State politicians call to bring back lucrative pension scheme
State MPs are calling for the return of a pension scheme that would secure them lifelong annual payments of more than $84,000 if they served two terms after it was closed to new MPs in 2004.
Victoria
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State MPs want to bring back a lucrative pollie pension that would secure them lifelong annual payments of more than $84,000 if they served two terms.
The defined benefits superannuation scheme, closed to new MPs in 2004, sees members put a portion of their salary into the fund while in office, in order to cash out a fixed yearly amount once dumped by voters or retired.
That payment is guaranteed and so protected from investment fluctuations, and increases the longer they stay in parliament and the more senior roles they take.
Just 17 MPs, including Daniel Andrews and several of his senior ministers, are left on the scheme, while the other 111 state members are on a regular accumulation scheme with a contribution rate of 15.5 per cent.
Victoria’s remuneration tribunal has been ordered to review superannuation, with legislation dictating that no MP would be worse off by any changes made.
The review comes at an awkward time for Premier Daniel Andrews and his government, given the growing unemployment queue caused by the COVID-19 crisis and the state’s budget crisis.
Despite this, Labor MPs Ingrid Stitt, Cesar Melhem and Mark Gepp penned a submission on behalf of their colleagues to propose reopening the old scheme.
But in order to stop MPs from “having their cake and eating it too” they would have to buy into the fund.
“Allowing current MPs who missed the opportunity to join to buyback in would certainly remove a remuneration package difference that has effectively created two classes of current MP,” they write.
“Arguably this is the only way to ensure a level playing field between all current MPs.”
The MPs argue it would also encourage better political candidates.
A review of pollie pay in 2012 found that putting all MPs on the old super scheme would cost about $6-7 million a year, and may be “unjustifiable given prevailing community values and expectations”.
Another submission to the current review, by former MPs, says some people who enter parliament need a financial parachute upon leaving.
“The experience of many, perhaps most MPs, that post Parliamentary employment is difficult to obtain and, if found, generally not at a salary level close to a backbench salary,” they say.
Under defined benefits, the minimum an MP can be paid if they’ve served 8 years is $84,450 a year.
The longer they serve the more generous the payment, rising to $126,675 a year if they sit for two decades, or even more if they have been a minister.
If an MP wants to “cash out” their balance they can, but this is capped at 10 times the annual rate — so almost $1.27 million for those with payments of $126,675 a year.
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