Pensions are charity

To my fellow mature Australians, I'd like to explain something. We are not entitled to an age pension merely because we have paid taxes all our life. Pensions are not for everyone; fundamentally they are welfare, reserved for the poor.

Like many others, I have been in continuous employment since 1974 and paid my taxes each year, increasingly fairly considerable sums. But governments have not saved my taxes to pay for my retirement. Instead, those sums were spent each year. In fact, our taxes haven't even covered each year's government spending. Over the past forty years, budget deficits have been the norm, with the country now in debt to the tune of $245 billion. If anything, I and my fellow baby boomers should pay the rest of Australia a lump sum when we retire, to cover the debt we are leaving.

And it's not as though my taxes have been devoted to buying assets that will be in service for decades to come. Successive Commonwealth Governments have been selling off these assets for much of my taxpaying career. Rather, my taxes have been devoted to providing services to the voters of the day, including many from which I've benefitted, such as medical services, university studies and opera performances.

It is true my taxes have also funded the welfare state. But that doesn't represent a down‑payment on a pension. The welfare payments were primarily to parents, the sick, the disabled and the unemployed.

It is also true that my taxes funded age pensions, but this has been a small part of my tax bill. When I started in the workforce, there were more than seven working age Australians for every Australian aged 65 or over. There are still around five working age Australians for every older Australian now. But at some point during my retirement, this ratio will probably fall to less than three.

More to the point, my taxes have not helped every older Australian, because the age pension has never been a universal entitlement. Eligibility has been income‑tested since 1909, and asset‑tested from 1909 to 1976 and then since 1985. This is different from the UK and New Zealand, where pensions are not means tested and funded from special tax contributions.

Given the debt we will leave behind, baby boomers like me have a duty to make the asset test comprehensive. Those who own million dollar houses shouldn't rely on welfare when they can draw on their own wealth, especially knowing they can take out a reverse mortgage and avoid the need to move. A desire to leave the family home to dependents is no justification for receiving welfare funded by the taxes of people who don't even own a home.

We also need to increase the eligibility age for the age pension. Current law will lift this to 67 by 2023 and the Commission of Audit recommends a glacial increase to 70 by 2053. We actually need to get to 70 by 2027. This would mean fewer baby boomers escaping the burden of debt we've helped create. And it would also mean we don't defer fiscal responsibility forever.

Such a change would also belatedly reflect the reality of our lifespans. The eligibility age of 65 was introduced in 1909 when male life expectancy at birth was 55. Now a 65 year old is likely to live to 86. Many will remain active and healthy over this period, and those unable to work will be eligible for the disability support pension. Taxpayers should not be required to pay people of sound body and mind not to work.

Finally, before anyone complains about hypocrisy from a politician, I should point out that the scheme giving retired federal politicians a generous life pension was closed in 2004. New politicians like me contribute to a superannuation fund, the same as everyone else who has a job. And, like everyone else, whether we will need welfare in the form of a pension depends on how much super we manage to save, not how much or how long we have paid tax.

What Australians have an entitlement to is the assets we own; our houses, our superannuation, our savings. If we give in to the notion that everyone is entitled to government handouts when we are not poor, then our assets will surely suffer the death of a thousand taxes. Let's save for our retirement and keep pensions in the charity basket.