I’ve had spirited discussions with a lot of people about superannuation this week. It’s clear that many think it’s OK to change the superannuation rules retrospectively to go after millionaires.
As a matter of principle - I don’t. And that principle applies to anyone with superannuation, whether the threshold be $3m or $300,000 or $30,000. If governments can do it to someone else, they can do it to you.
Last week I suggested they wouldn’t do it to themselves by targeting the cosy defined Benefits Pension scheme.
This is the scheme that allows politicians (and public servants) like Anthony Albanese and Wayne Swan to retire on an annual pension of hundreds of thousands of dollars every year - indexed for their lifetime. Even when they die a whopping 83% of it flows on to their spouse for their lifetime too.
That scheme means the PM’s pension pot could be worth the equivalent of having $20 million stacked away.
It’s the same scheme that saw former politicians like Bill O’Chee and Natasha Stott-Despoja retire in their 30’s and start getting their taxpayer funded pension immediately.
Incredibly, this generous scheme isn’t fully funded, meaning we keep having to find money to keep these beneficiaries in the lifestyle they have become accustomed to.
All the media commentary says that tackling the Defined Benefits of politicians and public servants is too hard, but it’s not actually. Here’s how to level the playing field.
Firstly, you get an actuary to calculate what would be the risk free rate of return on, say, a $3m nest egg, based on life expectancy at retirement age. That becomes the absolute maximum that any one can receive per annum.
It’s likely to be around 150K per year. A pretty good sum but nowhere near what they currently get.
For those younger, they get an actuarial calculated amount, again based on life expectancy. For someone in their 40’s it’s likely to be a lot lower but still better than nothing.
Then we make sure the pensions aren’t indexed for inflation because that’s the rule they are applying to our super.
And because the government keeps telling us super is for retirement and not for inheritance, we cut the scheme off for the spouses. This would save the rest of us billions.
It won’t happen and I bet you can guess why.
That’s right, it’s because the beneficiaries will complain about the unfairness of ‘retrospective legislation’ . And do you know what? They’d be right.
It would be unfair, but so is the retrospective legislation and rule changes they want to foist on the rest of us.
Maybe you think it’s all ok because, like the politicians, this tranche of change is unlikely to affect you.
Well as I said earlier, if you abandon principle because it only negatively impacts others, then it’s only a matter of time before you become the next target.
