Note: Where available, the PDF/Word icon below is provided to view the complete and fully formatted document
 Download Full Day's HansardDownload Full Day's Hansard    View Or Save XMLView/Save XML

Previous Fragment    Next Fragment
Tuesday, 24 November 1959

Mr HAROLD HOLT (HigginsTreasurer) . - by leave - I move -

That the bill be now read a second time.

Under the Superannuation Act the Commonwealth has for almost 40 years provided a contributory scheme of retirement benefits for its employees and their dependants. Originally, the act provided pension benefits only which were payable on the retirement of a contributor on reaching the maximum age or on his prior invalidity or death. In addition, pensions to widows and children under sixteen years of age were paid on the death of a pensioner. These conditions have remained unchanged, but over the years there has been a number of changes in the maximum pension payable, the value of the unit of pension and the basis of financing the scheme. Most of these changes have resulted from economic changes since the last war, and perhaps the most significant is the basis of financing the scheme. Until 1947 the employee and the Commonwealth met the cost of pensions in equal shares, but currently the Commonwealth provides five-sevenths of each pension and the employee the remaining twosevenths.

In 1937 the scope of the act was widened to include a provident account, the main aim being to provide some cover to employees who were medically unfit for pension benefits. Contributors to the provident account pay contributions amounting to ls. in each £1 of salary received by them and receive retirement benefits in the form of a lump sum. Here, too, the Commonwealth supplement has increased in the post-war years.

The act provides that the fund shall be actuarially controlled and that an investigation as to the State and sufficiency of the fund shall be made at the expiration of each period of five years. The actuary is required to report to the Superannuation Board the result of his investigation and to state whether any reduction or increase is necessary in the rates of contributions payable to the fund or in the proportion of benefits payable by the Commonwealth. Where his investigation discloses a surplus he is required to state what additional benefits, if any, could be provided out of the surplus. Past investigations have resulted in some increased benefits. For example, the additional pension payable to a contributor who continues to work beyond his normal retiring age, and on one occasion, in 1942, a small increase in rates of contributions. The Commonwealth Actuary has recently concluded the seventh quinquennial investigation of the fund, which disclosed a surplus the disposition of which will be referred to later in this speech.

The principal purpose of this bill is to provide a new table of pension entitlement for contributors to the superannuation fund. The proposals are designed to restore the basis of pension entitlement adopted by the Government in the 1954 legislation when it was decided that the pension entitlement of officers on lower and middle salary ranges should be stabilized at 70 per cent, of salary, of which the Commonwealth would meet an amount equal to 50 per cent, of salary, and that for those on higher salaries the proportion of pension to salary should reduce to a limit which, in relation to the scale of pension units, was 40.9 per cent, of salary for those whose salary was £4,000 per annum.

Since the 1954 amendment there have been substantial changes in salaries. While these salary increases have automatically entitled many employees to contribute for a higher money pension, the percentage of pension entitlement to salary over a significant range of positions has declined. Thus, those officers the salary of whose positions was at the end of the range entitled to a pension of 70 per cent, of salary in 1954 are to-day able to contribute for a pension which represents only 59.6 per cent, of salary. More senior officers have been more severely affected, and at the upper limit the pension entitlement has deteriorated from 40.9 per cent, of salary to 27.3 per cent, of salary.

It is proposed to restore the 1954 position by applying the principles laid down at that time to present-day salaries. This results in an increase in the scale of units of pension from 36 to 54 providing a new maximum pension of £2,457 per annum, representing 40.9 per cent, of a salary of £6,000 per annum, which is the salary payable to officers who in 1954 received £4,000 per annum.

An adjustment is also proposed in the salary level up to which the maximum percentage of pension entitlement to salary - 70 per cent. - is available, so that additional units of pension will be available to all existing contributors whose salaries exceed £1,365 per annum. The pension value of each unit will remain unchanged.

There will be no alteration to the present basis of financing pensions. Contributions are calculated to provide two-sevenths of the total cost of benefits, the remaining five-sevenths being met by the Commonwealth. Therefore, in respect of the new entitlement, contributors will be required to pay in contributions sufficient to meet two-sevenths of the increase in the benefits.

All contributors pay the same total amount of money towards each unit of pension. However, those with fewer years to serve until reaching the retiring age must pay a greater rate of fortnightly contribution. Thus, in a change such as 'that now proposed, existing contributors who are nearing retirement will be required to pay a much higher fortnightly rate of contribution for each additional unit than contributors who still have, say, fifteen or twenty years to serve. To assist older contributors to take up the additional units available to them, the bill provides for those who are within eight years of retirement, and whose fortnightly contributions would otherwise be excessive, to defer portion or all of the additional contributions until retirement, when many will be entitled to a lump sum in respect of furlough, from which they can pay the outstanding amount. This provision is consistent with the recommendation made by the Allison committee in its review of the 'Defence Forces Retirement Benefits Act, to permit those contributors who are approaching retirement to meet portion of their contributions in a lump sum on retirement.

In conjunction with the introduction of the new scale of 54 units, it is proposed to introduce a principle which, while new to the Superannuation .Act, is a .feature of many similar schemes. This is to make the pension entitlement of a contributor dependent, to some extent, upon the length of service of that contributor. At present, a contributor who has given a lifetime of service to the Commonwealth receives no greater benefit that a contributor on the same .salary at retirement who has completed less than ten years' service.

Future entrants to the fund will be ^permitted to contribute only on the basis of the 54-unit scale if their prospective service exceeds twenty years. Those whose prospective service is less than ten years will contribute on the basis of the existing "36-unit scale, and those who will serve "between ten and twenty years will have a greater -entitlement proportional to service "in excess of ten years. I emphasize that this provision has no application to any existing contributors to the fund, and is related solely to those who will become contributors in the future.

Another major change is in relation to the widow's pension, which is at present one-half of the pension payable to the contributor.

As mentioned Jin my Budget speech .the Government : has carefully considered the position of pensioners ;and .has decided that, in respect of all existing pensions, the benefit for widows should be increased from one-half to five-eighths of the full pension. The cost of this increase will be met by the Commonwealth, but the bill provides that the portion of any surplus revealed at the seventh quinquennial investigation of the fund which is attributable to married contributors who have retired or died will be applied towards the cost of the increase.

The five-eighths widow's pension will be a basic feature of the superannuation scheme "for all future contributors who will be required to pay contributions at an increased rate in order to provide this new benefit. Those who are now contributing to the fund will have an option to take up the additional widow's pension provided they meet their proportion of the additional cost in extra contributions.

In calculating future contributions to the fund, both for the new .entrants and for new units of pension for the existing contributors, revised rates of contribution have been compiled by the Commonwealth Actuary following >the completion of his seventh quinquennial investigation. The rates to be paid by those existing contributors who decide to take .up the additional widow's pension in respect of ;their existing units take into account the portion of the surplus revealed by the valuation which is attributable to those contributors.

As honorable members are aware, there is provision in the Superannuation Act 1922-1958 for contributions to a provident account providing lump sum 'benefits. "The contributions of employees are accumulated at interest and supplemented by the Commonwealth. The rate of interest at which contributions are accumulated is being increased from 3 per cent, to 3'f per cent, per annum. This will increase the ultimate benefit to contributors to the Provident Account by three times the increase resulting from the higher rate of interest as the lump sum payable from the Provident Account is equal to three times the amount of contributions paid by the contributor plus interest thereon. Of this amount the Commonwealth contributes two-thirds.

Other amendments are proposed in the provisions relating to the Provident

Account. At the present time contributions are based on the actual salary of the contributor, whereas contributions to the Superannuation Fund are based on the maximum of the salary range of the contributor. This provision was introduced for contributors to the Superannuation Fund several years ago in order to avoid a number of successive adjustments as a contributor advanced through his salary range by annual increments. It has resulted in considerable administrative savings and, in addition, provides a slightly better benefit to the contributor who dies or retires before he reaches the maximum of his range. It is now proposed that similar conditions should apply to contributors to the Provident Account.

There are occasions on which a person becomes entitled to contribute but before actually commencing contributions suffers death or invalidity. At the moment potential contributors to the superannuation fund have the benefits of the act extended to them in these circumstances but potential contributors to the provident account do not. The bill makes similar provision for the potential provident account contributor.

There is also a number of minor amendments contained in the bill. Provision is being made to admit, as contributors to the fund, married women whose husbands are incurably insane. The Government felt that these women were in no better position than widows. As widows may already contribute to the fund it was decided that these married women should be permitted to contribute on a similar basis.

The superannuation board includes as a member a representative of the contributors whose term of office, in common with other members of the board, is seven years. In response to many representations by and on behalf of contributors, provision is made in the bill to reduce the term of office of the contributors' representative to five years.

The act also permits contributors to take up reserve units of pension at the rate appropriate to their age next birthday when they make such an election. These reserve units are not effective for pension purposes until such time as the contributor elects to transfer his reserve units instead of paying additional contributions to take up additional units. Thus, contributors can pay for units from an early age at a low fortnightly rate in advance of their future entitlement, when the rate will be substantially higher. This provision, which has been a part of the act since 1947, has provided some solution to the problem of a contributor becoming entitled to take up a number of additional units late in life when he receives a substantial promotion. It has been widely used, particularly by younger contributors, and in view of the larger number of units now available it has been decided that the permissible number of reserve units should be increased from four to eight.

A widow who is receiving a pension under the act may become a permanent employee of the Commonwealth and therefore become entitled to contribute under the act in her own right. At present she would lose the whole of the Commonwealth share of her pension on becoming an employee. As a male pensioner who is re-employed by the Commonwealth has his pension reduced to £500 10s. per annum or half of his pension, whichever is the greater, it is proposed that a comparable restriction should be applied to widows who become employees. Thus, instead of losing the whole of the Commonwealth share of her pension a widow who becomes an employee, and is in receipt of a pension on a fiveeighths basis, will have her pension reduced to £312 16s. 3d. per annum, or half pension, whichever is the greater, and a widow whose pension is on a one-half basis will have her pension reduced to £250 5s. per annum or half pension, whichever is the greater.

Consistently with the Government's policy of providing uniform superannuation rights for as many Commonwealth employees as possible, the bill also provides for the provisions of the act to be extended to members of the police force of the Australian Capital Territory whose benefits were previously provided under a separate ordinance. At present certain ex-members of the forces, who, immediately following their discharge from the forces, become permanent civilian employees of the Commonwealth, are permitted to transfer their rights under the Defence Forces Retirement Benefits Act to the superannuation fund. The bill extends this right to similar exmembers of the forces who are unable to gain permanent Commonwealth employment as civilians but who are engaged in a temporary capacity by the Commonwealth in circumstances in which they will be likely to serve for at least a further seven years.

The other amendments are of an administrative or consequential nature.

Before I conclude, I feel that I should make one or two comments to the House with respect to this bill, and also the kindred bill which I shall introduce in a few minutes. Both of these bills, as the bare recital which I have given of this measure and will give of the next bill show, are clearly highly technical. Honorable members have a general idea, and some, perhaps, a more detailed awareness, of the Commonwealth Public Service superannuation scheme and of the proposals which are to be brought forward in respect of our defence forces; but these are bills which run to great length.

Mr Bryant - Is that why you have brought them in late?

Mr HAROLD HOLT - No, that is not why I have brought them in late. I am trying to tell the honorable gentleman the reason why they are being presented at this late stage, and also the reason why I, personally, regret, as I know my colleagues of the Government do, that the Parliament will not have a great deal of time on this occasion to study the details of the legislation.

Mr Bryant - That is your fault!

Mr HAROLD HOLT - The loquacious gentleman opposite says it is my fault. It is nobody's fault. Indeed, I have been assured by the Parliamentary Draftsman that he and his colleagues have never had two more difficult bills to draft than the two that I am bringing before the House at this stage. I can assure the honorable gentleman who interjects that there are those of us on this side of the House, and certainly in the Government service, who have given very much more thought to this matter over the last twelve months than he will be required, or, indeed, is likely, to give. In any case, the bills have been brought forward at this time, which is the earliest that the draftsman could submit them to us. The Government had to decide whether to defer consideration of the legis lation until the autumn session. It was not a case of extending this session for another week or two, because this bill has 79 pages and another bill that I shall be introducing has 58 pages. It would take literally weeks of consideration if the committee stage were to be followed through for both bills, with all their detail and all their complexity. If the legislation had been deferred for that kind of treatment in the autumn session, the very substantial benefits contained in the bills would have been denied to members of the Commonwealth Public Service and of the defence forces, who will be affected by their provisions. I have no doubt that honorable members from all parts of the House would wish these benefits to apply as soon as possible.

I again express my regret that it has been necessary to adopt this course, but I am sure that on balance it will be found to be the more satisfactory course. I suggest that, over the period of recess between now and the next session, honorable members from both sides of the House give such study as they can to the more technical and detailed provisions of the bill. For my part, I shall make myself, and the officers of the Treasury, available in the New Year for discussions with honorable members, who may be interested, to see whether, out of our consideration of the legislation together, there are improvements which can usefully be adopted.

Mr Haylen - Are you hoping to have 58 amendments?

Mr HAROLD HOLT - I am not necessarily expecting amendments, but I hope that, in the consideration they give to it, members will be able to make up their minds whether amendments are appropriate - not necessarily to the substance of the bill, because that is an expression of Government policy. We have not brought forward this bill with the idea that it should be amended so as to increase the charge on the Commonwealth revenues or on the taxpayer for a scheme which we think is the expression of a fair-minded employer wishing to deal reasonably with his employees. The Commonwealth Government is, of course, the biggest employer, in point of numbers, in Australia.

I offer that word of explanation knowing that, when honorable members have in mind the choice that was open to the Government, they will agree that it is better to give the bills legislative expression and apply their benefits to the thousands of people to be affected by them. If there is some tidying up to be done, we can do it together when we meet again early next year. I commend the bill to the House.

Debate (on motion by Mr. Calwell) adjourned.

Suggest corrections