Analyzing non-contributory social pension programs

Prasetyono, Pipin (2017): Analyzing non-contributory social pension programs.

Abstract

Due to higher life expectancy and declining fertility which cause an accelerated demographic transition, there was an increasing trend in population ages of 65 and above, as a percentage of total population in the last three decades, from 5.88 percent in 1985 to 8.27 percent in 2015. In 1994, the World Bank suggested three pillars of old age security programs which are non-contributory (basic pension), contributory (forced savings) and voluntary savings to provide help the old as well as helping the broader economy. By examining Australia’s experience in implementing pension programs, this paper attempts to (1) identify the advantages and disadvantages of non-contributory pension programs, and (2) provide an empirical comparison between universal and mean-tested pension programs. This paper argues that a non-contributory, means-tested retirement scheme, as has been implemented by Australia, would better support the old-age population by better targeting the beneficiaries, relatively low cost, and enhancing fairness among beneficiaries.

• Item Type: MPRA Paper
• Language: English
• Keywords: pension; retirement
• Subjects: H - Public Economics > H5 - National Government Expenditures and Related Policies > H55 - Social Security and Public Pensions

References

AFTS, see Australia’s Future Tax System

Agnew, J 2013, Australia’s retirement system: strengths, weaknesses, and reforms, Issues in Brief, Center for Retirement Research at Boston College, Massachusetts, viewed 5 April 2017, <https://wattlecourses.anu.edu.au/course/view.php?id=20645>.

Australia’s Future Tax System 2009, The retirement income system: report on strategic issue, Australia’s Future Tax System Panel, viewed 4 April 2017, <https://taxreview.treasury.gov.au/content/downloads/retirement_income_report_stategic_issues/retirement_income_report_20090515.pdf>.

Australian Government 2016, ‘Objective of superannuation’, The Treasury, Canberra, viewed 5 April 2017, <https://wattlecourses.anu.edu.au/course/view.php?id=20645>.

Bacchetta, M, Ernst, E & Bustamante, JP 2009, ‘Globalization and informal jobs in developing countries’, joint study of the International Labour Office and the Secretariat of the World Trade Organization, Geneva, viewed 6 April 2017, <http://www.ilo.org/wcmsp5/groups/public/@dgreports/@dcomm/documents/publication/wcms_115087.pdf>.

Department of Human Services 2017a, Income test for pensions, Department of Human Service of Australia, viewed 9 April 2017, <https://www.humanservices.gov.au/customer/enablers/income-test-pensions>.

Department of Human Services 2017b, Age Pension, Department of Human Service of Australia, viewed 9 April 2017, <https://www.humanservices.gov.au/customer/services/centrelink/age-pension>.

DHS, see Department of Human Services.

Euzeby, C 1989, ‘Non-contributory old-age pension: a possible solution in the OECD countries, International Labour Review, vol. 128, no. 1, pp. 11-28.

Gora, M 2004, ‘Solidarity versus free market: is this opposition crucial?’, MSZW Working Paper, Ministerie van Sociale Zaken en Werkgelegenheid (Ministry of Social Affairs and Employment of Nederland), Amsterdam, viewed 8 April 2017, <http://docs.minszw.nl/pdf/135/2004/135_2004_1_7653.pdf>.

Gugushvili, D & Hirsch, D 2014, ‘Means-testing or universalism: what strategies best address poverty’, Working Paper, Centre for Research in Social Policy, Loughborough University, Loughborough, viewed 8 April 2017, <http://www.lboro.ac.uk/media/wwwlboroacuk/content/crsp/downloads/reports/Means%20testing%20or%20Universalism_Final%20Report.pdf>.

Hu, Y & Stewart, F 2009, ‘Pension coverage and informal sector workers: international experiences, OECD Working Papers on Insurance and Private Pensions, No. 31, Organisation for Economic Co-operation and Development, Paris, viewed 6 April 2017, <http://www.oecd.org/finance/private-pensions/42052126.pdf>.

Ingles, D & Stewart, M, 2015, ‘Superannuation tax concessions and the age pension: a principled approach to savings taxation’, TTPI Working Paper, N0. 7/2015, Tax and Transfer Policy Institute, Crawford School of Public Policy, The Australian National University, Canberra, viewed 7 April 2017, <https://taxpolicy.crawford.anu.edu.au/files/uploads/taxstudies_crawford_anu_edu_au/2015-12/m_stewart_d_ingles_retirement_income_final.pdf>.

Johnson, JKM & Williamson, JB 2006, ‘Do universal non-contributory old-age pensions make sense for rural areas in low-income countries?’, International Social Security Review, vol. 59, no. 4, pp. 47-65.

Khan, Q 1999, ‘Australia’s retirement income system: an example of sustainable cost-effective coverage’, in Policy implications of the ageing of Australia’s population, Proceedings of the Policy Implications of the Ageing of Australia’s Population Conference, 18-19 March 1998, Productivity Commission and Melbourne Institute of Applied Economic and Social Research, Melbourne.

OECD, see Organisation for Economic Co-operation and Development.

Organisation for Economic Co-operation and Development 2015, Pension at a glance 2015: OECD and G20 indicators, Organisation for Economic Co-operation and Development, viewed 10 April 2017, <http://www.oecd-ilibrary.org/social-issues-migration-health/pensions-at-a-glance-2015_pension_glance-2015-en>.

Preston, D 2008, ‘Retirement income in New Zealand: the historical context, Working Paper’, The Retirement Commission of New Zealand, Wellington, viewed 6 April 2017, <http://www.cffc.org.nz/assets/Documents/RI-Review-BP-Retirement-Income-History-2008.pdf>.

Rickard, P 2015, ‘3 super myths busted’, Switzer Daily (online edition), 12 March 2015, viewed 7 April 2017, <http://www.switzer.com.au/the-experts/paul-rickard/3-super-myths-busted/>.

Stahlberg, A 2007, ‘Redistribution across the life course in social protection systems: an overview’, in Modernising social policy for the new life course, Organisation for Economic Co-operation and Development, pp. 201-216, viewed 10 April 2017, <http://www.oecd.org/els/soc/modernisingsocialpolicyforthenewlifecourse.htm>.

Swoboda, K 2014, ‘Chronology of major superannuation and retirement income changes in Australia’, Department of Parliamentary Services, Parliament of Australia, Canberra, viewed 5 April 2017, <https://wattlecourses.anu.edu.au/course/view.php?id=20645>.

Van Oorschot, WJH 1999, ‘Targeting welfare: on the functions and dysfunctions of means-testing in social’, WORC Paper, Vol. 99.05.007/2, Work and Organization Research Centre, Tilburg, viewed 9 April 2017, <https://pure.uvt.nl/portal/files/1256537/OW5620027.pdf>.

Whiteford, P & Stanton, D 2002, ‘Targeting, adequacy and incentives: assessing the australian system of retirement incomes’ paper presented to the 9th International Research Seminar on Issue in Social Security, Seminar on Pension Reform, Foundation for International Studies on Social Security and Swedish Federation of Social Insurance, Sigtuna, Sweden, 15-18 June 2002.

Willmore, L 2007, ‘Universal pension for developing countries’, World Development, vol. 35, no. 1, pp. 24-51.

World Bank 1994, Averting the old age crisis: policies to protect the old and promote growth, World Bank, viewed 4 April 2017, <http://documents.worldbank.org/curated/en/973571468174557899/pdf/multi-page.pdf>.

World Bank 2017, Population ages 65 and above (% of total), World Bank, viewed 4 April 2017, <http://data.worldbank.org/indicator/SP.POP.65UP.TO.ZS>.

Zelleke, A 2016, ‘Lessons from Sweden: solidarity, the welfare state, and basic income’, Journal of Sociology and Social Welfare, vol. 43, no. 3, pp. 73-96.