Misconceptions about National Welfare Fund and the aged pension

Monday, 20 February 2017

Letter to the editor submitted to the Bundaberg NewsMail on 21 February 2017:

Dear Editor,

It’s unfortunate that the NewsMail has continued to perpetuate common misconceptions around the National Welfare Fund and the aged pension (NM, 16-02-17).

I’m sure that many NewsMail readers rely on it to provide accurate information, but this is not the case in relation to this subject.

This story caused senior citizens unnecessary angst, by including misleading details about the National Welfare Fund.

The age pension was introduced in 1908 – several decades before Prime Minister Robert Menzies’ time – and was subject to income and assets tests.

The National Welfare Fund was created in 1943 and included widows’ pensions, unemployment and sickness benefits, an expanded maternity allowance, and health services.

It did not include the age pension when it was first created.

In 1945, the Government made changes so all health and social services expenditure – including the age pension ­– was charged to the National Welfare Fund.

At the same time the Government separated income tax into two levies – a general income tax levy and a social services contribution.

The National Welfare Fund was not created to save up and invest workers compulsory contributions to be paid back to contributors when they retired.

Importantly, there was never a direct link between contributions and eligibility for payment.

An individual did not need to have paid the social services contribution to be eligible for the age pension payments and those who had paid could be denied the age pension because of the means test.

The Menzies Government merged the social services contribution back into general income tax in 1950.

Since that time, Australia has had no specific tax levied to pay for social security benefits.

So, the NewsMail was incorrect to state that ‘the 7.5% levy continues to be collected as general income tax’.

The age pension is there to help those who can’t support themselves.


Federal Member for Hinkler

Assistant Minister for Trade, Tourism and Investment

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