Federal election 2016: MPs average $211k-plus in super per year

More than 30 Coalition MPs are entitled to indexed pensions totalling more than $6.7m each year in retirement.

Bronwyn Bishop is one of 30 politicians covered by a defined-benefits super scheme. Picture: Kym Smith

More than 30 Coalition MPs are entitled to indexed pensions totalling more than $6.7 million a year in retirement, courtesy of John Howard’s loathing of retrospective changes to superannuation.

As the Turnbull government presses ahead with a cap on non-concessional super contributions that has been labelled retrospective, analysis by The Australian reveals­ nine cabinet ministers are among those whose lucrative pensions were grandfathered in 2004.

They will collect an average allowance­ of about $211,400 each year for the rest of their lives from the scheme, which will pay out about $46.4m next year alone.

In 2004, Mr Howard, responding to public discord over politic­ians’ retirement perks, closed the generous defined-benefit scheme for new MPs but drew a line at retrospective changes.

“People who enter into an arrange­ment or part of their career on a certain basis are entitled to enjoy the entitlements of that arrangem­ent as they entered into it,” he told parliament at the time.

Malcolm Turnbull has argued that the imposition of a $500,000 lifetime non-concessional cap on superannuation balances, backdated to 2007, is “not retrospective at all” as it will only hit people’s futur­e earnings.

However, the government’s critics, echoing Mr Howard, argue that savers might not have invested money in super, locking money away until retirement, had the cap existed at the time. Bill Shorten has criticised the retrospective measure as “un­think­able­”.

Mr Howard, the prime minister between 1996 and 2007, did enact retrospective laws as treasurer in 1982 to attack “bottom of the harbour” tax arrangements, through which people stripped companies of their assets to avoid paying tax.

GRAPHIC: What Coalition MPs are in line for

Mr Howard argued that the public interest in clawing back the unpaid taxes outweighed his phil­o­soph­ical objections to retrospective taxation. Fourteen Coalition MPs crossed the floor in disgust.

The old parliamentary pension scheme calculates a former politic­ian’s entitlements based on their length of service and responsibilit­ies as a minister, office-bearer or committee chairperson. The pensions rise in line with the salaries of sitting parliament­arians, which are fixed by the arm’s-length Remun­eration Tribunal.

To achieve super earnings equivalent to the $331,700 pension Tony Abbott will enjoy for life after his parliamentary career would requir­e about $5m in a fund.

The pensions of 23 sitting Labor MPs — including Tanya Plibersek, Wayne Swan, Penny Wong and Anthony Albanese — were also grandfathered in 2004, as was independ­ent Bob Katter’s.

The current Prime Minister’s first budget also targeted defined-benefit superannuation schemes, such as the one accessed by Australia’s political veterans.

From July next year, members of defined-benefit schemes will face a high-income contributions tax at a $250,000 threshold.

Pension payments of more than $100,000 a year paid to members of unfunded defined-benefit schemes will also be taxed at the full marginal tax rate to replicate the impact of the government’s planned $1.6m transfer balance limit that hits people on accumula­tion schemes.

For members of defined-benefit­ schemes that are funded, 50 per cent of pensions above $100,000 will be taxed at the indiv­idual’s marginal tax rate.