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Thursday, 15 October 1970

Mr BURY (Wentworth) (Treasurer) - I. move:

That the Bill be now read a second time.

In a statement to the House on 25th September 1969 the Prime Minister (Mr Gorton) outlined the Government's proposals for the preservation of superannuation rights. As the Prime Minister then explained, the benefits provided by most superannuation schemes in Australia are payable on the employee's retirement, for example, at age 60 or 65 or prior to retirement only in the event of his invalidity or death. Employees leaving in any other circumstances, for example to take up employment elsewhere, usually receive only a refund of their own contributions, often without interest. That is, they do not receive any superannuation benefits from their employer for the years they have spent in his service.

Because the value of an employee's interest in a superannuation scheme increases with his length of service, superannuation schemes that do not provide for preservation can operate as a very real barrier to the willingness of employees to move from one employer to another. This barrier to mobility has been a feature of most Commonwealth superannuation schemes since their inception. The Government's intention is to remove that barrier from Commonwealth schemes so that Commonwealth employees who have spent a considerable part of their working lives in one field of endeavour and who could contribute much more to the community and to their own lives in some other area of Commonwealth, State, university or private employment will no longer feel compelled, by the fear of the loss of thenaccumulated superannuation rights, to remain in their employment waiting only for the effluxion of time and the arrival of their date of retirement.

This Bill amends the Superannuation Act 1922-1969 to extend preservation to the two retirement benefits schemes established under that Act - the superannuation fund and the provident account. I intend also to introduce later this day a companion Bill to amend the Defence Forces Retirement Benefits Act 1948-1970 to extend the preservation arrangements to the Defence Forces Retirement Benefits Fund. A Bill to amend the Parliamentry Retiring Allowances Act 1948-68 is in course of preparation and will be introduced as soon as possible. Because the schemes covered by the three Acts are each quite different it follows that there should be differences between the provisions of each Bill. However, in terms of general principle, the approach being adopted is the same. The rules of other Commonwealth schemes will also be amended to provide for the preservation of superannuation rights in general accord with the provisions of this Bill. When these schemes have been amended preservation of superannuation will be available to some 300,000 contributors to Commonwealth superannuation schemes. 1 shall deal first wilh outwards preservation for employees leaving the Superannuation Fund or the Provident Account under the Superannuation Act. Under the provisions of the bill such an employee will be able to move to an area of Commonwealth employment to which the Superannuation Act does not apply without loss of his accumulated superannuation interest or stake in it - including the employer share of that interest or stake - provided the period between employment is not longer than 3 months. In addition, an employee who moves to public employment with the States, including State universities, within 3 months of ceasing his Commonwealth employment, will be able to preserve his superannuation rights. As well, an employee who resigns after completing 20 years service and moves to private employment or self employment, or does not engage in any other employment, will be able to take advantage of the preservation arrangements.

Generally, preservation of superannuation rights under the Superannuation Act will be effected by means of transfer values or deferred benefits. Subject to the conditions 1 have outlined a transfer value will be payable to a Commonwealth or State superannuation scheme to which an employee moves, if that scheme has acceptable preservation arrangements; in other cases a deferred benefit will be available to the employee. To retain his right to this deferred benefit an employee who has not already completed 20 years service will need to remain in public employment until he does, or he attains the age of 60 years, so that he will not gain an advantage over an employee who continues as a contributor to the Superannuation Fund or the Provident Account. A deferred benefit will be payable in accordance with the normal provisions of the Superannuation Act, that is, at any age between 60 and 65 depending on the wish of the former employee. Earlier payment will be made subject to the fulfilment of the prescribed conditions in the event of invalidity before normal retirement or, in the event of the death of the employee, to an eligible widow or chihldren

The preserved benefit, whether in the form of a transfer value or deferred benefit, will be determined by the Superannuation Board after receiving advice from an actuary and will include the appropriate Commonwealth supplement. The Commonwealth supplement will not be confined to service after the date of commencement of the new arrangements but will cover the full period of membership of the superannuation fund. The right to elect for preservation benefits on leaving the two schehmes has not been extended to a person who has attained the age of 60. This is because such a person is already eligible to receive the employer contribution in his pension entitlement if he is a contributor to the

Superannuation Fund, or in the lump sum payment if he is a contributor to the Provident Account. It will of course not be obligatory for an eligible employee to avail himself of the preserved benefit. He will continue to have the right to an immediate cash refund of his own contributions but, as a general rule, it will not be in his interest to take this refund and thereby forgo the right to receive an employer contribution. This, I am sure, will be clear from the following hypothetical examples of the deferred benefits that will be available to contributors to the Superannuation Fund. In providing these examples I should emphasise that each preservation benefit will require an individual assessment and will need to take into account such variable factors as age on entry to the Superannuation Fund, age at exit, whether the person is an age 60 or age 65 contributor, and his unit and contribution history. The examples assume that the person has contributed to his full unit entitlement throughout his membership and is now leaving the Fund.

An age 60 contributor who entered the Fund in 1950 at age 20 contributing to 7 units, who is now receiving a salary of $4,500 a year and contributing to 34 units, would be eligible for a deferred pension commencing at age 60 of $1,326 a year. His contributions to the Fund to date would amount to $1,648. In the case of an age 65 contributor of the same age with similar service and unit history the deferred pension payable from age 65 would be $1,321 a year, and his contributions to date, $1,249. An age 60 contributor who entered the Fund in 1.940 at age 20 contributing to 4 units, who is now receiving a salary of $5,500 a year and contributing to 42 units, would be eligible for a deferred pension commencing at age 60 of $2,21.2 a year. His contributions to the Fund to date would amount to $3,780. In the case of an age 65 contributor of the same age with similar service and unit history the deferred pension payable from age 65 would be $2,105 a year and his contributions to date, $2,698.

Turning now to inwards preservation, on becoming a contributor a person will have the right to choose to pay to the Superannuation Board any preserved superannuation rights received from his previous employment, including private sector employment, and to obtain credit in the Superannuation Fund or the Provident Account for the amount paid. In the Superannuation Fund the credit will be applied in the form of units and the new employee will then contribute only for the balance of his unit entitlement under that scheme. It follows from this that a person, who has available to him a preserved benefit in the form of a transfer value from his former scheme but does not choose to pay it to the Superannuation Fund, or has available to him a pension or a deferred benefit entitlement, will be restricted in the benefits available to him. The reason for this is to avoid his gaining an advantage over a person who brings a preserved right with him into the Fund or one whose whole membership has been with the Fund. In the case of the Provident Account the transfer value will form part of the benefit from that account.

A person who enters the Superannuation Fund less than 20 years before he will reach his selected age for retirement contributes to a lower level of unit entitlement than otherwise. The Bill modifies this limiting provision by allowing a period during which a person was a member of another superannuation scheme that provided preservation benefits to be taken into account, in certain circumstances, in determining years of prospective service.

The Bill provides that the valuation of preservation benefits on entry is ip be in accordance with acturial principles and practice and requires certain matters to be taken into account. In this way the rights of the employee himself, as well as those of continuing contributors to each scheme, will be protected. There will be no change in existing medical standards for entry into the Supperannuation Fund or Provident Account. But if it was necessary for an employee to pass a medical examination to become a contributor to his previous scheme the requirement to pass a further medical examination to eater the Superannuation Fund or the provident account may be waived subject to certain conditions being met regarding preservation benefits, the nature of the previous scheme and its medical standards for entry. This relaxation of the normal requirement will be available only if the period between leaving the employment to which the previous superannuation scheme applied and becoming an employee for the purposes of the Superannuation Act does not exceed 3 months and the termination of the previous employment was not on the grounds of invalidity. Existing transfer arrangements with the schemes of the 6 States will continue on the present 'knock for knock' basis.

The Bill includes provisions to facilitate movements between the Commonwealth and universities. A person entering the Superannuation Fund or the Provident Account, who. as an alternative to other courses open to him, wishes to keep alive, and up to date, policies under the scheme known as the Federated Superannuation System for Universities - FSSU - or similar schemes will be able to transfer the policies to the Superannuation Board. He will pay contributions at least at the level at which he would have been required to contribute had his former scheme continued to apply to him and the Commonwealth will pay the premiums on the policies at the levels appropriate to his Commonwealth salary. If. before attaining age 60, he moves to employment to which FSSU or similar type policy arrangements apply, he will be able to take his policies with him as his preservation benefit, if he does not elect to do so and in all other circumstances the benefit will be that available from the Superannuation Fund or Provident Account.

In accordance with the announcement already made the Bill provides for the benefits of preservation to be available to or in respect of persons who have entered or left the superannuation Fund or the Provident Account since 1st January 1970. J should mention that, the opportunity has been taken to remedy defects that have been found in sections 52 and 88 of the principal Act that relate to the rights of an employee who resigns to contest a parliamentary election. When these sections were inserted in (he Act in 1942 it was intended. as stated by the then treasurer, that they should provide cover for such a person in the event of invalidity or death between the times of his resignation and reinstatement in the Commonwealth Service. The replacement provisions in the Bill will achieve this.

The main provisions of the Bill are explained in more detail in the explanatory memorandum that I have arranged to have distributed to honourable members. As the Prime Minister said in his statement last year, the Government believes that the arrangements now being made for preservation of superannuation rights in Commonwealth schemes mark an important step forward in the development of Australia. We believe that there are great advantages for our community from an interchange of employees between the Commonwealth, the States, the universities and industry and this Bill and related measures will do much to ensure that the Commonwealth's superannuation arrangements will not impede this. I commend the Bill to honourable members.

Mr Crean - Before i move the adjournment of the debate could 1 ask for some assurance from the Treasurer that this Bill will not be debated until at least Tuesday week? 1. would like an assurance that the Bill will not come on next week because a number of. interests need to be consulted. I would like an assurance from the Treasurer that the debate will be adjourned until at least Tuesday week.

Mr BURY - I agree to this. In fact, I think it is most desirable. Many people will not be fully acquainted wilh this Bill, which is a very difficult and complex one, until they can study it. lt is certainly not the desire of the Government or myself to rush this matter without giving honourable members an opportunity to consider the Bill properly.

Debate (on motion by Mr Crean) adjourned.

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