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Superannuation Legislation Amendment Bill 1991
House: House of Representatives Portfolio: Finance Purpose To amend the 1976 Commonwealth superannuation scheme to provide for the postponement of benefits while a person remains in the workforce, to provide for the review of decisions made by the Commonwealth Superannuation Board and to provide for certain members to transfer to other, authorised superannuation schemes. The 1990 Commonwealth superannuation scheme will also be amended to provide for transfers to other, authorised schemes. Other amendments will bring the 1976 scheme into line with the Occupational Superannuation Standards.
Background Since its establishment, there have been three superannuation schemes introduced for federal public servants, which were introduced by the Superannuation Act 1922 (the 1922 scheme), Superannuation Act 1976 (the Commonwealth Superannuation scheme(CSS)) and the Superannuation Act 1990 (the Public Sector Superannuation scheme (PSS)). The 1922 scheme has become less important over time and applies to people who were in receipt of a pension, or had a deferred benefit, on 1 July 1976, the children of such people and certain widows and ex-wives. There were 22 811 pensions in force under the 1922 scheme on 30 June 1990 (of which 12 598 were for dependents), with a value of approximately $324 million in 1989- 90. 1 Entrance to the scheme ceased on 1 July 1976, when the CSS came into effect.
The CSS provides for the retirement, termination and death benefits for members who joined on or after 1 July 1976 and for previous members of the 1922 scheme who continued to contribute to superannuation after that date. At 30 June 1990 there were 74 563 pensions in force under CSS (of which 11 462 were in respect of dependents) and the amount paid in 1989-90 was approximately $1 billion. 2 The largest category of recipients was those receiving invalidity benefits without a benefits classification certificate. This latter fact was a large reason for the introduction of the PSS. The PSS will be the superannuation scheme for all people who commenced after 30 June 1990 and will be open for members of the CSS who elect to join. The date for the making of the election is 1 July 1991, so that no figures are available on the numbers who have transferred from the CSS to the PSS.
One of the major changes in superannuation in recent years has been the introduction of the occupational superannuation standards (OSS). These relate to a number of matters, such as vesting, the age for payment, preservation and portability, and must be satisfied for funds to receive concessional tax treatment. The PSS was designed with the OSSs in mind and continued amendments to the CSS have been made to bring it into line with the OSS.
An aspect of the corporatisation of various government business enterprises has been the removal of some the employees from the general government employment superannuation schemes and the introduction of separate schemes for the bigger employers. For example, the two of the largest government business enterprises, Australia Post and Telecom, have established their own superannuation schemes. Generally, employees have the option of joining the new schemes or remaining within the CSS or PSS. Under the PSS, employees of a number of authorities are excluded from membership of the scheme , although members may elect to remain in the CSS if they so desire. The authorities include: ANL Ltd., Australian Airlines Limited, Australian Defence Industries, Australian Postal Commission, Australian Telecommunications Corporation, Australian Wool Corporation, a number of Northern Territory bodies, OTC Limited and the Snowy Mountains Engineering Corporation Limited. An area of contention when a member transfers to a new, authority based scheme has been the inability to transfer the members entitlements to the new scheme, rather than retaining an eligibility for benefits under two or more schemes. This matter was addressed in the rules of the PSS and it is proposed that similar rules will apply for transfers out of the CSS to another approved scheme.
Main Provisions Sub-section 16(4) of the Superannuation Act 1976 (the Principal Act) provides for the issue of benefit classification certificates. Clause 10 will insert a new sub-section 16(4A) which will provide that where a certificate is not in force in respect of a person on 31 March 1991, and the person was an eligible employee on 30 June 1990 and continued to be an eligible employee until 31 March 1991, sub-section 16(4) will not apply. Proposed sub-section 16(4B) provides that sub-section 16(4) may be applied where the person ceases to be eligible employee and again becomes an eligible employee after 31 March 1991. The effect of the amendments will be to prevent the issue of BCCs to continuing employees after 31 march 1991. BCCs may still be issued in respect of such people where they have provided false information etc.
The functions of the Commonwealth Superannuation Board will be increased by clause 13 which will amend section 27C of the Principal Act. The new functions will include to: manage the investment of the superannuation fund; to give directions that people have been retired on the grounds of invalidity; provide that the leave without pay of greater than 12 months provisions do not apply to a person; declare superannuation schemes to be eligible schemes for the preservation of certain accumulations; and to reconsider decisions in accordance with proposed Part XA. Except for the latter matter, which is a new provision, these matters are currently performed by the Minister or the Commissioner.
Where the Board has been requested to assess whether a person is totally and personally incapacitated and the request is in respect of an employee of an administering authority (as defined in the Commonwealth Employees' Rehabilitation and Compensation Act 1988, the Board is also to seek the recommendation of the administering authority (clause 18 which will replace section 54G of the Principal Act).
Section 62 of the Principal Act provides for the payment of a lump sum benefit where a person has been subject to involuntary termination. Clause 24 will amend this section to provide that where the person so involved ceases to be an eligible employee after 30 June 2000, they will be able to elect to receive a lump sum if they are 55 or over, or can provide a statement that they have retired from the workforce. In other cases, either the persons entire entitlement, or the employers component of the entitlement is to be paid into a preservation fund or be used to buy a deferred annuity. These changes will bring these provisions into line with the OSS.
Clause 26 will amend section 73A of the Principal Act to provide, for the purposes of invalidity benefits, the persons final annual salary is to be used rather than their final salary. This is a technical amendment that will allow the highest rate of salary in respect of contributions or since their last birthday to be used. The amendment will apply from 18 December 1986.
Division 5 of part VI of the Principal Act, which deals with the benefit for a deceased pensioner survived by more than one spouse, will be repealed by clause 29 which will substitute a new Division into the Principal Act. Proposed section 109AB deals with the situation where there is a surviving spouse and child who is not in the care or custody of the spouse. Basically, the proposed provision provides that a percentage of the deceased deemed entitlement will be payable to the spouse based on whether they have the care and custody of other such children. The percentage is not to exceed: if there are no such children, 67%, if there is one: 78%; two: 89%; and for three or more: 100%. Proposed sub- section 109AB(4) provides for the Commissioner to then determine the part of the spouses benefit that is attributable to the children. The maximum that may be so determined is based on the number of eligible children that are not in the care or custody of the spouse and, as a percentage of the spouses entitlement, are: for one such child: 45%; for two: 80%; for three: 90% and for four or more: 100%. the percentage attributable to the children is relevant as the spouse may only make elections under the Principal Act in relation to benefits that are not attributed to the children.
Proposed section 110 deals with the situation where a deceased beneficiary is survived by more than one spouse. The proposed section is similar to proposed section 109AB in that the total amount of pension payable to the spouses will be a percentage of the deceased's nominal entitlement depending on whether there are eligible children under the spouses' care or such children who are not under the spouses' care. The Commissioner will, having regard to the matters referred to in the proposed section determine the percentage that is payable to each spouse. Similar provisions as those described above will apply in relation to elections by spouses.
Proposed section 110AB deals with the situation where the spouses of a deceased beneficiary together receive less than the annual rate of the spouse entitlement under the relevant retirement/death benefit provision. Where this occurs, the rate of the spouses' pensions will be increased: until benefits equal the spouse entitlement under the relevant provision; or by the percentage contained in the proposed section. Of these two, the rate will be increased by the lower amount.
Clause 34 will substitute a new sub-section 110Q(1) into the Principal Act. The main difference with the current provision, which deals with the calculation of employer contributions to productivity entitlements, will be that the employer contribution, and the interest payable on those contributions, will be calculated by reference to the productivity contributions less the tax payable on those contributions. The tax amount is currently included in the calculation.
Section 110R of the Principal Act will be amended by clause 35. The main effect of the amendment will be that where a person leaves the workforce before 65 and has reached age 60, or age 55 and has been deemed to have retired voluntarily, or has retired due to invalidity, the productivity benefit will be payable provided the person has supplied a statement to the effect that they have retired from the workforce.
A new part VIB, dealing with the postponement of benefits for certain people who remain in the workforce, will be inserted into the Principal Act by clause 36. The proposed Part will apply to people who have attained the minimum retirement age (usually 55), who have yet to reach age 65 and are entitled to retirement benefits. Such people will have three months to notify the Commissioner if they have not retired from the workforce. In such cases, the persons entitlement will be postponed until they reach 65 or provide a notice that they have left the workforce. The rate of benefit is dealt with in proposed section 110TC. The person's entitlements will be calculated as if they were entitled to the benefits payable for their age on retirement, which will be the age when the postponed benefit is received. However, their period of contributory service will be their period of actual service and their final annual rate of salary will be that applicable to the level they occupied before they resigned. The proposed part also contains provisions relating to the death of the member, commutation by a surviving spouse and orphans benefits.
Sections 127 and 128 of the Principal Act provide for members who have superannuation entitlements before they joined the Commonwealth scheme to transfer the entitlements to the Commonwealth scheme. The amendments provide for the calculation of the transfer value of the persons productivity benefits and provide for such amounts to be paid into the superannuation fund.
A new Part XA, dealing with the review of decisions made by the Board, will be inserted into the Principal Act by clause 55. The decisions that will be subject to review are detailed in proposed section 153AA, and include decisions relating to:
* directions as to whether the person should be retired on the grounds of invalidity (this is currently contained in Division 5 of part IVA of the Principal Act which will be repealed by clause 21); * declarations that employment is public employment; * declarations that a superannuation scheme is an eligible scheme; * the ability of certain people to make elections in relation to transfer values; and * decisions made under proposed section 153AL (see below).
The board is to establish Reconsideration Advisory Committees where necessary and the Board will be able to determine the number and qualifications of the people on the Board (proposed sections 153AB and 153AC). The Committees are to review decisions referred to it (see below) and make recommendations to the Board (proposed section 153AD). Proposed Division 3 provides for the Board to reconsider decisions made by its delegates. Generally, where an application has been made for a decision to be reconsidered, it must be referred to a Committee (proposed section 159AK). Decisions relating to the assessment of invalidity made by a panel are first to be referred to a similar panel (proposed section 153AJ). The Board is then to determine whether to affirm or vary the original decision after considering any recommendations made by a Committee, relevant principles formulated by the Minister and other matters the Board considers relevant. Reasons are to be given for such decisions of the Board. Following this stage, proposed Division 4 (proposed sections 153AM to 153AS) provides for decisions made by the Board to be reconsidered if there if new evidence that the Board had not previously taken into account. If the Board finds that there is new evidence, the matter is to be referred to a Committee. As with the previous stage, recommendations made by Committees will not be binding on the Board.
The power of the Minister to delegate powers under the Principal Act will be widened to include the Board, members of the Board, the Commissioner and staff assisting the Commissioner, as well as members of the Department (clause 58 which will substitute a new section 165 into the Principal Act).
A new Part XIIIA, dealing with the transfer to other schemes, will be inserted into the Principal Act by clause 63. Proposed section 242B will allow the Minister to determine that a superannuation scheme is an authorised scheme for the purposes of the proposed Part. Where a person who has been an eligible employee for at least 12 months transfers to an authorised scheme, they will cease to be a member of the CSS and will be entitled to deferred benefits under that scheme. The benefits available will be calculated according to Division 3 of Part IX of the Principal Act, which deals with the preservation of benefits. Such benefits will become payable on earliest of the date nominated by the person so long as this is after their minimum retirement age, the day they turn 65, the date of death or the date on which the Commissioner determines that they are totally and personally incapacitated (proposed section 242E).
Amendments to the Superannuation Act 1990 Clause 74 will insert a new Part 8A into this Act that will deal with transfers to authorised schemes. The proposed Part deals with the authorisation of schemes by the Minister and the transfer from the Fund and Consolidated Revenue of assets to the authorised scheme sufficient to cover the employee/employer benefits the person has accumulated under PSS.
References 1. Commissioner for Superannuation, Annual Report 1989-90, p. 191. 2. Ibid., p. 192.
Bills Digest Service Parliamentary Research Service For further information, if required, contact the Economics and Commerce Group on 06 2772460.
This Digest does not have any official legal status. Other sources should be consulted to determine the subsequent official status of the Bill.
Commonwealth of Australia 1991
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Published by the Department of the Parliamentary Library, 1991.