Background to the Inquiry
What is happening now is that the superannuation
scheme we have in place actually fails the test of fairness. [1]
The origins
1. From time to time, concern is expressed about the Commonwealth Government's
liability for those unfunded defined benefit superannuation funds for
which it is responsible. In addition, 'defined benefit schemes are generally
more complex and costly to administer, less visible and their benefits
less transferable between different employers than are comparable accumulation
schemes'. [2]
2. In its June 1996 report to the Government, the National Commission
of Audit made the following comment in relation to future superannuation
arrangements:
The Government should initiate further work to examine the
replacement of its current defined benefit superannuation schemes with
accumulation schemes. The objective of this change is to increase remuneration
flexibility rather than to reduce the total cost of overall remuneration
packages. [3]
3. The report went on to recommend that superannuation for parliamentarians
and judges should be similar to 'arrangements for senior executives in
the rest of the workforce'. This meant accumulation benefits and 'the
amount of superannuation should be determined by individuals as part of
fixed overall remuneration package'. [4]
The reference
4. Following a lengthy period on the Notice Paper and a debate in the
Senate chamber on 25 November 1996, the following matter was referred
to the Senate Select Committee on Superannuation for inquiry and report:
(1) The appropriateness of current unfunded defined benefit superannuation
schemes application to judges and parliamentarians, including but not
limited to:
(a) the equity between members; (b) the cost to the Commonwealth and members; (c) the impact of unfunded liabilities on future budgets; (d) the advantage or otherwise of member choice of fund or investment
strategy; (e) the flexibility of existing schemes, including in respect of
portability, in the context of their working arrangements and those
applying in the general work force; (f) the appropriateness of replacing such schemes with a fully-funded
accumulation scheme; (g) the appropriateness of the application of preservation rules
and taxation on benefits taken prior to age 55 to such schemes; (h) the capacity for making superannuation arrangements less complex
than current arrangements; and (i) the administrative costs of such arrangements and their alternatives.
(2) That for the purpose of the inquiry the committee take evidence
from the public, Government agencies and State, Territory and Federal
government departments, and conduct public hearings as appropriate.
Conduct of the Inquiry
5. The Committee contacted a number of organisations inviting submissions,
and advertised the reference in The Australian on 18 December 1996 and
nationally in the various State daily newspapers on 12 February 1997.
In response, the Committee received 46 submissions. Public hearings to
hear evidence on the judges' pension scheme were held in Sydney on 1 May
1997 and in Canberra on 26 May 1997. A further public hearing to take
evidence on the parliamentary scheme was held in Canberra on 4 June 1997.
6. A list of those who made submissions is at Appendix A and details
of witnesses who appeared at the public hearings is at Appendix B.
7. The Committee was asked to examine both parliamentary and judicial
superannuation. In the course of its inquiry the Committee found the principles
in operation within the two schemes to be quite different. In particular,
the issue of independence was crucial in the judges' scheme. Accordingly
the Committee has divided its report, dealing in Part A with parliamentary
superannuation and with the judges' pension scheme in Part B.
Issues raised by the Law Reform Commission
8. In an Issues Paper published in April 1997, the Australian Law Reform
Commission raised some matters in relation to the structure of the judiciary.
The Commission 'has been asked to look at the advantages and disadvantages
of the present adversarial system of conducting civil, administrative
review and family court proceedings before courts and tribunals exercising
federal jurisdiction'. [5] The
Commission said the composition of the judiciary, in 'largely comprising
men of similar ethnic and cultural backgrounds, may reflect a culture
that is not representative of the community at large'. [6]
9. In its paper the Commission considered the possibility of creating
a federal magistracy. Should such a proposal proceed, an important issue
would be the appropriate terms of appointment and remuneration of magistrates,
including their superannuation. [7]
Also, toward the end of the Commission's paper, there is a brief discussion
on the concept of a career judiciary which does not exist now.
10. Should there be significant changes in the role of judges as a result
of the questions raised in the Commission's paper, then the Commission
says that 'new processes of selection and appointment may need to be examined'.
For example, one objection to the establishment of a career judiciary
relates to the possible problems of promotion within that structure being
determined by the government. [8]
At the outset
11. In the conduct of its inquiry, the Committee was sensitive to public
perceptions of the two schemes into which it was inquiring, and to parliamentary
superannuation in particular. These perceptions may include:
- over-generosity of these schemes;
- being out of step with the superannuation available to the rest of
the community;
- unreasonable early access to full parliamentary pension entitlements;
- the availability of lucrative post-parliamentary employment; and
- the fact that a Committee of parliamentarians was inquiring into their
own scheme.
12. However, the number of submissions received from individuals protesting
especially about the parliamentary scheme was relatively modest (around
20), with the majority of those attempting to be constructive in their
criticism.
13. The Committee expresses its appreciation for the contributions by
those individuals, and by all who made submissions and gave evidence at
the public hearings.
Footnotes
[1] Senator Kernot, The Senate, Hansard,
25 November 1996, p. 5905.
[2] National Commission of Audit, Report
to the Commonwealth Government, June 1996, p. 98.
[3] National Commission of Audit, Report
to the Commonwealth Government, June 1996, p. 98.
[4] National Commission of Audit, Report
to the Commonwealth Government, June 1996, p 99.
[5] Australian Law Reform Commission, Issues
Paper 20, Review of the adversarial system of litigation, Rethinking
the federal civil litigation system, April 1997, p. 7.
[6] Australian Law Reform Commission, Issues
Paper 20, Review of the adversarial system of litigation, Rethinking
the federal civil litigation system, April 1997, p. 98.
[7] Australian Law Reform Commission, Issues
Paper 20, Review of the adversarial system of litigation, Rethinking
the federal civil litigation system, April 1997, p. 132.
[8] Australian Law Reform Commission, Issues
Paper 20, Review of the adversarial system of litigation, Rethinking
the federal civil litigation system, April 1997, p. 135.
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