Posted June 11, 2020 05:59:18The Australian Government’s pension scheme will pay its share of the $1.1 billion cost of the planned privatisation of its Pensions Board.
The Government will pay for a “management agency” to handle the transition from the Pensions Fund to the new Pension Management Agency.
Key points:The Government says it will have to repay the remaining $3 billion to its existing shareholders in 2018-19 and 2019-20The plan will have a cost of $3.1 trillionThe Government is considering an overhaul of the retirement age and the age of retirement to help ease the transition to a new fundThe Government wants to overhaul the retirement ages to reduce the number of people needing to be at work to make ends meetThe Government’s decision will allow for the Government to cover some of the cost of privatisation and the management agency, which will take over management of the scheme from the existing Pensions Trustee.
The Government had initially said it would pay its shareholders $1 billion in 2018 and 2019.
But it announced in July it would not be able to cover the costs.
Pension funds are Australia’s biggest employers, but the Government has been struggling to keep them running.
Its plan is to set aside $3 trillion to cover retirements in retirement.
The pension fund has a $1 trillion capital reserve and has a total of 2.6 million employees.
Its capital requirement is about $7.2 billion per year.
At the end of 2020, the fund would need to have about $1,600 in cash reserves and about $2.6 billion in assets to be able pay for the new management agency.
Mr Hockey said it was a “huge undertaking” to privatise the Pension Fund and it would be difficult to achieve.
“It will be a significant cost to the Government,” he said.
“We will have an agency in place and the Government will be responsible for that agency and its costs.”
Mr Hockey was speaking as he announced a raft of new measures for the fund to help speed up the transition.
They include an increase in the pension age from 70 to 75, a change to the age at which people can get a lump sum payment, a move to allow people to get an annuity instead of a pension, and an increase to the maximum amount people can receive in a lump-sum payment.
In the plan, the Government says $2 billion in additional investment from other Government agencies would help it reduce the risk of a taxpayer-funded bailout.
It says it would also make an additional $5 billion available to help offset some of its losses in the scheme.
Mr Hockey says the Government’s plans are “fair and reasonable” and will “help to accelerate the transition”.
“This is a significant investment in the Government of Australia’s long-term economic recovery,” he told reporters.
“We need to keep the confidence of taxpayers and help the economy to get back on its feet.”
The Government of the day will not be doing this without confidence in the ability of the Government, through the pension fund, to deliver for taxpayers and ensure the continued viability of the pension scheme.
“He said the Government is still considering the changes to the retirement and age of pension rules.”
This will be reviewed in the coming months,” he added.
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Should the Government privatise pensions?