Thursday, 24 March 2011
Governance of Australian Government Superannuation Schemes Bill 2011
That this bill be now read a second time.
The Governance of Australian Government Superannuation Schemes Bill 2011 (the bill) is part of a package of bills to improve and modernise the governance arrangements for the main Commonwealth civilian and military superannuation schemes.
The bill gives effect to the government’s announcement, in October 2008, to merge the trustees for the Commonwealth’s main civilian and military superannuation schemes—that is, the Australian Reward Investment Alliance, the Military Superannuation and Benefits Board and the Defence Force Retirement and Death Benefits Authority (DFRDB Authority)—to form a single trustee body.
The main civilian and military superannuation schemes that will come under the single trustee are the:
- Commonwealth Superannuation Scheme;
- Public Sector Superannuation Scheme;
- Public Sector Superannuation Accumulation Plan;
- Military Superannuation and Benefits Scheme;
- Defence Force Retirement and Death Benefits Scheme; and
- Defence Force Retirement and Benefits Scheme.
The single trustee will also assume responsibility for the scheme established by the Superannuation Act 1922, the Papua New Guinea Scheme and the Defence Force (Superannuation)(Productivity Benefit) Scheme. These schemes currently come under the Commissioner for Superannuation and, in the case of the latter scheme, the DFRDB Authority and the Commissioner for Superannuation.
Importantly, the bill does not impact on the design of the schemes or on members’ entitlements, which are protected by separate scheme legislation that cannot be changed by the trustee. In particular, there is no change to the existing features and benefits that reflect the unique nature of military service in the Australian Defence Force, such as death and disability arrangements.
The government’s decision to merge the civilian and military trustees was made with the aim of improving member benefits and service levels.
The ability of a single trustee to consolidate scheme funds will provide the opportunity to access increased benefits of scale. This includes access to higher service levels and better investment opportunities, which will allow members of all the schemes to benefit through lower investment costs and higher investment returns.
Members of the Military Superannuation and Benefits Scheme (MSBS)—which comprises the bulk of serving Defence Force personnel—stand to gain substantial benefits from the merger. This is because the scheme has just over $3 billion in assets under management whereas the civilian schemes have approximately $18 billion in assets under management. There is clear industry experience that members of smaller superannuation schemes have the most to gain when their scheme funds are consolidated into a larger pool of funds.
All scheme members will also ultimately benefit from a highly skilled and innovative trustee being responsible for their superannuation schemes. This includes the ability for the single trustee, due to its increased presence in the superannuation industry, to attract and retain quality and experienced board members and staff.
Since last year, the government has undertaken consultation with military stakeholders on how the bill will affect members of the military schemes. While recognising that members of the MSBS in particular will benefit from the trustee consolidation, the government has also accepted many of the suggestions made by the ex-service community to protect the status of military superannuation. This includes a requirement for CSC to have regard to the unique nature of military service as set out in the relevant military superannuation legislation when it is performing a function under that legislation. I thank the ex-service community for their dedication to representing the interests of their members.
Both military and civilian interests will be represented on the 11-member governing board of CSC. The Chief of the Defence Force will be responsible for nominating two member directors and there will be consultation between the finance and defence ministers on suitable candidates for the five employer director positions. Three other member directors are nominated by the President of the ACTU.
The government has also responded to suggestions that there be a review of the first five years of the operation of the act. This will ensure the ongoing effectiveness of the single trustee arrangements.
Overall, the bill will better secure the superannuation arrangements for military personnel and Commonwealth civilian employees for the long term. It will also allow substantial benefits to flow to members, while retaining the individual scheme benefits and entitlements.
The bill reflects the government’s ongoing commitment to provide efficient and sustainable superannuation arrangements for Commonwealth employees and military personnel, together with its strong commitment to protect those features of military superannuation that recognise that military service is unique and different from civilian employment.
Debate (on motion by Mr Turnbull) adjourned.