The pension, available to MPs who served at least two terms, ranged from annual payments of $84,000 to $126,000, depending on how long the member served and what parliamentary positions they held.
The scheme was scrapped under the Bracks government in 2004 and MPs elected since then receive superannuation payments from the government, in the same way as other public servants, but do not receive pension payments. A 2013 review found it would cost between $6 million and $7 million a year to reopen the so-called “defined benefits” program.
Seventeen veteran politicians, including Premier Daniel Andrews, will be eligible for the pre-2004 pension when they leave politics, but approximately 110 more recent members are ineligible. About 200 former MPs currently draw the pension.
A group of Labor MPs made a submission to the remuneration tribunal on behalf of the Labor caucus, noting that more junior members were worse off. “Reopening the [pension scheme] and allowing current MPs who missed the opportunity to join to buy-back in would certainly remove a remuneration package difference that has effectively created two classes of current MP,” they said.
Labor upper house MP Cesar Melhem, one of three MPs who drafted the submission, said he was unsurprised by the tribunal’s decision and believed it would have been inappropriate to financially reward MPs during a recession.
But Mr Melhem said it was important politicians were paid enough to entice individuals with skills that could earn them high incomes in the private sector, but said politics should not be a “gravy train”.
“People who enter politics because they want a pension, I’m sorry, but that’s not the right approach,” he said, adding that some younger MPs found it difficult to secure employment after short stints in politics.
The Labor members also called on the tribunal to increase separation payments for MPs who leave Parliament after one or two terms. Victorian politicians currently receive between three and six months’ salary if they lose their seat.
The tribunal dismissed the urgings of MPs, but found some politicians who served one or two terms could leave parliament with meagre retirement incomes. The tribunal recommended no changes to MP retirement schemes, but called for increased transitional assistance to help members find employment.
Victorian Parliamentary Former Members Association president and former Labor MP Peter Loney said there was an incorrect perception that retired MPs on the legacy pension system “all lived happily on millions of dollars of super”.
“That perception people have is generally based on those on the highest pensions and that former MPs all walk into board positions or company jobs,” Mr Loney, a visitor at Deakin University specialising in government accountability, said.
“The ones who do that are a remarkably small percentage [and] what we’ve found is many members of parliament have great difficulty finding work of any type.”
Mr Loney said there was some merit in the argument made in a 2013 review into Victorian MPs superannuation that said increased remuneration reduced the risk of corruption because elected members were less likely to seek ways to boost their income.
To illustrate the difference in the retirement models, the remuneration tribunal used the example of a hypothetical 43-year-old who went on to serve 12 years in parliament. This person would accumulate about $700,000 in superannuation under the current scheme compared with $1.1 million in the pre-2004 pension program. Under the pre-1996 scheme the MP would have been eligible receive as much as $2.96 million.
Many public servants were on defined benefits schemes until the mid-1990s when the government closed them due to the high cost to the state. Some government employees, including certain judges, still have access to pensions when they retire.
The salary of Victorian backbenchers rose from $163,189 to $182,413 this year, while ministers and Opposition Leader Michael O’Brien received pay rises of 11.8 per cent, taking their pay packet to $352,057. The Premier received a $46,522 pay rise in July, making him the highest-paid state premier with a salary of $441,000.
Victorian politicians receive 15.5 per cent of their income as superannuation contributions, the highest of any jurisdiction in Australia, and will receive 16 per cent from next year.
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Paul is a Victorian political reporter for The Age.