“Stolen pensions” post recycles misinformation

FactCheck December 2, 2019

The Statement

A lengthy Facebook post from an Australian user starts with a headline that reads: ÔÇ£OLD AGE PENSION QUIETLY CHANGED TO WELFARE PAYMENTÔÇØ and a claim that the age pension is now (or soon will be) referred to as ÔÇ£Low Income Aged Persons WelfareÔÇØ. It also claims that ÔÇ£7.5% of our wages deducted before tax for the whole of our working lives has been stolen by both sides of politicsÔÇØ.

AAP FactCheck examined the post, which goes on to provide calculations purporting to show the value at retirement of money ÔÇ£harvested by the government pension fundÔÇØ, claiming: ÔÇ£If you calculate the future value of your monthly investment in a pension ($375/month at a meager 1% interest rate compounded monthly), after 40 years of working you’d have more than $1.3+ million dollars saved!ÔÇØ

It continues with a claim that the thieves in Canberra  took our money and used it elsewhere. They forgot (oh yes, they knew) that it was OUR money they were taking.

The post concludes with a call to ÔÇ£Demand that our MP’s (sic) bring some sense into our government. Find a way to keep Old Age Pension going for the sake of that 92% of our population who need it. Then call it what it is: Our Earned Retirement IncomeÔÇØ.

The post has been shared more than 6700 times and attracted more than 800 reactions and 480 comments.

A Facebook post from November 20 claims the Age Pension is to be renamed as welfare – a claim that has circulated before in Australia and the United States.

The Analysis

The claim that the name of the Australian government Age Pension has been or is about to be changed to ÔÇ£Welfare PaymentÔÇØ has been circulating on social media, and previously viral email, for some years. 

AAP FactCheck examined another example of the claim in October, 2019, and found it to be false. A spokesperson for the federal Families and Social Services Minister, Anne Ruston, advised AAP FactCheck at the time that the information contained in the Facebook post ÔÇ£bears no relation to Austrailan Age Pension provisions.ÔÇØ 

The spokesperson also advised the text was based on a viral email that originated in the United States several years ago and has since been circulated around the world.

The claim has also been debunked in the US by fact checking organisation Snopes and a US news outlet.

According to the Australian Government’s Department of Human Services website, the payment is still referred to as Age Pension.

The ÔÇ£7.5% of our wages deducted before tax for the whole of our working livesÔÇØ is also a claim which has been circulating in various forms for some time. AAP FactCheck also examined this claim as part of a broader investigation in October, 2019 and found it to be false.

Professor Peter Whiteford, from the Australian National University’s Crawford School of Public Policy, told AAP FactCheck in October that a National Welfare Fund was set up in Australia in 1943 as part of new social security measures.

A researcher says a belief that 7.5 per cent of wages was put aside for workers in retirement funds may have arisen from the rate of a now-defunct levy.

ÔÇ£From 1945/1946 there was also a Social Services Contribution, which was in fact no more than an extra tax on income and was merged with income tax five years later,ÔÇØ Professor Whiteford said.

A 1985 paper by I. Scott, of the Education and Welfare Group in the Australian Parliamentary Library, states on page 2 that the fund was established with the smaller of either £30 million (this is in pre-decimal currency Australia) drawn from consolidated government revenue or one quarter of individual income tax receipts.

In 1945 Prime Minister Ben Chifley split income tax into two parts to create a separate levy to finance social security payments. The Parliamentary Library paper states on page 4 that this separate levy ÔÇ£created a mistaken belief in some quarters that the social services were thereby placed on a contributory basisÔÇØ.

David Stanton, from the Crawford School of Public Policy at the Australian National University and a former senior official in the Department of Social Security told AAP FactCheck in October that claims a percentage of taxpayers’ wages was set aside in a separate retirement fund most likely arose from the maximum rate of social services contribution in 1946, which was one shilling and sixpence in the pound – equal to 7.5 per cent.

More details of the history of the National Welfare Fund can be found in the AAP FactCheck report.

The Facebook post’s calculations of supposed future retirement income are also not accurate.

While the post claims a monthly deposit of $375 over 40 years would, with one per cent compound interest compounded monthly, deliver ÔÇ£more than $1.3 million savedÔÇØ, the ASIC Moneysmart compound interest calculator shows that the amount saved would in fact be just under $220,000.

The post also claims ÔÇ£today’s average Old Age Pension benefitÔÇØ is $1,230 per month. However the Australian government’s Department of Human Services website shows the maximum basic rate a person on the Age Pension can get is $850.40 a fortnight. Multiplying this figure by 26 (the number of fortnights in a year) and dividing it by 12 (the number of months) equates to $1,842.53 a month. The total rises to $933.40 a fortnight if the recipient is eligible for all available supplement payments. This equals $2,022.37 a month.

While the source of the post’s $1,230 per month figure is not stated, the same amount appears on an archived web page of the United States Social Security Administration under a section titled “Average monthly Social Security benefit for a retired worker”. The archived page, which is included in the references of a Wikipedia page on US social security , states that in 2012 the average monthly benefit for a retired worker in the US was $1,230 (in US dollars).

The Verdict

Based on the evidence, AAP FactCheck found the claims in the post to be false. The claim that ÔÇ£the Old Age Pension chequeÔÇØ is now, or soon will be, referred to as a ÔÇ£Low Income Aged Persons WelfareÔÇØ has been circulated and debunked in the United States previously and has been rejected by the Australian minister responsible as having no relation to Australian Age Pension provisions. The claim that 7.5 per cent of workers’ wages was deducted throughout their working lives and set aside in a retirement fund is also without foundation and appears to be based on a misinterpretation of the maximum rate of a now-defunct levy imposed on wages in Australia between 1964 and 1950.

False – The primary claims of the content are factually inaccurate.

First published December 2, 2019, 18:39 AEDT

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