With a focus on reining in budget debt, generous superannuation tax breaks for high account balances are in the spotlight. So, too, are the big retirement benefits for high-level public servants.
While Australians often debate public servants’ salaries, few probably think about their post-retirement earnings. Perhaps they would, though, if knew about the size of their generous defined benefit superannuation packages.
So says Geoff Wilson, chairman of Wilson Asset Management, who believes the public has a right to know about the defined pension benefits accorded those who make comments about superannuation tax breaks.
“A lot of people may not be aware that when they see a public servant or ex-public servant making a comment about superannuation or franking … they’ve been fortunate enough to be on these defined benefit pensions, which cost the Australian people a lot of money,” Mr Wilson says.
By the 2025–26 financial year, the federal government’s superannuation liabilities for retired public servants are projected to be $298 billion – and by 2026 $523 billion.
What’s more, public servants who retire and return to work as contractors continue to be paid their pension.
Mike Callaghan, a former senior Treasury official who led a retirement income review instituted by the Morrison government, says the tax concessions on superannuation overwhelmingly benefit those with high incomes.
He says the Albanese government should conduct another review, focusing on those concessions as part of repairing the federal budget.
It’s not just the post-retirement income of public servants that is causing consternation. High-ranking executives in the public sector have had recent taxpayer-funded bonuses questioned by the public and by the federal government alike.
Australia Post paid out $4.5 million in bonuses to current and former senior executives in the past financial year, while NBN Co employees were awarded $1.6 million in bonuses. This raised the eyebrows of both finance minister Katy Gallagher and communications minister Michelle Rowland, who asked the organisations to explain the reasons for the bonuses.
Somewhat predictably, both organisations defended those payments, with claims the bonuses “were critical in order to stop employees from being poached to the private sector”.
On top of a base salary of $1.15 million last year, Australia Post CEO Paul Graham received a bonus of more than $880,000.
Such large incentives being paid to active public servants brings us back to their superannuation packages. Public servant pensions were deliberately designed to be generous to offset the fact that public sector wages were generally lower than those in the private sector.
According to David Knox, a retirement income expert at Mercer: “It’s what they were promised as compensation when employed when traditionally public servants got paid less than the private sector.”
If those high-ranking public servants are now being paid comparable wages to avoid being poached by the private sector, it is reasonable to ask if generous superannuation packages on top of that could be seen as ‘double-dipping’.
For those concerned by that prospect, there is at least some good news. For most public servants, defined benefit pensions closed in 2005, and the same occurred for military staff in 2016.
That will be at least some small comfort to those of you wondering if your own superannuation balances will see you through your retirement years.
How do you feel about public service pension packages? Does the government need to look more closely at how much public service executives are paid? Why not share your experience and thoughts in the comments section below?