Invalid and old age pension schemes

Introduction

The modern Australian welfare system has undergone a number of reforms since it took its first steps towards securing pensions for the aged and disabled at the beginning of the 20th century. Today, the aged can access support upon retirement through three different avenues: a means tested aged pension, private superannuation or voluntary saving. It is this system which serves as the model for a number of countries around the world. Despite having come such a long way, the fundamental elements of these schemes for the aged and the disabled have remained almost unchanged since they were first introduced.

Old-age pensions in the lead up to Federation

Prior to Federation, the provision of welfare for the aged was the responsibility of each of the self- governing colonies. It was generally, however, left to family members or voluntary charities to care for the aged members of society. In the years directly leading up to Federation, the proportion of elderly was beginning to rise. Between 1891 and 1901, the percentage of the population over the age of 65 had grown by 60 percent. The financial circumstances of many had also declined during the 1890s Depression. There was a realisation that the aging population was too large a responsibility for families and charities alone. They needed to be taken care of by the government.

Following the lead of countries such as Germany (1882) and New Zealand (1898) which had already introduced similar schemes, the New South Wales parliament passed the Old-aged Pensions Act 1900 (NSW). It provided a non-contributory, means-tested payment of £26 ($52) per year for eligible residents 65 years of age or over. Victoria also introduced a pension scheme around the same time and Queensland followed several years after Federation. Neither scheme was as generous, as that of New South Wales.

The Commonwealth old-aged pension

On 1 January 1901, the Constitution came into effect under the Commonwealth of Australia Constitution Act 1900 (UK). The Constitution bestowed upon the federal parliament the power to make laws for the Commonwealth with respect to a number of areas, including invalid (disability) and old-age pensions. The colonies became States, which also held concurrent power to make laws for their elderly.

In 1906, a Commonwealth Royal Commission was appointed to make recommendations for an old-age pension scheme. The government, however, was bound by the Constitution to hand over surplus revenue to the States, which left it without the funds to implement an old-aged pension scheme. After attending to this problem with the Surplus Revenue Act 1908 (Cth), the Deakin government passed the Invalid and Old-Aged Pensions Act 1908 (Cth).  See image 1

Coming into effect on 1 July 1909, the Commonwealth pension was based on the principles of the New South Wales old-age pension. Part of the reason for this was that it did not seem fair to reduce the rights that those aged pensioners in New South Wales had already achieved.

The Commonwealth aged pension initially provided £26 ($52) per annum to men and women over the age of 65 years. This figure was just under one quarter of the 'basic wage' which was decided in 1907 by Justice Higgins. To be eligible for the pension, an individual had to be able to meet a number of criteria. They had to have resided in the Commonwealth for more than 25 years and to be of 'good character,' (despite the latter not being defined). Non-residents, the Indigenous people of Australia, Asians and Indigenous people from the Pacific Islands, New Zealand and Africa were completely excluded from claiming the pension. See image 2

To ensure that those who were most in need of the pension received it and also to limit the cost to the government, the 1908 Act also provided that the Commonwealth old-aged pension be means- and asset-tested. An individual who had an income of more than £52 ($104) per year or owned property valued at more then £310 ($620) became ineligible for the pension. See animation

In 1910, around 34 percent of those over 65 were receiving the old-aged pension. The average life expectancy of an Australian was only 55.2 years for men and 55.8 years for women, which meant that not many people lived long enough to receive the pension. Today, the average life expectancy of Australian men is 77.6 years and 83.5 years for women. Since more Australians are living beyond 65 years of age, unprecedented numbers are becoming eligible for the aged pension. In 2004 the number of aged pensioners reached 72 percent.

Invalid pensions

After the Invalid and Old-Aged Pensions Act 1908 (Cth) was passed, on 15 December 1910 pensions for people with disabilities came into effect. Much like the old-aged pension, the invalid pension also developed out of the same basic need to relieve the pressure on families and charities that were often left caring for those in greatest need.

The invalid pension was designed for people with a disability which prevented them from being able to support themselves through paid employment. This disability had to completely and permanently prevent them from working. It also had to have occurred whilst the person was in Australia otherwise the claimant was deemed ineligible for payment. The original Act required that individuals be over the age of 16 years and not be supported by relatives. It also provided that payment be dependent on means- and assets-testing, as well as being subject to a five-year residence requirement.

Those who were eligible were entitled to the same rate as recipients of the old-aged pension, £26 ($52) per year. Non-residents and Indigenous peoples were excluded from claiming the disability pension. See image 3