Just deserts? 'Privatisation' and the history of deservingness in Australia's retirement incomes system.

Hamilton, Myra

Introduction

Over the last few decades, changes in retirement incomes policy across a number of countries have seen governments encourage individuals to provide for their own old age from private means. In Australia, like many other countries, the shift towards individualised responsibility has involved a greater emphasis on private or occupational pensions supported by generous taxation concessions. In Australia, the central pillar of the retirement incomes system is a social assistance-style public pension that is flat rate and means-tested. Since the early 1990s, the public pension has been supplemented by a system of compulsory contributions to occupational pensions, known as the Superannuation Guarantee. The Superannuation Guarantee is a fully-funded, defined contribution system of occupational pensions that compels employers to contribute nine per cent (rising to 12 per cent by 2020) of their employees' incomes into approved individual savings accounts. The superannuation savings are taxed concessionally at the time of contribution, during accumulation, and at the withdrawal of the balance. The introduction of the Superannuation Guarantee led to a dramatic increase in occupational pension coverage (Shaver 2001: 188). In 1974, 36 per cent of men and 15 per cent of women had occupational pensions, primarily in the public sector (Nielson & Harris 2010); by 2007, 81 per cent of men and 74 per cent of women aged 15-69 had occupational pensions (ABS 2012).

Mandated occupational superannuation coincided with a shift from defined benefit schemes to defined contribution schemes, which transferred the risk associated with retirement pension accumulation from the employer (who, in a defined benefit scheme, guarantees a payment of a certain value to their employee upon retirement) to the employee (who in a defined contribution scheme receives in retirement whatever has been invested in the fund by their employer, therefore bearing the investment risk) (Olsberg 1997: 31-2). This has been accompanied by increases to the age at which individuals become eligible for the state pension, to increase the number of years of contributions to private pensions and reduce the number of years of reliance on the state. These changes have taken place within a discourse that valorises the 'self-sufficient' citizen who funds their retirement with private savings. The changes have also taken place within a discourse of fiscal restraint, whereby the rationale for the promotion of private saving is the reduction in state expenditure on pensions (National Commission of Audit 1996; Department of Treasury 2001).

Internationally (Feldstein 1998; Orenstein 2008; Ebbinghaus 2011) and in Australia (Gallery et al. 1996; Jefferson & Preston 2005; Bonasia & Napolitano 2006), this process has been described as the 'privatisation' of pensions, a shift that has assigned a greater share of responsibility for funding old age to the individual and a greater role in the delivery of support to the private sector (Shaver 2001). In Australia, the analysis of this shift has focussed on the extent to which compulsory superannuation can address the fiscal implications of an ageing population (Davidson & Guest 2007; Guest 2008; Keegan 2011), and on the way that individuals understand and manage superannuation and are exposed to its associated financial risks (Bateman & Thorpe 2008; Borowski 2009; Gerrans et al. 2009). Researchers have also examined how superannuation creates inequitable outcomes, especially for women (Jefferson 2005; Olsberg 2005; Jefferson & Preston 2005; Keegan & Kelly 2011; Spies-Butcher & Stebbing 2011) in part through the regressive nature of tax concessions (Spies-Butcher & Stebbing 2011; Davidson 2012). In sum, attempts to describe these policy changes have focussed on the way that they alter the structure of Australia's retirement incomes system by individualising responsibility for funding old age and shifting this responsibility from the public to the private sphere, and the implications of doing so.

This paper seeks to deepen the analysis of these policy changes by situating them in their historical context to explore what they have meant for the nature and relative importance of the principles underpinning Australia's retirement incomes system. Moving beyond the focus on the contemporary shift towards individualisation, it begins by developing a framework based on the principles on which Australia's retirement incomes system was built in the late 19th century--deservingness and need. Drawing on this framework, it then traces the development of the retirement incomes system throughout the 20th and into the 21st century to understand how the principles have evolved historically. This approach provides a deeper understanding not only of how the contemporary policy changes have altered the structure of Australia's retirement incomes system, but also of how these changes were made possible and where the continuities lie. The focus on the historical continuities as well as the changes in the contemporary policy trajectory provides a new way of thinking about this reform process. The paper describes this process as 'state-supported private saving'. While the paper focuses on Australia, it draws on international research to highlight the global significance of these issues.

Deservingness and need as principles of pension provision

The principles of deservingness and need provide a useful conceptual framework through which to understand changes to Australia's retirement incomes system. The two principles have played, and continue to play, an important role in informing the development and transformation of the modern welfare state (Plant et al. 1980; Rowlingson & Connor 2011). Since the emergence of payments such as old age pensions at the end of the 19th century, deservingness and need have been central both as principles of distributive justice and reasons for welfare provision underpinning the introduction and transformation of social security payments. There is, however, deep and longstanding conflict about which of these principles should take priority in the design of social security payments (Campbell 1974; Plant et al. 1980; Taylor-Gooby 1991). The outcome of this conflict has implications for policy design. If a payment is underpinned by the principle of provision based on need, access is likely to be tied to a means test. The debate then becomes one about what level of need should trigger state support and the means test is adjusted accordingly. If a payment is underpinned by the principle of deservingness, access can be based on a wide range of activities, dispositions or community membership depending on the dominant definition of deservingness. Access to a payment can be based both on an assessment of need and an assessment of some kind of deservingness.

At the conceptual level, much has been made of which of these principles provides the more legitimate basis of social provision (Campbell 1974; Plant et al. 1980; van Oorschot 2000). Meeting human need is commonly understood as the central objective of the welfare state and the argument that the state has an obligation to prevent destitution has been an important principle underpinning the emergence of social provision (Plant et al. 1980; Taylor-Gooby 1991). But some have argued that 'need is a criterion of justice only where it happens to be associated in some way with our ideas of merit and demerit' (Campbell 1974: 14). The result is a complex relationship between the principles of need and desert, because '[t]hose who are in need are not necessarily meritorious' (Plant et al. 1980: 63) and those who are 'meritorious' are not necessarily in need. The appropriate balance of the principles of need and deservingness underpinning state support--and how they should govern access to a payment --has been the subject of widespread debate since the earliest deliberations about social provision in the late 19th century (Kewley 1980; Thane 2000). Debate about need centred on whether a payment should be based on need or destitution (understood as the complete exhaustion of an individual's resources), resulting in a liberal or strict means test respectively. But the debates about deservingness were somewhat more complex because of the range of definitions of deservingness and how they should be applied to govern access to different forms of social provision.

There have been several attempts to develop 'deservingness criteria' by which entitlement to social support may be judged, which have clustered around four criteria. The first criterion is an individual's control of, or responsibility for, their neediness, with more control resulting in less deservingness (van Oorschot 2000: 36). This is described as the 'locus of responsibility' (Albrekt Larsen 2006: 48). A second is identity, understood as belonging to a culturally or geographically defined group, where the closer to the group, the more deserving the individual is perceived to be (Rowlingson & Connor 2011: 438). A third is attitude and refers to an individual's response to receipt of social support, whereby the more appreciative or 'compliant' the individual is, the more deserving they are of support (van Oorschot 2000: 36). A fourth criterion is reciprocity which refers to the extent to which an individual has 'given back' in return for their social support, whereby the more they are perceived to have reciprocated, the more deserving they are perceived to be (van Oorschot 2000: 36). Character is also an important deservingness criterion for welfare provision that is not captured in the above attempts to map the criteria of deservingness. Character refers to the extent to which an individual claiming social support behaves responsibly and avoids excess. This criterion was particularly important during Victorian times in the separation of the deserving and undeserving poor (Kewley 1980; Thane 2000). These criteria underpin state support to the needy in different ways.

While deservingness criteria have focussed on the poor, state support to the wealthy is also governed by deservingness principles (Rowlingson & Connor 2011). State support to the wealthy, such as tax concessions on private pensions that largely accrue at the top of the income scale (Hughes & Sinfield 2004), are often provided according to deservingness principles that operate independently of need. Rowlingson and Connor set out three deservingness criteria that underpin state support to the wealthy: rewarding merit or hard work, or the principle that hard work and taking opportunities to do well are 'positive social goods' that deserve to be rewarded; incentivising wealth creation, or the suggestion that people need to be incentivised to work hard; and character, or the principle that behaving responsibly, generously or avoiding excess are signs of deservingness (Rowlingson & Connor 2011:441-446). (1)

In public opinion surveys, older people are typically perceived to be the recipient group that is most deserving of state support (van Oorschot 2005; Albrekt Larsen 2006). Since the emergence of the first provisions for old age in Australia (and other liberal regimes like Britain and New Zealand) a number of deservingness criteria have shaped entitlement to the public age pensions. These criteria have interacted with the principle of need in legislative provisions governing entitlement to support in old age. These criteria did not only govern access to the public age pension. As superannuation became a larger part of Australia's retirement incomes system, state support for private saving would also come to be underpinned by deservingness criteria, although this time divorced from concepts of need.

Deservingness and need in the history of retirement incomes policy in Australia

Calls for Australia's first comprehensive system of provision for old age arose amid concern about the problem of old age poverty. At the end of the 19th century, there was growing awareness among policymakers of the entrenched problem of destitution in old age and the strained capacity of the charitable sector to respond (Jones 1983; Unikoski 1989). There emerged a sense that the state had a paternalistic duty to provide for its older citizens (Kewley 1980: 6). At the same time, there was growing public sentiment that older people were not merely in need of support, they were deserving of it. The recognition of both unmet need and deservingness in the older population mobilised public and political support for some form of government scheme for older age.

In response to growing momentum behind a government scheme, two types of old age pension scheme were proposed: a non-contributory social assistance scheme and a contributory social insurance scheme. Advocates of a contributory scheme suggested that it would be a more appropriate way of directing support to the deserving, creating a payment based on 'logic' and 'thrift' rather than 'pity' and benevolence' (Kewley 1980: 10). However, an insurance scheme was dismissed for several reasons: in a time of dire economic conditions and high unemployment, there was no use encouraging thrift; the scheme would not meet the needs of those precluded from contributing throughout the lifecourse, such as many women; and contributory insurance would do little to address the real and extensive problem of those older citizens who were destitute now, without the time or resources to make contributions (Dixon 1977: 11; Unikoski 1989: 6). As a consequence, a non-contributory social assistance scheme--the primary objective of which would be poverty alleviation rather than income replacement in old age--became the favoured approach and a national payment of this kind was introduced in 1908. (2)

The flat rate, social assistance-style age pension provided a payment to men and women once they reached the age of 65 (changed to 60 for women in 1910 to account for the age difference between married partners, enabling pension eligibility at roughly the same time) (Cass 2003: 257). Eligibility for the age pension was based on need, assessed according to a means test. In the debates leading up to the introduction of the age pension a universal, free-of-means-test payment was mooted as an option that would elevate the age pension from existing forms of charitable relief that were directed to the destitute and ensure that all 'deserving' citizens were entitled to the payment (Kewley 1980: 7,15). However, when the payment was introduced, eligibility was subject to a means test to limit the financial pressure on government (Kewley 1980: 7). The result was a means test with moderate income and asset limits so that, unlike charitable relief, individuals with reasonable levels of means could claim the payment (in this paper, 'means' encompasses both income and assets).

However, the desire to provide a payment that simultaneously met the needs of the vulnerable and rewarded the deserving meant that eligibility was also closely linked to deservingness. The new payment created a right to have need met, but a number of deservingness criteria meant that this right was to be 'earned' by deserving citizens. This enshrined a multi-layered conception of deservingness in Australia's retirement incomes system. At the turn of the 20th century, growing public and government support for an old age pension was based on the separation of the 'impotent' poor--those who were incapable of work and so poor through no fault of their own--and the 'able-bodied poor'--those who were considered to be capable of work and therefore assumed to be poor because of lazy or irresponsible behaviour. The 'old and infirm', like deserted women and the sick (Unikoski 1989: 5), were perceived to be blameless for their destitution. Support for the introduction of a public age pension therefore emerged from a growing sense that the locus of responsibility did not lie with older people and that they were therefore deserving of state support. I will call this criterion 'deservingness-as-responsibility'.

During debates about the introduction of the age pension, support for the new payment was also strongly linked to the idea that older people had contributed to the nation throughout their lives and therefore deserved to be rewarded. The idea that older people had made generalised contributions to the nation through paid work, military service, the payment of taxes and caring work pervaded debates at the time and provided a strong legitimising rationale for the introduction of the pension. For example, one supporter of an age pension, E. W. O'Sullivan--chairman of a select committee of the New South Wales Legislative Assembly set up to consider the introduction of an age pension in that colony--declared in 1897 that

[a]n old-age pension is a right which every man and woman at the age of 60 can claim at the hands of the state they have served ... We do not want anything in the nature of outdoor relief, or in the form of a dole ... We are dealing with men and women outside who walk with the elastic tread of free people, and have a right to come to the State they have so well served and claim this pension just the same as a soldier or a sailor would (cited in Kewley 1980: 6).

In this sense entitlement to the age pension was constructed as support in return for service to the nation. I will call this criterion 'deservingness-as-reciprocity'. Unlike in social insurance schemes like the one in Germany at the time, the structure of Australia's social assistance scheme meant that the principle of access based on reciprocal contributions existed discursively but was not legislatively enshrined.

Upon its introduction in 1908, eligibility for the age pension was conditional on clauses designed to ensure that recipients were of good moral character (Jordan 1989: 12). The clauses--known as the moral provisions--excluded from eligibility those who had deserted their spouse within five years prior to making a claim, had deliberately deprived themselves of property in order to claim the pension, were inmates of a benevolent asylum or charitable institution (except in special circumstances), and those who were not of 'good character', a phrase that was not defined in the legislation and which could therefore be applied with discretion. Pensioners found guilty of alcohol consumption or any other offence punishable by one month in prison or more were required to forfeit their pension for a specified time (Kewley 1980: 15), suggesting the application of the moral provisions to both previous and current behaviour. Access to the payment was therefore governed by the principle of deservingness based on character. I will call this criterion 'deservingness-as-character'.

There were also exclusionary clauses that made access conditional on certain requirements about residency or ethnicity. Under these clauses, a recipient of the new payment was required to have resided in Australia for the previous 25 years or more. The payment was not available to 'Aliens', 'Asiatics' born outside of Australia, and some groups of Aboriginal people (Kewley 1980: 15). Hence access to the payment was also governed by the principle of deservingness based on identity, whereby eligibility hinged on the claimant belonging to a culturally and geographically defined group. I will call this criterion 'deservingness-as-identity'.

Hence, at the introduction of the age pension, access was based on several forms of deservingness that framed discussions of the payment and regulated access to it. Provisions attached to the age pension regulated access based on character and identity. Entitlement to the payment was also closely tied to, but did not legislatively depend on, the sense that older people were not responsible for their situation of need and the sense that they had contributed retrospectively to the nation. Policymakers at the time expressed their desire to introduce a payment that was not means tested; a payment to which access would be based on deservingness alone. However, cost constraints resulted in the imposition of a means test, which raised concerns that some deserving citizens were excluded from eligibility. This created a situation in which the deservingness clauses could exclude the most 'needy' and the means test could exclude those perceived to be most deserving.

The uneasy relationship between deservingness and need created difficulties for the new age pension scheme. Its introduction was immediately followed by challenges to its legitimacy that centred on the perception that the means test was punishing one group of deserving citizens - those with higher means --and was therefore incongruent with the deservingness clauses that were designed to limit pension eligibility to 'good' citizens. Concerns were raised that a means test may stifle individual incentive (Dixon 1977: 7). Including those with higher means in eligibility, it was thought, would reward their (assumed) merit and hard work in acquiring their means, and further incentivise wealth creation. I will combine these two closely aligned criteria and call them 'deservingness-as-wealth-creation'. There emerged a problem of how to reward this group of deserving citizens in a means-tested social assistance-style scheme.

The result was two reform processes that would come to drive the development of the age pension throughout the 20th century: The first would be the long and gradual process of liberalising the means test to make citizens with greater means eligible for the age pension. As the focus on deservingness-as-wealth-creation became more central, other forms of deservingness became less important. In this second trend, deservingness-as-character enshrined in the moral provisions and deservingness-as-identity enshrined in the exclusionary clauses would start to become less relevant and the normative concept of citizenship more inclusive, and these provisions would gradually be repealed or liberalised. These two trends came to shape the development of Australia's retirement incomes system throughout each stage of the 20th century.

The early years

The liberalisation of the means test began soon after the introduction of the age pension. In the early years, the most significant change to the means test came in 1912 when a pensioner's home became exempt from the calculation of their pension entitlement (Kewley 1980: 19). For the most part, this was due to the perception that the inclusion of the home in the calculation of the pension was penalising the prudence of some of the nation's most deserving citizens because of their wealth (House of Representatives 1912: 6,973). This significantly altered the functioning of the means test and began to draw citizens with higher means into entitlement, increasing the eligible population. This change was succeeded by a number of increases to the income and assets test limits peppered throughout the early parts of the century, each time extending pension eligibility to citizens with higher means.

The relaxation of the moral provisions and exclusionary clauses began only two weeks after the introduction of the age pension, with a change to the residency requirements. The change reduced from 25 to 20 the number of years that an applicant must have resided in Australia in order to qualify for a pension. Then, in 1912, 'Aliens' who met the other eligibility requirements became eligible for the age pension immediately upon naturalisation, rather than being required to wait three years (Kewley 1980: 18-19). Both changes created a more inclusive definition of 'deservingness-as-identity'.

As the age pension was becoming entrenched as the cornerstone of Australia's retirement incomes system, a very small proportion of citizens (fewer than 5 per cent of workers in the public sector, where superannuation coverage was strongest) were making contributions to occupational superannuation accounts (Olsberg 1997: 59). In 1915 there emerged some important changes to the treatment of superannuation. The Commonwealth Government introduced an income tax, payable on individual income and business profits, but the income thresholds meant that most wage earners did not pay the tax. The legislation included a number of tax concessions for superannuation contributions, (3) such as tax deductions for contributions to superannuation up to a cap (Nielson & Harris 2010), tax exemptions for interest earned on investments in superannuation, and tax exemptions for superannuation withdrawn as a lump sum (Stebbing 2011). As the concessions were only available to those who paid tax and most wage earners did not pay tax, the superannuation concessions were only accessible to a small number of wealthier citizens (mainly high income males) (Stebbing 2011; Olsberg 1997: 59, 61). While these concessions were only available to a minority of citizens, and were largely absent from parliamentary debates, they were an early expression of deservingness-as-wealth-creation and set the foundations for what would become a central part of Australia's retirement incomes infrastructure towards the end of the 20th century.

Post World War Two

By the middle of the 20th century, income and asset limits on the means test continued to increase and taper rates were introduced so that income had a more gradual impact on pension entitlement. (4) These changes were in part a response to ongoing concerns that stricter means test limits were punishing the deserving because of their means (Kewley 1980: 63). However, each time the test was liberalised, a new group of citizens missed out on eligibility by a small margin and would apply pressure for further liberalisation of the means test. As a result, a pledge by both major parties to phase out the test built growing momentum (Kewley 1980: 64). The rationale behind phasing out the means test, however, differed across party-political lines. The Labor Party advocated the abolition of the means test in favour of a universally accessible social assistance payment for which eligibility was determined by citizenship rather than means (Kewley 1980: 64).

In contrast, the conservative parties advocated the abolition of the means test in favour of the introduction of a contributory social insurance scheme. In the first half of the 20th century, conservative parties advocated a social insurance scheme as a method of directing support to those who had contributed based on a new expression of deservingness-as-reciprocity, This was based on the argument that the tighter link between contribution and benefit would create a greater sense of deservingness than a benefit indirectly linked to generalised contributions such as taxpaying or caring. However, their attempts to introduce such a scheme were unsuccessful. In 1928, legislation for a national insurance scheme introduced into Parliament met with resistance from friendly societies, employers concerned about wage rises and States concerned about increasing Commonwealth powers. Thus the Bill failed to pass through Parliament (Bateman & Piggott 1996: 8). Debate about a contributory scheme continued and the (conservative) United Australia Party (UAP) introduced a Bill for a national insurance scheme in 1938 (Kewley 1980: 10). The Bill passed through Parliament but when the attention of the UAP Government turned to the war later in the year the scheme was aborted (Borowski & Olsberg 2007: 6).

In 1941, the UAP Government set up a parliamentary committee to examine the desirability of a social insurance scheme to cover all contingencies, not just old age (Shaver 1990: 98). However, the urgency of providing for those in need during the war, such as widows, prompted the committee to support a social assistance-style model funded by a new system of progressive income taxation. In response, a federal income taxation scheme was introduced in 1942 and a proportion of the revenue earmarked for spending on income support (Shaver 1987: 429). This association of income taxation with social security payments created a 'symbolic connection' between contribution and benefit (Shaver 1990: 112) but a truly contributory scheme was ultimately discarded for its failure to meet need. Hence while a contributory scheme would strengthen the principles of provision based on deservingness-as-wealth-creation and deservingness-as-reciprocity, the failure to introduce such a scheme in the mid-20th century resulted from the continued policy imperative to meet need.

By mid-way through the 20th century, the population eligible for social assistance had increased so dramatically that the provision of the age pension was now a large-scale, administratively complex operation in which the state had less capacity (and inclination) to assess individual character, and the 'good character' test was applied less rigidly (Jordan 1989: 38). In 1947, all of the more specific provisions about drunkenness and imprisonment, except the exclusion of those guilty of deserting their families, were omitted. However, the new Act still specified that any recipient of an age pension should be 'of good character' and 'deserving of a pension' (Jordan 1989: 40).

By this stage in the history of Australia's retirement incomes system, the emphasis was shifting from disqualifying undeserving individuals from eligibility for the age pension towards including the deserving. The tension between deservingness and need was gradually being resolved by increasing the means test limits to include citizens with greater means in entitlement for the age pension. Character and identity were becoming less influential as deservingness criteria as the debate shifted to one that focused on access to the age pension as a method of rewarding and incentivising wealth creation --or deservingness-as-wealth-creation. At the same time, the principle of deservingness-as-reciprocity underpinning the age pension continued to recognise contributions outside of paid work--such as caring work--and this ensured that the age pension continued to meet the needs of those with interrupted workforce histories.

The 1970s

By the 1970s, the continued bipartisan support for phasing out the means test began to be linked to the idea of a national occupational pensions (or 'superannuation') scheme. In 1973, the Labor Government under Prime Minister Gough Whitlam set up a Committee of Inquiry into the possibility of a national superannuation scheme as a 'free-of-means-test' retirement benefit scheme (Kewley 1973: 434; Borowski & Olsberg 2007: 193). A national superannuation scheme was therefore proposed as a state-based mechanism for providing retirement benefits to those with higher means. The Inquiry recommended the introduction of a national superannuation scheme resembling a system of national insurance, but the recommendations were not released until 1976, after the Labor Government had been replaced by a Liberal Government under Prime Minister Malcolm Fraser (Borowski & Olsberg 2007: 193).

The Whitlam Labor Government removed the means test for those aged over 75 years and subsequently for 70-75 year olds, but it was dismissed before its intended final step, abolishing the means test for those aged 65-69 years (Kewley 1980: 72). After taking office in 1975, the Liberal Government under Prime Minister Malcolm Fraser replaced the remaining means test for 65-69 year olds with an income test whereby income, including income earned from assets, was assessed but assets themselves were exempt from the test (Borowski & Olsberg 2007: 192).

At the same time the moral provisions and exclusionary clauses, now highly anachronistic, continued to be repealed. In 1973, the Whitlam Government removed all references to 'good character' and 'deserving of a pension' from the Act (Jordan 1989: 55). By this point, with the moral provisions all but removed from the legislation (5) and the means test abolished for those aged 70 years and over and liberalised for those under 70 years, the age pension closely resembled a social right. It was available to all citizens aged 70 and over regardless of character or means, and the wealthiest citizens aged 70 years and over, for the first time, had access to the age pension. Thus, in an important sense, the principle of deservingness-as-wealth-creation was instrumental in the abolition of the means test and the emergence of the right to support from the state in old age.

The 1980s

In the late 1970s and early 1980s, citing cost constraints, means testing was reintroduced first by a Liberal and then a Labor Government under Prime Ministers Malcolm Fraser and Bob Hawke respectively (Bateman & Piggott 1996: 24). The new income and assets test limits were high and continued to be raised in response to arguments that they were reducing incentives to save. However, in spite of the high limits, with the reintroduction of the means test, the now familiar problem remained: how to recognise the deservingness exhibited by citizens with higher means in a means-tested scheme.

In the 1980s, a compulsory national superannuation scheme was gaining momentum as a policy approach. By this stage, the focus had moved from a scheme resembling a system of national insurance to a scheme of compulsory contributions to individual accounts administered by the private sector. While a private sector-administered scheme had been favoured by non-Labor Governments prior to the 1980s, the Labor Party changed its policy platform in the mid-1980s from one that favoured a national state-administered scheme to a privately-administered one. This was a result of several factors, including its embrace of the individualised and market-based approach of neoliberalism and the strong support among employers and the union movement for a system of privately-administered accounts (Sharp 2009: 202). From this time, the debates focussed on the role of a privately-administered superannuation scheme in complementing the age pension (Foster 1988: 179) to improve the retirement incomes of those who contributed. The trade unions began to play an important role in the national conversation about superannuation, arguing that superannuation should not be reserved for the very wealthy and public sector workers--where voluntary occupational superannuation coverage was widest--but should be an 'industrial right', improving the retirement incomes of all who worked (Bateman & Piggott 1996: 7).

A compulsory superannuation scheme called the Productivity Award Scheme (PAS) was first introduced in 1985 in negotiation with the trade unions (Borowski & Olsberg 2007: 197). In this scheme, employers would contribute three per cent of an employee's income into an individual superannuation account in an industry fund (Bateman & Piggott 1996: 7-8). However, many employees were confused about their entitlements and, as the contribution had to be made into a registered industry fund and some unions did not yet have a fund, some employers were confused about their obligations (Bateman & Piggott 1996: 9).

The 1990s and beyond: occupational superannuation and 'self-provision'

The PAS scheme was replaced with a more comprehensive superannuation scheme in 1992. Introduced by the Labor Government under Prime Minister Paul Keating in 1992, the Superannuation Guarantee, which is the scheme in operation in Australia today, requires employers to pay nine per cent (rising to 12 per cent by 2020) of an employee's salary into an approved occupational pension fund. These contributions are treated concessionally for taxation purposes. The fully-funded scheme covers all employers and most employees, and individuals are only able to access their superannuation savings upon reaching a 'preservation age' of 55 (rising to 60 by the year 2025).

A system of compulsory superannuation contributions to individual savings accounts was based on different conceptions of deservingness from the age pension. Like the contributory insurance scheme proposed earlier in the century, the compulsory superannuation scheme created a more direct link between participation in paid work, or earnings throughout the lifecourse, and income in older age. This was a new expression of deservingness-as-reciprocity based on a more direct relationship between contribution and benefit than the more generalised sense of contribution underpinning entitlement to the age pension. (6) Whereas with the age pension, the benefit had an inverse relationship to the 'contribution' (the more wealthy a citizen, the less pension they received), superannuation provided a reward commensurate with the contribution, since the 'benefits' (including tax concessions) increased with the contributions.

The superannuation scheme was also underpinned by the principle of deservingness-as-wealth-creation. The scheme, which incorporated taxation concessions on contributions as a design principle, was explicitly based on the principle of rewarding and incentivising saving. Superannuation and its associated tax concessions created a form of government-assisted retirement income that could be enjoyed by those with means. Whereas the means test on the age pension was liberalised to avoid punishing the deserving because of their means, superannuation would become a method of recognising and rewarding wealth creation, through the provision of generous taxation concessions. In one sense, therefore, compulsory superannuation provided a solution to the century-long problem of how reward the deservingness of those with means without abolishing the means test on the age pension. This is because the superannuation scheme, premised on participation in paid work, was based on deservingness principles that were divorced from the concept of need.

While need remained an important principle underpinning the age pension, the focus in a system of superannuation was on the concept of adequacy. This concept of adequacy, in contrast to its meaning earlier in the century that focussed on whether the age pension was adequate to alleviate poverty, referred to whether an individual's retirement income provided a standard of living that was commensurate with that enjoyed throughout the lifecourse. The compulsory superannuation scheme shifted the emphasis in the retirement incomes debates in Australia from poverty alleviation towards income replacement (Shaver 2001: 179). The objective of income replacement was easier to reconcile with the desire to incentivise and reward wealth creation than the age pension's objective of poverty alleviation.

The principle of rewarding deservingness-as-wealth-creation through the superannuation system became more explicit upon the election of the Liberal/ National Coalition Government under Prime Minister John Howard in 1996 and intensified throughout its period in office until 2007. The Howard Government set out to emphasise the desirability of 'self-provision', emphasising the 'virtue' of self-reliance. For example, in 2001, in a report entitled A Better Superannuation System, the Government argued that

Australians fundamentally desire self-reliance--it is the hallmark of a society built upon the aspirations of generations of pioneers, migrants, self sufficient indigenous [sic] Australians and all their descendents. At a time when Australia's population is ageing, this virtue--building personal self reliance in retirement--will vitally contribute to Australia's ongoing national prosperity (Department of Treasury 2001: 2).

The Howard Government set out to encourage and reward this deserving behaviour primarily through the provision of increasingly generous taxation treatment of superannuation. It also introduced some other measures such as relaxing the means test on the Commonwealth Seniors Health Card that provides subsidised pharmaceuticals and health costs '[i]n recognition of self-funded retirees' efforts to save during their working lives' (Department of Treasury 2004: 13). The increasing emphasis by the Howard Government on 'self-provision' was not accompanied by a winding back of the age pension. Instead, at the same time as promoting 'self-provision', the Howard Government continued to liberalise the means test on the age pension, expanding pension coverage to those with higher means. The Howard Government excluded certain income stream products from the assets test (7) and, shortly after, increased the threshold for income and assets exempt from the test. While ostensibly these measures appear contradictory to the promotion of 'private provision' for old age (and create what Borowski (2008) describes as 'fuzziness' in the goals underpinning Australia's retirement incomes system), they are in fact wholly consistent with the long standing deservingness principle in Australia's retirement incomes system of rewarding and incentivising wealth creation. According to the Government's Department of Treasury, these measures 'made the age pension more accessible to self-funded retirees and improved incentives for self-provision in retirement' (Department of Treasury 2004: 13).

The Howard Government also introduced some measures that were designed to incentivise and reward saving among lower income earners. It introduced provisions that encouraged superannuation contributions to be made on behalf of a non-working or low income spouse (Department of Treasury 2004: 14) and introduced a 'superannuation co-contribution', a measure designed to augment the superannuation savings of low income earners by paying one dollar into an individual's superannuation savings for every dollar voluntarily contributed by the individual to their account in a given year, up to a limit (Selleck 2004: 1). However, these measures assumed that those outside of the workforce had disposable incomes that would enable them to contribute (Olsberg 2005: 34-37).

In 2006, as part of what the Howard Government called 'the biggest reform to Australian superannuation ever', it introduced a major change to the operation of the means test for the age pension. The Government halved the taper rate for the assets test which effectively doubled the value of assets permitted before the individual is excluded from eligibility for the age pension. This increased the amount of pension received by many existing part-pensioners and made eligible a large group of individuals previously excluded by the means test. The changes took place with the objective of rewarding savings behaviour and the Government described them as '[a] better government pension deal for people with savings' (Department of Treasury 2007: 6 emphasis added). Those who had saved were constructed as deserving of support from the state, regardless of whether or not they needed it.

The current Government: 2007-today

After winning office in 2007, the Labor Government introduced several measures that have to some extent diluted the principle of rewarding deservingness-as-wealth-creation. In 2009, the Government increased the value of the age pension and reduced the access of individuals with higher means to both the age pension and some superannuation taxation concessions (Nielson & Harris 2010). In 2012, it introduced measures that further reduced the generosity of tax concessions on superannuation contributions for those with higher means, and a measure to compensate lower income earners for the regressive nature of the taxation concessions. However, the taxation concessions on superannuation remain generous, as do the income and asset limits governing eligibility for the age pension. At the time of writing, eligibility for a part age pension cut out at assets worth $707,750 in excess of the family home for an individual homeowner and $1,050,000 for a couple (for non-homeowners, these thresholds were $847,250 and $1,189,500 respectively) (Centrelink website 2013). The Labor Government has also legislated to increase the compulsory superannuation contribution from nine to 12 per cent over the next 20 years, and has stated that it 'applauds the efforts of self-funded retirees who have saved to fund their own retirement' (Sherry 2010). While under the Howard Government the move towards private saving through superannuation was constructed as a method of reducing the cost to the state, the reduction by Labor of the taxation concessions suggests the recognition that superannuation is a source of potential savings and cost to the state. However, the emphasis on self-provision as a behaviour that should be rewarded continues.

Conclusion: historical legacies and future opportunities

This analysis reveals that, while compulsory superannuation has meant that individuals now play a greater role in privately funding their old age, the state still plays the central role in Australia's public and private systems of provision for old age. The occupational superannuation scheme is mandated by the state and additional contributions are strongly encouraged. Like many other countries, including Britain and the United States, private superannuation is heavily subsidised by the state through taxation concessions, resulting in high tax expenditures (Hughes & Sinfield 2004; Davidson 2012). This creates what Spies-Butcher and Stebbing call a 'dual welfare state' that combines direct social transfers with 'a second layer of subsidies for private welfare spending', provided through the taxation system (2011: 54). At the same time, since the introduction of compulsory occupational superannuation, the means test limits for the age pension have become more generous, drawing those with higher means into entitlement, justified by the discourse that those who have saved deserve to be recognised or rewarded by government. Hence while public policy discourse declares the goals of encouraging self-reliance and reducing state expenditure, the evidence shows that what is labelled 'self-reliance' by policymakers is in fact heavily government-assisted and tax concessions on superannuation and increases to the means test limits are actually increasing state spending. At the same time, the status of the age pension as a legitimate social right has been protected, and indeed strengthened. Rather than challenging the rights-like status of the age pension, superannuation has been constructed as a concurrent or complementary social right, emerging alongside a strong role for the state rather than as a departure from it. The term 'privatisation' conceals the extensive involvement of the state in supporting the private saving of individuals and the phrase 'state-supported private saving' captures the nature of this contemporary reform process.

These complexities have emerged from the legacy of the long-lasting tension in Australia's retirement incomes system between rewarding deservingness and meeting need that has become deeply entrenched throughout the 20th century. As the principles of deservingness-as-character and deservingness-as-identity enshrined in the moral provisions of the first half of the century became anachronistic, the principles of deservingness-as-reciprocity and deservingness-as-wealth-creation have become the dominant deservingness principles. In the case of the age pension, deservingness-as-wealth-creation resulted in the liberalisation of the means test in order to incentivise or reward wealth creation. The pension is also underpinned by deservingness-as-reciprocity, which recognises all forms of contribution to the nation including paid work, taxpaying and caring, and therefore continues to meet the needs of those with interrupted workforce histories. However, the debates on the age pension between the principle of deservingness-as-wealth-creation and the payment's primary objective of poverty alleviation--or meeting need--created ongoing tension in the administration of the payment.

Compulsory superannuation created a mechanism for overcoming this tension. Superannuation, like the age pension, is based on deservingness-as-wealth-creation and deservingness-as-reciprocity but in a manner that is divorced from the concept of need. Deservingness-as-wealth-creation is rewarded by tax concessions on contributions with the 'reward', or concessions, increasing with the level of contribution (up to a cap). This is in contrast to the age pension whereby the 'reward' for deservingness-as-wealth-creation has an inverse relationship to the 'contribution' (the higher the means, the lower the pension that an individual will receive). In addition, the system of compulsory superannuation is based on a different conception of deservingness-as-reciprocity. Unlike the generalised contributions to the nation on which entitlement to the age pension was built, superannuation is based on a more direct, individualised exchange between contribution and benefit--the higher the income or the greater the level of participation in paid work, the higher the retirement benefit is likely to be.

The combination of high means test limits on the age pension and tax concessions on superannuation means that both systems reward deservingness-as-wealth-creation but only one meets the needs of the vulnerable. Citizens who save to provide for their old age are treated as deserving of state support, even though they are less likely to need it. The age pension continues to provide for those in need but the superannuation system, while improving the retirement income adequacy of those with the capacity to contribute, is unable to meet the needs of those who cannot. If the principle of deservingness-as-reciprocity underpinning superannuation resembled that underpinning the age pension--recognising all forms of contribution by providing state support for saving during periods of workforce absence--the superannuation system would have a greater capacity to improve the retirement income adequacy of those with interrupted workforce histories. This would be more consistent with the structure of many social insurance schemes around the world and bring superannuation into line with the principles that have underpinned Australia's retirement incomes system since the beginning of the 20th century.

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Endnotes

(1.) In European earnings-related social insurance schemes, particularly in continental European countries such as in Germany, a further basis for support for the better-off is that of 'status maintenance', so that pensions are based on maintaining a fixed proportion of previous earnings (Esping-Andersen 1996: 69).

(2.) It was closely modelled on a scheme introduced in New South Wales in 1900 which itself was closely modelled on New Zealand's scheme that was introduced in 1898 (Jordan 1989: i).

(3.) This was consistent with the precedent set in Victoria prior to Federation and New South Wales and Queensland after Federation that contributions to superannuation be treated concessionally for tax purposes in order to 'encourage thrift' (Stebbing 2011).

(4.) Rather than being reduced by one dollar for every dollar of individual income, taper rates meant that die value of the pension was reduced by less than a dollar for each dollar of income.

(5.) The last moral provision that excluded individuals guilty of 'deserting' their families from eligibility was repealed by the Labor Government under Prime Minister Bob Hawke in 1984 (Jordan 1989: 56),

(6.) While a state-based contributory insurance scheme and a national superannuation scheme are based on similar deservingness principles, it is important to emphasise that the design structures of these two schemes are very different. In particular, while both are state-mandated savings mechanisms, a state-based contributory insurance scheme involves contributions to a state-administered PAYG savings scheme whereas a national superannuation scheme of the kind introduced in Australia involved contributions to fully-funded individual accounts that are administered by the private, rather than the public sector.

(7.) In 1998, the Howard Government made changes to the treatment of superannuation draw-down in the calculation of age pension entitlement. The treatment of income streams now depended on the type of product, with income stream products divided into three categories. Payments in the first category included, '[i]ncome streams for life, life expectancy or at least 15 years with no access to capital and purchased after age pension age', and would be exempt from the assets test (Daniels 2010). Payments in the other two categories, those income streams between five years and 15 years, and those of five years or less, would be taken into account in the assets test (Daniels 2010).