Academic journal article Health Sociology Review

The Certainty of Uncertainty: Superannuation and Globalization

Academic journal article Health Sociology Review

The Certainty of Uncertainty: Superannuation and Globalization

Article excerpt


To obviate the fi nancial losses that would otherwise accompany leaving paid work in old age, most countries have developed retirement income systems. These systems emerged in response to such factors as the increasing inability to work with age, the myopic failure of many individuals to prepare for an extended period of retirement if left to their own devices, and the recognition that industrialised free market economies 'generate insecurity from which their citizens need some protection' (Schulz and Binstock 2006). They employ a limited range of governmental, quasi-governmental and private mechanisms that, to varying degrees, replace retirees' pre-retirement earnings and seek to institutionalise certain, or stable, sources of income support throughout what is often a very lengthy period of retirement (Kingson and Williamson 2001). They thus seek to protect workers against the fi nancial risk of retirement in the face of numerous uncertainties such as the retiree's age of death, future income needs and future rates of infl ation and economic growth (Schulz 2001).

Australia has similarly long sought to protect its workers from the risk of a loss of earned income due to retirement. Retirement income arrangements in Australia have generally been thought of as being comprised of three pillars: the public pillar of the means-tested Age Pension, the market pillar of occupational superannuation, and a third pillar of voluntary personal savings (including owner-occupied housing). The latter two pillars are variably government-subsidised. Borowski (2008) has suggested that a fourth pillar has emerged in recent years, viz., continued employment.

As a means-tested publicly-funded source of retirement income, the Age Pension is a stable income source that fl uctuates only with changes in the personal circumstances of recipients (changes in income and/or assets). Currently, about 83% of the population of Age Pension age receive either a full pension (68% of those of Age Pension age) or a part pension (15%). This includes recipients of the Age Pension, Service Pension and War Widows Pension (KPMG and the Brotherhood of St Laurence 2007).

The last year or so witnessed considerable debate about the adequacy of the Age Pension. Indeed, the Federal Government ultimately recognised that the Age Pension was unable to lift signifi cant numbers of older Australian out of poverty. Thus, underpinned by research fi ndings which showed, for instance, that almost half of all lone older persons live in poverty (Tanton et al 2008), the government fi nally increased the Age Pension in its May 2009 Budget. The increases will take effect in September 2009 and will provide payments equivalent to 27.7% of average wages for single recipients and 41% for a couple.

The role of the market pillar of occupational superannuation has become progressively more prominent since the 1980s. In the 1986 national wage case, the Australian Council of Trade Unions sought, in lieu of a pay rise, a 3% wage equivalent in the form of employer-paid superannuation contributions for employees working under national awards. The (then existing) Conciliation and Arbitration Commission endorsed employer-employee negotiations for either new or improved superannuation based on 'award superannuation' (the 3% wage equivalent). Award superannuation resulted in coverage increasing to 79% of all employees by the end of the 1980s (APRA 2007:3).

The market pillar was substantially strengthened as a result of the Superannuation Guarantee (SG) Charge Act of 1992, which mandated a 3% employer contribution to workers' individual retirement savings accounts held in superannuation funds. Higher levels of mandatory employer contributions were progressively phased in over the next decade and reached 9% in 2002 where they have remained.

The driving force behind this new superannuation regime was Treasurer and, subsequently, Prime Minister, Paul Keating. …

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