Paying for our old age

The result was the introduction in the early 1990s of the system of compulsory private superannuation, whereby employees (but not self-employed people) were effectively obliged to have a portion of what they were paid by their employer handed to a superannuation fund to manage the money so as to provide an income for them later in their life.

The system has evolved in a way that employees can now freely choose a superannuation fund (i.e. who manages their money, including themselves). A number of changes, including to taxation provisions relating to superannuation, have also enhanced the attractiveness of individuals effectively being forced to provide an income for themselves in old age.

Changes in taxation laws have also been passed to encourage voluntary contributions to superannuation funds.

While these measures have been taken in order to lessen dependence on the age pension (and thus relieve pressure on government finances) the pension continues to be payable under quite liberal terms (in respect for example to the income and assets of individuals).

Increasingly over time (and especially once everyone will have spent a working life under the regime of private superannuation) the pension will come to be seen merely as a “safety net” to catch those people who, for whatever reason, have not made adequate provision to self-fund their old age.

It may be that far from the pension being seen as a “right” there will even be a slight stigma attached to receipt of it - an acknowledgement that the recipient has failed somewhere along the line to provide for themselves.

Whether these “three pillars” dictated, encouraged, and provided by the government -constitute an appropriate method for a society to oversee the need for an increasing number of people to fund their old age depends essentially on one’s view of the appropriate function of government.

In respect of the second of the questions raised above, it could be argued that what people do with their time (provided it’s legal) is no one’s business but their own. Currently government (mainly state and local governments) fund activities and programs, many of which are at subsidised, even zero, cost to those who avail themselves of them. This possibly reflects the widespread view that older people are disadvantaged and in particular, those who are heavily or totally reliant on the pension should have what is provided to them by government “topped up”.

Nevertheless, could it be argued that in a world where individuals accept the idea that  they should act themselves to fund their old age (while a “safety net” should be provided to prevent hardship) and that they need to explicitly think about how they occupy their lives, the market should be left to respond to needs and demands. If this is the case, the most a government should do is undertake the minimal task of informing people of the need for, and the options available to them, to take action for themselves.