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Thursday, 5 May 1994
Page: 307

Senator WATSON (11.50 a.m.) —The Senate now has before it the Superannuation Legislation Amendment Bill 1994, which will make amendments to allow superannuation schemes for Commonwealth civilian employees to comply with the Superannuation Industry (Supervision) Act 1993, known as the SIS Act, and associated legislation. The bill amends four acts: the Superannuation Act 1976; the Superannuation Legislation Amendment Act 1990; the Superannuation Act 1990; and the Superannuation Benefits (Supervisory Mechanisms) Act 1990. All these acts relate to the provision of superannuation benefits for Commonwealth sector employees.

  I remind the Senate that the SIS legislation was preceded by the Occupational Superannuation Standards Act only in 1987. It is somewhat ironic that that act had to be completely replaced within seven years of its introduction to parliament. The new act is certainly very much superior, and it was certainly improved upon as a result of your participation, Madam Acting Deputy President, on the Senate Select Committee on Superannuation, which reviewed that particular act.

  The government has now decided that all Commonwealth sector superannuation schemes should comply with the SIS Act, and I think we all heartily agree with that. This bill commences that process of altering the various Commonwealth schemes. So, in due time, we will see these sorts of schemes replicated through the Senate.

  Honourable senators would be aware that the main thrust of the changes to the SIS legislation and the regulations which commenced after 1 July this year will give trustees a greater responsibility for and control over the administration of funds under their control. At the same time, arising from the legislation before us, the powers of the minister and the role of the employer have therefore been diminished in some areas. But in other cases the ministerial responsibilities will be shared with the trustees. For example, many of the discretions previously exercised by the minister have been replaced by specific provisions in the legislation.

  The SIS Act deals in the main with the prudential supervision of the superannuation industry as it essentially applied to the private sector. As mentioned earlier, this bill now extends the wide arms of the SIS prudential standards to certain Commonwealth funds. Apparently, under the Superannuation Act 1976 the Commissioner for Superannuation and the board of trustees share the responsibility for the administration of the Commonwealth superannuation scheme, known as the CSS. Under the SIS legislation, there can be only one responsible entity, and the bill makes the trustee of the SIS that body.

  In addition, the SIS legislation requires that the rules of a superannuation fund may not allow trustees of the fund to be directed by another person or any other person to exercise a discretion unilaterally. The rules of the fund should also not be changed without the approval of the trustees. Therefore, under this legislation the trustees of both the CSS and the PSS—the PSS, of course, followed the CSS—are not subject to any direction by any person except the minister, as provided for under the SIS Act. In a sense, I believe, therefore, it is somewhat reassuring for Commonwealth sector public servants that their funds will now be protected in the same way as the private sector funds are protected under the SIS legislation.

  I remind the Senate that in its first major report, Safeguarding Superannuation, the Senate Select Committee on Superannuation made some strong recommendations for implementing measures to safeguard retirement income savings. The recommendation resulted in legislation being passed—the SIS legislation that I referred to—which set up prudential standards for the superannuation industry; and these will commence on 1 July 1994.

  While the SIS Act, for obvious reasons, exempts certain public sector superannuation schemes from those controls, under section 19(7), the government has decided that all Commonwealth superannuation schemes with invested funds will comply with the SIS Act and its associated legislation. Those without an invested fund will comply with the main requirements of SIS, particularly preservation. This is an example of government superannuation funds making a concerted effort to comply with the SIS Act for the benefit of their members.

  It will be interesting to see how long it takes the Commonwealth to adjust the parliamentarians scheme. It is interesting to see the Commonwealth endeavouring to subject itself to the same rules as private sector superannuation funds. The Senate committee was informed that some of the states would have difficulty adjusting their rules to meet SIS. I believe that in time they will and that is why the committee recommended that the government give them time to adjust to the new regime. The proposed amendments will result in the Minister for Finance having his role in the administration of these funds somewhat diminished.

  I should take this opportunity of saying that I find it a little unusual that the responsibility for these funds had its genesis in the Department of Finance. All previous superannuation legislation came from the Treasury. Therefore, I ask Senator Collins, as the responsible minister, whether Treasury officials who have direct responsibility for superannuation, particularly the Commissioner for Superannuation, have cast their eye over these funds to make sure they comply with the SIS rules.

  With due respect to the Department of Finance, it does not have the day-to-day, ongoing expertise of Mr George Pooley's Insurance and Superannuation Commission. It is important that we get that assurance to make sure it has passed the flick test and has been before the relevant officers of the Insurance and Superannuation Commission to make sure that the legislation we are debating today has been reviewed by people with technical expertise. Coming back to procedural requirements, the trustees will be able subsequently to further comply with their duties and responsibilities as required under SIS.

  The SIS legislation places a great onus on trustees to provide members with quality information on the operation of the fund. My observation of the CSS and PSS schemes is that they are doing just that. I would like to take this opportunity of commending them on their work and their enterprise in this direction.

  I would also like to acquaint honourable senators with a number of the current publications. I have before me News Update, the newsletter to PSS members. That comes from the Commonwealth Superannuation Board of Trustees No. 1. The second document is Access, the newsletter to CSS members from the Commonwealth Superannuation Board of Trustees No. 2. I would like to table these quality documents. I believe they set a standard for the private sector to follow and therefore the Comsuper group, which was responsible for the publications, should be congratulated in this respect. I seek leave to have these documents tabled in the Senate.

  Leave granted.

Senator WATSON —I thank the Senate. The only point of contention is that the CSS and the PSS perhaps do not participate as fully in all the superannuation investment performances as they might, although I understand they are moving in that direction. I congratulate them for that. Because the funds are recognised as registered and complying superannuation funds, fund members will be able to seek appropriate advice and assistance from the soon to be established superannuation complaints tribunal, which is part of the prudential standards that will come into effect on 1 July.

  The fact that they will have access to the Superannuation Complaints Tribunal will provide both the CSS and the PSS members with a very low cost dispute resolution mechanism, although they already have access to administrative law revenue tribunals such as the AAT. As we are aware, this is a low cost dispute resolution mechanism, and I believe that it will be an important adjunct to the rights that are available to CSS and PSS members. The Superannuation Complaints Tribunal will operate in a less litigious and adversarial way, and this is very good for fund members, many of whom have difficulty grappling with the complexities of their schemes, despite the excellent publications I have just referred to.

  The amendments proposed in the bill do not alter—and this is important—the benefit design of the schemes provided for by the legislation and, therefore, there is no financial impact. Honourable senators listening to this debate would therefore recognise why I had such concern about a previous bill when it was indicated that, because there was an unfunded element, certain governments could walk away from their responsibilities to their employees. I put it to the Senate that it really should not make any difference whether it is funded or unfunded. I therefore sought assurances because, in future, that may set a precedent for some people in the CSS or the PSS where the government decides to hive off some of those activities to the private sector and, in order to get the price right, could well suddenly do a deal.

  We sought some time so that we could consult with the union to make sure that everything was fair and above board and that the rights of the people who have entitlements under that scheme were not diminished in any way. I believe that that is an appropriate role for this Senate. Since we are talking about improving and enhancing prudential standards for both CSS and PSS employees under this legislation, I again took the liberty to remind the Senate of my concern about the members of the fund and their transfer rights. I commend the bill to the Senate and I thank the Senate.