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Budget 2009-10 - Pension Review Report

2. Context and challenges

It was not possible for the Review to develop considered views on its terms of reference without taking into account the role of the Age Pension, Disability Support Pension and Carer Payment in Australia’s broader social protection system, and the social and economic context in which the Review has been undertaken and how this context is likely to change in the future.

This chapter discusses the nature of Australia’s pension system and how it fits within the broader social protection system. It outlines the characteristics of Australia’s system and the ways in which it differs from those in other OECD countries. It then considers the effects of demographic change and the ageing of the population because these long-term trends will have a major impact on the Age Pension, Disability Support Pension and Carer Payment.

This leads to the identification of five major challenges that the Review considered as a part of its analysis of its terms of reference: the global financial crisis, sustainability, the management of risk in retirement, workforce participation incentives and interactions with the broader tax-transfer system, and complexity.

This chapter concludes with a discussion of how these considerations relate to the work of the Australia’s Future Tax System Review Panel, including its report on retirement incomes.

2.1 Australia’s system of social protection

The Age Pension, Carer Payment and Disability Support Pension are part of a broader social protection system designed to assist individuals and families to manage risk and change in their lives.

Australia, in common with most other OECD countries, has developed a social protection system that involves a combination of:

The first three of these are often referred to, in the context of retirement income policy, as a ‘three pillar’ system. The Review considers that focusing solely on the traditional three pillars runs the risk of downplaying the role of services. Having effective services is critical to achieving a balanced income protection system that has the flexibility to meet the diversity of needs and life-cycle experiences of the pensioner population.

The Review has used the term ‘income support’ to refer to pension payments and associated supplementary payments. The term ‘income protection’ is used to refer to the compulsory and voluntary mechanisms that in combination with income support help smooth an individual’s income over their lifetime and across transitions. The term ‘social protection’ is a wider notion that the Review has used to refer to the whole system of income support, income protection, and concessions and services that assist individuals and families to manage risk and change.

2.1.1 Income support

Australia has historically focused to a greater extent than most other OECD countries on providing comprehensive, conditional, basic income support to those who are most at risk of falling below an acceptable standard of living at a point in time.

Compared with other OECD countries, the Australian tax-transfer system is highly efficient in redistributing resources to those with least means. Among the 27 countries for which data are available, Australia has the highest proportion of public transfers flowing to the quintile of the population with the lowest private incomes. Australia also has the lowest rate of direct taxation in the group of 19 countries with data on this (Treasury 2008).

The adequacy of the Age Pension, Carer Payment and Disability Support Pension in performing this basic income support role is the central focus of this Review.

As discussed in Chapter 3, the Review has defined adequacy as ‘a basic acceptable standard of living, accounting for prevailing community standards’. While the Age Pension, Disability Support Pension and Carer Payment perform a number of roles in the income protection and social protection systems, the Review considers that providing adequate income support to those with little or no private means is the most important role of these payments, both now and into the foreseeable future. This is also an area where reform is needed. There are significant aspects of the current structure and rates of pension, in particular the treatment of single pensioners who live by themselves, that do not currently meet the needs of Australian pensioners.

2.1.2 Income protection

The Review recognises that pension payments cannot be considered in isolation from the other mechanisms that form part of Australia’s system of income protection, especially those components with which the pension system directly interacts.

The Age Pension and superannuation

The introduction of the Superannuation Guarantee in Australia made income protection for retirement more widely available to Australian workers. The Superannuation Guarantee provides a mechanism that links retirement savings with a person’s earnings and level of engagement with the workforce over their lifetime. The Superannuation Guarantee reduces the risk of ‘myopic’ behaviour (that is, individuals not saving enough for their retirement), and thereby helps smooth income over an individual’s full lifetime. However, because it is based on private accumulation plans it does so without guaranteeing a specific final level of retirement income.

The Superannuation Guarantee was designed and operates as a supplement to the role of the Age Pension in providing retirement incomes. Consequently, it increases the level of individual income in retirement to above what would otherwise have been provided through the Age Pension and private savings alone, and most retirees will continue to receive a substantial level of the Age Pension across their retirement. This is modelled in Chart 1 which shows, for full-time, full-career workers, the relative contribution of the Age Pension and the Superannuation Guarantee to their retirement incomes.

Chart 1 Retirement incomes—contribution of the Superannuation Guarantee and Age Pension (modelled results under full superannuation guarantee)

Chart 1 Retirement incomes—contribution of the Superannuation Guarantee and Age Pension (modelled results under full superannuation guarantee)

Notes: Model parameters at Appendix E. Average annual retirement income is given in earnings discounted terms, that is, relative to the income of employed people.

Source: Review modelling.

The maturing of the Superannuation Guarantee will see:

Of course actual retirement incomes will vary significantly from this theoretical outcome, depending on people’s workforce experience and in many cases that of a partner, and their private savings. Treasury modelling suggests that by 2050:

What this means for the Review is that reform directions for the Age Pension need to take account of policy settings for superannuation, including the impact of changes on Superannuation Guarantee outcomes and the impact more broadly on incentives to save for retirement.

In addition, Treasury modelling underscores the importance of the Age Pension’s role as a safety net. Many of the 28 per cent of Australians aged over 65 years who are expected to be on the full rate of pension in 2050 will have few if any assets or private income. They will therefore be entirely, or nearly entirely, dependent on the Age Pension to achieve an acceptable standard of living. This group will include people who have been reliant on income support for much, if not all, of their lives because of disability or other factors, such as caring responsibilities, that have prevented their participation in the workforce. In other cases, they will be people who, due to longer than expected longevity or unexpected costs, have exhausted their retirement savings.

The implication of these issues for Age Pension means testing is examined more fully in Chapter 7.

Disability and caring

Disability Support Pension and Carer Payment are the principal forms of income support for people with disability who are unable to support themselves through employment and for people whose caring role limits their employment opportunities, where family incomes would otherwise be insufficient.

There is also a range of private or mandated forms of support such as workers compensation arrangements and motor vehicle insurance systems, as well as income protection and related insurance. In the short term, for some employees, workplace-based sickness and carer leave provisions can provide full income replacement when they are ill or need to care for a family member.

However, in contrast to the Age Pension, which is part of a wider income protection system for retirement, the Disability Support Pension and Carer Payment generally operate as safety nets in cases where private income protection mechanisms are not available or have been exhausted. Rather than supporting mechanisms that operate to smooth income over an individual’s lifetime, the Disability Support Pension and Carer Payment focus almost entirely on providing a basic acceptable standard of living for people who have little or no private means.

Chapters 6 and 7 look at these issues in more detail.

Women

The majority of pensioners in Australia are women. Currently women account for 57.4 per cent of age pensioners and 68.8 per cent of those on Carer Payment. While the proportion on Disability Support Pension is lower, at 43.8 per cent, women account for 48.6 per cent of the new entrants into this program, in part reflecting the impact of the increasing Age Pension age for women. Around 55.7 per cent of women on these pensions are single, compared to 40.3 per cent of men.

In large part, therefore, the issues considered by the Review have particular importance for women. The Review notes that while many of the issues and reform directions identified affect women and men equally, the different life experiences of men and women can create significant differences in their experience of the income protection system. In particular, many women have major responsibility for unpaid caring and domestic work, are more likely to have broken patterns of workforce participation and to have lower income and fewer assets.

Analysis by the Review indicates that among the current population the level of superannuation assets varies considerably. There are particularly marked differences by gender, labour force status and age. Men have considerably higher levels of superannuation than women across different age categories of the population. Some of this is related to levels of earnings, with some groups, for example ‘middle-earning women’, having levels of superannuation assets much more closely aligned to men than other groups. However, women are disproportionately represented in the lower earnings group, in part because of part-time employment. When relationship status is considered, lone mothers have much lower superannuation assets than other women.

2.1.3 Services and related social infrastructure

Income support and income protection mechanisms are strongly complemented by social infrastructure such as public housing and aged-care facilities and access to goods and services, including through concessions.

Much of the feedback from the Review’s consultation focused on the role of concessions and services in supporting the overall purchasing power of pension payments and the value pensioners attach to them.

However, the Review considers that the unique role that concessions and services play in the social protection system is to provide targeted and cost-effective assistance for specific needs that are not dealt with well by income support or protection. The Review’s consultations and analytic work have shown that:

In cases where levels of need vary considerably across the population, concessions and services entail less risk than transfer payments of undercompensating those with high needs and overcompensating those with low needs. Concessions and services also link funding and assistance to usage better than transfer payments. In some situations co-payments can play a useful role in the framework of service delivery. Co-payments for concessions and services indicate to consumers that they have a value and an economic cost, and can balance reasonable access to them while ensuring they are not overused.

Concessions and services therefore complement the income support and protection systems by providing extra assistance to people who, compared with the general population, have additional needs because of their particular circumstances, such as frailty, disability and caring responsibilities. This is a focus of Chapter 6, which also notes the roles of other reviews including the work of the Council of Australian Governments and the Disability Investment Group.

The policy challenges of the provision of services and social infrastructure go well beyond the scope of issues considered in this report, but are vital to the broader framework of social protection and the role and sustainability of the pension system. To an even greater extent than the income protection system, services will be significantly affected by demographic change and population ageing. While much of the long-term increase in demand will be for aged-care facilities and other services for the frail aged, it has many other dimensions. One of these is supporting the workforce participation of a larger cohort of older workers, some of whom may require services to address the higher level of incidence of health and disability concerns in this age group, while maintaining employment. There will also be a demand for services directed at maintaining and adapting skills to ensure that these older Australians continue to be productive members of the workforce.

However, in contrast to the social security and taxation treatment of superannuation, there are few mechanisms available to facilitate and encourage services with mixed government and private provision beyond the purchaser/provider model, or that take an insurance focus. In addition, existing service models provide little scope for effective empowering of consumers.

2.2 Population ageing and demographic change

Australia, like most OECD countries, is facing the major challenge of an ageing population. The implications of this were an essential consideration for the Review and are critical to the question of the sustainability of the pension system and the long-term security of pensioners.

As has been documented in the Treasury Intergenerational Report 2007, demographic change in Australia will be primarily driven by lower birth rates and increasing life expectancies. The report indicated that:

One of the consequences of these changes, as shown in Chart 2, is a marked increase in the dependency ratio (the proportion of people of working age (15 to 64 years) to those retired or of school age), which has been at historically low rates over the past ten years.

Chart 2 Age dependency ratios 1950–2050

Chart 2 Age dependency ratios 1950–2050

Source: Intergenerational Report 2007.

Currently there are some 5.0 people of working age to support every person aged 65 and over, but this will more than halve to 2.4 people by 2047. This change presents major economic and social challenges. These include a reduced taxation base reflecting the relative decline in the size of the workforce, along with pressures on spending on a larger proportion of the population who are not supporting themselves, many of whom will have high health care and other needs. In addition, this demographic shift will result in a reduction in the level of output per person relative to that which would be achieved with the current population structure, and will generate competition for labour.

Although the magnitude of the impact of this demographic change on the government’s fiscal position may be mitigated by factors such as increases in the rate of workforce participation, increasing productivity and future changes to Australia’s population profile from fertility and migration, such responses can at best only reduce, but not eliminate, these pressures.

The structure and functioning of the social protection system can also mitigate or magnify the impact of demographic change on the government’s fiscal position.

In this regard, compared with many other OECD countries, while there will be fiscal challenges for governments to face, Australia’s income support system is relatively well placed to deal with demographic change. This is primarily because Australia’s focus on providing comprehensive, although conditional, basic income support does not expose the government to the financial risks of many of the social insurance style schemes adopted by other OECD countries. Within the Australian system investment and longevity risks are shared between the government and private individuals. Many OECD countries are currently reducing the risk borne by the government.

However, Australia’s relatively high emphasis on private provision in itself raises other challenges that may place growing pressure on the sustainability of Australia’s income support system:

2.3 Challenges

The broad structural and demographic environment has consequences for the Review’s approach to its terms of reference. The Review considered that there were five particular challenges that it needed to incorporate into its considerations. While these challenges go beyond an immediate focus on current adequacy and affordability, this broader approach is essential to the underlying concept of ‘security for pensioners’—that is, the capacity of pensioners to rely on relatively stable arrangements to meet their long-term needs.

These five challenges are:

2.3.1 The global financial crisis

An immediate challenge in the Review’s considerations was the impact of the global financial crisis. As well as having readily apparent short-term consequences for the pension system, this crisis may affect the longer-term balance of the income protection system.

In the short term, many pensioners and retirees have faced falling asset values and declining income from investments, and for some from employment. With these declines in private means, their pension rate has increased. These aspects have been complemented by administrative changes designed to respond to the crisis, including deeming rate changes and deeming exemptions in cases where investments have been frozen. There has also been a marked increase in claims for the pension, much of which may be attributable to these changes which have seen retirees previously ineligible for assistance becoming eligible for some pension payments. For example, Age Pension applications in December 2008 were around 50 per cent higher than the number recorded in October of the same year. These short-term changes illustrate how the pension system helps manage risk for individuals. However, they also have a direct impact on the cost of the pension and hence on the government’s fiscal position.

While long-term structural sustainability is the prime consideration for pension reform rather than cyclical budget considerations, these effects which are part of the automatic budgetary stabilisers cannot be ignored.

The crisis has also eroded the value of retirement savings of many individuals and weakened their capacity and motivation, at least in the short term, for discretionary private retirement savings. This has considerable significance at a time when the first groups of ‘baby boomers’ are approaching retirement (the first baby boomers will reach 65 years of age in 2011). For some members of the current cohort of older workers the consequences of the global financial crisis means they may not be able to reach their target retirement savings within their planned remaining working lives. While some may postpone retirement, a substantial cohort may enter retirement with lower superannuation balances and greater reliance on the Age Pension for the duration of their retirement than intended.

Over the intermediate period there is also the potential for increasing levels of demand for income support, including pensions, as people experience difficulties in the labour market. While pension eligibility focuses on the supply rather than the demand side of the labour market and lack of available employment is not a criterion for eligibility, it is clear from previous economic downturns that lack of employment opportunities does result in an increasing number of pensioners who, even when labour market conditions improve, rarely return to employment.

A more difficult question, in particular given the timing of this report, is whether, in addition to these consequences, the crisis will also have significant longer-term and structural implications for the pension system.

Australia has experienced a long period of relatively steady economic growth, and as a consequence private wealth accumulation and superannuation have grown rapidly over past decades. The impact of the global financial crisis on the type of retirement income products that consumers want, the level of investment risk they are willing to bear, their attitude to longevity insurance, and their expectations of the pension system is not clear at this point. It is also not clear what impact the crisis will have on prudential regulation.

While the Review considers it inappropriate to speculate on the long-term impacts of the global financial crisis on income protection in Australia at this time, it remains an issue that will require very close monitoring.

2.3.2 Sustainability

Population ageing brings with it a significant challenge for social policy. Projections presented in the Intergenerational Report 2007 indicate that current policies settings would result in social spending increasing from its 2006–07 level of 13.1 per cent of gross domestic product (GDP) to 18.2 per cent in 2046–47, a 5.1 percentage point increase. By way of comparison, the Intergenerational Report indicates that Australian Government receipts were 22.1 per cent of GDP. Although there are some off-setting savings, funding these increased social expenditures would require an increase of over 23 per cent in government receipts.

Increased spending on the Age Pension, and related payments for the aged, accounts for 1.9 percentage points of the 5.1 percentage point increase (37 per cent), with the balance being taken up by increases in the costs of aged-care and health spending.

Specifically, these estimates are a projection of the impact of current policy settings and do not take account of how policy may change over time. For example, any increase in the maximum rate of pension will, other things being equal, increase the share of GDP taken by spending on the Age Pension. However, other policy and behavioural changes will also have an effect.

Again, in considering these longer-term prospects, the Review was aware of the uncertainties raised by the global financial crisis. Clearly any reduction in superannuation or other savings, or in the financial returns on these, has implications for these longer-term projections of pension spending and associated analysis of the level of wellbeing people will be able to achieve in their retirement.

In this context, it should be noted also that the structure of the means testing of pensions results in any increase in the base rate of the pension flowing on, in full, to all full-rate and part-rate pensioners. For example, an increase in the base rate of pension of $10 a week would be received by all pensioners, whether they are wholly reliant on the pension, or just eligible for a single dollar of pension.

Indeed, any increase would also act to extend eligibility for pensions and concessions to people who were previously excluded due to their private means. This is illustrated in Chart 3. This aspect of the operation of the means test presents a specific challenge to policies directed at increasing the adequacy of the base rate of pension as a means of targeting assistance to those with the highest needs.

Chart 3 Components of means testing and impact of a change in the base rate

Chart 3 Components of means testing and impact of a change in the base rate

The bottom line is that government decisions on the rate of the pension cannot be considered in isolation from the long-term fiscal impact of demographic change and increasing dependency rates, which magnify the long-term economic cost of any increases. Decisions on pension rates and conditions need to be taken with regard to, and indeed may be constrained by, both the short-term and long-term macroeconomic environment and the capacity of taxpayers to support the pension system. The implications of this for pension reform are considered further in Chapter 7.

2.3.3 Managing risk in retirement

As noted above, the income support system assists with the management of a number of risks. With respect to pensions for the aged, those with disabilities and carers, these include the risk of disability or caring responsibilities that restrict the capacity of individuals to support themselves in the labour market, and the risk that individuals cannot, or because of myopia do not, save sufficiently to support themselves in retirement.

As a part of the broader retirement income system, the Age Pension also plays a role in managing a number of other risks.

The role of the Age Pension in assisting individuals to manage those risks means that Age Pension policy has to take account of broader retirement income policies and work with the private sector, which supplies the products that many individuals use to manage these risks. In this regard it should be noted that:

With a framework that places many of these risks onto the individual, the lack of appropriate products that allow them to effectively manage these risks remains a major gap in, and contributes to the vulnerability of, the whole retirement income and support system.

The role of the Age Pension in supporting the retirement income system’s management of risk, including the issues identified above, is being examined in the more comprehensive review of retirement incomes by the Australia’s Future Tax System Review Panel. The importance of this role for the Age Pension means that the Pension Review could not ignore this interface in its approach to its terms of reference. The Review has not examined these issues in the breadth and depth that is being undertaken by the broader tax system review.

2.3.4 Participation and interaction with the broader tax-transfer system

Increasing workforce participation in Australia is an important national goal, for both people of ‘working age’ and beyond. Greater participation by mothers and the mature-aged and those on income support, including pensions, has the potential to lift national incomes and improve living standards as well as more specifically helping to meet the demand for the labour-intensive services associated with the needs of an older population. While most pensioners do not have an obligation to seek employment, where they do so, not only do they obtain benefits for themselves but they make an additional contribution to the wider community.

Specifically, higher levels of participation can result in:

Analysis by the Productivity Commission in 2006 (Abhayaratna & Lattimore 2006) shows that while Australia had the fifth highest level of workforce participation in the OECD, the proportion of the population who were employed was below that of countries such as Iceland, New Zealand, Canada and Switzerland. Further, within this total, although Australia had very high rates of youth employment (largely as a result of students having part-time jobs), it performed less well for many other population groups.

For many groups current levels of participation are well below what they were in the past. For example, the participation rate for 55 to 59 year old men is 77 per cent, compared to up to 90 per cent in the 1970s. The average age at retirement in 2006–07 for recent retirees (those who retired in the previous five years) was 60.3 years. Within this group, the difference between the retirement age of men and women was relatively small, with women retiring a little younger than men (the average retirement ages for this group were 61.5 years for men and 59.0 years for women) (ABS 2008d).

The income support system, including pensions, affects incentives for labour market participation in many ways. At the most basic level, the provision of income support in itself can provide an alternative means of support for people to employment. This is managed in the pension system by targeting payments to those who are not currently able or expected to support themselves through employment because of their disability or caring responsibilities, or those, such as the aged, whom the community no longer expects to support themselves in employment. The activity test plays a similar role for other payments.

The second impact relates to program design in areas such as the means test. While the test is primarily designed to target assistance to those with limited means, at the same time it can operate as a disincentive for people to accumulate assets or to undertake employment while in receipt of assistance.

The third impact is the effect of funding of these payments on the taxes that need to be paid by the working population.

In labour market terms there are both income and incentive effects at work. In some cases, higher tax rates (and effective tax rates) will act to reduce incentives to work since people will have a smaller marginal gain from employment and face the associated loss of leisure time (a substitution effect). In other cases, people may in fact work more to achieve a certain target level of income that they consider adequate for their needs (an income effect).

Workforce participation by pensioners is supported in the pension system in a number of ways, including by the settings of the means test. In addition, people over the preservation age for superannuation can access their superannuation and continue to work. They are also affected by the range of incentives in the taxation system, including the Mature Age Worker Tax Offset and the Senior Australians Tax Offset. These mechanisms are intended to encourage workers to delay retirement and/or to make a more gradual transition into retirement, including by combining part-time employment with receipt of the pension. While, as discussed in Chapter 5, there are issues with the effectiveness of the program, the Pension Bonus Scheme is available to some people who choose to work beyond Age Pension age. Carer Payment and Disability Support Pension recipients under Age Pension age are eligible for ‘working credits’ which are a means of assisting all working age income support recipients who undertake irregular employment.

Similarly, those receiving Disability Support Pension and Carer Payment have access to participation support, including in-work benefits such as access to Working Credit, a Mobility Allowance to assist those who cannot use public transport, retention of a Pensioner Concession Card or Healthcare Card, as well as in-work support such as special disability employment services and a workplace modification scheme. There are also schemes available to employers to assist with any additional costs of employing a person with a disability.

However, despite these initiatives, the level of workforce engagement for individuals on pensions is low in Australia compared to other OECD countries. Just 4.3 per cent of Age Pensioners, 11.9 per cent of those on Disability Support Pension and 11.1 per cent of those on Carer Payment are employed, in most cases on a part-time basis.

Moreover, despite the strong labour market Australia experienced up until the global financial crisis, there has been a strong increase in the numbers of people of working age on Disability Support Pension and Carer Payment. In December 2008 there were 726,800 people under Age Pension age on Disability Support Pension, despite the implementation of program changes which have resulted in many people with a disability that only partially restricts their work capacity no longer being eligible for the program. There has also been a strong increase in the number of working-age people in receipt of Carer Payment. The total number of people on this payment increased from 52,300 in December 2000 to 137,100 in December 2008. Over the two years to December 2008, the number of working-age recipients of Carer Payment grew by 20 per cent.

Reflecting the importance of participation, the Review was mindful that the reform directions it identifies need to ensure that:

These issues, which again may be sensitive to the impact of the global financial crisis, are discussed more fully in Chapters 5 and 7 and will also be more comprehensively examined by the Australia’s Future Tax System Review Panel.

2.3.5 Complexity

Complexity in policies and programs is sometimes necessary because the realities of the modern world are complex. However, like the Australia’s Future Tax System Review Panel, the Review considers that complexity should be avoided where possible. Complexity adds to costs and reduces effectiveness in four ways:

In addressing its terms of reference, the Review has identified several areas of unnecessary complexity, including:

At the same time, the Review notes that reducing complexity needs to be balanced against other goals. Two drivers of increasing complexity in the social security system are:

The latter reflects one further dimension of complexity with which the pension and the broad social support systems must deal; namely the many complexities and transitions of people’s lives. For example, labour supply decisions are often determined jointly within households and depend on the availability of services such as child care and how family and other caring responsibilities are divided, as well as the particular incentives any one partner faces. Jointly made retirement decisions such as the level and type of asset accumulation can have significant impacts on a survivor after the death of a partner. In addition, at times, simple categorical approaches deal poorly with the realities of life. For example, a person may have a partially incapacitating disability, some caring responsibilities and some part-time employment.

2.4 Australia’s Future Tax System Review

The findings of this report are focused on one aspect of Australia’s tax-transfer and retirement income systems, and need to be considered in the context of the broader work of the Australia’s Future Tax System Review. As indicated in Chapter 1, the government has requested that the Chair of the Review, Dr Ken Henry AC, bring forward the part of his review relating to the retirement income system and provide a report by the end of March 2009 that contains recommendations ‘on the adequacy of the retirement income system and the appropriateness of the current taxation arrangements’. This request was to enable the government to consider this report in conjunction with other aspects of the retirement income system.

The Pension Review’s relationship with the Australia’s Future Tax System Review was raised in some of the submissions to the Pension Review. Several of these suggested that it was desirable to consider all of the allowances and pensions that are part of Australia’s income support system at the same time to address questions of priorities, fairness, balance and incentives in the social protection system as a whole. One of the concerns raised in these submissions was that a limited focus on a subset of payments would introduce further distortions to the incentives for people to seek to qualify for those payments with higher rates of assistance, leading to increasing numbers on non-activity-tested payments.

The Pension Review recognises the underlying concerns expressed in these submissions. However, it was not appropriate for the Review to defer a full consideration of its terms of reference, as was suggested by some submissions.

While the terms of reference of the Pension Review are more narrowly directed and have shorter time frames than those of the Australia’s Future Tax System Review, the work of the Pension Review could not be conducted without reference to the larger challenges and systems within which the pension system operates and which are the focus of the Australia’s Future Tax System Review.

In doing so the Pension Review has been mindful not to anticipate or circumscribe these broader considerations. In particular, the findings of this Review, with one exception, that of the Age Pension age, are primarily concerned with the operation of the pension system within the current environment.

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