Protecting the most vulnerable: Pension Reform Now!

As we lurch deeper into economic crisis, the unemployed face a potential backlash as they are particularly vulnerable to the ravages of poverty. Pensioners, aged and disabled are also unfairly disadvantaged and there is an urgent need for reform “across the board”. In the run-up to the next federal budget, the poor and the vulnerable - and those with the decency to stand alongside them - need to mobilise for change.

This paper considers the plight of the most economically vulnerable of our community; and demands change now in the name of kindness and justice.

Aged pensioners are already - and justifiably - mobilising for a “living income”. The Council On The Ageing (COTA) in New South Wales, has called for single aged pension payments of 35 per cent of Male Average Total Weekly Earnings (MATWE).

Theoretically, this is to be linked to a new “Cost of Living in Retirement” benchmarkwhich would translate to $750.60 a fortnight for singles, and $1125.90 a fortnight for couples. For singles, this would amount to $19,515 a year for those living purely on the pension.

Alternatively, the Combined Pensioners and Superannuants Assocation (CPSA), has made the case for a more tightly targeted regime of assistance “to be paid to around 1.5 million pensioners with little or no additional income”.

Charmaine Crowe, speaking on behalf of the organisation, has indicated that these figures refer to “age, disability support pensioners and carers”. Ms Crowe, elaborating further, argued for an extra $80 per week for those single pensioners now on $280 a week. Such a move, providing a modest income to some of the most vulnerable pensioners, according to the CPSA, would cost $3.2 billion.

These proposals must be taken seriously, and should feature prominently in public debate, so that the vulnerable may be delivered from grinding poverty.

The CPSA has defined “low income” as $19,399 a year for singles: enough for a “modest” standard of living. Furthermore, the CPSA has noted that pensioners cannot earn over about $18,200 under the current means test regime; well short of the “modest living” standard of $19,399.

To view this in the appropriate context: such figures stand in contrast to “expenditure on [concessionary] taxation of superannuation” which for the last financial year was “almost $24 billion”. Expenditure on the Age Pension in the same financial year was $22.6 billion. Many superannuation concessions, here, apply to the wealthy.

In light of the hardship suffered by so many, the call for justice, and for governments with better priorities, must go out now.

Compassion and justice for the unemployed

The plight of so many pensioners, aged and carers, must be addressed as a matter of great urgency. And yet the plight of the unemployed is also of critical importance: their financial straits being all the more dire. According to the Brotherhood of St Laurence, Newstart (Australia’s unemployment pension) is $50 less than the Aged Pension every week.

There is a deeply-ingrained sentiment among some sections of the Australian community that the unemployed are “undeserving poor”. Populist rhetoric about “dole-bludging” abounds. Importantly, though, some commentators predict unemployment will rise by an additional 300,000 by mid-2010. As this human tragedy unfolds - now more than ever - we need to counter popular disdain for the unemployed. How can appalling myths and contempt for these people stand in the face of such widespread human misery?

Our response to the crisis ought to be one of social solidarity: a repudiation of the selfish core of the neo-liberal ideology.

The pressing need for reform arises with the backdrop of increases in the cost-of-living, and the moral imperative of providing dignity and quality of life for all.

Reform of pensions - the need for a clear formula

The Greens - in negotiations with Labor - until recently looked to have secured an increase of only $30 a week for single aged pensioners.

These proposals did not come anywhere near the modest standard proposed by the CPSA. Furthermore, they seem to be considered in isolation from other vulnerable pension groups.

The Federal Government’s “Pension Review”, meanwhile, looks set to suggest an increase of $35 a week for single aged pensioners. Recently Treasurer Wayne Swan seemed likely to accept this option, reportedly confirming to The Age that there will be an increase for pensioners.

When pressed, though, Mr Swan's office said that the government had not formally committed to its response to the pension review, and that no firm figure had been “set in stone” yet for any pension groups.

But even supposing there is an increase of $35 a week for pensions “across the board”, there remains the need for a formula that builds upon and extends the previous standard of 25 per cent of Male Total Average Weekly Earnings (MATWE). Without a new formula, immediate changes in pension rates cannot deliver security and certainty for pensioners of all kinds over the long term.

Australian Greens Senator, Rachel Siewert, has made a point of condemning current rates for the unemployed. For singles, the unemployment allowance, Newstart, is only $224.65 a week; for singles with children, it is $243 a week.

Considered on a fortnightly basis, the single unemployed person’s pension is $449.30: more than $100 a fortnight less than the appallingly inadequate single pension for the aged, carers and the disabled.

Some welfare groups, meanwhile, have been reticent in arguing for more ambitious agendas. This February, the Australian Council of Social Services (ACOSS) called on the government to increase the Newstart Allowance (the dole) by $30 a week - to $255.

Among these competing claims for reform, the key to fairness ought to be discerned through ongoing enquiry into the material needs of all pensioners: such as to provide - among other things - for the following:

•  social connectedness, recreation and activity
•  personal development - e.g. through community education and other avenues;
•  access to high quality health care of choice;
•  the means to enjoy a nutritious and varied diet;
•  subsidised pharmaceuticals and free health care;
•  fair and comprehensive allowances for utilities bills;
•  transport expenses;
•  adequate housing - and where applicable - home maintenance and gardening expenses;
•  engagement through the communications and information technology of the day;
•  allowance for contingencies - eg: repairing the fridge, the computer or the TV; and
•  purchase of consumer goods which are in keeping with the accepted standards of the age.

Such standards must be considered essential for all pensioners and allowance recipients: the aged, unemployed, disabled and carers.

Pensioners should not be forced to choose only the worst quality cuts of meat; to use candles instead of electricity; to risk pneumonia because they cannot afford adequate heating; to be lost as to what to do - in the instance of a broken washing machine or fridge. Such austerity simply is not right.

And much more generous provisions should be made for students also: many whom struggle to apply themselves to their studies while working part-time; barely making ends meet. Surely students should be financially secure so as to be free to apply themselves properly to their studies. Not only is it in the interests of individual students: there is also a social benefit from - and investment in - their education.

If support is provided by the Greens, Nick Xenophon, and Family First, one possible response to the impending crisis could be a formulaic increase in the full single rate of all pensions - perhaps to 30 per cent of Male Average Total Weekly Earnings (MATWE). This would amount to $674.52 a fortnight. (an increase of just over $100 on top of the current singles rate of $562.10 a fortnight for aged pensioners). The full single pension rate, in such an instance, would be about $17,537 a year.

While such reform would still not meet the modest standard proposed by COTA and CPSA, the benefit for Newstart pensioners would be especially marked - in comparison with their current circumstances.

Here the point needs to be made - emphatically - that government should aim to eliminate unnecessary poverty and hardship. We need an honest and comprehensive enquiry as to how this may be achieved. The modest standards promoted by the CPSA, here, might comprise the desired outcome.

It is to be hoped that inclusive and comprehensive benchmarks will have been set by the government’s pension review: but there is the danger that standards will be understated for the benefit of the budget bottom line.

Perhaps the most vulnerable pensioners of all ought to be provided with the kind of tightly-targeted cash payments proposed by Charmaine Crowe of the CPSA. Here, we refer to those who are dependant upon their pensions, and without other sources of income.

Importantly in this equation, we must take into account reasonable activity tests on the part of the unemployed. And we should also consider the enormous amounts which are saved every year by the selfless efforts of carers.

These elements considered, what just argument can be made against granting these people a modest yet adequate living income? Just as critically though: the Greens, Family First and progressive voices from within the Labor government need to mobilise behind - and promote - such reform.

No one should be excluded from the struggle, or from the reform agendas of those politicians guided by compassion and justice. All those concerned should co-operate in the spirit of solidarity. “Let no one be left behind.”

by Tristan Ewins

Avoiding austerity - caring for our aged

(part one of a two-part series on the rights of the aged) Considering the rights of aged pensioners All too often, the rights of aged pensioners are overlooked in what is sometimes a callous and cynical political game. For the residential care system - high and low intensity care, there is already an urgent need for reform. This paper, however, will survey the plight of those aged Australians not yet in residential care, but struggling to “make do” in the broader community. Whether dependant upon the Aged Pension, or otherwise supplementing this with continued paid work even beyond the official retirement age, these Australians deserve security, comfort, dignity, social engagement and purpose. Many services and allowances should be made available for elderly Australians after application of a generous and fair means test. We will consider some of these - one at a time - leading towards the conclusion of this paper. Choice in work and retirement To begin, Australia should not respond to the ageing of our population by raising the minimum retirement age beyond 65. Indeed, it would be preferable to set this threshold to 60 years for both men and women. After 40 years - or more - in the workforce, it is reasonable that elderly Australians be free to pursue their passions. This is especially important in cases where that work has involved drudgery. That said, many elderly Australians, given the choice - and the incentive - would continue work. For some, work does provide social engagement and connectedness; as well as opportunities for self-expression, purpose and personal development. Providing tax and welfare incentives for continued work can provide an element of choice. The existing Pension Bonus Scheme is an important move in this direction, but ought to be more generous at the time of its inception. However, Combined Pensioners and Superannuant’s Association Policy Co-ordinator, Charmaine Crowe, has identified a number of problems with the program. At first payments are minimal: $1,373.80 for the first year. Thereafter payments increase more steeply: $5,495.10 for the second year; $12,364 for the third year; and $21,980.40 for the fourth year. After five years payments reach is $34,344.30. (These calculations apply only in the case of singles. Rates for couples can also be found here.) Such provisions may provide reason for pensioners to continue work long beyond the official retirement age. But there is an argument to be made that the process is discriminatory. Perhaps the payments should be more evenly spread, providing a more immediate incentive. In correspondence, Ms Crowe also raised concerns about the severity of the income test for working aged pensioners. To begin with, the current fortnightly income test for aged pensioners “kicks in” at “$134 a fortnight” after which 40c in every dollar is taken from the pension. As Crowe argued, “they take two steps forward and one step back”. Most elderly people have difficulties in finding work. And with a means test so severe as to provide a crushing deterrent - even the prospect of casual work is substantially less appealing. Compared to the preferential treatment of superannuation, treatment of earned income via the Pension Bonus Scheme - is not generous enough over the first couple of years. And for those attempting to supplement their pensions with earned income, the regime is punitive. Superannuation also, more generally, reproduces class stratification in retirement - yet does not provide security for retirees in the event a financial crisis such as the one we are facing now. There is an unreasonable element of risk. A fully public pension fund scheme could address these issues. Quality of life for every pensioner There are many other essential issues regarding the rights of aged pensioners - and the support they deserve - so that each may enjoy true quality of life. As noted earlier, support should be provided for all pensioners - in particular aged pensioners with generous but fair income and assets tests. To begin with, quality heating units and air-conditioning should be provided for aged pensioners, and installed free-of-charge. These units need to be safe and energy efficient. During winter, in particular, elderly Australians are at risk of contracting pneumonia and similarly, air conditioning can be of critical importance - especially in light of the extreme weather seen in Melbourne and Adelaide at the time of writing. Failure to provide essential heating and cooling has the potential (quite literally) to be a matter of life and death. Mobility is also a core contributor to quality of life, including the vital area of social engagement. Free public transport for these men and women must be provided while taxi vouchers ought to be provided where public transport is not a reasonable option. Imposts upon those least able to afford … With the increased costs of living, aged pensions should also be raised to ensure that none of these citizens live in poverty. In some states, construction of private infrastructure will see an explosion of costs into the future. In Victoria, private tollways already provide a significant imposition.; while there is an increasing cost for water - supposedly to “send market signals” - in the context of drought and scarcity. Such measures, though, could hurt those most vulnerable. The proposed desalination plant in Victoria is one such example. Peter Ker, writing in The Age reported that Victoria’s water retailers were set to double the price of water by 2013: with a decision being made in 2009. Yarra Valley Water, for instance, will charge its customers - on average - “about $585 per year”. Such factors as this make plain the need for reform not only of aged pensions, but of all pensions. Reform of pensions There are a number of streams of thought on the reform of the aged pension. The Greens have for some time been arguing for “an increase of $30 a week” for the unemployed and for carers - and also for aged pensioners. Drawing on last year’s figures, such a move would bring single aged pensions up from $562.10 a fortnight to $592. However, there needs to be a specific and persistent formula to make sure pensions keep up with the cost of living. The Council On The Ageing (NSW), for instance, is calling for single aged pension payments of 35 per cent of male average total weekly earnings (MATWE). Specifically, the citizen’s representative group has developed a new “Cost of Living in Retirement” benchmark, which would translate to $750.60 a fortnight for singles, and $1125.90 a fortnight for couples. Alternatively, the Combined Pensioners and Superannuants Assocation, has made the case for a more tightly targeted regime of assistance “to be paid to around 1.5 milllion pensioners with little or no additional income”. More specifically, the CPSA has argued in favour of an extra $80 a week for single pensioners who do not have additional income. These pensioners are those who would otherwise have insufficient income “to purchase essential goods and services”. Finally - in the past, the author has made a personal call for a rate of 30 per cent of the male average total weekly earnings for single recipients. Today, this would amount to $674.52 a fortnight. Rates for couples could be set at 90 per cent of the full single rate for each recipient. (for a total of $607.86 a fortnight each). This proposal is a more modest compromise for the time being. Importantly, such reform could be implemented alongside the CPSA’s proposal for targeted supplements. Even here, though, such redistributive measures could well necessitate tax reform. In the context of a devastated revenue base, and a ballooning deficit, there is little option. Many part self-funded retirees have lost an enormous portion of their income with the crash of the share market, and the rapid decrease in interest rates. In addition to targeted supplements, reform in this field needs also to be accompanied by an easing of means tests at the lower end of the scale. All such demands are achievable given the political will and decency of our politicians. Importantly, by redistributing wealth within the economy, there would be no resultant drop in aggregate demand. If anything, those on lower incomes spend a greater proportion of their wealth. As a consequence, such measures could even increase demand. Labor holds primary responsibility as it is in government. But Malcolm Turnbull, also, has sought to make political capital from the plight of aged pensioners. Instead of calling for tax cuts, perhaps instead he should “put his money where his mouth is”. Other factors in achieving dignity, comfort, purpose and social engagement Support for carers needs to be increased substantially so as to provide - where appropriate - a viable alternative to admission to nursing homes. Such support should be especially generous: given that it would ultimately save money which otherwise would be devoted to more intensive and costly professional care. These reforms should be sufficient to ensure that pensioners not in care do not suffer malnutrition. But for those - for whatever reason - who are unable to shop for their own groceries - continuing support is necessary for “meals on wheels” programs. And here, there is need for thorough-going quality control. To further ameliorate the stress faced by pensioners simply trying to survive and maintain some basic quality of life, more generous subsidies could also be provided for water and energy. Health care, meanwhile, should be made available to pensioners with genuine need with no effective discrimination on the basis of wealth and class. As such, the Pharmaceutical Benefits scheme should be strengthened such as to improve affordability for aged and disability pensioners. Housing stress and social engagement According to Charmaine Crowe, more than 500,000 age and disability support pensioners “rent in the private market”. Many of these are suffering “housing stress”. In some cases, Ms Crowe has “spoken to pensioners paying 70 per cent of their income on rent”. Furthermore, according to the Department of Health and Ageing, in 2008 “close to 6,000 people aged 65 years or more are homeless.” With Prime Minister Kevin Rudd promising $6.6 billion on 20,000 units of “social housing”, surely much of this should go to the most vulnerable in our community. Then there are other - generally under-appreciated issues - that are also central in maintaining quality of life. For some, educational grants could be provided. This could include anything from Higher Education, to “Neighbourhood House” programs. For some this could provide a means of re-entering the labour market. But the aspect of social engagement, or even simply the motive of human development, is more than enough to justify such measures. In a similar vein, “community circles” should be fostered to help prevent elderly citizens “withdrawing” from social life. And a modern program to eliminate poverty must also consider the need for social activity, and inclusion in a digital age - in pace with ever advancing standards and means of communication. Fast internet access is today a central need for most Australians, pensioners included. Calculation of such costs needs to be factored into any attempt at setting a benchmark against poverty. Finally, for those who are capable or interested, gentle fitness activities should be encouraged - and provided free-of-charge, for example, water aerobics. A broader crisis - not only the aged pension Of course, there is a crisis faced by all manner of pensioners - not only aged pension recipients. Areas of concern include: the aged pension, disability support pension, single parents pension, carer’s allowance, Newstart and Austudy. As Australia is drawn into the global fiscal crisis, and the resultant recession, the most vulnerable should not be made to pay the price through austerity. Formulae need to be developed to provide for the needs of pensioners “across the board”. If need be, taxes should be raised: to provide decent and just pension rates, tax rebates and supplements for low income earners, and the construction of major infrastructure projects that will drive quality of life and productivity into the future. During the Great Depression of the 1930s many had to line up at soup kitchens. Desperate battles were fought against evictions, and unemployed workers were exploited for a miserable and threadbare sustenance. But now, in 2009, we need not make the most vulnerable pay for a crisis brought on by greed, systemic failure and the ill-informed ideology of neo-liberalism. Austerity for vulnerable pensioners must not be an option. Yes, there will be need for sacrifice. But assuming real social solidarity, despite the depth of the crisis, the kind of human misery of the 1930s need not be repeated.