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2002-2003
The Parliament of the
Commonwealth of
Australia
Explanatory
Memorandum
Parliamentary (Choice of Superannuation) Bill
2003
The Bill amends the Parliamentary Contributory Superannuation Act 1948
(the Act) to give Senators and Members of the House of
Representatives the freedom to opt out of the compulsory parliamentary
superannuation scheme.
Retiring Members and Senators currently receive
superannuation benefits from the Commonwealth, administered
by the Parliamentary Retiring Allowances Trust (the
Trust), as established under the Act. The day-to-day administration is
undertaken by the Department of Finance and Administration.
From the
first day a Senator or Member becomes entitled to a parliamentary allowance, he
or she is automatically obliged to make contributions to the Commonwealth under
the provisions of the Act.
The Bill allows new Senators or Members to
elect not to make contributions to the Commonwealth under the provisions of the
Act upon first taking office, and instead, to make contributions to a complying
superannuation fund or Retirement Savings Account (RSA) of their choice. The
Bill gives current Senators and Members the same choice, but will also allow
them to have any superannuation benefit accrued under the parliamentary scheme
rolled-over into a complying fund or RSA of their choice.
[1] Once a new, current, or returning
Senator or Member has exercised the right to choose not to make contributions to
the Commonwealth under the provisions of the Act, he or she will not be able to
make such contributions in the future.
If a Senator or Member elects to
opt out of the Parliamentary scheme, he or she will also have superannuation
contributions paid into their chosen fund or RSA by the Commonwealth. These
contributions will be made in accordance with the Superannuation Guarantee
(Administration) Act 1992.
The Superannuation Guarantee
(Administration) Act 1992 currently determines how the majority of
Australian workers have their employer contributions made to their
superannuation. Therefore, those Members or Senators who exercise the freedom of
choice the Bill provides will have their superannuation arrangements brought
into line with those applying to the wider community.
The Government
last year introduced the Superannuation Legislation Amendment (Choice of
Superannuation Funds) Bill 2002, designed to give employees greater choice
and control over their superannuation arrangements. Senators and Members are,
however, exempted from the Government’s proposed choice of fund
arrangements. By allowing Senators and Members to choose the complying fund or
RSA into which their contributions are paid, the Bill seeks to give
parliamentarians the same freedom of choice the Government has already sought to
give other workers.
The Bill will result in the funding of future superannuation accruals for
new and existing Senators and Members who elect to join another complying
superannuation fund or an RSA. It is difficult to estimate the outlays that
might be required as this will depend on how many Senators and Members choose
not to contribute to the Commonwealth under the provisions under the Act.
However, any increased cash flows do not represent additional costs to the
Commonwealth.
According to the submission of the Department of Finance
and Administration to the Senate Select Committee on Superannuation and
Financial Services’ inquiry into the Parliamentary (Choice of
Superannuation) Bill 2001 (the predecessor to the current bill), the
financial impact was described in general terms as:
• There will be
an immediate negative impact on the underlying cash budget once the first
Senator or Member exercises choice because of the payment of employer
contributions to a funded superannuation arrangement for the Senator or Member
during their parliamentary service and also, where relevant, the proposed early
roll-out of PCSS benefit will be a positive impact on the underlying cash budget
due to higher potential benefits at retirement having been
foregone;
• There will be a positive impact on the fiscal balance
from the effect of the changes on the PCSS average employer cost and the
unfunded liabilities for the PCSS. This reflects the improvement in the fiscal
balance because of reduced accruing superannuation liabilities and notional
interest expense in relation to members who opt out of the PCSS and have their
superannuation immediately funded.
There will be a long-term benefit to
consolidated revenue, and hence to the taxpayer.
Members and Senators who
opt out of the parliamentary scheme will reduce the Commonwealth’s
liability from an unfunded commitment to be paid out of consolidated revenue to
the amount required under the superannuation guarantee scheme (currently 9 per
cent of salary).
A Senate Inquiry in 1997 concluded the parliamentary scheme lacks
transparency, is out of step with superannuation practice in the wider community
and is in some cases excessively generous. In 2001, a
minor change was made, limiting new Senators and Members access to their
retirement allowances after reaching 55 years of age. No changes have been made
to address the excessive generosity of the PCSS.
The parliamentary scheme
had its origins in an era when people contemplating public office were
considered more likely to face job insecurity than the rest of the workforce.
However, in 2001 there is no such thing as ‘job security’ or a
‘job for life’ for the vast majority of the Australian workers.
The nature of modern parliamentary life means many ex-parliamentarians
are now at a competitive advantage when they re-enter the general workforce
after time in politics.
By giving Members and Senators the freedom to
opt out of the parliamentary scheme the Bill simply implements one of the key
conclusions reached by the Government members of the Senate Select Committee on
Superannuation in 1997.
On the 25th of November 1996 the Senate asked its Select Committee on
Superannuation to inquire and report on the appropriateness of the parliamentary
superannuation scheme.[2]
The
Committee received 46 submissions and held three public hearings before handing
down its report on 1 September 1997. In the report, entitled The
Parliamentary Contributory Superannuation Scheme and the Judges’ Pension
Scheme, the Committee concluded that:
• change to the
parliamentary superannuation scheme was desirable;
• the scheme was
out of step with superannuation practice in the wider
community;
• the scheme lacked transparency, and this lack of
transparency gave rise to much of the public criticism it attracted; and
• there was convincing evidence the scheme was excessively
generous to a small group of retiring
parliamentarians.[3]
According
to its report:
The Committee agreed that the scheme has many
significant shortcomings. It does not necessarily serve its members well, may
be outdated in some of its provisions and attempts to achieve too much in
relation to what a superannuation scheme can fairly be expected to
provide.
There is also a lack of transparency in parliamentary
superannuation that gives rise to much of the criticism of the PCSS. Further,
there is also clearly a negative perception in the mind of the public about the
scheme, and an uneasy relationship between the PCSS and superannuation in the
broader community. In light of these findings, the Committee considers that
reform is
desirable.[4]
Regarding
issues of flexibility, portability and choice the Committee said:
The
result of the inflexible nature of the PCSS is a lack of choice for individual
parliamentarians. In view of the increasing prospect of new members bringing to
their parliamentary life substantial superannuation as a result of other
employment, it seems inefficient as well as unnecessary to be requiring them to
contribute to a scheme which may result in them exceeding the Reasonable Benefit
Limits or exceeding their own superannuation requirements ...
The
Committee also recognises the lack of portability involved in the parliamentary
scheme. While it is possible for a member of the PCSS to purchase notional past
service that will be taken into account in determining future entitlements under
the PCSS, this option is generally not taken up. Then, on leaving parliamentary
service, there is no transferability of a PCSS pension entitlement to another
scheme.
One possible solution to these dilemmas is for membership
of the PCSS to be optional, to the extent that every parliamentarian is a member
until he or she opts out.[5]
Government members of the Committee recommended, among other
things, that upon taking office new parliamentarians should be offered the
choice of opting out of the parliamentary scheme in favour of a fully funded
accumulation scheme or retirement savings account of their
choice.[6]
The Australian Labor
Party Members of the Committee did not recommend specific changes to the scheme
but concluded the Remuneration Tribunal was the appropriate body to make
recommendations for
reform.[7]
In a dissenting
report on behalf of the Australian Democrats, Senator Lyn Allison expressed the
view that the scheme was too generous and was in urgent need of
reform.[8]
On the 1st of
December 1997 the Minister for Finance the Hon. John Fahey formally responded to
the report in a letter to the Committee’s Chair Senator John Watson. In
his response the Minister stated that:
The Government welcomes your
Committee’s report on its inquiry into the superannuation arrangements for
parliamentarians and judges. I note the committee members were all of the view
that the Remuneration Tribunal should be involved in setting parliamentary
superannuation. [9]
The
Minister went on to say that the Government would give further consideration to
the Committee’s findings in the context of changes then proposed to the
way Members of Parliament were paid. These involved setting
parliamentarians’ remuneration by reference to classifications determined
by the Remuneration Tribunal, rather than by direct linkage to public service
Senior Executive Service salaries.
Following the 3rd of October 1998
Federal election it was revealed that 33 year old Queensland Senator Bill
O’Chee, who had lost his seat after nine years service, would leave
Parliament entitled to an indexed lifetime pension of approximately $45,000 a
year. On the 7th of October 1998, in response to the public outcry over these
revelations, the Minister for Finance was reported to have pledged to review the
Parliamentary Superannuation
Scheme.[10]
On the 12th of
November 1998, the Minister for Financial Services & Regulation the Hon. Joe
Hockey introduced to Parliament the Superannuation Legislation Amendment
(Choice of Superannuation Funds) Bill 1998. That Bill proposed to amend the
Superannuation Guarantee (Administration) Act 1992 to give ordinary
employees a choice as to which fund their superannuation contributions are paid.
In his Second Reading Speech to the Bill the Minister said among other
things:
The choice of fund arrangements are about giving employees
greater choice and control over their superannuation savings, which in turn will
give them greater sense of ownership of these savings. The arrangements will
increase competition and efficiency in the superannuation industry, leading to
improved returns on superannuation savings ...
The fundamentals of
this reform are that employees get a genuine choice as to which fund their
superannuation is
paid. [11]
This
legislation sought to implement a key recommendation of Stan Wallis’ 1997
report on the Australian Financial System. Recommendation 88 of that report
said in part:
Employees should be provided with choice of fund, subject to
any constraints necessary to address concerns about administrative costs and
funding
liquidity.[12]
The
Government’s choice of superannuation legislation stalled in the Senate,
since its introduction there in February 1999, and lapsed with the proroguing of
the 39th Parliament in 2001. The current version of this bill was
introduced to the House on the 27 June 2002, and the second reading debate is
due to be resumed in this spring sitting.
However, parliamentarians are
excluded from the choice arrangements proposed by the Government’s
legislation. In other words, while the Government is of the view that ordinary
workers should have a genuine choice when it comes to their superannuation
arrangements, it has not sought to extend the same freedom of choice to
parliamentarians.
When asked in Parliament on the 24th of November 1998
whether he supported a review of the parliamentary superannuation scheme the
Prime Minister replied: “I never close my mind to reviews of
superannuation, be it parliamentary or otherwise”, but went on
to conclude, “that you will never really solve the problem. I say to
those who have recently joined this place – I say this to people on both
sides – that if you imagine you will solve the anomalies of all this
within a short space of time, you will
not.”[13]
On the
8th of February 1999, in response to a Question on Notice seeking confirmation
about the review he was reported to have proposed, the then Minister for Finance
said: “the Government has not decided at this time on any review of the
Parliamentary Superannuation Scheme.”
[14]
On the 9th of March
1999 in response to another Question without Notice the Prime Minister said:
“I have never ruled, nor has the Government ever ruled out, further
examination of parliamentary superannuation arrangements.”
[15]
On the 7th of
December 1999 the Remuneration Tribunal reported to the Government on the
remuneration of Senators and Members. In its report the Tribunal recommended
that the method for setting the remuneration of Members of Parliament should no
longer be linked to the salaries of Senior Executive Service Commonwealth public
servants. Instead, the Tribunal proposed a new base payment for backbenchers
($90,000 pa) and Office Holders to be adjusted twice yearly in accordance with
increases in Average Weekly Ordinary Time Earnings index (the AWOTE). The
Tribunal concluded that with these changes it was ‘satisfied that the
remuneration package for Senators and Members (salary, superannuation, and
vehicle) is now
competitive’.[16]
However, the Tribunal gave no justification as to why
parliamentarians’ superannuation arrangements were considered
appropriate.
The predecessor to this bill, the Parliamentary (Choice
of Superannuation) Bill 2001, was introduced to the House of Representatives
on 5 March 2001. It was not given a second reading, but was referred to the
Senate Select Committee on Superannuation and Financial Services for
review.
The Committee invited public submissions through its website and
advertisements in the Australian Financial Review and the Weekend
Australian between 20-21 April 2001. The inquiry was also featured on
Channel 9’s A Current Affair on 17 May 2001.
The Committee
received 2,649 submissions and heard from 16 witnesses at a public hearing on 11
July 2001 in Sydney. Below are extracts from just two public
submissions:
No.1823: Inflation Proofing is for Politicians
Only: If my superannuation is not INFLATION PROOF why should the politicians
be so protected? If their superannuation was being eroded at the rate mine has
been they would be more responsible in their control of
inflation.[17] (B.
Hughes, Tinana, QLD).
No.1848: I am writing to lodge my objection to
the manner in which politicians receive their superannuation payouts.
Politicians are public servants and as such should be treated the same as all
Australians. The public should not subsidise their super and they should not be
able to take early payouts.[18]
(G. McLean, Kingston, QLD).
The Committee recommended “that in
order to achieve a cohesive and consistent approach, the issue of parliamentary
superannuation be considered by the remuneration tribunal as part of a
consolidated package comprising salaries, superannuation and
allowances”[19]. This
recommendation marked no departure from previously stated government and
opposition statements in this regard.
Much of this section has been extracted from the 25th Report of the
Senate Select Committee on Superannuation, The Parliamentary Contributory
Superannuation Scheme & the Judges’ Pension Scheme. For full
details of the parliamentarians’ superannuation arrangements readers are
directed to that report[20].
The parliamentary superannuation scheme provides for the superannuation
benefits of Commonwealth parliamentarians. Membership is compulsory and member
contributions are required. Benefits are paid to former Members of Parliament
or, on their death, to their surviving spouse or orphan children.
The
scheme is administered by the Department of Finance under the direction of the
Parliamentary Retiring Allowances Trust. There are five trustees – the
Minister for Finance who is the presiding trustee, plus two Senators and two
Members of the House of Representatives appointed by their respective Houses.
The parliamentary superannuation scheme was established in 1948 under the
Parliamentary Contributory Superannuation Act of that year. Reasons for
the establishment of the scheme included:
• entering Parliament
often meant foregoing potential superannuation pay-outs from previous employers
due to leaving that employer prior to retirement age;
• electoral
or parliamentary demands reduced members’ chances to re-establish careers
when their parliamentary term was over; and
• the need to entice
people to enter Parliament who would not otherwise nominate.
When then
Prime Minister and Treasurer Ben Chifley introduced the legislation in 1948 he
said:
It has frequently been said that the loss and insecurity which
attend upon service in Parliament deter men and women capable of making a
worthwhile contribution to the service of the Commonwealth from offering
themselves for election. It is hoped that this measure will help in overcoming
difficulties of this
nature.[21]
Originally
the scheme was funded to the extent of the member contributions, and was framed
along the lines of the Commonwealth Public Service Superannuation
Scheme.
Contributions were three pounds per week (about 10.4 per cent of
salary) and a fixed annuity of eight pounds per week was payable when a member
qualified for a pension, an amount which, according to Prime Minister Chifley
was in 1948: “much less than the maximum pension provided under many
private and public superannuation
schemes”.[22]
Between
1948 and 1973, the main amendments to the scheme were:
• in 1955,
the three occasions rule was introduced (see below);
• from 1959,
the age at retirement became a factor in fixing the rate of
pension;
• orphan benefits were introduced in 1959;
and
• from 1963, pensions changed from a fixed amount to being
based on salary.
In 1973 the scheme underwent major changes. The fund
was abolished and its assets transferred to the Consolidated Revenue Fund (CRF).
Contributions were then paid into the CRF, out of which benefits were also
paid.
The maximum benefit payable to a member was increased from 50 per
cent to 75 per cent of the parliamentary salary, and pensions accrued according
to the length of service rather than age at retirement. Also, the minimum age
requirement of 40 years for the pension on involuntary retirement was removed,
and the minimum age on voluntary retirement was raised from 40 to 45 years
(eventually removed in 1978). Provisions for invalidity pensions, indexation of
pensions and the recognition of State parliamentary service were also
introduced.
Since 1973, various amendments have been made including the
introduction of a 50 per cent commutation of pension option in 1978. This
option was increased to a 100 in 1979. Further changes in the same period
included:
• reducing the 100 per cent commutation option back to 50
per cent in 1983; and
• the provision for reducing a pension, on
the basis of the former parliamentarian receiving remuneration from an Office of
Profit under the Crown, was reintroduced in 1983 (it had been removed in
1973).
The level of the superannuation contributions made for parliamentarians
by the Commonwealth is set by the Parliamentary Contributory Superannuation
Act 1948. Members and Senators must contribute at the rate of 11.5 per cent
of their Parliamentary Allowances for the first 18 years in office and at 5.75
per cent for subsequent years. In addition, they must contribute the same
percentage of their Additional Office Holder Allowance if they hold a higher
office (such as ministerial).
The parliamentary scheme is also an
unfunded defined benefit scheme. ‘Unfunded’ means that the scheme
funds its benefit payments from annual Commonwealth appropriations.
‘Defined benefit’ means that members’ entitlements are, in
general, multiples of years of service and a percentage of salary. In such a
defined benefit scheme, the employer is responsible for providing the difference
between the benefit actually paid and what the member has contributed toward the
benefit.
Every three years the Australian Government Actuary provides
the Department of Finance with details of the long-term cost to the Commonwealth
of funding parliamentarians’ superannuation. At each review, the notional
employer contribution rate is reported. This rate illustrates the effective
cost of parliamentary superannuation benefits as a percentage of the total
salaries of scheme members. As at the 30th of June 1996 the rate was 69.1 per
cent.[23] The Parliamentary
Retiring Allowances Trust Annual Report for the financial year 2000-2001 puts
this figure at 69.4 per cent.[24]
This is the notional employer contribution from the Commonwealth needed
to meet the lump sums and pensions payable to retired members under the scheme.
In other words it is a three-yearly snapshot by the Government actuary of the
projected cost of scheme.
Compared to the majority of Australian workers
this level of employer contribution for superannuation is very generous. The
generosity of the scheme is demonstrated by comparing it with other
superannuation schemes operated by the Commonwealth for its public servants and
the wider public. Based on the 1996 figures, under the Commonwealth
Superannuation Scheme (CSS) the notional employer contribution was 23 per cent,
while for the Public Sector Superannuation Scheme (PSS) it was 13 per
cent.
The generosity of the parliamentary scheme is further demonstrated
when it is compared with the level of compulsory superannuation paid by most
employers under the Superannuation Guarantee (SG) scheme. The SG scheme
requires all employers to make a minimum superannuation contribution on behalf
of employees (with limited exceptions). The minimum level of employer-supported
superannuation is currently 9 per cent. When compared with the contributions
under the SG, the level of support parliamentarians receive is very generous as
the following table
illustrates.
In 1994 the parliamentary superannuation scheme was amended to make it
subject to the same preservation rules applying to other superannuation funds.
New preservation rules, administered by the Australian Prudential Regulation
Authority, took effect from 1 July 1999. From this date, all superannuation
contributions (including member contributions) and superannuation fund
investment earnings have been preserved until fund members reach their
preservation ages.[25]
In the
1997 Budget the Government announced that the preservation age would be
increased from 55 to 60 on a phased in basis. By 2025, the preservation age
will be 60 years for anyone born after June 1964, with the age 60 preservation
age being reduced by one year for each year that person’s birthday is
before 1 July 1964. This means that a person born before 1 July 1960 will
continue to have a preservation age of 55.
For the general public,
preserved superannuation benefits can usually only be accessed on limited
compassionate and severe financial hardship grounds. However, under the new
preservation rules, a person continues to be allowed to have early access to
preserved benefits where they are taken in the form of a
non-commutable[26] lifetime pension
or annuity on termination of gainful employment. It is this feature that has
allowed parliamentarians elected before 2001 to gain early access to their
superannuation entitlements. Such early access is, however, generally not an
option for most other workers until they are very close to
retirement.
This is because the generosity of the Parliamentary Scheme
(69.4 per cent of total parliamentary salaries) provides Members and Senators
with a much larger entitlement after 8 or 12 years of service compared with a
worker only receiving the SG minimum amount (currently 9 per cent of salary).
The generosity of the parliamentary scheme thus ensures that on conclusion of
his or her parliamentary service, a Senator or Member can access a much larger
non-commutable lifetime pension or annuity than other workers.
It also
means a member losing either pre-selection or an election at his or her
“third occasion” (the third election subsequent to initial election)
can access the full benefits of the scheme. In this way the scheme rewards
relatively short-term members to a far greater degree than long serving MPs.
Apart from this it encourages the “pensioning-off” of non-performing
Members or Senators.
Notes on
clauses
Clause 1 – Short title
Clause 1
provides for the short title of the Act to be Parliamentary (Choice of
Superannuation) Act 2003.
Clause 2 –
Commencement
Subclause 2(1) provides for the Act to commence
on the day that it is proclaimed.
Subclause 2(2) provides that
the proclamation cannot be made unless the Parliament has appropriated funds for
the purposes of the Act.
This measure is necessary because a private
Member may not introduce a bill requiring the appropriation of public revenue,
as an appropriation must first be recommended to the House by message of the
Governor-General. This requirement reflects the constitutional and parliamentary
principle of the financial initiative of the Crown. As Parliament considers the
Bill it may then provide for the appropriation of funds for the payments to be
made to the superannuation funds or RSAs of the Members of Parliament who choose
not to make contributions to the Parliamentary Contributory Superannuation
Scheme (PCSS). After the appropriation is made the proclamation can be
issued.
Clause 3 – Schedule
Clause 3
provides that the Acts specified in the schedule are amended or repealed as set
out in the applicable items in the Schedule.
Schedule 1 –
Amendment of the Parliamentary Contributory Superannuation Act
1948
Item 1 – Subsection 4(1) definition of
member
Item 1 repeals the existing definition of
member and replaces it with a new extended
definition.
Item 2 – Subsection 4(1) definition of non
PCSS contributor
Item 2 inserts a definition of the term
non PCSS contributor.
Item 3 – Paragraph
4(4A)(aa) deeming a Member of Parliament to be employed by the
Commonwealth
Item 3 repeals the existing deeming provision and
replaces it with a new extended provision.
Item 4 – New
sections 4G and 4H provision of choice of superannuation fund and providing for
Commonwealth contributions to the chosen fund
Item 4 inserts
new section 4G into the Act to enable a Senator or Member to choose not
to contribute to the PCSS. New subsection 4G(1) provides that a Member of
Parliament may continue to be or become a member of another complying
superannuation fund or the holder of a Retirement Savings Account (an
RSA).
New subsection 4G(2) provides that a serving Senator or
Member may cease to contribute to the PCSS on or after 1 July 2003. New
paragraph 4G(2)(a) requires a Member or Senator’s decision to be given
in writing to the Trust and stipulates that if written notice is given, the
earliest the Senator or Member could become a non PCSS contributor is the date
of that written notice.
New paragraph 4G(2)(b) applies to new
Senators and Members, and allows them to forego being a PCSS contributor upon
first entering parliament.
New subsection 4G(3) allows Senators or
Members to make their decision to opt out on first becoming entitled to a
parliamentary allowance or at any time they are a Member of Parliament. A
parliamentary allowance is any allowance as defined by section 4(1) of the Act
and is typically payable to a Member or Senator from and including the day of
his or her election to office.
New subsection 4G(4) stipulates
that once a Member or Senator has exercised their choice under the Act, they
must maintain membership of a complying superannuation fund or be the holder of
an RSA for the whole time they remain a Member of Parliament.
New
subsection 4G(5) has the effect that once a Member or Senator exercises
their choice under the Act, they will not be able to reverse their decision. The
decision to opt out of contributing to the Parliamentary Contributory
Superannuation Scheme will be permanent.
New subsection 4G(6)
provides for definitions of complying superannuation fund and RSA.
New
subsection 4G(7) provides for regulations to be made to put in place
detailed arrangements for the making of a choice under the Act and
administrative matters related to such a choice.
New section 4H
compels the Commonwealth to make contributions for the benefit of non PCSS
contributors, to the complying superannuation fund or RSA chosen by the
individual Senator or Member, in accordance with the Superannuation Guarantee
(Administration) Act 1992. This measure means that Members and Senators who
choose not to contribute to the PCSS will have superannuation contributions paid
on their behalf by the Commonwealth at the minimum rate payable, and on the
terms necessary, to avoid a superannuation guarantee shortfall under the
superannuation guarantee scheme.
Item 5 – Subsection 13(9)
definitions
Item 5 repeals the existing definition provision
for section 13 and replaces it with a new extended provision. In new
subsection 13(9) definitions of Minister of State,
office holder and person applying only in section 13
have been inserted. Each definition has a common requirement for the person to
be a PCSS contributor. The effect of the definitions is to limit the scope of
section 13 to those persons entitled to a parliamentary allowance, Ministers of
State and office holders who make PCSS contributions. Those persons who elect
not to make PCSS contributions are excluded from the requirement to make
contributions.
Item 6 – Section 18C benefits for members who
cease to make contributions to the PCSS
Item 6 inserts new
section 18C into the Act stating that the only Commonwealth benefit for
Senators and Members who choose to stop making PCSS contributions is the
superannuation guarantee safety-net amount. However, as is the case for all
other employees, this benefit must be rolled over into the complying
superannuation fund or Retirement Savings Account of the Senator or Member.
The superannuation guarantee safety-net amount has the meaning given by
section 16A of the Act.
New subsection 18C(3) puts in place
arrangements for the circumstance where a person and his or her spouse are both
members of Parliament and one of the couple opts out of the PCSS and the other
chooses to remain in the PCSS. If the partner who remains in the PCSS dies, his
or her spouse would remain eligible for payment of the spouse benefits applying
in relation to the death of the person, in spite of having opted out of the
PCSS.
[1] The Bill proposes that a Member
or Senator’s benefit on exercising their choice to opt out of the Trust
will be the ‘superannuation guarantee safety-net amount’ as defined
by section 16A of the Act.
[2] The
full Terms of Reference the Committee was asked to inquire and report on
were:
1) The appropriateness of the current unfunded defined benefit
superannuation schemes’ application to judges and parliamentarians,
including but limited to:
(a) the equity between members;
(b) the cost
to the Commonwealth and members;
(c) the impact of unfunded liabilities on
future budgets;
(d) the advantage or otherwise of member choice of fund or
investment strategy;
(e) the flexibility of existing schemes, including in
respect of portability, in the context of their working arrangements and those
applying in the general work force;
(f) the appropriateness of replacing such
schemes with a fully-funded accumulation scheme;
(g) the appropriateness of
the application of preservation rules and taxation on benefits taken prior to
age 55 to such schemes;
(h) the capacity for making superannuation
arrangements less complex than current arrangements; and
(i) the
administrative cost of such arrangements and their alternatives.
2)
That for the purpose of the inquiry the committee take evidence from the public,
Government agencies and State, Territory and Federal government departments, and
conduct public hearings as
appropriate.
[3] The
Parliamentary Contributory Superannuation Scheme & Judges Pension
Scheme, Senate Select Committee on Superannuation, 25th Report,
Parliament of the Commonwealth of Australia, Canberra, 1 September 1997, p.
41.
[4] The Parliamentary
Contributory Superannuation Scheme & Judges Pension Scheme, Senate
Select Committee on Superannuation, 25th Report, Parliament of the
Commonwealth of Australia, Canberra, 1st September 1997,
p.3.
[5] ibid, at
p.27.
[6] ibid, at
p.42.
[7] ibid, at
p.43.
[8] Senator Lyn Allison,
Dissenting Report, Senate Select Committee on Superannuation, 25th
Report, The Parliamentary Contributory Superannuation Scheme & Judges
Pension Scheme, Parliament of the Commonwealth of Australia, 1 September
1997, p.1.
[9] The Hon. John Fahey,
Minister for Finance, Government Response to Senate Select Committee on
Superannuation’s, 25th Report, The Parliamentary
Contributory Superannuation Scheme & Judges Pension Scheme, 1 December
1997.
[10] Peatling, Stefanie,
“Fahey Pledges Super Review”, Sydney Morning Herald, 7
October 1998, p.10.
[11] The Hon.
Joseph Hockey, Minister for Financial Services and Regulation, House of
Representative Hansard, 12th November 1998,
p.261.
[12] Australian
Financial System Inquiry, Final Report (Wallis Report), Canberra, Australian
Government Publishing Service, March
1997.
[13]The Hon. John Howard,
Prime Minister, House of Representatives Hansard, 24th November 1998,
p.481.
[14]The Hon. John Fahey,
Minister for Finance and Administration, House of Representatives Hansard,
8th February 1999,
p.2165.
[15]The Hon. John Howard,
Prime Minister, House of Representatives Hansard, 9th March 1999,
p.3443.
[16]Report on
Senators and Members of Parliament, Ministers and Holders of Parliamentary
Office – Salaries and Allowances For Expenses of Office, Remuneration
Tribunal, December 1999, p.10.
[17] Provisions of the
Parliamentary (Choice of Superannuation) Bill 2001 Submissions No. 1670-1897
Vol.8, Senate Select Committee on Superannuation and Financial Services,
August 2001, p.2324.
[18] ibid,
at p.2354.
[19] Report on the
provisions of the Parliamentary (Choice of Superannuation) Bill 2001, Senate
Select Committee on Superannuation and Financial Services, August 2001, p.21 at
4.16.
[20] The
Parliamentary Contributory Superannuation Scheme and Judges Pension Scheme,
Senate Select Committee on Superannuation, 25th Report, Parliament of
the Commonwealth of Australia, Canberra, 1 September
1997.
[21] The Hon. Ben Chifley,
Prime Minister and Treasurer, House of Representatives Hansard, 1 December 1948,
p. 3738.
[22]ibid, at p.
3739.
[23] The Parliamentary
Contributory Superannuation Scheme & Judges Pension Scheme, Parliament
of the Commonwealth of Australia, 1st September 1997, p.
15.
[24] Parliamentary
Retiring Allowances Trust Annual Report 2000/2001,
p.7.
[25] Preservation Age is the
age at which a fund member can gain access to benefits that have accumulated in
a superannuation fund or RSA, provided the member has permanently retired from
the workforce.
[26] Commutation
refers to the taking of a benefit in a lump sum.