The Pension Savings Account Myth.

I posted this at The Pub in July 2019. I’m posting it again here because the topic has come up again and I’m having a Twitter argument with a bloke who swears there was a scheme specifically to pay for pensions and “we all” paid into it. I think it might save me a lot of searching if I can keep all this information handy.

The current focus on pensions and a tweet I saw yesterday reminded me of some nonsense that keeps popping up on social media.

It’s the daft idea that Australians, in pre-compulsory superannuation days (some say it’s still going on) used to pay part of their tax into a special government pension fund set up to pay only pensions. Some versions of this myth tell us what sort of pension you ended up getting depended on how much you had paid in.

It’s all complete and utter rubbish, pushed partly by the same types that delighted in telling us the myth about Tony Abbott missing out by two days on getting his prime minister’s pension- he didn’t. He will be getting his full ex-politician, ex-PM entitlements by now.

How did this myth start? Most likely (like the Abbott one) by someone doing a half-arsed search, finding something that seemed to agree with their thinking, grabbing onto that and not bothering to read any further.

When the age pension started in 1908 (for men only, at first) it was financed from general revenue and it stayed that way. In 1945 new benefits were added to the Commonwealth’s social security payments, and the Chifley government introduced a system where a percentage of income tax funds would go towards social security. It was a levy, similar to the Medicare levy we now have, used to meet the increasing cost of wartime and post-war welfare, and was a way of increasing taxes while not seeming to increase them. A “National Welfare Fund” was set up to receive this money. This is where we get the misapprehension we still hear today, people talking about “paying tax all my life” and expecting to get an age pension in retirement whether they meet the assets test or not. Despite what some people still believe today the welfare fund did not mean Australians started contributing to their own pension funds or the government started setting aside money for each taxpayer in the event they might one day need an invalid pension or the dole. The amount each taxpayer contributed had nothing to do with how much they eventually might receive in benefits. In fact the tax income for the fund was not enough to meet the cost of social security payments and it had to be topped up from general revenue.

In 1947 the various social security cash payments were consolidated into a single payment by a new Social Services Act.

The Menzies government stopped the levy in 1950, and tax payments went back to going entirely into general revenue.

Despite that there are tweeters and Facebook addicts who assure us the non-existent legislation that allowed these mythical personal funds has never been repealed (it was, in 1985) and therefore the government has been secretly taking tax revenue and stashing it away. I’ve even seen people who have calculated that “the government” owes them hundreds of thousands, paid in over their working lives. I’ve seen them demand “their” money.

Yesterday someone tweeted at me about this, claiming there are people “still alive” who have paid into these funds and deserve their money. Somehow they had it all mixed up with deeming rates.

Some reading –

History of Pensions and Benefits in Australia.
https://www.abs.gov.au/AUSSTATS/abs@.nsf/3d68c56307742d8fca257090002029cd/8e72c4526a94aaedca2569de00296978!OpenDocument

The National Welfare Fund.
https://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id:%22library/prspub/4511255%22

 

Update.

Since that was written I’ve found the legislation that finally repealed the National Welfare Fund in 1985.

https://www.legislation.gov.au/Details/C2004A03063

The  1943 legislation to establish the fund –

https://www.legislation.gov.au/Details/C1943A00012

The 1945 bill to amend the original legislation to allow age pensions to be paid from this fund.

https://www.legislation.gov.au/Details/C2004A03063

Hansard of the 1952 House of Representatives debate on the National Welfare Fund Bill 1952, a bill to stop paying social security benefits from this fund.

https://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A”hansard80%2Fhansardr80%2F1952-09-18%2F0087″;src1=sm1

And the Senate debate –

https://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22hansard80%2Fhansards80%2F1952-10-16%2F0127%22;src1=sm1

There is a lot more information about the fund in the 1952 debate.

Nothing anyone says, no amount of facts, no amount of links to legislation and commentary will convince these fools that there never was a special government fund set up just to pay pensions. Many still believe “the government” is sitting on billions of dollars of “their” money.

I give up. You cannot argue with stupid people.

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