Deflation puts brakes on retired SA public servants’ pensions
For the first time since the 1990s, nearly 15,000 retired South Australian public servants will see their indexed pensions frozen until consumer prices bounce back – but the state Treasurer has intervened to ensure they don’t lose money.
Photo: InDaily
After this year’s record fall in the consumer price index, State Treasurer Rob Lucas has used his legislative discretion to maintain pension payments at their current level to more than 14,300 people in the pre-1986 scheme administered by Super SA.
However, the pensions won’t rise again until CPI outstrips the fall in the previous quarter.
The super scheme in question provided an indexed pension based on each member’s time of service, age of retirement and other factors. It closed to new entrants in 1986, later being replaced by a lump sum scheme.
The freeze, rather than a cut, has also been applied to some former MPs, retired judges and former Governors who receive indexed pensions. There are 132 pensioners in the Parliamentary pension scheme (which was closed in 2006), 71 pensioners in the Judges pension scheme, and three in the Governor’s scheme. The scheme for judges and former Governors remains open.
Lucas told InDaily that Super SA pays fortnightly pension payments to 14,387 people, including some who live overseas and interstate, at an average level of $50,885.
The Superannuation Act 1988 requires the Super SA board to adjust these pension amounts twice a year – in April and October – to reflect any movement in the CPI.
In June this year, the ABS reported the biggest-ever quarterly drop in the CPI – 1.9 per cent. The largest fall was in childcare expenses, due to the Federal Government’s subsidisation of the sector during the period.
Lucas said Super SA uses the index for Adelaide, determined by the ABS.
“When there is a negative movement in the CPI, under legislation as Treasurer, I may direct that the adjustment may not be applied,” he said.
“However, as per the legislation, any future increase in the CPI will be netted off against the previous negative period.
“This decision ensures that the superannuants who receive the pension did not have their payments reduced.
“This approach was recommended by SuperSA and I agreed with their recommendation.”
He said such a move hadn’t been made since the 1990s and would have no impact on the upcoming State Budget.
The Treasurer indicated that even if the next quarterly CPI was negative, he wouldn’t reduce the pension amount.
He said that if the next CPI period showed further deflation, he intended to “adopt the same principle or approach”.
Labor Treasury spokesman Stephen Mullighan said the move was a response to unprecedented economic times, but he would seek more information about the impact of the decision.
“It will mean there’s a saving to the scheme, so what’s happening to that saving?” he said.
