Paying for public servants to live longer

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By Leith van Onselen

Financial services giant, Mercer, has released new research claiming that Australian public servants live on average four years longer than the rest of the population, and that this longer life expectancy poses problems for future taxpayers who will be called upon to fund their generous defined benefit pensions. From The Canberra Times:

…male workers in Australia’s state and federal public sectors have an average life expectancy of 88 and female bureaucrats will live on average to 91. Australian Bureau of Statistics figures show an average life expectancy of 84 years for men and 87 for women in the general population…

The link between the public service lifestyle and longer life has not been pinpointed but Mercer partner Richard Boyfield says some research suggests higher retirement incomes from their defined benefits superannuation schemes give former bureaucrats access to better healthcare and healthier lifestyles as they age…

“The findings have significant relevance for federal and state governments, in terms of the impact on public sector pension liability

Until access to defined benefit schemes was shut-off federally in the mid-2000s (earlier in some states), life long employment in the public service was a sure fire way to an easy life.

In addition to their greater life expectancy – which in fairness probably extends to all white collar workers (both public and private) – public servants also enjoy relatively high salaries, with the average public servant earning a whopping 21% more than an average private sector worker, and the average full-time public servant earning 8% more than their private sector counterparts (see next chart).

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Moreover, public sector wages have grown faster on average than their private sector counterparts since the late-1990s, despite the once-in-a-century mining boom:

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What is particularly galling for younger Australians is that they will be required to make up any shortfall in the generous defined benefit pensions provided to retired public servants via increases in their taxes, without enjoying the same benefits when it is their turn to require.

But hey, that’s indicative of the retirement system more generally.

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