AUSTRALIA - The Australian Government civilian and military superannuation schemes' pensions should continue to be indexed by the consumer price index (CPI), a report has concluded.
The CPI was "the most suitable index to protect pensions against inflationary price increases available at this time," chief executive of UK insurer Friends Provident Trevor Matthews, who led the review, said in the report.
The report covered the seven Australian Government civilian and military defined benefit superannuation schemes.
Government officials supported the findings.
Minister for finance and deregulation Lindsay Tanner said: "We are aware that this will disappoint many superannuants and their representatives, but we are satisfied that the CPI is the most suitable index.
"It is also in line with the indexation of most other similar pensions in Australia, including all equivalent state Government schemes."
In the report, Matthews acknowledged the CPI was a measure of inflation for Australian households as a whole and therefore might not represent the average experience of a particular sub group.
He said the only alternative would be to use the Analytical Living Cost Index (ALCI), but a 10-year comparison with the CPI showed indexation by this measure would not make any practical difference over time and might disadvantage retirees in the short term.
"A change to the indexation of these pensions therefore is not warranted, especially as it would come at a significant cost to the taxpayers. It would also be inequitable for superannuants who previously chose to take their superannuation in a lump sum," concluded Tanner.
Tor Consulting managing director David Harris - who assisted in the compilation of the report - said: "The report provides an international template for other developed nations to look at pension issues in the public sector.
"In particular, the United Kingdom should look at issues related to its public pensions' exposure, where unfunded liabilities are much larger than in Australia."
The report said the government should be open to using other indexes if they become available in the future and prove to better reflect the price inflation experience of superannuants.
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