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<\/p>\nThe Tasmanian government is considering slashing the superannuation payments given to some high-earning current and retired public servants as part of May’s budget, as it seeks to improve the state’s financial position and rein in debt, the ABC understands.<\/p>\n
It is understood the Department of Treasury and Finance has been tasked with examining a range of options to reduce the state’s unfunded superannuation liability, which is predicted to exceed $7 billion by June.<\/p>\n
These options include reducing the payments of those who receive annual superannuation payments of more than $200,000.<\/p>\n
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The Department of Treasury and Finance will provide its advice to Eric Abetz ahead of the budget in May. (ABC News: Simon Farrell)<\/p>\n
There is no publicly available data about how many former public servants \u2014 likely confined to former judges, heads of departments and senior politicians \u2014 receive that amount each year, but the government estimates such a reduction could save tens of millions of dollars per annum.<\/p>\n
It is unclear whether the government has sought advice about the legality of decreasing payments for already retired public servants, with economist Saul Eslake noting it would require “breach of contract considerations that would need to be carefully worked through”.<\/p>\n
What is the defined benefit superannuation scheme?<\/p>\n
Tasmania’s defined benefit superannuation scheme was only available to people who joined the public service before May 1999.<\/p>\n
It pays retirees either an annual salary or lump sum, with the amount determined based on their length of service, salary in the years prior to retirement and the amount they have contributed into the scheme.<\/p>\n
In most cases, the payment transfers to the former public servant’s spouse \u2014 but at a reduced rate \u2014 when they die.<\/p>\n
It is considered a generous scheme that has caused a headache for state finances. The state’s unfunded superannuation liability is predicted to exceed $7 billion by June.<\/p>\n
Asked specifically whether the government was considering slashing superannuation benefits for high earners, a spokesperson for the Department of Treasury and Finance said it “provides ongoing advice to government on a wide range of budget-related matters”.<\/p>\n
Similarly, a spokesperson for Treasurer Eric Abetz said the government was “analysing a range of options” as part of its work towards this year’s state budget.<\/p>\n
“Our focus is on delivering for those Tasmanians dealing with the cost of living while responsibly managing the budget,” the spokesperson said.<\/p>\n
The spokesperson also noted the government was doing analysis following a review of the state’s finances by Mr Eslake, which recommended the government consider moving current public sector employees away from the defined benefit superannuation scheme, and transitioning them to the same superannuation arrangements as people who joined the public service after May 1999.<\/p>\n
In his review, Mr Eslake said it had been suggested to him that it could save the budget between $2\u20133 billion over the next 50 years, but he had not been able to verify those estimates.<\/p>\n
Slashing entitlements of retired public servants ‘contractually difficult’<\/p>\n
Mr Eslake told the ABC he was also in favour of the government investigating whether it could reduce payments provided to already retired public servants, but thought it might be more “ethically and contractually difficult” to do so.<\/p>\n
“But given the size of the financial commitments that are entailed in the public sector superannuation scheme, I certainly thought it was appropriate for the government to be looking at whatever options it might think were feasible,” he said.<\/p>\n
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Saul Eslake has analysed the government’s finances. (ABC News: Maren Preuss)<\/p>\n
Mr Eslake said reducing superannuation payments could also be politically difficult for the government.<\/p>\n
“What it arguably entails, especially from the perspective of those who might be adversely affected by it, is the removal of an entitlement which they thought they had and had presumably arranged their affairs on the assumption those entitlements would remain unchanged,” he said.<\/p>\n
“Conversely, of course, there’s an argument that says why should people who happened to be working for the public service up to the point when these defined benefits schemes were closed continue to enjoy far more generous superannuation treatment?”<\/p>\n