Good to see local Liberal leader Elizabeth Lee and Member for Canberra Alicia Payne at the Ukrainian demo last Friday.
Several weeks ago, I suggested a way to reign in bloated defined benefits pension schemes. The federal treasurer has now announced he wants to cap superannuation at $3 million per person.
I am pleased to see prominent economist Ross Greenwood comment in the Weekend Australian:“For having $3 million in super, you (on the current law) have generated $113,000 or so a year in after tax income. It’s solid, but not a motza. It’s way short of the $300,000 to $400,000 p.a. that some politicians and public servants are drawing down from their old-style defined benefits pension funds. If you want fairness, the politicians, judges, and public servants in these old-style funds also need to take a haircut. The full age pension for a couple, remember, is now about $40,000 p.a.”
Ross Greenwood, in my view, is spot on.
There is also a big difference between a defined benefit pension and a private or industry super scheme. A defined benefit scheme may deduct a small percentage of your wage (the Commonwealth Superannuation Scheme was 5 per cent). But that was invested for you, and you got it back multiplied many times over as a lump sum when you retired, PLUS an indexed pension. Mr Albanese will get something like $400,000 p.a. indexed for life, and probably well over a $1 million lump sum when he retires, as he is on the old parliamentary scheme John Howard and Mark Latham abolished in 2004. These pensions are paid for by the Australian taxpayers. It’s an unfunded scheme.
The new super schemes, introduced by Paul Keating and refined by later PMs, are your money. It is a funded scheme funded by you, the taxpayer, with your money for your benefit. There is a very strong argument the government should not be taking your money. (And if they do, the fat cats on the old defined benefit scheme should be included, too.)
About one per cent of super holders have more than $3 million in super. I can see the logic in the figure, but apart from the fact it’s your money, not the taxpayer’s, there is another problem. The big industry schemes are run by big unions who have their pet projects to invest the money in. The federal government also wants to use this potentially huge nest egg in their pet projects. I can see a scenario where the plan goes ahead and the federal government / unions blow the nest egg on renewable energy projects that, at the end of the day, don’t work. (A bit like the ACT government blowing a lot of our local hard–earned money on a tram instead of funding hospitals, police numbers, and education.)
On balance, I’d have to say: by all means, Albo, hit the fat cats (including yourself) – but leave the hard-earned retirement savings of millions of Australians alone. You are tinkering with a good scheme at your peril.
