Snuck away in today’s Financial Reviewstory on plans for a federal takeover from state governments of the administration of universities is an apparent costly rescue plan for the superannuation scheme for academics. The Fin report says:
The Abbott government is also poised to relieve NSW of the burden of $2 billion of unfunded obligations for superannuation schemes operated by NSW universities. The federal government will take responsibility for 80 per cent of the unfunded obligations of the defined-benefit schemes.
Academics, especially younger ones, should be grateful for the Commonwealth’s largesse for without it their retirement incomes are in big trouble.
The rather sad story of UniSuper is not one that has received much coverage in the mainstream news pages. Superannuation is a complex subject for journalists to cover and the couple of attempts I made to draw attention to the university problem aroused little interest and thus can be included in the “failure” category.
More successful are the efforts of financial consultant Daryl Dixon in his regular columns hidden away on the finance pages of The Canberra Times and The Australian. They are worth a read.
Daryl Dixon September 28, 2013 The Australian (subscription required)
Unisuper has acknowledged that its defined benefit superannuation fund is no longer prepared to pay all the benefits promised to members when they were forced to join this fund. Its latest chief executive, Kevin O’Sullivan, has indicated that a name change, including “target benefit” rather than “defined benefit”, will be considered. For younger members with many years of employment ahead, and nearly 7000 non commutable lifetime pensioners, a more suitable description could well be “uncertain benefits” scheme.
Defined-benefit funds CSS and PSS pensioners are highly unlikely to face the uncertainties plaguing UniSuper. A protection for public servants is that a breach of the Commonwealth’s statutory commitments would trash Australia’s credit reputation. Apparently tempted by the extra cash on offer, Australian National University employees have been keen to volunteer for one of the 230 early-retirement packages now on offer.
Last month, the Australian National University joined other university and public sector employers in announcing it would shed a large number of jobs. The ANU will seek 230 volunteers to accept an early retirement package, offering cash inducements of between six and eight months’ salary depending on the staff’s length of service. These incentives will be paid, subject to Taxation Office approval, not as a tax-free voluntary redundancy pay-out but as an eligible termination payment instead, subject to less generous concessional tax arrangements.
The federal government’s unfunded super liability for politicians, judges, public servants and military personnel now totals some $200 billion and continues to increase. This is more than 2.5 times the assets in the Future Fund set up by the Howard government to help fund these liabilities.
UniSuper University staff may lose the retirement benefits that their super fund promised them. The fund is relying on the contributions of new younger members to help fund the larger benefits promised to older members.