‘Outrageous hangover from a bygone era’: Judge pensions costing taxpayers millions

Closing the generous pension scheme for federal judges that currently provides each retiree hundreds of thousands of dollars a year would leave the budget more than $400 million better off by the end of the decade, according to independent costing analysis.

Liberal senator Andrew Bragg said the defined benefits scheme was way outside community expectations. The current scheme sees retired judges who had been in their role for a decade or longer receive 60 per cent of their working income as a pension, which in some cases is nearly $365,000 a year.

Senator Andrew Bragg says the defined benefits scheme should be closed.Credit:James Brickwood

“This is really the most outrageous hangover from a bygone era,” Bragg said.

The independent Parliamentary Budget Office, on request by Bragg, analysed the costs involved in closing the existing pension scheme to new judges and moving to superannuation.

Its report found that in the short term, closing the existing scheme to new judges and instead paying 15.4 per cent in superannuation would cost the government $4.7 million over the next four years, and would boost the government’s financial worth by about $42 million over the same period.

But as more retired judges took up the super scheme instead of the old pension, savings would swell.

Current pension scheme for High Court and Federal Court judges

A High Court chief justice, retiring on $608,150, would be paid $364,890 a year under the current pension scheme, while the chief justices of the federal and family courts on base salaries of $514,980 receive $308,988 a year in pension.

A High Court justice, retiring on $551,880 would receive $331,128 a year. Those on a base pay rate of $468,020, which includes Federal Court judges, Family Court judges, and the president of the Administrative Appeals Tribute would get $280,812 each year in retirement.

Only judicial officers who have served for 10 years can receive the full pension, and they must also retire at 70.

In a decade’s time, the budget would be $415 million better off as a result of the change, and the report said those savings were projected to “rapidly accelerate” from 2031-32 as the number of retirees on the old pension scheme declines.

“Savings would dominate over the long term,” the report said.

A 2021 Finance Department report on the current pension scheme found it would rise in cost over the next 40 years – from just under $60 million this year, to more than $250 million by 2060.

The same report found the government would need to set aside nearly $1.3 billion this year to pay for future judge’s pensions. That budget liability would blow out to nearly $1.7 billion by 2030, and reach $5.2 billion by 2060 if the current scheme remained in place.

Bragg said the government cannot afford to run large deficits for decades, and moving federal judges onto superannuation would be one way to find future savings.

“There is too much wastage in the budget, and the budget needs to head back into the black so we can prepare for the next crisis,” he said.

“If legislation was introduced to effect this change, I will definitely vote for it. It’s a special deal that exists for one profession. I don’t understand why the taxpayers of Australia should continue to fund that.”

Gross government debt is predicted to reach $1.2 trillion by 2025, and the budget deficit for the first 11 months of 2021-22 was $34.6 billion.

Treasurer Jim Chalmers has repeatedly stressed the importance of budget repair and finding savings ahead of the government’s first budget in October.

The federal judge pension plan is the last of the government’s generous defined benefits schemes.

The defined benefits scheme for politicians, which pays former politicians 75 per cent of their last base salary, was closed by former Prime Minister John Howard to all new politicians elected after 2004.

The rest of the federal public service moved off the defined benefits scheme after it was closed to new members in 2005.

The finance minister was approached for comment.

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