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Tuesday, 23 October 1956

Mr COSTA (Banks) .- The bill before the House is designed to amend the Superannuation Act 1922-1955 in order to implement the recommendations of the committee which made the quinquennial investigation into the superannuation fund. Two or three small amendments are proposed, which will give some advantage to contributors. Naturally, the Opposition supports the bill because it seeks to improve the lot of superannuitants. There is disappointment, of course, because the Government has failed to propose any amendments which would bring advantage to the contributors. The Retired Officers Association, and also current contributors to the fund, believe that the unit value should be increased by 2s. 6d., and other suggestions for the improvement of the fund have been made. The Australian Labour party supports this bill to the extent that it does propose improvements. Those persons who have contributed to the fund on the basis of retirement at age 60 and who remain in the service, will benefit from its provisions Their contributions, of course, cease at age 60, and they receive a varying percentage increase of that portion of the annuity which is attributable to their own contributions according to their years of service after having attained the age of 60 vears That allowance has been very slightly increased. Prior to the adoption of the committee's report, an officer who continued to serve in these circumstances for one year received an increase of 5 per cent. in respect of that portion of his annuity which was attributable to his own contributions. That proportion has been increased to 6 per cent. It rises, after five years' service to 37 per cent., whereas formerly he would have received a maximum increase of 31 per cent. That increase is not very great having regard to the fact that the superannuation fund benefits when officers remain in the service in such circumstances because the payment of their pensions is deferred for the additional period of their service.

I should like to refer briefly to other matters contained in the quinquennial report. This was the third time in which the fund was investigated. A report was made in 1937; I do not know whether there was an earlier investiaation. The act was introduced in 1922, but the first quinquennial report in 1937 showed that the fund had suffered a deficiency of £331,000. The next quinquennial report in 1942 revealed a deficiency of £304,000, which by 1947 had been reduced to £140,000. The latest report shows that the fund in 1952 had a surplus of £653.000. The Australian Labour party contends, therefore, that consideration should have been given to increasing the value of the unit of superannuation. I know there is no provision for this in the act, but I should like the committee at some time to report to the Parliament on how much the public service superannuation scheme saves the community in the way of expenditure on social services. It is to be noted with satisfaction that, after the deficiencies shown by the previous investigations, the actuary is able to report a surplus for the first time.

The Commonwealth Superannuation Act was passed in 1922. In the opinion of all concerned, the scheme then was really good. The value of a superannuation unit was 10s. a week, and at that time the purchasing power of 10s. was quite substantial. However, inflation, which this Government has taken but little action to curb, has destroyed, to some extent, the value of the superannuation scheme, in much the same way as it has adversely affected the value of several other forms of long-term investment. At one time, a man could take out an insurance policy for a certain purpose, knowing that when the policy matured the sum of money that he received would be sufficient for the purpose that he had in mind, but that is not so to-day. Inflation is also destroying the value of the peoples' savin :s. It is compulsory for public servants to contribute to the superannuation fund. Although an officer may consider that, because of inflation, the scheme is not a good one, he is compelled to contribute to the fund, if he is under the age of 40 years. From the age of 40 years upwards the matter is optional.

Commonwealth public servants, in addition to paying superannuation contributions, pay taxes at the same rate as everybody else, but in many cases their superannuation pensions will be such as to disqualify them from entitlement to a social services pension, because of the operation of the means test. Those people are paying for two social security schemes, but they will be entitled to receive benefits from only one. I point out that income tax instalments and superannuation contributions represent a fairly substantial proportion of a public servants pay.

In 1922, the basic wage was £4 a week and the age pension was 15s. a week. At that time, many officers of the Public Service were contributing for what they thought would be a reasonable pension. They had taken out four units of superannuation, which, as a unit then was worth 10s. a week, entitled them to a pension of £2 a week on retirement. They believed that a pension equal to half of the basic wage was reasonable. Let us look at how the basic wage, the age pension and the value of the superannuation unit have increased since then. The basic wage has risen from £4 to £13 14s. a week, the age pension has risen from 15s. to £4 a week and the value of a superannuation unit has risen from 10s. to 17s. 6d. a week. Officers who had contributed for four units, as a great many did, drew on retirement in 1922 a pension of £2 a week, which was 266 per cent, of the age pension. Since 1922, the basic wage has increased by 242 per cent, and the age pension by 433 per cent., but the value of a superannuation unit has increased by only 75 per cent. Those figures show the degree to which, owing to the ever-increasing cost of living, the value of superannuation pensions has declined over the years. Inflation has thrown out of gear the retiring plans of many officers.

I read recently in a report of the Superannuation Board - I am pleased to say thai the information contained in the reports now is more up to date than it was for some time after the unfortunate burning of the board's records - that the average public servant contributes for nine units of superannuation, which entitles him to a pension of £7 17s. 6d. a week on retirement. The widow of such an officer would receive 50 per cent, of that amount - £3 18s. 9d. a week. Honorable members will see that the average contributor just deprives himself of entitlement to a social services pension by contributing to the fund. If a married officer contributed nothing to the fund, he would be entitled at the appropriate age to an age pension for himself and his wife amounting to £8 a week. If he died before reaching retiring age, his widow would receive from the Department of Social Services an A class widow's pension of £4 15s. a week. Therefore, the average contributor to the Superannuation Fund would be better off on retirement if he had contributed nothing to it.

A total of 78,000 permanent officers subscribe to the fund. That figure does not include those officers who subscribe to the Provident Fund. One-half of the contributors to the Superannuation Fund contribute for nine units, which entitle them to a pension of £7 17s. 6d. a week. The thousands of officers who contribute for nine or more units deprive themselves of the right to an age or an invalid pension. It is important that their positions should be made clear. We know that a married couple drawing an age or an invalid pension receives £8 a week from that source and that they are permitted to have an income from other sources of not more than £7 a week. A superannutant who contributes for nine units, entitling him to a pension of £7 17s. 6d. a week, deprives himself of 17s. 6d. a week in social services payments. A SUper.annutant who contributes for ten units, entitling him to a pension of £8 1 5s. a week, deprives himself of £1 15s. a week in social services payments. A superannutant who contributes for eleven units, or a pension of £9 12s. 6d. a week, deprives himself of £2 12s. 6d. in social services payment. A superannutant who has taken out twelve units, entitling him to a pension of £10 10s. a week, deprives himself of £3 10s. a week in social services. A superannutant who has taken out thirteen units, entitling him to a pension of £11 7s. 6d. a week, deprives himself of £4 7s. 6d. a week in social services payments. A superannutant who has contributed for fourteen units, or a pension of £12 5s. a week, deprives himself of £5 5s. a week. A superannutant who has taken out fifteen units, entitling him to a pension of £13 2s. 6d. a week, deprives himself of £6 2s. 6d. a week. A super.annutant who has taken out sixteen units, entitling him to a pension of £14 a week, deprives himself of £7 a week. A super.annutant who contributes for seventeen units, worth £14 17s. 6d. a week on retirement, deprives himself of £7 17s. 6d. a week in social services payments. Any one who contributes for more than seventeen units deprives himself completely of social services benefits. I do not doubt that there are thousands of public servants in that position. 1 should now like to mention the Provident Account, which provides for officers who enter the service at 45 years of age or more, or in a temporary capacity, or who are not eligible to contribute to the Superannuation Fund itself. Such officers pay fortnightly ls. in the £1 of their salary, and on retirement receive a lump-sum payment of three times the total of their contributions, plus compound interest on their contributions of 3 per cent, per annum. There are about 10,000 contributors to the Provident Account. Such officers serve a» average of about 25 years in the Commonwealth Public Service and contribute sufficient to entitle them to a lump-sum payment of between £2,000 and £3,000. They also are affected by the means test, and they are deprived of full social services benefits although they have paid contributions over a considerable period for their Provident Account benefits.

Public Service organizations are interested also in obtaining better pensions for the widows of superannuated officers. They receive half the rate payable to the husband, plus 10s. a week for each child under sixteen. This pension ceases if a widow remarries, and quite a number of them do. This redounds to the benefit of the fund. The average pension for a widow is about £3 18s. 9d. a week. Since the permissible income under the means test is £3 10s. a week, the widow of an officer who contributed for a pension of nine units is deprived of portion of the social' services benefits. Under the Social Services Act, an A-class civilian widow receives £4 15s. a week, plus 5s. a week for each child under sixteen, for which no contributions have been paid. The Public Service organizations suggest that the widow's rate should be four-fifths of the pension for which the husband contributed. This would make the average pension for widows of deceased officers £6 6s. a week instead of £3- 18s. 9d. a week, plus 10s. a week for eachchild under sixteen. Since such an arrangement would effect considerable savings insocial services payments, the amount could be increased even beyond that. As 1 pointed out, the Retired Officers Association requests that the value of the pension unit be increased by 2s. 6d. a week. If this were done an officer who at present contributes for a pension of £7 17s. 6d. a week would be entitled to a pension of £9- a week. But even this would be £4 14s. a week below the basic wage. The report of the sixth quinquennial investigation of the Superannuation Fund shows that it has- made a surplus of £653,326, which is the first surplus it has shown. This report and the Auditor-General's report for the financial year 1955-56 show that the fund is buoyant and could stand the increases of pensions that have been suggested.

Many officers who were contributing ten years ago for retirement at 60 years of age believed that their superannuation would meet their financial obligations on retirement. But the cost of living has increased so greatly since 1949 that those officers find it difficult to provide for their needs between 60 and 65, for they are not eligible for social services benefits until they reach 65. Present contributors and former officers who have retired on superannuation are constantly worrying and wondering when the Government intends to take a stand against inflation and stabilize the economy. This would assure their future. The favorable report of the sixth quinquennial investigation of the Superannuation Fund and the Auditor-Generals' report for the year ended 30th June, 1956, show that the suggested increases of pension are warranted. The Auditor-General's report shows that the fund is in a very healthy condition. Contributions by officers during the financial year 1955-56 amounted to £5,461,913, and receipts from the Consolidated Revenue Fund amounted to £3,276,573. Interest earned on the investments of the fund totalled £1,728,128, and there was a miscellaneous item of receipts of £22,000, making a total of £10,488,614. Pensions paid amounted to £3,858,056, and lump-sum payments amounted to £460,711. Refunds paid totalled £584,241 . The total payments out of the fund amounted to £4,903,008. So it can be seen that the income of the fund greatly exceeded its expenditure last financial year. That is another argument in support of my contention that the Government should have taken the opportunity while the principal act is being amended to increase the value of the unit by 2s. 6d. a week.

Increases are apparent in every aspect of the fund. For example, in 1950 contributors totalled 56,980. In 1954 the total number was 78,351. This indicates that the fund is improving its solvency all the time. Because contributors are receiving the benefit of the present high wage levels, they contribute more to the fund, and its revenue is continually increasing. I think present contributors have an obligation to those who contributed in the past and find, themselves in difficulties to-day owing tothe upsurge of the cost of living in the last five or six years. I regret that the Government has not taken this opportunity tomake the improvements to the superannuation scheme that I have suggested, especially by increasing the value of theunit in order to help superannuated officers who are so severely hit by the present high cost of living.

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