The first year’s gross cost of $42 million, which will compound, is a little more than one tenth of one per cent of the 2007/08 budget surplus. There will be indisputable clawback of approximately 40% due to increased income tax and GST collections and a reduction in Age Pension expenditure. Due to their low superannuation pension, many Commonwealth superannuant pensioners qualify for a part Age Pension which will reduce when their superannuation pension increases with fairer indexation.
Unfunded superannuation liability estimates will increase but these are balance sheet figures only and are not estimated for far larger items such as Age Pensions, Veterans’ pensions, Medicare etc. They are big numbers only because they’re cumulative forty year estimates. They are only calculated for Commonwealth superannuation pensions because of a Government accounting regulation. They are not annual costs to budgets.
The indexation of the Age Pension and other Government pensions was formally changed in 1998 at a cost of approximately six times that of the cost of fairly indexing Commonwealth superannuation pensions. No unfunded liability figures were announced regarding that new, much larger cost over forty years and there were no budget surpluses or a Future Fund at that time! The Future Fund held almost $60 billion at 31 December 2008[1].
The view of the organisations representing those affected is that to commit to this change would not involve future Governments in unaffordable expense. We are talking about income justice for those who receive defined benefit 1922 Act, CSS, PSS and Defence superannuation pensions. Government changes to the superannuation structure have made these defined benefit schemes obsolete, and because of this it is a decreasing liability in the long term. Unfunded Commonwealth Superannuation liabilities are set to fall from 0.5% to 0.2% of GDP over the long term due to the closure of most of the defined benefit Commonwealth superannuation schemes.
[1] Federal Government’s 2007 Intergenerational Report.
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The costing post above is excellent and it explains that there are rules for age pensions and different rules for Commonwealth superannuation pensions.
Is the government going to release the cost of introducing the Pensioner Benefit Living Cost Index (PBLCI) as another factor to be considered when indexing the age pension, and then show the cumulative forty year estimates? Probably not as there is no requirement to do so but they are still happy to use the cumulative 40 year estimates to justify not indexing Commonwealth superannuation pensions the same way as the age pension.
The ABS is going to be given about $18M to develop the PBLCI. The papers that have been published by the ABS indicate that it will not be all that different from the CPI. If this is true, is this the best way to spend $18M, especially when one considers that it is about the first years cost of fairer indexation for Commonwealth superannuants (when you consider the clawback)?
It is fair to note that the 2008 budget also promised a ‘pensioner index’ but nothing happened. Will this happen again?
There will be huge “clawback” from Defence superannuants due to each time our superannuation entitlement increases, in a fair, just and equal manner,a our WS entitlements will decrease at 50 cents in the dollar!
Politicians would attempt to have us believe anything at times?
Persevere
Bernie
I am also affected by this unfair treatment of Defence / commonwealth superannuation. Why would anyone bother to serve their country if the word gets out that in the years when you leave the service you are treated as poorly as we are? What can I do to further the cause of Defence superannuants present and future?
The Labor Party agreed before the last election that indexation of our pensions was unfair. They implied that, if elected, we would have our pensions indexed in a fairer manner. Did anything happen? Yes, the Matthews report. And what government doesn’t know the result when it commissions a report? As the comedian Billy Russel said many years ago “The trouble with Governments is that they promise you everything, give you nothing, and before you get it they take it away”!