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Finance and Public Administration Legislation Committee
24/02/2015
Estimates
FINANCE PORTFOLIO
ComSuper

ComSuper

CHAIR: Dr Charker, do you wish to make an opening statement?

Dr Charker : No, thank you.

CHAIR: Mr Carrigy-Ryan?

Mr Carrigy-Ryan : No, thank you. I do not wish to make an opening statement.

Senator LUDWIG: Where are we up to with the proposed merger of ComSuper and the Commonwealth Superannuation Corporation? I think this is a perennial question that I ask.

Mr Carrigy-Ryan : It is progressing very well. We have a scheduled commencement date of 1 July 2015. We have had numerous committees of both organisations and we are heavily involved with the Department of Finance in discussing it. As of now we are on track for a 1 July commencement.

Senator LUDWIG: So, when we come back for budget estimates, which is just before 1 July, you should be nearly there?

Mr Carrigy-Ryan : We would expect to be very well near there at that date.

Senator LUDWIG: So you do not foresee any impediments? You do not want to throw out a risk profile that says there might be these matters that might stop you making the 1 July 2015 deadline?

Mr Carrigy-Ryan : There is an issue for the parliament. The merger requires legislation.

Senator LUDWIG: I was going to come to that. So there is a requirement for legislation. Has that been introduced?

D r Helgeby : No, not at this stage.

Senator LUDWIG: How are you going to get it passed by 1 July?

D r Helgeby : There are quite a few sitting weeks in between.

Senator LUDWIG: Pray on Senator Cormann to—

Senator Cormann: Again, it can happen very quickly and you can help us facilitate the very speedy passage of that in time before the end of June. The government continues to work towards that timetable and we are looking forward to your cooperation.

Senator LUDWIG: When is the cut-off date for introduction?

Senator Cormann: You know perfectly well that we still have a lot of time to introduce legislation between now and 1 July coming into effect. If you want to know the specific cut-off date in relation to this particular legislation I will take that notice.

Senator LUDWIG: No. I thought you might have been familiar with Senate procedures.

Senator Cormann: I am.

Senator LUDWIG: There is a Senate order for a cut-off and I just cannot recall it at this point.

Senator Cormann: Given that you are a former long-serving manager of government and opposition business in the Senate and you cannot recall, then what I will do, if you are genuinely asking the question, is get that information for you.

Senator LUDWIG: No, I am not asking the question. It is a question of when you are likely to have the legislation in place, because the longer you leave it the harder it gets to get it through by 1 July. That is my best advice as a previous manager of both sides.

Senator Cormann: My response to that is that we will do it as soon as possible.

Senator LUDWIG: Is there a hiccup? Is there something—

Senator Cormann: No, there is no hiccup at all. We are just going through the process in the right way, making sure that we dot all the i's and cross all the t's properly before we press ahead. As there always is and as you would be well aware, there is always a lot of legislation that competes for priority with each other in terms of the sequential introduction of various bills across the whole of the government. We are working our way through that process in an orderly fashion as you would expect us to be doing.

Senator LUDWIG: Are you seeking non-contro for it?

Senator Cormann: I would like to think it will be a non-contro piece of legislation, but you are well and truly getting ahead of yourself now. There is an established process on how we deal with legislation through the parliament, through the Senate, and we will cross that bridge when we get to the relevant point in the process.

Senator Ludwig: Do not take my advice, but as a former manager you are leaving it very late.

Senator Cormann: I can remember where the former manager that is asking the questions was leaving things at least as late if not later in relation to certain bills. I do not think this is unheard of.

Senator LUDWIG: You could always declare it urgent—there are always other ways—if you must. So, with the 2014-15 MYEFO measure that requires Public Sector Superannuation Accumulation Plan members to pay administration fees, which is page 145, is there a year-by-year profile of that $26.8 million savings claimed in the measure description? How do I see that more clearly? Now I have got the perfect example where I do have the agency responsible and Finance in front of me. Are you able to help me?

Ms Halton : They will have to take that on notice.

Senator LUDWIG: Is that Finance taking it on notice or ComSuper taking it on notice?

Senator Cormann: The portfolio is taking it on notice and the answer will be provided by that part of the portfolio that is best equipped to provide you with the best answer.

Senator LUDWIG: I thought I might have nearly got you there.

Senator Cormann: Keep trying.

Senator LUDWIG: I will, because you would have the information, but I am happy for you to take it on notice. Is there work that needs to be done? As I understand the measures, a decision has been taken but not yet announced. What work needs to be undertaken between the decision being taken and the announcement of the measure in MYEFO?

Senator Cormann: Are you asking a general question?

Senator LUDWIG: No. It is page 145.

Ms Halton : This is one of the examples of the measures that you said previously, 'When do they merge?' This is one that was included in the 2014-15 budget.

Senator Cormann: You asked before when does a decision taken but not yet announced become—

Senator LUDWIG: Crystallised.

Senator Cormann: This is an example.

Ms Halton : This is crystal.

Senator LUDWIG: That is why I wanted to look at it a little bit harder. It is crystallised. Has the work been completed? I am just trying to understand this. Can you take me through that measure? Once it crystallises at a particular date what work has been led to crystallise that measure?

Senator Cormann: Obviously practical implementation related work to make sure we are in a position to actually proceed with implementation, as you will see in the description. If you look at the Public Sector Superannuation Accumulation Plan administration fees measure, there is a saving of $26.8 million over four years, but you see in the table that it shows little hyphens. That is again because this is an update compared with what was in the budget. The savings for this measure were included as a decision taken but not yet announced in the 2014-15 budget. But this provides the detail for the purposes of MYEFO.

Senator LUDWIG: With respect to the average administration fees for a PSSap account that the government pays for, is there such a thing as an average administration fee?

Mr Carrigy-Ryan : At the moment it is calculated on a per member basis and depending on whether the member is a contributing member or a preserved member.

Senator LUDWIG: What is the range? Can you give me a flavour of what would be indicative of a still participating member of one who is preserved?

Mr Carrigy-Ryan : The fee is currently not payable by a member.

Senator LUDWIG: So it is only payable by a—

Mr Carrigy-Ryan : It is payable by an agency where the PSSap member is an employee and it is a levy on that particular employee for that number of members.

Senator LUDWIG: What would be the figure? I am just trying to find a concrete term. Is there a range of figures?

Mr Carrigy-Ryan : No. Currently it is a per head fee.

Senator LUDWIG: So what is the fee?

Mr Carrigy-Ryan : I will need to check that. My recollection is it is about 118 per head.

Senator LUDWIG: I am happy for you to take it on notice.

Mr Carrigy-Ryan : I will take it on notice and come back to you on that.

Senator LUDWIG: Do you do any comparative work as to how that would compare with industry funds or other funds in the marketplace?

Mr Carrigy-Ryan : Yes. The comparative work that is done is a comparison of across-the-board ICR fees; that is, investment cost and cost to members. That is published in the financial press and certainly in the industry magazines. Those costs will include investment costs and scheme administration costs. Your scheme administration costs would vary depending on the fund, I would think, by about $65 to $70—this is flat fees and there are other fees that go with it—to $130 or $140 a year, depending on the services, again, that the member accesses. If a member has insurance, for example, or the member has a number of transaction fees or switches or whatever, it will vary. It is very difficult to get an average fee for a particular member.

Senator LUDWIG: How do you compare in the marketplace with other industry funds?

Mr Carrigy-Ryan : I can give you a table from the APRA figures.

Senator LUDWIG: That would be helpful.

Mr Carrigy-Ryan : I can take that on notice and provide those to you.

Senator LUDWIG: So in the top 10 or the top 20?

Mr Carrigy-Ryan : Remember at the moment that the administration fee is not a fee to the member. It is a fee that is paid by the employer. We can give you the comparative fees of where PSSap fits on the official data.

Senator LUDWIG: So the government pays the fee. How do you set the fee?

Mr Carrigy-Ryan : The fee is set on the basis of the cost, and there are a number of costs involved in administering a scheme. There are obviously trustee costs.

Senator LUDWIG: Who sets the costs, the government or you?

Mr Carrigy-Ryan : That is a discussion that is had between now us and the government, because we now have the contract with Pillar, who is the scheme administrator. In the past it has been a conversation between ComSuper, who had the contract with Pillar, the government and ourselves. It is consultative. It is a cost recovery-type fee.

Senator LUDWIG: I guess there is always an argument about what the cost recovery fee actually is.

Mr Carrigy-Ryan : No doubt.

Senator Cormann: I will just add that that is the same wherever and whoever is administering superannuation arrangements. The objective here is to bring arrangements in line with what applies for other people in superannuation that are contributing or being in various stages of their employee life.

Senator LUDWIG: When you merged—and I do not mean this to be a hypothetical question so I will try to bring it out of being a hypothetical question—have you determined what the fee structures will be?

Mr Carrigy-Ryan : Do you mean in relation to PSSap?

Senator LUDWIG: Yes. Will that change?

Mr Carrigy-Ryan : No.

Senator LUDWIG: So it will be grandfathered, effectively?

Mr Carrigy-Ryan : No.

Senator LUDWIG: That is my term. You can tell me the proper term.

Mr Carrigy-Ryan : The merger of ComSuper into CSC has no direct impact on the cost of scheme administration in relation to PSSap. The scheme administrator for PSSap is Pillar.

Senator LUDWIG: So that will just remain?

Mr Carrigy-Ryan : That will remain.

Senator LUDWIG: In the future, then, the negotiation from the merged entity will be between Pillar, the government and yourself as the merged entity?

Mr Carrigy-Ryan : No. In relation to PSSap, that will be a decision that is made by the trustee, because the fee will be charged to members through the fund. As the minister explained, it is like every other superannuation fund or most other superannuation funds in Australia. That fee will be a function of what the trustee fee is, what the scheme administrator's fee is and what other fees are necessary, and it will be paid for by members. The discipline on that fee is, of course, the marketplace. Whatever fee is charged is going to have to be consistent with what is purchasable in the marketplace for that sort of product.

Senator LUDWIG: So the member who is not currently paying a fee now post merger will pay a fee?

Mr Carrigy-Ryan : There is a coincidence in timing of the merger commencement and the payment of PSSap fees, but there is no other correlation.

Senator LUDWIG: You have lost me. What do you mean by that?

Mr Carrigy-Ryan : With PSSap fees being paid by members the government has announced a policy decision and that will come into effect on 1 July. The government announced separately a policy decision that ComSuper would be merged into CSC, and that will come into effect on 1 July.

Senator LUDWIG: So they are unrelated?

Mr Carrigy-Ryan : They are unrelated.

Senator LUDWIG: Does the fee payment require legislation?

Mr Carrigy-Ryan : Yes, it does.

Senator LUDWIG: So that is part of the legislative package the minister will bring forward so that it is passed by 1 July?

D r Helgeby : Yes.

Senator LUDWIG: So, amongst other elements, there are the two elements, and one is the fee structure which requires legislation and the second is the merge itself which requires legislation. Is that right?

D r Helgeby : Yes.

Senator LUDWIG: What cohort will that apply to? Who will pay a fee?

Mr Carrigy-Ryan : Could you ask that again?

Senator LUDWIG: What cohort will that apply to? There are those people who are in the PSSap. How many are in that?

Mr Carrigy-Ryan : I can give you an exact number. As at 31 December, in PSSap there were 129,000 members. Of those, 82,534 were contributors and 45,359 were preserved members.

Senator LUDWIG: Will the preserved members have to pay a fee?

Mr Carrigy-Ryan : Yes.

Senator LUDWIG: So everybody pays a fee?

Mr Carrigy-Ryan : Yes. As is the case with accumulation plans that operate by industry funds and retail funds in Australia.

Senator LUDWIG: Is PSSap an accumulation fund? It is a pity they do not have an acronym for it!

Mr Carrigy-Ryan : Correct.

Senator LUDWIG: Like every other accumulation fund?

Mr Carrigy-Ryan : Yes.

Senator LUDWIG: And the preserved amounts are both what people who have left, moved on or have left money sitting there?

Mr Carrigy-Ryan : Yes.

Senator LUDWIG: They can make their decisions about what they do with that fund. They can roll it over or they can transfer it, I take it, if they so choose?

Mr Carrigy-Ryan : Yes. PSSap is not mandatory. If people are in a scheme when they join APS employment, they can continue contributing to the scheme they are in. It is not compulsory.

Senator LUDWIG: It is not a default fund?

Mr Carrigy-Ryan : Yes, it is a default fund.

Senator LUDWIG: Who will be the trustees of that fund from 1 July onwards?

Mr Carrigy-Ryan : The current trustee is Commonwealth Superannuation Corporation, and there is no change to that.

Senator LUDWIG: Is there a board?

Mr Carrigy-Ryan : Yes, there is a board, the Commonwealth Superannuation Corporation. The Commonwealth Superannuation Corporation is a continuing entity. It exists now. I am the chief executive. There is an 11-member board and it is going on. The only thing that is happening on 1 July is ComSuper is being merged into CSC.

Senator LUDWIG: And everything else remains pretty much the same?

Mr Carrigy-Ryan : Correct.

Senator LUDWIG: So the savings from the government no longer paying the fee, that is then 26.8?

D r Helgeby : That is the figure in the budget.

Senator LUDWIG: Yes. I may have got that figure wrong.

Senator Cormann: So 26.8 is the figure over four years from 2015-16.

Senator LUDWIG: Yes. That is from 1 July onwards.

Senator Cormann: Yes.

Senator LUDWIG: I did not have anything else that I wanted to explore with ComSuper. I was not sure whether Senator Lundy sometimes pursued this issue, but she is not here.

Senator Cormann: I think they all seem to have more fun elsewhere.

Senator LUDWIG: I have heard that.

CHAIR: Senator Ludwig has been left to shoulder a heavy load.

Senator LUDWIG: I am not going to say anything. I am happy to move on, unless someone else wants questions of ComSuper.

Senator Cormann: Could we move back to Finance.

CHAIR: Yes, we will move back to Finance. I thank the officers of Commonwealth Superannuation Corporation and ComSuper for their attendance today. We do appreciate it.