Up to half a million retired public servants could be kicked off the age pension under the looming shake-up of the nation's superannuation tax system, a leading expert says.
A government move within months against the generous tax breaks on retirement savings looks inevitable and speculation has begun that the nation's army of retired state and federal government workers will not escape the pain.
But groups representing public sector retirees have reacted angrily to suggestions they are enjoying privileges denied to former private sector workers.
Most retired state and federal public are on lifetime-indexed pensions after contributing throughout their working lives to super schemes that are now closed off to new members.
The pensions are not included in the asset tests for the aged pension despite the Coalition's beefing up the test rules this year in a move that is thought to have taken the pension away from about 300,000 retirees.
But according to leading superannuation adviser Daryl Dixon and News Ltd economics writer Robert Gottliebsen, retired public servants have good reason to worry too.
Both men say that if the valuable indexed pensions were treated as assets, as they would be if they were purchased in the private sector, then hundreds of thousands of public sector retirees would lose access to their Centrelink age pensions.
But retirees groups says the idea is "sensational and superficial," does not take into account key differences between public sector pensions and privately purchased annuities and misses other key facts too.
Mr Dixon told Fairfax Media that having the same rules for private and public pensions would be fair.
"Treasury and Finance have never brought this to the attention to the government," the veteran investment adviser said.
"But if they wanted to be fair, they would have had the same rules.
"If I purchased an annuity from Challenger, whatever I used to purchase the annuity is counted as an asset.
"If I purchase an asset from the Public Service Superannuation Scheme, the only thing they [the government] will assess is the pension I get from the PSS and they ignore the asset.
"The asset test is much tougher than the income test that and that allows a former public servants to have a pension and a beach home.
"If you added the value of their pension to the value of their beach home, they wouldn't get a part age pension, but now they do get a part age pension so it really is a huge difference in treatment."
But Annette Barbetti, federal president of the Australian Council of Public Sector Retiree Organisations, said the a public sector indexed pension was nothing like a privately purchased annuity for several key reasons.
"Unlike most private sector superannuation pensioners, retired public servants cannot neither access the notional assets underlying their pensions nor leave them to their children," Ms Barbetti said.
"The defined benefit pensions of retired Commonwealth public servants are taxed, with a 10 per cent tax offset, not a rebate, and consequently any other income is taxed at their marginal tax rate.
"There is now a 10 per cent cap on the proportion of a defined benefit pension that can be excluded from the age pension income test."