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Wednesday, 2 May 1973
Page: 1578

Mr CREAN (Melbourne Ports) (Treasurer) - I move:

That the Bill be now read a second time.

The purpose of this Bill is to amend the Superannuation Act 1922-71 to provide for annual increases in certain pensions payable under the Act. It gives effect to the recommendations made by Professor A. H. Pollard who was asked to report to the Government on the methods available for adjusting Commonwealth Superannuation Fund and similar type pensions. Honourable members will be aware that the report was tabled in the House by the Prime Minister (Mr Whitlam) on 10th April 1973. As Professor Pollard stated in his report, the aim of employers in providing superannuation schemes is not only to give protection but also to give peace of mind or to free the employee from the ever present fear that a long retirement might bring severe financial problems in its latter years. Professor Pollard also stated that the necessary criteria for pension adjustments, if superannuation schemes are to achieve that aim, are that adjustments should take place automatically, that they should maintain the purchasing power of the pension and that they should be made frequently. In examining possible alternative methods of adjustment, Professor Pollard considered the notional salary method of adjustment that had hitherto been adopted on an ad hoc basis. He observed that the notional salary method has a number of disadvantages in its operation and that it performs more roles than merely adjusting pensions in changing economic circumstances because it adjusts for salary increases not received before retirement began and for changes made to the rules of the scheme. To the extent that the notional salary method effects these other changes, it exceeds its role as an adjuster for price and productivity increases. He also noted that it acts quite inequitably between different groups.

Professor Pollard also gave consideration to adjustments by growth in average weekly earnings. He took the view that those figures include overtime, shift work payments and like allowances which are not appropriate when considering pension adjustment. He also referred to the fact that Commonwealth Service salaries have, on average, increased at slightly below the rate of increase in average weekly earnings over recent years and that, in these circumstances, pensioners would receive larger proportionate increases in their incomes than public servants still in the work force if average weekly earnings were to be used. Like the notional salary method it could provide increases higher than those represented by price and productivity increases. Other methods were also examined but Professor Pollard concluded that automatic annual adjustments of the Commonwealth share of pension by 1.4 times the consumer price index was the most appropriate formula. His formula is designed to provide a greater share of productivity increases when inflation is high and adjustments are needed, and a lesser share when there is little inflation. The adoption of his proposal will result in the pensioner receiving the guarantee that the purchasing power of his full pension is more than maintained. The Bill proposes that the Commonwealth share of the pension being paid to ex-contributors or their widows, including the full share relating to noncontributory units of pension, be adjusted automatically each year on the first pension pay day in each July. The adjustment will be by a percentage - to the nearest one-tenth of one per cent - equal to 1.4 times the percentage by which the immediately preceding March quarter consumer price index - 6 capital cities - exceeds that index for the March quarter of the previous year, with the proviso that the percentage by which pensions are increased should not exceed the percentage increase in the estimates of average weekly earnings, seasonally adjusted, for the corresponding period. Where the period between the date of retirement and 1st July is less than one year, the percentage will be reduced in the proportion that that period, taken to the nearest month, bears to one year.

The Bill does not require pensions to be reduced in the event that the index moves downwards - a blessed thought. Increases will be paid notwithstanding that the percentage increase in some years may be small. The first adjustment will be made on 5th July next. Because no increase has been granted since 1st October 1971, that increase will be related to the movements in the index between the June 1971 quarter and the March 1973 quarter. The proportionate reduction, however, will be related to the 21 months between 1st October 1971 and 30th June 1973. We cannot be certain at this stage, pending the publication of the estimate of the average weekly earnings rate for March 1973, that the proviso to which I have earlier referred will not apply to the adjustment this year. If it does not apply, those in receipt of a pension at 1st October 1971 will receive an increase of 15.8 per cent in the Commonwealth share of the pension then being paid. The estimated cost of the increase on this basis is $8.4m for the financial year 1973-74.

Examples of the increases that would result are: A telecommunications technician whose pension on retirement at 1st September 1971 was $2,925, made up of 25 contributory units and 10 non-contributory units, would receive an increase in his pension of $359.45 per annum; that is 15.8 per cent of $2,275, which is the Commonwealth element of his pension. A clerk class 4 whose pensions on retirement at 10th October 1972 was $4,342, made up of 42 contributory units and 8 noncontributory units, would receive an increase in his pension of $220.07 per annum; that is, nine twenty-firsts of 15.8 per cent, which is the Commonwealth element of his pension.

As on previous occasions, a widow will receive the appropriate proportion, five-eighths or one-half as the case may be, of the increase that her husband would have received had he been alive and in receipt of a pension on 30th June 1973. Certain orphans will also receive increased pensions. The position of orphans and children, however, is under further consideration in the comprehensive review of the present superannuation scheme currently being undertaken by my Department. Other matters referred to in Professor Pollard's report, such as the investment powers of the Fund, period of actuarial investigations, etc., are also being examined. I hope shortly to table the results of the review for the information of honourable members. I commend the Bill to the House.

Debate (on motion by Mr Sinclair) adjourned.

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