Time to end the super inequities

As our burgeoning unfunded superannuation liability demonstrates, with rare exceptions our politicians and bureaucrats are only too willing to protect their own privileges while attacking the benefits available to the rest of us. This is clearly evident in two areas.
 
The first is the savage cutbacks in the concessional superannuation contribution caps with no equivalent reduction in the benefits available to pre-2009 Defined Benefit fund members. 
 
The second was the Henry tax review proposal to reduce the taxation advantages of funded concessional contributions with no similar proposals to deal with the much larger unfunded employer benefits. 
 
Attacking the accumulation of assets in super funds — tied up and untouchable until at least age 60 — without similar restrictions on unfunded benefits is unfair. The end result is that future taxpayers will have to service unfunded liabilities averaging between $500,000 and $1 million for each of the approximately 600,000 current and retired federal defined-benefit fund members. 
 
Mark Latham saved taxpayers billions of dollars by forcing John Howard’s hand to close new entry to the Parliamentary Pension Plan in 2004. This inspired the following decision to close off the public service scheme to new members in 2005. 
 
Tasmanian taxpayers are similarly indebted to Richard and Carl Sherriff. Their grassroots campaign led to the closure of new entry to that state’s parliamentary scheme in the mid-1980s and the subsequent closure of the public service unfunded scheme to new members in 1999. 
 
Admittedly it is difficult to design tax arrangements and contribution limits which impact equally on unfunded and funded superannuation scheme members. But this does not excuse our decision-makers from exempting their own benefits from the changes they make. 
 
Even when the changes have included unfunded benefits, most recently in the 15 per cent Division 293 surcharge on taxpayers earning above $300,000 annually, the assessed accruing unfunded superannuation benefits do not accurately measure the benefits accruing. 
 
The actuarial calculations used for making the tax assessments are based on assumptions such as average salary growth and age of entry to the fund. Such methodology is flawed for benefits based on final salary or final average salary, which include valuable surviving spouse benefits. A large salary increase late in a career or a relatively young spouse can result in accruing benefits many times those estimated by the actuaries. 
 
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Daryl Dixon

Executive Chairman

Daryl Dixon is one of Australia’s foremost investment experts and a well known writer and consultant. He has provided trusted advice to thousands of personal clients over more than 25 years and is an acknowledged expert in the areas of tax, superannuation (including public sector superannuation), social security and investments.

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