Monday, 1 June 2015
Governance of Australian Government Superannuation Schemes Legislation Amendment Bill 2015; Second Reading
It is a pleasure to speak on this bill. I will state at the outset that Labor will be moving amendments to this bill when it comes to the Senate.
Labor does support reducing duplication and finding efficiencies within the public sector. Labor is very concerned that the ComSuper staff, who are moving to the CSC, are being transferred away from the APS and will lose their ability to apply for jobs in the APS, and transfer at level to an APS agency, and that they will be disadvantaged compared to APS employees. This is particularly important in Canberra, where the ComSuper staff are based, as the majority of available jobs they may wish to apply for will be within the APS. If the government is determined to compulsorily transfer ComSuper employees to CSC, they should ensure that all rights and entitlements are protected. Labor is preparing amendments that will achieve this and protect these employees, who face an uncertain future, and that will not affect the operations of CSC at the same time. I will speak in more detail on the amendments later during my contribution, but first I would like to go over the general outline of this bill as set out in the explanatory memorandum circulated by the minister.
The bill merges ComSuper, the provider of administrative services in relation to the Australian government civilian and military defined benefit superannuation schemes, with the Commonwealth Superannuation Corporation, the trustee of the Australian government schemes. CSC, a corporate Commonwealth entity for the purposes of the Public Governance, Performance and Accountability Act 2013, will be the continuing government entity and will be responsible for the overall management of the Australian government superannuation schemes, including both trustee and administrative services roles. The relevant schemes are: the Commonwealth Superannuation Scheme; the Public Sector Superannuation Scheme; the Public Sector Superannuation Accumulation Plan; the Military Superannuation and Benefits Scheme; the Defence Force Retirement and Death Benefits Scheme; the Defence Forces Retirement Benefits Scheme; the Defence Force (Superannuation) (Productivity Benefit) Scheme; the 1922 scheme; and the PNG scheme. CSC will have similar responsibilities in relation to the proposed new military superannuation arrangements that will commence from 1 July 2016, subject to the passage of the proposed legislation.
The merger will improve the efficiency of the management of the Australian government superannuation schemes by removing duplication and overlap that exists as a result of two government bodies being involved with the delivery of administration services. The merger will provide CSC with control over the delivery of administration services in relation to the Australian government defined benefit superannuation schemes, consistent with its regulatory responsibility as trustee of the schemes.
It is important to note that the bill does not change the benefit design of the civilian and military superannuation schemes. The bill, also, does not change the composition and structure of the board of CSC, the trustee of the affected funds. The merger is expected to deliver savings of half a million dollars per annum. The changes that relate to PSSap administration fees have estimated savings of $26.8 million over four years from 2015-16.
Administering the defined benefit superannuation schemes will require CSC to draw on Commonwealth appropriations to pay superannuation benefits to members of the schemes. It will also collect administration fees that are payable by the Commonwealth under legislation governing the schemes, and recover debts owing to the Commonwealth—for example, arising from overpayments of benefits. As CSC is a separate legal entity to the Commonwealth, the bill includes provisions to legally enable CSC to perform these functions on behalf of the Commonwealth. As the Commonwealth remains legally responsible for the functions, the bill enables the minister to make instruments in relation to these functions. These powers are currently available to the minister under the administration of ComSuper.
A CSC special account will be established. Administration funding, including administration fees collected by CSC on the Commonwealth's behalf from agencies with employees in the Australian Government schemes, will be credited to that account. The account will form part of the CRF, and CSC will be able to debit the account to, among other things, pay costs incurred in the performance of its role as administrator.
As a result of the merger, the statutory office of CEO of ComSuper will cease, and the statutory agency of ComSuper will be abolished. ComSuper staff whose employment is transferred to the CSC will become non-APS employees of CSC engaged under section 26 of the governance act. This will be achieved by a determination of the Australian Public Service Commissioner under section 72 of the Public Service Act 1999.
The transitional provisions in the bill will assist in maintaining the terms and conditions of employment of ComSuper staff on transfer to CSC and meeting legislative requirements governing the transfer. Currently, there are roughly 400 employees of ComSuper and, because of job duplication that may occur in the merger, a voluntary redundancy program will be undertaken. The targeted number of voluntary redundancies is 70 positions. The merger is the single largest forced transfer of employees out of the Public Service since the Australian Protective Services was moved. Concerns have been raised that, because the merger means that ComSuper will cease to exist and its staff will be compulsorily transferred out of the Australian Public Service to the CSC, this forced change could affect their careers and make it much more difficult to move to an APS agency. In the event that the new CSC downsizes, staff are also concerned at losing the redundancy rights that would allow them to be redeployed in the APS if their positions are cut.
I flagged earlier that Labor will move amendments to this bill when it reaches the Senate. Labor's amendments will address the concerns by providing transferred ComSuper employees with broadly equivalent mobility rights to those they would have had if they had remained employed in the APS. Labor's amendments enable transferred ComSuper employees to move from the CSC to an APS agency as if they were still APS employees. These measures in Labor's amendments will ensure that ComSuper employees who transfer to CSC will be able to transfer at any level or win promotion to APS roles at other agencies. Labor's amendments ensure ComSuper employees who transfer to CSC are not disadvantaged in seeking and applying for a future role with the APS. Labor's amendment will apply for a period of three years. Our proposed amendments are simple and sensible changes that address the concerns of ComSuper staff. When the bill comes to the Senate, I urge the government and the crossbench to work constructively to make sure that these amendments do address the concerns of ComSuper staff. I thank, in advance, the government and the crossbenchers for their support in this.
The bill includes consequential amendments to a range of Commonwealth legislation governing the superannuation schemes to take account of the merger. In addition to dealing with matters arising from the transfer of ComSuper staff to CSC employment, the bill contains provisions that deal with a number of other transitional matters arising from the merger. This includes provisions to transfer the assets and most of the liabilities of ComSuper to CSC. To maintain consistency with the treatment of administration funding currently received by ComSuper for provision of administration services, the bill makes CSC exempt from income tax in relation to funding received from the Commonwealth for this purpose.
The other significant measure in this bill deals with the collection of the cost of administering the PSSap. The governance act and the 2005 act which governs the PSSap will be amended by the bill so that the cost of administering the PSSap will be deducted from member accounts, consistent with arrangements that apply in private sector accumulation superannuation funds. The changes that relate to PSSap administration fees have estimated savings of $26.8 million over four years from 2015-16. Until now, the government had covered the costs of administering the PSSap for its members. There are 127,628 members of the scheme. While this bill will allow the CSC to set administration fees for the benefit of members, a rough, back-of-the-envelope calculation based on the $26.8 million saving over four years is $52.50 per member per year. These new arrangements for PSSap members will bring these members into line with members of private sector funds, and Labor will not oppose this measure.
The two measures in this bill deal with Public Service superannuation, so it is timely to examine the Abbot government's record in this area. The Abbott government has shown its contempt for the Public Service by offering employees from several departments an unreasonable cut to their hard-won conditions on top of a pay cut in real terms. Under the Abbott government's public sector workplace bargaining policy, every government department and agency has been left with nowhere to turn but to cut costs through cutting real wages and working conditions. The government cannot expect the Australian Public Service to function effectively when large numbers of staff are being sacked and those left behind are forced to fight for the most basic workplace entitlements. The Abbott government has recklessly gutted the Public Service even faster than planned, with 11,000 full-time equivalent public servant positions gone in 2014 alone.
Before the election, Tony Abbott said that 12,000 jobs would be shed from the Public Service but only through natural attrition. After the election, though, he announced 16,500 full-time public servant jobs would be cut and not though natural attrition. Most of these jobs are now gone, putting strain on the system and the workers who remain. The Abbott government is so focused on job cutting that it has ignored the key drivers of efficiency, productivity and customer service. Labor believes very much in an affordable, sustainable and productive Public Service, but crudely retrenching staff, cutting back on jobs, reducing wages and cutting conditions does not lead to a more efficient or effective workforce.
On its record on superannuation, as it relates to this bill and in a range of other areas, the Liberal government has a very poor record by any measure. Let's look at the pause in the superannuation guarantee. The superannuation guarantee is currently at 9.5 per cent. Under Labor, the increase to 12 per cent was to take effect between 1 July 2013 and 1 July 2019. The Liberals announced their first delay as part of the original MRRT repeal bill. This delay postponed any further increase till 1 July 2016, and the full 12 per cent would take effect on or after 1 July 2021. Then, as part of the budget, the Treasurer announced the government's second delay of a further 12 months, meaning the full 12 per cent will not be reached until 1 July 2022. As part of a deal with the Palmer United Party, the Liberals have made a third delay, meaning the full 12 per cent will now not be reached until 1 July 2025. These pauses come in the wake of the Prime Minister promising before the election, on no fewer than 14 occasions, that there would be no unexpected adverse changes to superannuation. That promise seems to have gone the way of so many other promises made before the election.
On another adverse change to superannuation, the Liberals did remove the low-income superannuation contribution, which was part of the MRRT repeal, from 1 July 2017. The LISC is a superannuation contribution made on behalf of individuals with an adjusted taxable income of $37,000 or less in an income year, with the maximum contribution amount payable being $500. The contribution is designed to broadly return the tax paid on concessional contributions by any individual's superannuation fund.
The Abbott government's cut will take effect from 1 July 2017 and will affect approximately 3.6 million low-income earners, two-thirds of whom are women. This will have an enormous impact on their retirement savings. Taken together with the pause in the superannuation guarantee, industry estimates that the combined adverse negative impact on national savings by 2025 will be around $150 billion. At budget estimates it was revealed that the government did not request Treasury to model the impact of repealing the low-income superannuation contribution on superannuation savings. The LISC is a measure that has been described by Industry Super Australia as the single most important policy setting in the super system that helps to address the inequity in savings gap whereby women are currently retiring with about 40 per cent less in superannuation than men.
I would like to conclude where I started by reiterating that Labor does support reducing duplication and finding efficiencies within the Public Service. However, we are concerned that ComSuper staff who have moved to the CSC are being transferred away from the APS and will lose their ability to apply for jobs in and to transfer to an APS agency without being disadvantaged as compared to other APS employees. In a city like Canberra this is obviously something that is critically important. It is Labor's belief that, if the government is determined to compulsorily transfer ComSuper employees to CSC, they should ensure all rights and entitlements are protected. The amendments that Labor is preparing for the Senate will protect these employees who face an uncertain future otherwise.
It is with pleasure that I speak to the Governance of Australian Government Superannuation Schemes Legislation Amendment Bill 2015, a rather bureaucratic title for a bill that is all about reducing duplication and overlap. The merger of ComSuper and the Commonwealth Superannuation Corporation, or CSC, that this bill makes possible is important because it will reduce duplication and overlap in the administration of the Australian government's superannuation schemes.
CSC is currently ComSuper's only client, and giving CSC greater control over the administration of the schemes for which it is a trustee is consistent with good governance principles. As someone with experience in local government, I understand the importance of having the right institutions and the right administrative arrangements for the task at hand. Too much bureaucracy inevitably leads to waste through duplication of functions, and certainly something that this government is very cognisant of is making life much more simple and removing duplication. That is why our smaller government agenda is so important: we need to deliver greater value to taxpayers through better services delivered faster and at lower cost. We have reduced the number of government bodies by 286 so far, achieving savings of $1.4 billion. Part of that effort has been in reducing Public Service numbers—from September 2013 to February 2015 the number has been reduced 17,300—many of these through natural attrition. In response to the shadow minister's comments earlier on, most of that number of public servants was put on during the previous Labor administration.
That is not to say that public servants do not do valuable work—they do—but we have a duty to taxpayers to ensure that the business of government is conducted as efficiently and effectively as possible. Our smaller government agenda works in tandem with our efforts to reduce green and red tape. Since coming to government we have made a raft of changes. We have taken decisions and made changes that will reduce the regulatory cost burden by $2.45 billion. As I get around my electorate, one of the great topics that people, particularly those in small business, bring up with me is the amount of time it takes—and the cost to their business and their way of life—wading through different levels of government control. The red and green tape reduction agenda of this government is being very much appreciated, particularly by people who are involved in small business.
While I am a believer in small government, I am also a bit of a supporter of decentralised government, particularly for those agencies engaged in delivering services to industries that have their home in the regions. A great example of that is the Cotton CRC that is based at Narrabri. It has, I think, 16 or 18 direct employees and the flow-on effect in the wider region is large, not only through the many people who are employed but through the increased productivity from the on-the-ground research and knowledge being performed in the region rather than in a centralised location, and that is very pertinent. Importantly, all of the functions currently performed by ComSuper will continue to be performed following the merger. Benefits will continue to be paid to members of the civilian and military superannuation schemes and those benefits will not change as a result of this bill.
On superannuation more broadly, the government is delivering stability to the Australian superannuation system and security for Australia's retirees. That is something that, as I get around and speak to the self-funded retirees in my electorate, is of great concern. Stability and security were missing under Labor, and they would now have Australians believe that they can be trusted. But the Australian people are cleverer than that. In 2013 they promised that for five years they would not make any changes to super, and with barely six months of 2015 gone they have already announced two additional taxes on super.
This bill also makes changes to allow costs of administration to be met by members of the Public Sector Superannuation Accumulation Plan. Fees are a common way of paying for administration in accumulation-style superannuation funds in the general community. The changes in this bill will bring the PSSAP into line with community practice and the arrangements for parliamentarians like me who entered parliament after 2004. That is something that I might put on the record for anyone out there, particularly in the press gallery—that any member who joined this place after 2004 is not in a superannuation pension scheme—despite how many times that gets explained. By ensuring that the costs of administration are more appropriately met by fund members rather than the Commonwealth, the measure will save $26.8 million over four years from 2015-16, which can be used to fund other priorities.
The merger of ComSuper and CSC is the next natural step in a process to streamline the governance of the Australian government's civilian and military superannuation schemes that started in 2011, when CSC was established, merging three trustee bodies into one. I am happy to acknowledge that that was a sensible thing to do—a rare moment in the normally chaotic years of the Rudd-Gillard-Rudd government. The creation of CSC improved the efficiency of the trustee arrangements and enables CSC to harness economies of scale in its investment functions. Bringing the administration of the schemes for which it is trustee more directly under CSC's control will further streamline the governance arrangements. I commend this bill to the House.
I rise today to speak on the Governance of Australian Government Superannuation Schemes Legislation Amendment Bill 2015. The bill, with a catchy title like that, merges ComSuper into the Commonwealth Superannuation Corporation, the CSC. The result is that most government and military employees will have their super administered by the same government agency that manages their superannuation investments.
Before I turn to the very specific elements of the bill, it is worth providing some context. Labor, this side of the House, has a proud history when it comes to superannuation reform. The Labour movement was one of the key proponents of the first super funds over 100 years ago, and we remain the main proponent and advocate of superannuation today. More than two decades ago Labor was the party that created universal super so that all employees could benefit from investments in their own retirement. Last term, Labor was the party that introduced legislation to increase the superannuation guarantee, and this year our party is seeking to reform super tax concessions to make the system fairer and more sustainable.
Along the way, at every point, the coalition has stood in the way of better super. The Prime Minister himself said in 1995:
Compulsory superannuation is one of the biggest con jobs ever foisted by government on the Australian people.
And now he has frozen the superannuation guarantee. He has abolished the low-income super contribution and in the process has made superannuation less fair and less sustainable. I read a piece not too long ago that said that the sum total of the changes being made by the Abbott government will see $128 billion less in the superannuation pool by 2025. So, when we come to debate this bill we do so in knowledge that Labor is the party—the only party—that fights for super and fights for better retirement incomes in middle Australia.
On the specifics of the bill, superannuation funds operated by the government are among the largest in our super system. Currently we have two major agencies with responsibility for government super: ComSuper and CSC. ComSuper performs the administrative role for most super schemes for ADF members and government employees. These schemes are among the largest and most complex occupational super schemes in Australia. There is a combined membership of over 700,000 contributors, pensioners and preserved-benefits members. ComSuper employs 482 staff, all of them in here in the national capital. These staff help members with things like collection of member contributions and maintenance of member accounts, payment of lump sum and pension benefits, member communications, accounting services, dispute resolution, and secretariat support functions.
The Commonwealth Superannuation Corporation is a corporate Commonwealth entity and the trustee of most government and Defence super schemes and retirement income streams. It is responsible for investments and products for members. The fund has something like $32.7 billion under management at 30 June 2014. It pays pensions to more than 200,000 retirees. The CSC itself was formed by a merger of three previous Commonwealth super trustee bodies. It is regulated by ASIC and APRA, with a board consisting of an independent chairperson, three directors appointed by the ACTU, two directors appointed by the Defence Force and another five appointed by the finance minister. Because these two agencies both deal with the super of the same 700,000 people, there is considerable overlap in their activities.
Both sides of the House are interested in reducing duplication and finding sensible efficiencies within the Commonwealth Public Service. So this bill will merge ComSuper's activities and powers into the CSC. This means that the CSC will take over all active administration activities, including collection of contributions, payments, communications and dispute resolution. This requires CSC to perform financial functions on behalf of the Commonwealth, so this bill includes provisions to legally enable CSC to perform these functions. The minister will retain the right to make instruments in relation to these functions. The merger is expected to deliver savings of $½ million per annum in total.
This reduced duplication and greater efficiency is good in principle. In practice, the opposition has some concerns about aspects of the bill. The first one is that if ComSuper is abolished then most existing employees will be transferred to the CSC. Because of job duplication, approximately 70 of the 400 employees of ComSuper are expected to be offered voluntary redundancies. The major concern is that staff at ComSuper who are currently part of the Australian Public Service will become non-APS employees in the merger. While staff will maintain most of their terms and conditions in the transfer, the CPSU has raised some concerns about it. ComSuper staff are worried that they would no longer be able to transfer at level to other APS agencies and to win promotions to other APS agencies. They are also concerned about losing redundancy rights that would allow them to be redeployed in the APS if their positions are cut. That is why Labor intends to move amendments in the Senate to protect ComSuper employees from these changes. We want to protect these employees who would otherwise face future job uncertainty. Our amendments enable transferred ComSuper employees to move from the CSC to an APS agency as if they were still an APS employee. Our amendments will apply for a period of three years. We do this because we acknowledge that this is the single largest transfer of employees out of the APS since the Australian Protective Service was moved. There is no reason why efficiency and savings goals cannot co-exist with dignity and fairness for the employees involved.
The bill also makes some changes to the administration fees of the Public Sector Superannuation Accumulation Plan, or PSSAp. As it stands, members of PSSAp do not pay fund administration fees. These fees are paid through a levy on government agencies, costing the government an estimated $26.8 million over the forward estimates. At the same time, employees in most other industries do pay administration fees. The bill amends the PSSAp so that the cost of administering the fund will be deducted from member accounts. Based on current costs, this is expected to be around $52.50 per member per year. These minor fees will bring the fund into line with other private funds and save the budget around $26.8 million. Labor has indicated that we will not stand in the way of these changes.
Both sides of the House are interested in improving efficiency in the Public Service so that taxpayers get the best value for their tax dollar. But this goal is not incompatible with maintaining fairness for affected employees in these schemes. Labor will move amendments to this bill which will ensure that affected ComSuper employees will not get a rough go from the merger into the CSC. We are interested in budget savings and greater efficiency so we will be supporting the other measures contained in the bill. The government and the opposition have some vast differences when it comes to superannuation policy but we will be supporting the specifics of this bill.
The Governance of Australian Government Superannuation Schemes Legislation Amendment Bill 2015 implements two important government decisions: firstly, the 2014-14 Smaller Government budget measure to merge ComSuper, the administrator of the Australian government's civilian and military defined benefits schemes, with the Commonwealth Superannuation Corporation, which is the trustee of the Australian government schemes; and, secondly, the 2014 MYEFO measure to deduct the costs of administering the Public Sector Superannuation Accumulation Plan from member accounts. ComSuper is going to be merged with CSC, the trustee of the Australian government schemes, in line with the Smaller Government Rationalisation Allowance in the 2014-15 budget. A major focus of the government in the last 18 months or so has been to reduce red tape within the Australian economy. From measurements that have been done, we have already taken $2 billion of red tape costs out of the Australian economy. The importance of that cannot be overstated. When people in businesses, including superannuation schemes, are duplicating or doing unnecessary things that have been done by someone else or are not really necessary, that takes people in that business or entity away from doing something more productive. The figure of $2 billion in 18 months is not to be underestimated. This is obviously going to stop the duplication of what has been done within these super funds.
The merger will result in the Australian government superannuation schemes being managed by one government entity. This will improve the efficiency of the arrangements by reducing duplication and overlap. It will also provide the CSC with control over the administration of the Australian government defined benefits schemes, consistent with the CSC's regulatory responsibility for this function as trustees of these schemes.
A previous member spoke about defined benefit schemes and defined contribution schemes. I would like to put it on the record that many of the politicians in here have been elected since 2004 and are therefore not in a defined benefits scheme. Flying around this country, we hear much about the perks that politicians have. Well, a defined benefit scheme is not one of them. We have a defined contribution scheme—different from those members who were here prior to 2004—so I would like to put that on the record as well. I am not saying we should have a defined benefit scheme. We are in line with majority of the population, as we should be; we are in a defined contributions scheme.
Superannuation trustees in the broader superannuation industry commonly provide administration services for the schemes that they manage. The Smaller Government agenda aims to reduce the total number of government entities—and this is happening beyond the superannuation industry— by eliminating duplication and overlap. Ultimately, this agenda is about ensuring that the Australian government is structured and operates in a way that delivers efficient services, robust advice and value for money for taxpayers.
There is a lot of pressure on the three levels of government—federal, state and local government—for services. Those services rely on revenue from ratepayers and taxpayers. With every taxpayer dollar we spend, we have to do it as efficiently as we can and get the best result that we can—and these bills do that in the superannuation industry. Is there a link between the merger and the establishment of the CSC in 2011? Yes. The merger is the next step in streamlining the governance of the Australian government's civilian and military superannuation schemes. You, Mr Deputy Speaker Mitchell, know that this process began in 2011 when the three trustees to the schemes were merged to form the CSC.
Establishing the CSC as the single trustee strengthened the governance of the Australian government's superannuation, improved the efficiency of trustee operations and provided opportunities to benefit from the trustee's resulting increased scale. This has helped to put the delivery of the Australian government's superannuation on a more sustainable and cost-effective footing.
Can I just say: I have been a trustee of an industry super fund, and the amount of information they deal with, the job they do, the due diligence they do and the fiduciary duty they have are very important, and they are to be commended because they are literally making the investment and governance decisions on their members and it is a very important role.
The CSC-ComSuper merger will further improve the efficiency of the management of the Australian government schemes. CSC will be responsible for the overall management of the Australian government civilian and military superannuation schemes following the merger.
I turn to ComSuper staff. This is important. Bills often do have real ramifications for or tangible effects on people. ComSuper staff will be transferred to the CSC's employment by a determination of the Australian Public Service Commissioner under section 72 of the Public Service Act 1999.
As to the statutory officer or the CEO of ComSuper: will he transfer to CSC with the rest of the staff of the organisation? No. The Governance of Australian Government Superannuation Schemes Legislation Amendment Bill repeals the ComSuper Act of 2011 and, in doing so, abolishes ComSuper and the statutory office of CEO of ComSuper. Again, this is just part of the duplication process that will not be there once this happens.
Will ComSuper staff who transfer be employed under the Public Service Act? No. The CSC staff are employed on the terms and conditions determined by the governing board of the organisation, in line with CSC's enabling act, the Governance of Australian Government Superannuation Schemes Act 2011. ComSuper staff that transfer to CSC at the commencement of the merger will cease to be Commonwealth employees engaged under the Public Service Act and will become CSC employees. Again, this is part of the streamlining and efficiency that will come from this bill.
ComSuper staff who transfer to CSC employment will have conditions of employment that are no less favourable than those they were receiving at ComSuper immediately before the merger, and that is an important distinction for them to be aware of. The bill provides for the transfer of the ComSuper enterprise agreement to CSC. It also provides for the accrued entitlements—which are very important to them—of ComSuper staff to be recognised on transfer to CSC employment.
CSC has full membership of the Australian government civilian superannuation schemes. ComSuper staff with membership of the Commonwealth Superannuation Scheme or the Public Sector Superannuation accumulation plan will be able to retain this membership on transfer to CSC employment, and that is obviously exceptionally important to those individuals.
CSC will remain a corporate Commonwealth entity for the purposes of the Public Governance, Performance and Accountability Act 2013. The entity will continue to be governed by an 11-member board. The merger will not affect the appointment terms of the existing CSC directors.
CSC will be responsible for providing all of the administration services that are currently delivered by ComSuper in relation to the Australian government defined benefit scheme. This includes, for example, collecting member contributions, maintaining member accounts and paying lump sum and fortnightly pension benefits. CSC will also perform a range of functions that ComSuper currently undertakes as administrator on behalf of the Commonwealth. For example, CSC will pay superannuation benefits from the Commonwealth appropriations and recover debts owing to the Commonwealth arising from overpayment of benefits.
The Australian government has taken steps to help ensure that the merger does not disrupt the management of the Australian government's schemes. The merger is not expected to impact on the administration services provided to scheme members or returns on superannuation fund investments. The Australian government's military superannuation schemes are currently under the trustee of CSC and administered by ComSuper. At the merger, CSC will assume both of these roles. Steps have been taken by the Australian government to ensure that the merger does not disrupt the management of the military scheme.
The bill, importantly, does not change the benefits provided by the Australian government civilian and military defined benefit superannuation schemes. As a lot of people would be aware, people who are on defined benefit superannuation schemes—and, again, I make the point that that is no politician elected after 2004—are very fortunate people. The returns that these people get are not determined by the contributions they make or, indeed, the returns that the super fund gets. They are a very valuable thing for those people. However, in line with the government's announcement in the 2014-15 Mid-Year Economic and Fiscal Outlook, the bill amends the Superannuation Act so that the costs of administration of the PSSap will be deducted from member accounts, consistent with arrangements for private sector accumulation funds.
Negotiations for a new ComSuper enterprise agreement commenced in May 2014 in line with the Australian government's public sector workplace bargaining policy. Should a new ComSuper enterprise agreement be made prior to the merger, it will apply to transferred ComSuper staff at CSC. The change is being made to align the arrangements in PSSap with those of superannuation accumulation funds in the general community. Fees are a very common way of paying for the administration of accumulation superannuation funds. In the general community, members of accumulation funds pay fees. Commonwealth employees who have chosen an alternative accumulation fund, and federal parliamentarians elected since 2004, also pay fees.
The new arrangements require changes to the Superannuation Act 2005 and the trustee made by the Minister for Finance under the act. The bill will make changes to the act to provide that PSSap administration costs are to be paid out of the PSSap fund. Following the passage of the bill, changes will be made to the trustee to provide for CSC to determine the amount of the fee to be paid by PSSap members and for CSC to be able to deduct that fee from PSSap members' accounts.
The changes made by the bill will provide that the consent of the trustee will not be required with changes to the PSSap Trust Deed. This is consistent with arrangements under the government's prudential superannuation framework which provide that the consent of trustees is not required where changes relate to contributions by employer sponsors of a scheme.
The levels of administration fees will vary between accumulation funds. As in the practice of general superannuation industry accumulation funds, the fee will be determined by the trustee of the PSSap. These fees are varied, Mr Deputy Speaker Mitchell, as you are probably very well aware. Some of these funds, depending on the choice that you make, require less or more intervention from a fund manager. If it is in a more of a defensive fund, or if it is in a cash fund, the fees tend to be lower. But, if you are putting your money into a scheme that is more tradable, if you like, or is going in and out of different growth things, the fees tend to be a little bit higher because, where the money is given to the people to manage those funds, their fees are higher, so that has to be paid by the member.
With the savings, very importantly, as I have mentioned, we are a government that has taken $2 billion worth of red tape out of the economy in the last 18 months. That has been a breath of fresh air to many different sectors across the economy. The savings from this measure are $28.6 million over four years from 2015-16. The employer contribution rate of 15.4 per cent remains unchanged. The PSSap is a fully funded accumulation fund and has been open since July 2005. Commonwealth employees covered by the accumulation arrangements have the choice of a superannuation fund, with the PSSap being the legislated default fund for employees engaged under the Public Service Act 1999. Very importantly, benefits in the PSSap are fully portable.
The Commonwealth Superannuation Scheme and the Public Sector Superannuation Scheme are unfunded defined benefit superannuation schemes. Around 40 per cent of members in these schemes are pensioners and have no relevant moneys in the relevant schemes from which administration fees could be deducted. Pension payments are paid from the Consolidated Revenue Fund. Because of the unfunded nature of these schemes, benefits in these schemes are generally not portable. I commend this bill to the House.
I obviously rise to support this legislation, the Governance of Australian Government Superannuation Schemes Legislation Amendment Bill 2015. We need, of course, to do all that we can to make our superannuation scheme sustainable, including our Commonwealth government superannuation schemes. Reducing the cost structures for those superannuation schemes is an important part of that. I note that I believe that the government is now agreeing to support the amendments that Labor has flagged it will move in the Senate. Those amendments are important provisions that will ensure that those employees made redundant as a result of the merger of the operations have the opportunity to be treated as if they were still APS employees for the purpose of seeking transfer or seeking promotion within the Australian Public Service. I think that is a very reasonable provision. We have obviously got to rationalise our delivery of these services from time to time. That also gives us, however, the obligation to ensure that the workforces affected by those decisions have an opportunity to ensure that they still have a career pathway before them.
I want to use this opportunity to make a few reflections about superannuation and the sustainability of superannuation more generally. Around the globe we obviously have lots of very cheap money. Indeed, people like Paul Keating argue that this actual surfeit of money that has been washing round the system was the very thing, together with the lack of regulatory oversight, that led to the GFC. This, of course, is creating a problem for superannuation funds. We have to think very deeply about this. Superannuation is now so much part of our planning for the future. For us to be able to manage that as we inevitably become an older population, we really have to be doing some deep thinking about superannuation: how we make it more sustainable and how we ensure that the superannuation savings are able to generate sufficient income into the future for those people that are seeking to rely on them.
There is some cause for concern today when you look at the profile that we have for our superannuation funds. We have almost $3 trillion in superannuation funds in Australia. That has been projected to increase to something like $7 trillion by 2030. But today we have a very heavy weighting of those funds towards equities. This, of course, creates a very real risk. I want to quote the former Treasury Secretary, Ken Henry. He said:
The heavy weighting to equities by superannuation funds is exposing the nation to a dangerous financial instability and the public to excessive risk.
We need to look at the profile that we have of investment in infrastructure compared to the investment that we have in equities. Obviously, the driver for this move into the more risky area of equities is clearly the high level of returns. Those returns range from around 13.7 per cent, in positive territory in 2013, to a negative of 11.5 per cent in 2009, with an average return of around six per cent. So there have been many positives but many negatives—and a lot of risk. And that is a major problem.
On the other hand, we do see that the superannuation funds that invested in unlisted infrastructure had a relatively stable return and it is cited that this was, on average, around 12 per cent. Whether or not these sorts of returns are now available in this world of very cheap money is questionable, but it is very clear that in Australia we have very low investment by the superannuation funds in infrastructure. In fact, less than five per cent of that nearly $3 trillion is invested in infrastructure within Australia. However, we are seeing a trend of these super funds actually investing offshore. We have to ask ourselves: why is it that we cannot get our infrastructure funds diverted, to be utilised within Australia? I think there are a number of issues, probably many more than I can touch on here. I think that our bid models are flawed and not designed to attract superannuation funds. The bid models that we have, which are usually packages involving the putting together of the funds, the financing and the construction, as well as the ownership and management, are usually led by consortia which are project sponsors, which take their money in the first couple of years and which have very high fees. They are in the project for the very short term and they move on. However, the front-end loading of that cost is very unattractive to a lot of superannuation funds. Indeed, given the risk that is involved in that tender process, they are very often not prepared to participate in that sort of project because of the high cost involved. This has been reflected on in many places and, widely, this is not a new idea. We certainly saw the Productivity Commission come out and say that we have to reconsider the way in which we are putting these projects out for private sector participation. We have also had many within the super industry make a similar comment and, indeed, one of the findings of the House of Representatives Standing Committee on Infrastructure and Communications was along the lines that we should start looking at things such as the inverted bid model.
There is also a particular unattractiveness, in my view, of putting the finance packaging together with the design, construction and management contract. I think that that stops us getting the best engineering and construction response that we can get because it depends on the random grouping of construction and engineering outfits with financiers. I certainly always prefer to have, where we can, the DCM portion of these projects separately tendered and the finance being dealt with quite separately. That way, particularly when we have very big projects and where there are only a very relatively small number of unrelated parties that can be involved in tendering for the actual construction and management of the piece of infrastructure itself, I believe we allow ourselves to get the most creative engineering response. It also starts helping reduce that up-front risk for superannuation funds because you have more certainty when you are going into a project. You have more certainty about what the actual cost of the construction and the physical maintenance will be over the life of the project.
These are complex issues for us to deal with. But what is quite clear is that, currently, superannuation funds are simply not sustainable. It is not sustainable for us to have such a heavy weighting towards equities, with less than five per cent of funds invested in infrastructure. In particular, when we look at our needs for long-term infrastructure in Perth—for example, we need a new container facility—we see that it will not be within the capacity of the state government to build. It is the sort of project that would be an ideal project for a private-public partnership involving superannuation funds.
As I say, super is incredibly important to us, but just providing the framework for the accumulation of the funds will not be sufficient for us to ensure that those funds will bring home the retirement bacon for our citizens.
I would like to thank members on both sides of the House who have contributed to the debate on the Governance of Australian Government Superannuation Schemes Legislation Amendment Bill 2015.
I listened carefully to the member for Perth and, whilst I do not always agree with her on some of the sentiments she expresses in this parliament, I do wholeheartedly agree with her inasmuch as we do need to encourage Australian superannuation funds to invest more readily and more heavily into Australian-owned enterprises, certainly in, as she referred to, mining and construction, and I would also add in agriculture. As far as agriculture is concerned, there is good money to be made in the long term and I commend her for her comments in that respect. The bill merges ComSuper, the administrator of the Australian government's civilian and military defined benefit superannuation schemes, with the Commonwealth Superannuation Corporation, CSC, the trustee of the Australian government schemes.
The merger was announced in the 2014-15 budget in the context of our smaller government agenda. This agenda aims to reduce the total number of government entities by eliminating duplication and overlap and by simplifying inefficient and complex agency structures. The smaller government agenda has resulted in the number of government bodies being reduced by 286 so far, and achieved savings of $1.4 billion to repair the budget and fund other priorities. That is extremely important. But, fundamentally, this agenda is about ensuring that the Australian government is structured and operates in a way that delivers efficient services, robust advice and value for money for taxpayers.
Before addressing some of the points raised in the debate, I want to briefly go over some of the ways in which the bill will give effect to the merger of ComSuper with CSC. The general principle for the merger, which is reflected in the bill, is that the functions that ComSuper currently perform will be performed by CSC from commencement of the merger. Bringing the management of the Australian government schemes under a single body will improve the efficiency of this function by removing duplication and overlap. The merger will also give CSC control over the provision of administration services, in line with its regulatory responsibilities as trustee of the Australian government superannuation schemes. Importantly, the bill does not change the design of benefits provided by the Australian government schemes, or affect the delivery of services, including payment of benefits, to members of the schemes. The administration services to be provided by CSC include the collection of member contributions and payment of lump sum and fortnightly benefit payments.
As a result of its new administration services role, CSC will also perform several functions for and on behalf of the Commonwealth. This includes, for example, the payment of superannuation benefits from Commonwealth appropriations. The bill transfers the assets and most of the liabilities of ComSuper to CSC. The staff of ComSuper will be separately transferred from Australian Public Service employment to CSC employment by way of a determination of the Australian Public Service Commissioner under the Public Service Act 1999. The bill includes a range of transitional provisions to cater for the transfer of ComSuper staff to CSC employment. Under these provisions, ComSuper staff will continue to be covered by the ComSuper enterprise agreement on transfer to CSC. This will assist in ensuring that their remuneration and conditions of employment are no less favourable than those that applied to them immediately before the merger. ComSuper staff will also maintain their accrued entitlements to benefits on transfer to CSC.
The bill also makes consequential amendments to several acts of parliament governing the civilian and military superannuation schemes. Additionally, the bill amends the Superannuation Act 2005 to bring the arrangements for Public Sector Superannuation Accumulation Plan—PSSap—members into line with the arrangements for members of private sector accumulation superannuation funds. Under the new arrangements, the costs of administering PSSap will be deducted from member accounts. These PSSap administration fees will be determined by CSC, and I note that the CSC has already published indicative fees for the PSSap on its website, including a monthly administration fee of $5, which, of course, is subject to the passage of this legislation.
Overall, the bill delivers on the government's commitment to streamline the management of Australian government superannuation by merging ComSuper with CSC. The merger provides for continuity of administration services in relation to the Australian government's civilian and military defined benefit schemes while removing duplication and overlap in existing structures.
I note that the opposition has indicated it will be moving amendments to the bill when it reaches the Senate, and I thank the member for Oxley for his contribution to this debate. While I hope to have plenty of opportunities to robustly debate him in this chamber between now and the next election—and I am sure that will happen—I would like to take this opportunity to put on the record my respect for his contribution to parliament with regard to this particular bill. In the context of the amendments Labor intends to move in the Senate, I would note that the merger of ComSuper and CSC is quite a unique exercise. ComSuper employees are moving out of the Australian Public Service but will remain employed by an agency within the general government sector.
It is pertinent that from 1 July 2015 new controls will afford agency heads the flexibility to manage recruitment, including the consideration of candidates not already employed within the Australian Public Service, without the need for external approval. The new controls relax restrictions that we put in place from November 2013 to help reduce the size of the Australian Public Service in an orderly way. In around 18 months, the government has reversed an eight-year peak in staffing levels, bringing the Commonwealth public sector back to a more affordable and sustainable size. As the member for Parkes pointed out in his contribution, over the period from 1 September 2013 to 28 February 2015 more than 17,300 public servants left the APS, with around half of that number achieved through natural attrition. Also, the overwhelming majority of redundancies across the APS were voluntary.
The member for Page made some very pertinent points, too, in his contribution, particularly in relation to military superannuation schemes. In response to the comments from those opposite about the superannuation guarantee, I would remind them that if they had not worked so hard to frustrate the government's clear mandate on the repeal of the mining tax, those changes may not have been necessary. Once again, I thank all members for their contribution, and with that I commend the bill to the House.
Question agreed to.
Bill read a second time.
Message from the Governor-General recommending appropriation announced.