SUPERANNUATION LEGISLATION (AMENDMENT) BILL
Second Reading
The Hon. J. P. HANNAFORD (Minister for Health and Community Services), on behalf of the Hon. E. P. Pickering [8.57]: I move:
That this bill be now read a second time.
I seek leave to have the second reading speech incorporated in Hansard.
Leave granted.
This bill will effect further amendments to NSW statutory superannuation schemes for compliance with Commonwealth regulatory legislation. In December of 1991 the Superannuation Legislation (Amendment) Act 1991 received passage through this House and effected substantial compliance for the statutory schemes. At that time the need was foreshadowed for further amendments because of the complex and unsettled nature of the Commonwealth changes.
The changes still continue to flow from the Commonwealth Government in every area of superannuation - taxation, the financial arrangements of funds, contributions, benefit levels and administration. The Commonwealth has made retirement in Australia a jungle of rules and regulations with seemingly no prospect of relief from constant change.
Currently, the Commonwealth Government is trying to introduce its 'superannuation guarantee levy' - compulsory employer contributions starting at 5% of salary for each employee which will rise to 9% by the year 2000. This will result in weighty additional costs to all employers, including State governments, at a time when such extra costs can simply not be afforded.
Repeated approaches by the State Governments and industry representatives seeking consultation and co-operation on changes to superannuation have made little impact. The Commonwealth has continued its hard line approach in an area which has vital consequences for all Australians.
The primary purpose of this bill is to achieve substantial compliance with Commonwealth legislation in regard to contributions and benefits beyond age 65, the investment powers and financial arrangements of the funds, and preservation and vesting requirements of schemes.
Secondly, several amendments of an administrative nature will be effected. These amendments
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provide consistency and clarity in several areas of public sector superannuation.
Finally, the bill includes several amendments from the statute law revision program of the Government's superannuation administration which have been included with this principal legislation on the advice of the Parliamentary Counsel.
Mr President, the main body of compliance amendments will implement controls on contributions and payment of benefits in the various statutory schemes for members over the age of 65. The Commonwealth Occupational Superannuation Standards (or OSSA) legislation requires that contributions cease in respect of members over age 65, and no benefits can be accrued after that age. Persons who were over age 60 at 1 July 1990 will receive protection from short term transitional provisions that will allow them to continue to contribute and accrue benefits up to 70 years of age.
The Commonwealth Occupational Superannuation Standards Act and regulations (known as OSSA) also lays down certain circumstances in which benefits must be paid after age 65.
* The member is over age 65 and is working less than 10 hours a week,
* The member is over age 70 and is working between 10 and 30 hours a week;
* The member is over age 65 and requests that payment be made; or
* The member has retired from the workforce.
Our Government's commitment to the abolition of compulsory retirement in both the public and private sector in New South Wales is well known. As part of this commitment, amendments were made to the statutory superannuation schemes in 1990 to ensure that people who chose to work beyond the early retirement age were not adversely affected in their superannuation entitlements. These provisions remain operative and it is the Government's intention, within these restrictions now imposed by the Commonwealth, to continue to ensure scheme members are encouraged to work and that they have flexible working conditions and benefits to support them.
The approach taken in achieving compliance by our schemes with the Commonwealth legislation was to ensure that members receive the most advantageous style and level of benefit within the parameters set by the Commonwealth regulations. The achievement of flexibility within the provisions was also important, to enable members to arrange their financial affairs as best suits them at a very important stage of their lives.
Accordingly, the provisions will, in compliance with OSSA, crystallise members' benefits at age 65 and will give members the option to either take their entitlement at that age, or to preserve a lump sum amount within the scheme to accrue interest.
In the pension schemes of the State Superannuation Fund and the Police Superannuation Scheme, upon reaching age 65, members will be able to elect to take either their pension or commuted lump sum benefit entitlement as currently provided for in the scheme. Both benefits will be payable immediately, however a lump sum benefit can be preserved within the fund to earn interest if the member so desires.
Similarly in the lump sum schemes of SASS and PSESS, members will be able to elect to take their benefit entitlement at age 65, or to preserve that benefit within the scheme.
The second major OSSA compliance matter addressed by the bill relates to standards on investment and financial arrangements of funds. The Public Authorities (Financial Arrangements) Act 1987 already subjects New South Wales statutory schemes to control in some of these areas and as such, our schemes are generally already operationally compliant with the OSSA standards.
It is necessary however to insert appropriate provisions in the relevant acts because of the additional Commonwealth regulatory requirement that the governing rules of funds reflect the OSSA standards. Amendments are therefore necessary for those Acts which contain investment or financial arrangements provisions. The Acts to be amended are the
* Superannuation Administration Act 1991;
* Coal and Oil Shale Mine Workers (Superannuation) Act 1941;
* Parliamentary Contributory Superannuation Act 1971; and
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* Public Sector Executives Superannuation Act 1989.
Vesting and preservation standards are the third area in which this bill achieves compliance. Significant changes were made by the Superannuation Legislation (Amendment) Act 1991 in these areas - this bill will amend 2 further Acts in this regard. The Police Association Employees (Superannuation) Act 1969 will be amended to bring interest payable on withdrawal benefits in line with the OSSA standards and with other previously amended public sector schemes, in particular, it's parent scheme - the police superannuation scheme. Secondly, the Public Sector Executives Superannuation Act 1989 will be amended to provide for the compulsory preservation of certain contributions made after 1 July 1990 where a member had no employer support in the scheme. Very few senior executives are in this category because of their flexible remuneration packages and the availability of having employer contributions made as a pre-tax salary deduction. However, where members of the PSES scheme do elect to make only member or post-tax contributions, these are required to be preserved until age 55 or in other circumstances as laid down by the Commonwealth. These circumstances are detailed in the bill.
The second series of amendments contained in this bill will implement a number of changes of an administrative nature to the superannuation statutes. These changes achieve a twofold purpose of providing a consistent and equitable approach in the administration of schemes, and secondly, providing clear and workable provisions in the legislation governing the schemes.
A principal amendment of this bill will alter the retrenchment benefit available under the State Authorities Superannuation Act to members with short service. Currently, members of SASS with less than 3 years service receive a benefit of their own contributions and earnings thereon. They do not receive any employer financed benefit and cannot preserve a benefit to attract any of the employer financed component. This is inconsistent with the benefits available in other public sector schemes which enable, in different ways, an employee to attract an employer financed benefit, either immediately or through the availability of preservation.
To remedy this anomaly, the 3 year requirement in SASS will be removed and members will have access upon retrenchment to the fully vested benefit, including both contributor and employer financed benefit. This will operate from commencement of these provisions on 1 July 1992.
Additionally, members will have the option of preserving their benefit if so desired. Advice is awaited from the Insurance and Superannuation Commission on whether the additional employer financed component of these benefits which will now be payable will be classed as an improvement in benefits and so subject by OSSA to compulsory preservation until age 55. Provisions have therefore been included in the bill to allow for the compulsory preservation of the employer financed component if this is necessary. This provisions will commence on a date to be proclaimed.
Provisions will be inserted into the police superannuation scheme to allow for members whose benefits are unreasonably delayed to receive interest on that benefit. This is provided for in all other schemes which are under the responsibility of the state authorities superannuation board. Similarly, debt recovery provisions comparable to those operating for the State Superannuation Fund and other schemes will be inserted into the Police Regulation (Superannuation) Act.
Amendment to be made to the Police Regulation (Superannuation) Act will extend from 90 days to 6 months the time period in which appeals against hurt-on-duty benefit decisions can be made. This brings the appeal provisions of the scheme more in line with those in the workers compensation area, upon which these provisions are modelled.
Also in regard to decisions concerning hurt-on-duty benefits, the notification requirements in the Act will be extended to require notification in writing to be given to claimants and affected persons when a decision is made.
In 1988 a series of changes was made to the statutory superannuation schemes to provide for uniformity of employer coverage across the public sector. This enabled scheme members to move between employers without losing their superannuation entitlements. An amendment now proposed to the Superannuation Act 1916 will enhance those earlier provisions and allow existing contributors to the State Superannuation Fund to remain in the scheme if they move to payment at hourly, daily, weekly or fortnightly rates, or payment by piece work. The requirement for payment at annual rates under the Superannuation Act is a barrier to mobility. This provision will in no way extend the current coverage of the State Superannuation Fund, which was closed in 1985. It will only operate to ensure that existing contributors who change to this method of payment are not forced out of the
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scheme.
Mr President, the principal costs arising from the amendments within this bill stem from the proposed changes to the retrenchment benefit in SASS for those with under 3 years service.
As I indicated earlier, advice from the ISC may require compulsory preservation of the proposed improvement to this benefit meaning a minimal cash flow impact of approx $0.9 M per annum, and deferral of the full cost of approximately $3.7M per annum until the retrenched contributors ultimately retire, die, or otherwise qualify to take the benefit.
If this full cost is compared against the estimated cost of providing preserved resignation benefits under the existing rules it is apparent that a more realistic figure of the additional cost involved is approximately $2.2M per annum.
Mr President, the remaining matters in this bill are of a minor administrative nature or are part of the miscellaneous amendments from the statute law revision program concerning superannuation.
Included in the remaining amendments are:
* the provision of more flexible arrangements for changing the level of contributions in the Public Sector Executives Superannuation Scheme.
* Clarification of death or disability benefit calculations to be made under the Coal & Oil Shale Mine Workers (Superannuation) Act 1941 after transfer to Queensland.
* The transfer of certain regulations made under the Superannuation Act 1916 and the State Authorities Non Contributory Superannuation Act 1987 into the provisions of the Acts proper;
I commend the bill.
The Hon. M. R. EGAN (Leader of the Opposition) [8.58]: The Opposition supports the bill.
The Hon. ELISABETH KIRKBY [8.59]: The Australian Democrats support the Superannuation Legislation (Amendment) Bill. I do not need to make any further formal remarks about this mainly machinery bill, which will achieve compliance with the Occupational Superannuation Standards Act 1987 of the Commonwealth by amending a whole variety of Acts as listed in the explanatory note.
The Hon. J. P. HANNAFORD (Minister for Health and Community Services) [9.0], in reply: I thank honourable members for their support of this important legislation which I commend.
Motion agreed to.
Bill read a second time and passed through remaining stages.
[The President left the chair at 9.1 p.m. The House resumed at 10.33 p.m.]