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

Previous Fragment    Next Fragment
Wednesday, 2 June 2010
Page: 4961

Mr TANNER (Minister for Finance and Deregulation) (1:24 PM) —in reply—It is a great disappointment that, with what is essentially an important administrative reform to improve the administration of superannuation for both civilian and military employees, the federal government is hit with loopy conspiracy theories and complete ignorance and stupidity from the opposition. I will go through the key elements in the appropriate order to indicate to the House exactly what is involved here.

The Governance of Australian Government Superannuation Schemes Bill 2010, theComSuper Bill 2010 and the Superannuation Legislation (Consequential Amendments and Transitional Provisions) Bill 2010 modernise the governance arrangements for the main Commonwealth civilian and military superannuation schemes without altering the schemes or members’ entitlements under the schemes. In particular, they enable the Commonwealth to deal with some problems in the existing administrative arrangements that we inherited from the previous government and that need to be addressed.

The bills were developed with the priority of maintaining the features of military superannuation that reflect the special nature of military service and that differentiate military service from civilian employment. In further developing the package of bills the government welcomed the opportunity to hear the views of military stakeholders, particularly the ex-service community, on the proposed new governance arrangements. I wish to thank those organisations for their input.

The views of the ex-service organisations were canvassed at a roundtable and a summary of the outcomes of the discussion is as follows. The investment related benefits to military members arising from the merger were generally accepted in that there was the potential for significant benefits to Military Superannuation and Benefits Scheme members and no impact on Defence Force Retirement and Death Benefits Scheme members. It was also generally agreed that, in terms of concerns about any supposed dilution of the military voice in the merged trustee board, the protection afforded by benefits and entitlements and scheme rules that are contained in separate acts of parliament and the fact that trustees have a duty to act in the interests of all members were sufficient. There was consensus that a strong military voice did need to be maintained in the area of death, disability and reversionary spouse and children’s benefits where there is discretion vested with the trustee to consider and decide on individual cases.

There were differing views expressed on the question of whether the proposed the Defence Force Case Assessment Committee should be established by statute or whether there should be flexibility, as is reflected in the bill, for the trustee board to decide whether such a committee should be established. In the end it was agreed that it was desirable to retain the existing flexibility, hence the phrase ‘may establish such a board’ is in the legislation.

The government has responded to the issues raised in the consultations and made a number of changes to the proposed bills that are consistent with the views put forward by the ex-service community. These include a change to the process for the Chief of the Defence Force to nominate member representatives to the governing board of the single trustee, which will provide for ongoing consultation with the ex-service community. There is now support from the military community for the merger of the boards, subject to these amendments being adopted which address some aspects of the governance arrangements but do not compromise the integrity of the reforms.

The bills do not change the existing features of military superannuation that reflect the special nature of military service. The bills complement these features while providing opportunities for members of all of the schemes, civilian and military, to benefit from better practice trustee operations and administration services and better investment returns. Implementation of these governance reforms will improve efficiency in the management of the civilian and military schemes and will allow the benefits of these improvements to be passed on to all members in the form of reduced costs and higher investment returns.

In particular, the ability of a single trustee to consolidate scheme funds will allow members of the Military Superannuation and Benefits Scheme, which comprises the bulk of serving Defence Force personnel, to gain substantial benefits from the merger. I emphasise this point for the opposition and suggest to them that they are standing in the way of military scheme members, both current and future, achieving higher levels of superannuation return. This is because of the relatively smaller size of the existing military scheme compared with the civilian schemes. When they are pooled, it is anticipated that investment returns will be higher in the pooled funding arrangements than would have been the case with separate arrangements.

There is clear industry experience that members of smaller superannuation schemes have the most to gain when their scheme funds are consolidated into a larger pool of funds that are typical of bigger superannuation schemes. Overall, the implementation of these bills will better secure the superannuation arrangements for Commonwealth civilian employees and military personnel for the longer term. They will also enable substantial additional benefits to flow to members while retaining the existing individual scheme benefits and entitlements. These bills are evidence of the government’s ongoing commitment to providing efficient and sustainable superannuation arrangements for Commonwealth employees and military personnel, together with its strong commitment to protect those features of military superannuation that recognise that military service is unique and different from civilian employment.

The amendments that have been circulated in my name, in summary: first, require the Chief of the Defence Force to consult with relevant organisations on the appointment of two military member representatives; second, require the minister for finance to consult with the relevant defence minister on the appointment of the five employer representatives to the board; third, require the minister for finance to consult with the relevant defence minister on the appointment of the CEO of ComSuper; fourth, ensure that the quorum requirement includes at least one nominee director from the Chief of the Defence Force, when a matter before the board relates specifically to the interests of military members; fifth, ensure that any decisions taken by the board must include at least one Chief of the Defence Force nominee when the decision relates specifically to the interests of military members; and, six, require that the Chair of the Defence Case Assessment Committee be one of the Chief of the Defence Force’s nominee directors.

I will conclude with two things. One is by giving a couple of illustrations that the opposition may want to think very carefully about—that is, advice from my department about the likely beneficial impact of longer term superannuation returns arising from this merger that will flow to new military members. A new MSBS member, under the new arrangements, who joins the Air Force at 18-years-old as an officer cadet, and retires at the rank of group captain after serving 37 years, would be expected to have approximately $95,000 additional superannuation. A new MSBS member, under the new arrangements, who joins the Army at age 21 as an officer cadet, and retires at the rank of colonel after serving 34 years, would be expected to have approximately an additional superannuation payment of more than $60,000. And a new MSBS member, under the new arrangements, who joins the Navy at age 18 as a seaman and retires as a warrant officer after serving 37 years, would be expected to have an additional superannuation payout of approximately $70,000.

Can I respond to the points raised by the member for Paterson and echoed by one or two of the other opposition speakers. First, the suggestion that was put to me by the member for Paterson with respect to the prospect of continuing two separate boards but with some kind of pooled arrangement for investment. Contrary to the suggestions of some, we did actually explore this proposition very seriously and did examine it very closely. That did indicate that, although there would be some benefits as compared with the status quo from this approach, the new approach would be costly to establish and administer, there would still be duplication of some operational costs and there would be some degree of loss of prospective benefits to members. In other words, it would be an inferior outcome compared with the government’s proposals. There would be increased costs to civilian schemes if this approach were taken compared with current arrangements. We know that the opposition hates public servants, but this is a matter that the government does have to take into account. It would not be possible for trustees to agree to this arrangement on behalf of their existing members and fulfil their obligations to members. Where similar arrangements have been tried in the private sector they have given rise to significant practical difficulties, including the relationship between the two boards that are connected through their investment activities, and that can come as a cost to members.

Finally, I will refer to the loopy paranoia about the ACTU—perhaps predictable; perhaps I was giving the opposition too much credit for the possibility that they might actually treat these issues on their merits. I would remind the opposition that the role of the ACTU here is in representing hundreds of thousands of people who are employees of the Commonwealth. These are representative bodies. Not all of them are members of trade unions, but equally not all ex-service personnel are members of ex-service organisations either. The ACTU had a role in this process that existed under the former government, so there has been no substantive changes made to the role of the ACTU in nominating directors for the board. I would point out that the whole purpose of the minister for finance not being able to dismiss an employee representative, be they a military or civilian representative, is to ensure that they are genuinely representative of employees. If I, or any minister for finance, can arbitrarily dismiss somebody who was appointed there to represent employees, then they are no longer representing the people they are purported to be representing, because they are subject to my dismissal at a whim. What the opposition is failing to note is that there is piece of legislation called the Superannuation Industry (Supervision) Act, which actually provides that people who contravene the fitness and propriety standard under the SI(S) Act, who fail to comply with the material personal interest provision under the Commonwealth Authorities and Companies Act, or who are a disqualified person under the SI(S) legislation, will either not be eligible for appointment or will, if they are already appointed, have their appointment terminated—not as a matter of discretion or arbitrary whim on the part of the minister, but as a matter of existing legislation. So where there is misbehaviour there are existing provisions that ensure that that misbehaviour will be met with by termination of the appointment. For example, a person who is bankrupt would be disqualified under the existing provisions of the Superannuation Industry (Supervision) Act.

The issue here is that these bills, together with the amendments that have been adopted following consultation with the ex-service community, will strengthen the administration of the superannuation arrangements for both military and civilian personnel employed by the Commonwealth. Strengthening that administration means that the risks of problems, the risks of mistakes, the risks of damaging things that harm the interests of members of the scheme will diminish. That is a critical thing: better administration benefits members—that means people currently receiving pensions, as well as people who are currently employed by the Commonwealth and are contributing to the schemes. Even more significantly, by combining the investment pool and getting the benefits of economies of scale, those sections of the schemes that involve investment income returning to the individual members will, over the long haul, on balance, return significantly stronger returns to the individual members.

I have mentioned the examples. That is something that I would urge the opposition to think very carefully about, because the stance they are proposing to take means that they are seeking to stand in the way of military personnel getting better superannuation payouts. That is something that I would urge them to think very, very carefully about. They can scoff at that proposition, but that is the professional advice that the government has received, and I think it is a very courageous position for the opposition to take to be seeking to prevent that from occurring. I commend the bill to the House.

Question put:

That this bill be now read a second time.