Ricza, Jade (SEN)
From:	Bill Egan [wegan@pcug.org.au]
Sent:	Monday, 29 January 2001 4:58 PM
To:	super.sen@aph.gov.au
Subject:	Summissioin to Select Committee on Superannuation and Financial services re Indexation of ComSuper pensions
I wish to submit some ideas for consideration by the Committee relating to the basis of indexation of pensions under the Commonwealth Superannuation scheme.  I do not propose to consider the issue in its full complexity.  I am confident that will be done more competently than I could hope to achieve by representative groups like SCOA.

The point I would like to make relates to some undesirable side effects arising from the current system of indexation via the CPI.  I retired from a senior level position in 1992 at age 55 (voluntary early retirement, no package or special incentives involved).  At that time it was still possible to believe that the current indexation system would be adequate to ensure that the relatively lower pension one received at early retirement would maintain relative parity with the earnings of those who remained in the service, and with general earnings levels in the wider community.  By this I mean that one could have an expectation that someone who retired at the same age, years of service and at the same level ten years later would be on about the same pension level.  This is absolutely not the case now.  My pension has drifted way below any comparability with current remuneration levels and their concomitant pension implications.

While it is not surprising that people in these circumstances would feel unhappy about this, it might well be argued that this was simply a risk we took and should cope with.  However, the implications do not merely affect the individuals involved.  In contemporary society it is essential that people have a flexible approach to career movement.  Willingness to contemplate early retirement and career movement is vital to the regular revitalisation of the public service, and to the maintenance of a dynamic work environment able to compete with the private sector in offering attractive advancement opportunities to younger employees.

An environment in which deep uncertainty surrounds the question of whether one can look to a reliable level of earnings over the course of ones retirement is deeply inimical to the confidence needed to encourage such a stance.  The likely consequence of the present uncertainty associated with CPI indexation is an atmosphere of pessimism and distrust over retirement and a tendency for staff to prolong their careers for as long as possible merely to maintain their earnings into later years, rather than any genuine commitment to service.

To put the matter in a slightly different way, the present CPI indexation fails generally to deliver the protection of income level in retirement that it was originally intended to ensure, but it is particularly unjust in the case of early retirees and therefore likely to undermine the potential benefits of early retirement options for society at large.  The early retiree has to accept that there is a proportionately lower level of pension but not the double impact of a greater degree of erosion of that already lowered base.

Bill Egan 
36 Gundara St, Aranda, Canberra, ACT 2614, Australia
Phone: +61 (0)2 62512008, Fax: 62533699
E-mail: Wegan@pcug.org.au (or Wegan@ozemail.com.au)
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