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Tuesday, 28 May 2002
Page: 2546


Mr Murphy asked the Minister representing the Minister for Finance and Administration, upon notice, on 11 March 2002:

(1) Can he say when the formal response to the report of the Senate Select Committee on Superannuation and Financial Services titled A `Reasonable and Secure' Retirement? will be made.

(2) Has recommendation 1 of the report been examined; if so, what is the outcome; if not, why not.

(3) Will Commonwealth civilian and military superannuants have their pensions indexed to the Consumer Price Index (CPI), in the same way that Social Security pensions are indexed to the CPI or Male Total Average Weekly Earnings (MTAWE); if not, why not.

(4) What is the estimated cost to the Commonwealth if indexing for Commonwealth civilian and military superannuants was changed to the CPI/MTAWE, whichever is the higher.

(5) What will be the additional cost to unfunded liabilities if indexing is changed to CPI/MTAWE, whichever is the higher.

(6) What will be the differences when MTAWE is 1 per cent; 1.5 per cent and 2 per cent greater than the CPI.

(7) What flow on effect would there be on NSW State Superannuants if indexing for Commonwealth civilian and military superannuants was changed to the CPI/MTAWE, whichever is the higher.

(8) Did the Prime Minister's announced 13 point program of superannuation changes include provision for allowing spouses who are members of accumulation funds to split their superannuation contributions from 1 July 2003, thus giving access to two tax-free thresholds, two reasonable benefit limits and two lump sum benefits; if so, will these changes apply to members of defined benefit schemes; if so, when; if not, why not.


Mr Costello (Treasurer) —The Minister for Finance and Administration has provided the following answer to the honourable member's question:

In preparing this answer, it was necessary to obtain input from the Defence and Treasury portfolios.

(1) Given the Federal Election and subsequent changes that have taken place, the Government has not yet had an opportunity to provide a comprehensive response to the recommendations made by the Committee. The Government will submit its response to the Senate at the earliest possible opportunity.

(2) and (3) These issues are discussed in the Committee's report, and will be taken into account when the Government develops its response.

(4) The Budgetary impact will depend on the difference between CPI and the MTAWE measure used. If it is assumed that MTAWE will exceed CPI by 1 per cent, the estimated impact for the Commonwealth civilian and military schemes on the underlying cash and fiscal balance will be:

Civilian schemes

2001-02

2002-03

2003-04

2004-05

$m

$m

$m

$m

Underlying cash

0

-20

-45

-70

Fiscal balance

0

-345

-340

-355

Military schemes

2001-02

2002-03

2003-04

2004-05

$m

$m

$m

$m

Underlying cash

0

-8

-20

-34

Fiscal balance

0

-318

-338

-358

(5) and (6) The estimated impact on the unfunded liability for the Commonwealth civilian and military schemes of changing the indexation of pensions to 1%, 1.5% and 2% above CPI, is outlined in the tables below.

Civilian schemes

1% above CPI

1.5% above CPI

2% above Consumer price index

Change in Unfunded Liability

$4.1 billion

$6.6 billion

$9.3 billion

Note: These figures are based on the unfunded liability as at 30 June 1999.

Military schemes

1% above CPI

1.5% above CPI

2% above CPI

Change in Unfunded Liability

$4.0 billion

$5.9 billion

$7.9 billion

Note: These figures are based on the current projected estimate of the unfunded liability as at 30 June 2002.

(7) This is a matter for the NSW State Government.

(8) The Government's election commitment was to allow splitting of superannuation contributions between spouses who are members of accumulation funds. There are a number of administrative complexities in extending splitting of contributions to defined benefit funds.

The Government has committed to undertake a thorough process of consultation with stakeholders and will make a further announcement on this matter once the detailed policy design has been determined.