Judges and politicians have the most generous superannuation schemes in the country but we’ve never seen any analysis of the total amount owing to this elite group of less than 5000 Australians who are on these nice little taxpayer funded earners for the rest of their lives.

We reckon there is more than $2 billion owed to politicians and judges but Crikey is determined to tally up the 18 different parliamentary and judicial pension schemes that run nationally and in the states and territories to come up with an overall liability figure.

The Fin Review started the ball rolling with Friday’s excellent front page story by Chris Merritt which revealed that total pension liabilities to the 200 serving and retired federal judges is now a staggering $339 million. The scheme is totally unfunded and is now costing taxpayers an incredible $70 million a year which would suggest the $339 million is on the low side because it is less than 5 times the annual cost.

Judges and pollies are never keen to highlight their rort so it will be quite an exercise getting the information from the 18 schemes but we’d love the assistance of Crikey’s army of well-placed subscribers.

There are two issues here. Firstly, it is the sheer generosity of the schemes and secondly, you have the question of whether the scheme is funded and whether this differs from the general policy on funding superannuation commitments for ordinary public servants in that jurisdiction.

The Daily Telegraph splashed its December 30 paper with a Mark Skelsey story headlined “MPs’ super rort”. The main criticism was that the government was increasing funding from $10.3 million in 2000 to $15.3 million in 2005. This does look hypocritical given that overall unfunded liabilities are on the rise in NSW and budget funding of the general scheme has not risen by 50 per cent.

Then again, is the Tele suggesting they don’t fund the scheme at all? Afterall, Rupert Murdoch has a $900 million black hole in the News Corp super scheme for his employees around the world and this is regarded as poor form.

So this is what we want for the estimated 18 different judicial and parliamentary pension schemes around the country and we’ve used the figures from today’s Fin on Federal judges to demonstrate it:

Total assets: zero
Total liabilities: $339 million
Number of members: 200
Annual taxpayer funding of the scheme: $70 million
Annual payments out of the scheme to members: $70 million

The funding of a scheme and payments out of a scheme would normally be two different figures although the Federal judges are simply getting their pensions paid directly out of consolidated revenue and there is no separate scheme as such. They don’t even make any contributions and get the full pension after just 10 years of service.

We’ll give a free subscription/renewal to anyone who can produce the latest figures as set out above on any of the 18 schemes in question.

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SOME SUPER IS MORE IMPORTANT THAN OTHERS

Who noticed the item in yesterday’s Telegraph headed “Carr defends $115m super top-up for MPs”?

It quotes New South Wales Premier Bob Carr as saying “We run a state, the budget of which is $33b. The Treasurer and I get paid considerably less than the top dozen in many media organisations. One way that is balanced is public sector people get more generous superannuation.”

And clearly making sure some forms of government super get topped up is more important than funding others, hey Bob?  Mike?

If they’re worried, why not get a job with one of those kind companies who tip so much money into Tammany on Sussex.  There are plenty of them about. Iron Mark is on the money in realising that something has go to give on parliamentary super.


UNFUNDED SUPER – A PROBLEM AROUND THE WORLD

Unfunded public servant super is a growing problem around the world. It’s starting to blow up as an issue in Hong Kong where unfunded liaibilities for civil servants have soared to almost $60 billion. Given that Australia has three times the population of Hong Kong, the per capita problem is similar as the unfunded liability across Australian governments is about $150 billion, of which more than $1 billion relates to judges and pollies.


VICTORIAN POLLIES ARE FULLY FUNDED FOR SUPER

Details are starting to come in about the various judicial and political superannuation schemes across the country but today we’re focusing on the Victorian Parliamentary scheme. It is fully funded and has about $190 million in assets set aside to keep several hundred current and retired politicians in pensions for life.

When Joan Kirner left office in 1992 it was estimated the total liability was only $80 million but this has soared because a higher proportion of retired members opted for the generous pension ahead of the lump sum.

Kirner was a complete disgrace with super funding as she even borrowed the majority of the assets from the parliamentary scheme to help fund the budget deficits when the Loan Council was refusing to approve increases in borrowing limits.

Jeff Kennett deserves credit for reducing Victoria’s overall unfunded liability for superannuation from $18 billion to about $11 billion but the pollies did get special treatment with an extra $100 million being pumped in to make it fully funded.

However, at least the Victorians can claim that all the old defined benefit schemes are fully paid. This includes judges, cops, firies and ambos.

This less privileged public servants in the new accumulation scheme only enjoy about 40 per cent funding because unfunded liabilities have risen a couple of billion under the Bracks government to about $13 billion although they are scheduled to be fully funded by 2035.

Meanwhile, a subscriber has summed up how many of us feel about the hypocrisy of parliamentary super schemes:

“Your pursuit of the superannuation issue is welcome and appropriate. When the rest of us battle with the open markets to eke out a retirement income, with the attendant burden of new Government surcharges on contributions, it is hardly an equitable situation that politicians and judicial appointees continue to enjoy this level of protected benefit whilst forever raising the bar for the rest of us.

The politicians are the very people who have seen fit to close off all defined benefit schemes for their employees, recognising the unsustainable nature of the benefit, but continue to exempt themselves whilst taking from the very same purse they seek to protect. Go figure!!

For my part, I believe all new judicial appointments/elected representatives should be provided with an overall package and the allocation to super, cars, salary etc would then be a matter for them individually.  This approach would reflect the true value (and cost) of what is on offer and may possibly lead to interest being shown by higher callibre people if  the true value was revealed.  They often quote what the PM or Premier gets paid but in package terms they are probably worth two or three times the quoted salary.

Good on you Crikey, Subscriber 4275″

THOUGHTS FROM A SUPER PROFESSIONAL

I noticed your sprey  last week

about pollies’

 and judges’ 

super. My company, Rainmaker Information  (www.rainmaker.com.au)

, researches super and investment issues.

Getting the good oil on the funds and schemes that houses super for the judges and the pollies can be quite hard. But some background that may – or may not – be useful:

 

1. Total unfunded super  for public servants, judges, politicians etc

in Australia is around $130 billion. Don’t even think about putting this number into the Commonwealth Budget as it would blow it out of water.

 

2. The judges’ 

and politicians

‘ 

funds are odd beasts in that most don’t actually contain any money, as they are really just conduits to pay benefits from consolidated revenue.  They work by the fund just calling up money from consolidated revenue as required.

 

3.  Several state governments have been trying to pay down some of their unfunded liabilities to improve their balance sheets. Indeed, the ACT government basically sold ACTEW and dumped all the proceeds into a special fund to offset their expected long term superannuation bill. In 1999 the then Kennet government made some big payments into their super funds to reduce these unfunded liabilities as well. So its actually a big government finance issue, but equally its one that most governments don’t really like to talk about.

 

4. Because these judges’ and politicians’ schemes operate differently (refer 2), they are exempt from many of the normal rules governing how super funds operate. Reflecting that, they often don’t disclose info as openly as you would expect. But, technically speaking, they don’t have to because they are exempt from many of the normal rules (catch 22…).

 

5. Unfunded liabilities are also important issues when looking at government businesses that are moving down the corporatisation and privatisation road, eg Telstra and AussiePost. Indeed, fully privatising these organisations could get tangled up in resolving the super fund liabilities that the government owes these company’s funds resulting from corporatising these organisations and moving them out of CSS a few years back.

 

I’m sorry for not giving you more hard info, but the bigger picture on this issue is actually more confronting that the specifics of schemes for a few judges. Anyway, if you need anything further, please let me know.

 

Cheers

Alex Dunnin
Director Research
Rainmaker Information