnerable workers.^[84]

1.71 The Government of South Australia commented that ‘older women face double discrimination based on both their gender and age’, and that ‘stereotypes and assumptions prevent older women from being selected for jobs or from being considered for training and promotional opportunities’.^[85]