Overview
This report examines two very different schemes, the Parliamentary Contributory
Superannuation Scheme and the Judges' pension scheme. While these schemes
have a number of superficial similarities, they fulfil quite different
objectives in respect of the two classes of public office holders who
benefit from them.
The Parliamentary Contributory Superannuation Scheme provides for the
retirement needs of former parliamentarians and their dependants. It provides
relatively generous benefits by community standards for those who fulfil
the qualifying conditions, regardless of age.
The Judges' Pension Scheme is quite different. Judges must serve until
sixty years of age if they are to qualify for benefits. There is no payment
for those who fail to qualify, so the incentive for judges to remain in
the judiciary until age 60 is strong. This is a deliberate policy, encouraging
judges to view the judiciary as a long term career rather than a short
term option.
The Judges' Pension Scheme plays a very important role in ensuring judicial
independence and recruiting candidates to the bench from the ranks of
the senior legal profession. While the judges' scheme is sometimes criticised
as generous, the reality is that the Commonwealth pays judges considerably
less than they would receive if they continued their careers as senior
barristers in private practice. The Judges' pension scheme partially offsets
the considerable financial sacrifice that senior barristers must make
if they accept judicial office.
The Committee encountered only limited criticism of the Judges' Pension
Scheme. Indeed, much of the evidence supported the scheme, arguing that
any alternative, such as a fully funded accumulation scheme as suggested
by the National Commission of Audit, would be inappropriate. The Committee
finds itself in substantial agreement with this view and recommends that
the scheme be retained. The Committee has however recommended a number
of modifications to bring the scheme more into line with modern superannuation
practice.
The Parliamentary Contributory Superannuation Scheme attracted comment
during the inquiry from members of the public, recognised superannuation
experts and parliamentarians. Some criticised the scheme as excessively
generous and out of step with community standards. An area singled out
for particular attention was the payment of pension benefits to retiring
or defeated parliamentarians before recognised retiring age.
So, is there anything special about political life that justifies special
superannuation provisions for parliamentarians that are different from
those applying in the general community?
Understandably, there are people in the community who resent the superannuation
provisions enjoyed by parliamentarians. The average Australian workplace
is now much less stable than it was and many people face an uncertain
and volatile employment market. In many ways, the rest of the community
has caught up with the general lack of stability that has always characterised
political life.
The media has also contributed to resentment of the parliamentary scheme
by highlighting the substantial benefits that relatively young defeated
parliamentarians, particularly former ministers, are presumed to enjoy.
In reality, many parliamentarians do not survive political life for long
enough to enjoy the generous benefits the media is so willing to highlight.
The Committee received evidence that the average tenure of parliamentarians
is trending towards shorter parliamentary careers, for a variety of reasons
including a increasingly volatile electorate. Consequently, fewer parliamentarians
will satisfy the criteria for a pension.
The apparent generosity of parliamentary superannuation must also be
considered in the context of overall remuneration. There is adequate evidence
that parliamentary remuneration, particularly at Ministerial level, lags
well behind what may be expected for similar levels of responsibility
in the private sector and in some public sector positions.
While there is no apparent difficulty in attracting people to stand for
parliament, the Committee has received evidence that many talented people
will not contemplate parliamentary service because of the relatively low
remuneration when compared to other options available to them. The disruption
to established lifestyles and careers offer further disincentives.
Delicate balances must be maintained in this area. It would be regrettable
if people were attracted to parliamentary office purely for their own
financial gain. However, the Committee considers that, in the interests
of representative government, it is desirable that a wide range of people
undertake parliamentary service. While success in business or the professions,
with its attendant high remuneration, is no guarantee of the quality of
a parliamentary candidate, it is undesirable that conditions of service
in the parliament be so as to deter such persons.
These issues aside, the question must be asked - is the current Parliamentary
Contributory Superannuation Scheme (PCSS) appropriate? Aside from the
comments received about the generosity of the scheme, the Committee also
received evidence that the scheme has a number of shortcomings.
Witnesses and submissions focussed on a number of issues including:
- a lack of equity between members of the scheme;
- the inflexible nature of the scheme;
- the compulsory nature of members' contributions regardless of their
circumstances;
- no portability of entitlements if the member leaves Parliament; and
- inadequate controls over the costs associated with benefits received
by the partners of parliamentarians or ex-parliamentarians when they
die.
Several submissions and witnesses suggested that the PCSS should be replaced
with a fully funded accumulation scheme, in line with National Commission
of Audit recommendations. The Committee believes that, while this option
has a number of attractions, the parliament needs to more closely consider
issues relating to independence before agreeing to replace the scheme
with an accumulation scheme.
Witnesses regarded the independence issue as being particularly important
in respect of judges. It was surprising that this issue did not receive
closer scrutiny in respect to parliamentarians who are often placed in
situations where they have to make decisions on legislation affecting
the whole superannuation system.
The Committee agreed that the scheme has many significant shortcomings.
It does not necessarily serve its members well, may be outdated in some
of its provisions and attempts to achieve too much in relation to what
a superannuation scheme can fairly be expected to provide.
There is also a lack of transparency in parliamentary superannuation
that gives rise to much of the criticism of the PCSS. Further, there is
also clearly a negative perception in the mind of the public about the
scheme, and an uneasy relationship between the PCSS and superannuation
in the broader community. In the light of these findings, the Committee
considers that reform is desirable.
The Committee was very conscious about the difficulties associated with
a parliamentary Committee reviewing their own entitlements. Inevitably,
charges of conflict of interest will arise.
All members of the Committee were of the view that the Remuneration Tribunal
should play a greater role in respect of parliamentary superannuation.
However, there were differences of opinion within the Committee about
the appropriate approach to reform and Coalition and Labor Senators express
different views within the report. The Australian Democrat member of the
Committee has attached a dissenting report.
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