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Notice given 16 November 2010

196  Senator Humphries: To ask the Minister for Finance and Deregulation—Given the advice provided by the department’s ‘Red Book’ to the Minister that the ‘current unfunded liability’ for Commonwealth and military superannuation is $127 billion:

(1) Can an explanation be provided and substantiated as to how this figure was derived when the Future Fund Actuary estimated the liability to be $96.3 billion for the 2009-10 financial year, and the department itself was quoted on page 34 of the Matthews Review report ( Review of pension indexation arrangements in Australian Government civilian and military superannuation schemes , by Mr Trevor Matthews, dated December 2008) to have estimated the figure to be $100.3 billion as of 30 June 2008.

(2) Is it not standard practice to quote unfunded liability figures as a discount value in the current year and not in nominal terms unless otherwise specified.

(3) In the department’s submission to the Matthews Review, the department estimated the unfunded liability (in nominal terms) would be $147 billion by 2020 (page 19), but the latest ‘Red Book’ suggested that the figure is $168 billion; what has significantly changed that would account for a $21 billion increase.

197  Senator Humphries: To ask the Minister for Finance and Deregulation—In both the submissions from the department and the Australian Government Actuary (AGA) to the Matthews Review, there is an explicit assumption made that the ‘take up rate of pensions’ would be greater under improved indexation arrangements as analysed, which subsequently affected (significantly) the financial estimates generated:

(1) On what historical basis have these assumptions been made.

(2) What hard historical data can be provided to support the assumptions.

(3) Given that the AGA’s assumption that the take up rate of pension for the employer component would be from 75 per cent to 90 per cent for officers and 60 per cent to 80 per cent for other ranks (AGA submission, page 2) and that the implied take up rate of civilian schemes would be 50 per cent (department’s submission, page 27), what would the estimates be if this assumption was completely removed from the analysis.

198  Senator Humphries: To ask the Minister for Finance and Deregulation—

(1) Given the impact of previous assumptions on the financial wellbeing of Commonwealth and military retirees, what process is used to peer review assumptions.

(2) Are the main retiree representative organisations consulted on the use and change of underlying assumptions.

 

 199  Senator Humphries: To ask the Minister for Finance and Deregulation—Given that Chapter 1 of Professor Pollard’s 1974 report ( Report on the Treasurer’s Proposals for a new Superannuation Scheme for Australian Government Employees , dated June 1974) made very clear recommendations that he believed that the ‘Commonwealth Servant’ was entitled to ‘a share of national productivity’, and that, as such, retirement incomes should be indexed by a factor of 1.4 times the consumer price index, can the Minister confirm that Mr Matthews was provided with a full and unabridged copy of the 1974 Pollard Report.

200  Senator Humphries: To ask the Minister for Finance and Deregulation—The Matthew’s Review report ( Review of pension indexation arrangements in Australian Government civilian and military superannuation schemes , by Mr Trevor Matthews, dated December 2008) placed considerable emphasis, particularly within the Executive Summary, that consumer price index indexation alone was, and continues to be, adequate in maintaining the ‘purchasing power’ of Commonwealth provided retirement incomes. However, the Australian Bureau of Statistics (ABS) clearly states in its document 4102.0 (dated 7 August 2007) that ‘Purchasing Power’ and ‘material living standards’ are directly proportional to ‘real national disposable income per capita’ and ‘real national net worth per capita’, in other words, purchasing power is directly proportional to income and net worth after inflation. Given this does the Minister agree with the ABS analysis and definition of ‘Purchasing Power’; if not, is there a preferred alternative.

201  Senator Humphries: To ask the Minister for Finance and Deregulation—Given that on page 42 of the Matthews Review report ( Review of pension indexation arrangements in Australian Government civilian and military superannuation schemes , by Mr Trevor Matthews, dated December 2008), the department is quoted as stating that there ‘are no identifiable assets available to offset an increase to the unfunded liability’ and that the ‘Future Fund currently only has sufficient assets to meet superannuation liabilities at and beyond 2020 arising from current indexation arrangements’:

(1) Given the investment return of the Future Fund over the past financial year (i.e. 10.7 per cent), is it feasible that the annual cash cost of improved indexation arrangements could be reasonably met (after prospective legislative amendment) by accessing excess earnings from the Future Fund without creating serious detriment to the Fund’s original purpose.

(2) Has the department undertaken any detailed analysis of this proposal including potential ‘clawbacks’ of age pension and taxation receipts.

202  Senator Humphries: To ask the Minister for Finance and Deregulation—Given that in the Defence Force Retirement and Death Benefit s ( DFRDB) annual reports for 2008-09 and 2009-10 (pages 48 and 4 respectively) it states that the ‘average annual pensions’ as at 30 of June each year were $21 486 for 2008, $22 092 for 2009 and $23 549 for 2010:

(1) Can an explanation be provided as to why there is a seemingly large discrepancy between the COMSUPER annual report figures and that of the average annual pension figures for DFRDB as stated in Table F2 (Appendix F, page 58) of the Matthews Review report ( Review of pension indexation arrangements in Australian Government civilian and military superannuation schemes , by Mr Trevor Matthews, dated December 2008).

(2) What bearing did the figures in Table F2 of the report have on the estimates generated by the department.

 

 (3) If the DFRDB figures within the Matthews Review report are in error, what measures will the Government employ to ensure that the estimates within that report are iron clad.