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Wednesday, 17 October 1984
Page: 1880

Senator COATES —On behalf of the Standing Committee on Finance and Government Operations, I table a statement about the funding of superannuation by statutory authorities of the Commonwealth. I seek leave to move a motion on this statement.

Leave granted.

Senator COATES —I move:

That the Senate take note of the statement.

I wish to provide the Senate with an explanation for Standing Committee on Finance and Government Operations not yet having reported further on its reference 'Funding of Superannuation by Statutory Authorities'. We have been waiting since last year for the reports by the Australian Government Actuary on 15 larger authorities. These were initially expected early in 1984 but, even now , only 10 have been received by the Committee. We will therefore not be able to pursue this reference further until next year.

I seek leave to incorporate in Hansard a fuller discussion of this matter.

Leave granted.

The document read as follows-

Background to Issues

In December 1983 the Senate Standing Committee on Finance and Government Operations tabled in Parliament an Interim Report on 'Funding of Superannuation by Statutory Authorities'. In this report the Committee identified a number of issues relating to the funding of employer contributions to the Commonwealth Superannuation Scheme (CSS) by Commonwealth Statutory Authorities, which required further discussion. These issues included:

(1) for Authorities contributing on an 'emerging cost' basis:

(i) the lack of legal requirements for an Authority to make proper annual employer contributions and to manage its own reserve fund to meet its liability without creating a liability on the Commonwealth;

(ii) whether these Authorities should be encouraged, even directed, to change to the 'pay-as-you-go' system.

(2) for Authorities contributing under the 'pay-as-you-go' system:

(i) some may not be making an adequate annual contribution to the notional fund to meet future liabilities; this focuses attention on the problems of: the frequency of the Commonwealth Actuarial reviews of each authority, and the absence of any legislative requirement to ensure regular actuarial reviews;

(ii) some Authorities may prefer to manage their own contributions in the belief that they could achieve a better result;

(iii) those Authorities whose rate of contribution is insufficient to meet future pension increases need to introduce appropriate measures to offset future difficulties;

(iv) some study on the validity of continuing the practice of differential rates of contribution to the notional fund by various Authorities is needed;

(v) there is a need to quantify the accruing Commonwealth liability for the CSS ;

(vi) the Authorities' and Commonwealth's future liabilities may provide considerable difficulties at some later period, given the age structure of population, the tendency to earlier retirement and the narrowing of the tax base .

Objectives raised in the Interim Report:

In relation to these issues the Committee raised a number of objectives for future examination. These objectives were:

(i) the desirability of approved Authorities continuing in their present arrangements for funding their superannuation liabilities;

(ii) the appropriate rate of contribution by employers, should the 'pay-as-you- go' method be retained, and whether all Authorities should contribute an average or standard employer contribution or, alternatively, contribute on the basis of an actuarial review;

(iii) the performance and timeliness of actuarial reviews of Statutory Authorities including the role of the Department of Finance and the necessity for legislative amendment;

(iv) the Commonwealth's liability for Statutory Authorities' superannuation; and

(v) the applicability of private superannuation schemes to Statutory Authorities generally and to particular Authorities.

Actuarial Reports:

In December 1983, the Committee reported that it hoped to table a final report in Parliament as soon as possible. The necessary analysis of data by the Committee was dependent on its receiving the Australian Government Actuary's reports on 15 larger Statutory Authorities (each with employment levels in excess of 300). As stated in the December 1983 Interim Report, there was considerable delay in the commencement of these reviews as the Department of Finance and the Actuary experienced difficulties in agreeing on the framework for the reviews. This dispute has been resolved now but it did cause considerable delay in the completion of the reviews.

To date the Actuary has completed 10 of the proposed 15 reviews. On 2 August 1984 the Committee received from the Minister for Finance the Actuary's reviews on the following Authorities:

Australian Atomic Energy Commission;

Commonwealth Scientific and Industrial Research Organisation.

On 15 August 1984, the Committee received eight more reviews covering the following Authorities:

Australian National Railways Commission

Australian Postal Commission

Australian Shipping Commission

Australian Telecommunications Commission

Canberra College of Advanced Education

Commonwealth Serum Laboratories Commission

National Capital Development Commission

Snowy Mountains Engineering Corporation

The Committee has yet to receive the Actuary's reviews on the following Authorities:

Australian Capital Territory Electricity Authority

Australian Broadcasting Corporation

Capital Territory Health Commission

Commonwealth Accommodation and Catering Services

Overseas Telecommunications Commission

The Committee regards it as unfortunate that it has been necessary for the Actuary to comment on the completeness of data provided by the Department of Finance.

In its Interim Report the Committee raised the issue of the timeliness of the provision of this information. The Auditor-General, in his September 1984 report on the administration by the Department of Finance of employer contributions by approved Authorities under the CSS, also commented adversely on the delays in the provision of data. He stated that:

''The audit indicated that completion of the . . . actuarial reviews had been dependent on the Department taking, and communicating to the Actuary, a number of decisions involving factors bearing directly upon the calculation of employer liabilities. The audit also revealed that, notwithstanding a number of urgent requests from the Actuary to the Department for policy advice and related decisions between 1977 and 1983, and despite similar representations from certain authorities during the same period, firm guidelines for the calculation of employer contribution rates were not provided to the Actuary by the Department until late in 1983.

It is a matter for consideration whether the protracted delay by the Department in providing the Actuary with firm guidelines has prevented the pay-as-you-go group of authorities . . . from progressively recognising their full superannuation liabilities and making adequate provision for any deficiency. The trading authorities among them will have been quite adversely affected if the actuarial assessments should disclose that the interim rates have been insufficient to cover their accumulating liabilities.

This Office requested advice from the Department as to the reasons for the delay in providing the Actuary with the information he required.''

Due to the fact that one third of the anticipated reviews are not available, the Committee has not been able to pursue those issues and objectives which it has raised in its Interim Report and proposed for further examination.

Future Directions:

As soon as practicable in 1985, the Committee intends to pursue these matters by:

firstly, seeking the views of the 15 Statutory Authorities reviewed on the matters raised by the Actuary and detailed as points for concern; and

secondly, seeking the Actuary's views on a range of issues once all of the reports have been completed and received by the Committee.

The Committee wishes to note the general concern on the question of public sector superannuation and particularly the problem of emerging unfunded liability. Indeed, Committees of both the Victorian and New South Wales parliaments have recently published detailed examinations of their public sector superannuation schemes which have addressed this problem.

Question resolved in the affirmative.