Nick Sherry (Tasmania, Australian Labor Party, Shadow Minister for Banking and Financial Services) Share this | Hansard source

Thank you. Firstly, I will comment on the Superannuation Legislation Amendment (Trustee Board and Other Measures) Bill 2006. This is a bill to consolidate and revise the governance arrangements for the Commonwealth Superannuation Scheme, commonly known as CSS, the Public Sector Superannuation Scheme, PSS, and the Public Sector Superannuation Accumulation Plan, commonly known as PSSAP, with effect from 1 July 2006. The bill’s introduction is in response to the Review of the Corporate Governance of Statutory Authorities and Office Holders, commonly known as the Uhrig review, which reported in mid-2002.

The Uhrig review was appointed to review the governance practices of statutory authorities and office holders. Of particular interest to the review were those agencies which impact on the business community. The objective of the review was to identify issues in relation to existing governance arrangements and to provide policy options for government to gain the best from statutory authorities and office holders and their accountability framework. The review found the Financial Management and Accountability Act 1997 should be applied to statutory authorities and recommended that these organisations should be governed by a CEO. The review also found the Commonwealth Authorities and Companies Act 1997 should be applied to statutory authorities and these organisations should be governed by a board. In general, agencies which exclusively manage Commonwealth appropriations should be represented and governed by a CEO, and a board structure is favoured if there is a strong commercial focus to the organisation or if the agency is intergovernmental.

The main recommendation of the Uhrig review was on the optimal size of a statutory authority board. The review recommended a public sector board size of between six and nine members. Currently, the boards overseeing the Commonwealth superannuation schemes are of different sizes: the CSS board has seven members, the PSS board has five members and the PSS board is responsible for the operation of the PSSAP. Following the release of the Uhrig report, the Department of Finance and Administration recommended that the PSS board be increased from five to seven and consideration be given to the establishment of a single board for the CSS, the PSS and PSSAP. So the proposed merger of the CSS and PSS boards has several advantages, including reducing complexity, simplifying administration and bringing the Commonwealth superannuation investments into line with best practice principles identified in the Uhrig review.

Concerns were raised in relation to the assets of the three schemes being joined together and managed as one trust, but the government has given assurances that despite the merger of the boards the management of the funds will continue as separate investment trust organisations. It is important that the investment management of the three schemes are separately managed as the profiles and the rates at which members of the varying schemes retire result in different needs for the different schemes. There has been consultation in respect of the members of the boards. In fact, I think that there is some overlapping membership of some members of the boards at the present time. It is good efficient management practice, in Labor’s view. The bill has no financial implications and we do not regard it as controversial, and Labor will support the change.

Turning now to the Superannuation Legislation Amendment Bill 2004, the purpose of the bill is to amend the Superannuation Act 1976—the CSS act—in respect of the Commonwealth Superannuation Scheme and the rules of the Public Sector Superannuation Scheme, the PSS, in relation to the superannuation salary for departmental secretaries and certain other statutory office holders who are members of the CSS and PSS. The bill was originally introduced into the House of Representatives on 11 August 2004 but lapsed when parliament was prorogued for the general election. The bill as reintroduced is substantially similar to the lapsed bill. However, it now extends all determinations made under the Remuneration Tribunal Act 1973.

A condition of employment for the majority of employees of the Commonwealth government is membership of the Commonwealth superannuation schemes. Employees of the Commonwealth other than Defence Force personnel are either members of the CSS—closed to new members from 1 July 1990—or the PSS. The defined benefit at least is closed to new members. These schemes are generous to their members by community standards. They are defined benefit by formula as part of the PSS trust deed and the relevant legislation governing the CSS. The formulas are dependent on the length of service of members, a salary component for the CSS final salary, and for the PSS, final average salary based on the average of their salary at the three previous birthdays and the reason for ceasing their Commonwealth employment—for example, retirement, resignation, involuntary redundancy or invalidity.

Generally for the CSS the annual rate of salary used to calculate a member’s benefit is defined in subsection 5(2) of the Superannuation Act 1976. The annual rate of salary is used to determine the contributions made to the CSS by members and some of the types of benefits a member is entitled to, including when they retire from the workforce. Subsection 5(1) in the 1976 act defines salary for the definition of annual rate of salary as:

... salary means salary or wages and includes any allowance, or the value of any allowance, or any fee, that is an allowance or fee of a kind that, under the regulations, is to be treated as salary for the purposes of this Act, but does not include any part of any salary or wages that, under the regulations, is not to be treated as salary for the purposes of this Act.

For the PSS a member’s benefit is determined in accordance with the PSS rules. A member’s average salary is calculated using a member’s basic salary and recognised allowances. Both schemes—the CSS and the PSS—allow the superannuation salary for some Australian government office holders to be determined by the Remuneration Tribunal. The purpose of this bill is to provide the superannuation salary and the use of the remuneration of secretaries and certain Australian government office holders as made by determinations of ministers and presiding officers of the parliamentary departments. Labor does not regard this bill as controversial and it also has our support.