Defined benefit rorts for mandarins must finish now

It is in the interest of both the nation and federal public servants that the 45th parliament tackle the unsustainable benefits being promised in the current public service defined benefit schemes.

We know that the federal fund shortfall is between $314 billion (the latest estimate from the government) and $600bn (the top estimate of some of Australia’s best actuaries). Australia is currently borrowing to pay public service wages and community social services and that deficit looks like being with us for a long time. The next generation will face the prospect of either substantially cutting social services and other government expenditure or paying out pensions to retired public servants that in 2016 were worth $10 million plus per person for those in the top echelons.

The nation in 2016 slashed future superannuation benefits to the private sector because they were unsustainable. The benefits promised to public servants who joined before 2005 are many times levels that are believed to be too high in the private sector. They are even more unsustainable.

There are two clear alternatives. The first is the solution adopted by Telstra when it was privatised. Telstra quickly realised that the old commonwealth public service pension scheme meant that it had two salary scales, which would make management impossible (that’s what the commonwealth public service is now finding). Accordingly, Telstra froze the salaries of all those in the public service scheme — effectively also freezing their benefits.

On privatisation, Qantas faced the same problem but went one step further and effectively froze the defined benefits. The parliament should follow either Telstra or Qantas.

Irrespective of which party was in power, public servants have slipped rorts through gullible ministers. The rorts should simply be extracted, led by the scheme that enables a public servant who retires to take on a new partner (male or female) and that partner will continue receiving 67 per cent of the pension for life once the public servant dies.

Universities and the Reserve Bank have even more generous schemes and are creaming cash out of their institutions for vice chancellors and top managers, which would simply not be allowed in the private sector. A penalty tax should be imposed immediately and the Reserve Bank and the universities should adopt the Telstra or Qantas models. If we don’t tackle the defined benefit bonanza our children will do it and public servants can expect much more savage measures.