Chapter 3
The Judges' Pension Scheme Outlined
We are of the view that a judicial pension scheme should not
be seen as having as its primary object enrichment of judges but rather
as part of the constitutional apparatus for supporting judicial independence.
[1]
Authority for the scheme
3.1 The Judges' Pensions Act 1968 (the Pensions Act) provides for the
payment of pensions to members of the federal judiciary. The Pensions
Act is administered by the Attorney-General and payments under the scheme
are processed by the Attorney-General's Department.
3.2 The Pensions Act provides pensions for "judges". A judge
is defined as a Justice or judge of a federal court and a person who has
the same status as a Justice or judge of a federal court. [2]
Federal courts include the High Court, the Federal Court itself, the Family
Court of Australia and the Industrial Court.
3.3 Coverage of the Act also extends to a small number of statutory office
holders such as:
- a Presidential Member of the Industrial Relations Commission;
- the Solicitor-General (with modifications as to entitlement); and
- a full-time tenured Deputy President of the Administrative Appeals
Tribunal. [3]
Some history of Australia's scheme
3.4 In 1948 the then Labor Government introduced the Judges' Pensions
Bill (the forerunner to the current Judges' Pensions Act). As described
in the second reading speech, this was not the first legislation covering
the provision of pensions to retiring judges of Commonwealth courts, as
provision for pensions had been made in the Commonwealth Conciliation
and Arbitration Act in 1926 for judges of the Arbitration Court. The second
reading speech on the 1948 Bill continued:
This was followed by a similar provision in the Judiciary Act
of the same year to grant pensions to justices of the High Court. In
1930 a pension on similar terms was provided for the judge of the Bankruptcy
Court, and in 1945 for the judge of the Supreme Court of the Australian
Capital Territory. The most recent legislation to provide such pensions
was passed in 1947 and covered judges of the Federal Court of Claims
...
It is not proposed to disturb the present rights of pensions of sitting
justices or judges except with their concurrence. [4]
3.5 So there had been a lengthy history of judges' pensions even before
1948. The 1948 Bill effectively offered an extension of benefits to Federal
judges, especially in the provision for widows and children. The Government
considered that preserving the independence and the 'high status' of a
judge as a member of a Commonwealth court 'warrants a pension provision
which is complete and adequate'. [5]
3.6 It is interesting to note the features of the scheme as proposed
in the Bill:
- an age pension payable at age 60;
- after ten years service, 27.5 per cent of salary increasing by 2.5
per cent for each additional year up to a maximum of 40 per cent of
salary at retirement;
- a pension on account of permanent disability or infirmity (of which
the Attorney-General certifies) of 15 per cent of salary up to five
years service, rising by 2.5 per cent for each additional year up to
a maximum of 40 per cent;
- a pension to the widow of a judge who dies in service or after retirement,
equal to half that payable to the judge;
- an allowance of one pound a week for each child under 16; and
- the option for judges to adopt these provisions or adhere to the pensions
provisions of existing legislation, but all new appointees subject to
the new scheme. [6]
3.7 Of course there have been changes to the scheme over the years. Probably
the most significant changes occurred after a review in of the 1948 Act
as amended, and the introduction of the Bill which became the Judges'
Pensions Act 1968. In the second reading speech on that Bill, the then
Attorney-General listed the features of the Bill as:
- the pension on permanent disability or infirmity to be increased to
40 per cent of salary on retirement, plus two per cent of salary for
each completed year of service for each year in excess of five years,
with a maximum of 50 per cent;
- the widow of a judge or retired judge to receive five-eighths of the
pension the judge would have received;
- several changes to the provision for children; and
- counting judicial service in a State or Territory for the purposes
of the Act. [7]
3.8 In 1973 the Parliamentary and Judicial Retiring Allowances Act increased
the basic pension level to 60 per cent. That is the most significant of
the changes that has occurred since 1968.
Features of the Scheme
Core benefits
3.9 This is a very simple scheme in concept. It involves the payment
of pensions to:
- qualifying judges on retirement;
- qualifying judges in the event of incapacity; or
- the surviving family on death of the judge.
3.10 The level of pension is directly proportional to the level of judicial
salary and conditions of payment are set out below.
3.11 The central benefit is for a judge who retires and is at least 60
years of age and has served as a judge for not less than 10 years. In
that case the pension payable is 60 per cent of the 'appropriate current
judicial salary'. [8]
3.12 The scheme is non-contributory and commutation of benefits is not
permitted. Benefits are provided for by section 6 of the Pensions Act.
3.13 Federal judges appointed after Constitutional amendment in 1977
are appointed until age 70. A pro-rata formula applies for judges who
cease to hold office by reason of attaining a particular age and who have
served at least six years but less than 10:
In that case, the pension payable is at the rate of 0.5% of salary
for each month of service. For example, a judge whose appointment expires
at age 70 and who has 8 years and 6 months service is entitled to a
pension of 51% of the appropriate current judicial salary (ie. 102 months
x 0.5%). [9]
On resignation
3.14 A judge is not eligible for a pension if he or she retires:
Nor, under these circumstances, are any benefits accrued for preservation
until retirement or transfer to another superannuation scheme.
3.15 However, from 1 July 1992 the superannuation guarantee minimum benefits
payable to Commonwealth employees under the Superannuation (Productivity
Benefit) Act 1988 are payable to judges who have no entitlement to a pension
under the Pensions Act. [10]
On invalidity
3.16 Pensions of 60 per cent of the appropriate judicial salary are also
payable on the grounds of invalidity, if the Attorney-General certifies
that a judge's retirement is due to permanent disability or infirmity.
[11]
Death benefits - to dependents
3.17 Where a judge dies in office, a surviving spouse (including a de
facto spouse) is entitled to a pension of 62.5 per cent of 60 per cent
of the appropriate judicial salary. The spouse is also entitled to additional
benefits for eligible children. The rate of additional pension is 12.5
per cent per child (up to a maximum of 37.5 per cent) of 60 per cent of
the appropriate judicial salary. [12]
3.18 A spouse of a retired judge who dies is entitled to a pension of
62.5 per cent of the pension that was payable to that judge if he or she
had not died. [13]
3.19 Finally, sections 10, 11 and 12 of the Pensions Act provide for
the payment of pensions in respect of children of a judge in the event
of that judge's death before or after retirement.
Funding, costs and employer support
3.20 Judges' pensions are appropriated and paid out of the Consolidated
Revenue Fund. [14] The cost for 1995-96
was $6.88 million. [15]
3.21 The latest report by the Australian Government Actuary to the Attorney-General's
Department on the benefits to judges under the Pensions Act was provided
in February 1994, based on data as at 30 June 1993. This report identified
that the cost of benefits varied, 'depending on the period of service
and the age of a judge on exit from judicial service':
For Judges who exit prior to age 60 or with less than 10 years
judicial service the annual rate of employer support was estimated to
vary between 5% and 20% of salary. For Judges with at least 10 years
of judicial service and who retire on or after age 60 a range of values
between 30% and 120% was reported. [16]
3.22 The Committee also noted the comments by the Australian Government
Actuary that actuarial analysis is mainly an exercise in financial control.
Actual experience will differ from the assumptions made to reflect long
term expectations. Also, the cost of the scheme to the Commonwealth will
vary for different individuals.
As a result, the estimated actuarial contribution rates reported
should not be taken as the actual cost of
the scheme but as an estimate of the
cost.' [17]
3.23 Administrative costs of the judges' scheme are not significant,
being largely absorbed by the policy and administrative function in the
Attorney-General's Department.
A changing judiciary
3.24 The Australian Government Actuary said the benefit structure of
the judges' pension scheme 'was designed at a time when it was expected
that Judges would always serve through to at least age 60'. [18]
3.25 With the greater flexibility in modern work practices, and movement
within and between the professions and other employment, there is no reason
to expect that judges will not be part of this movement. It may not be
to the extent of some other occupations, but with the age of judicial
appointment tending downward in some jurisdictions at least, there is
a reasonable expectation that not all judges will accept appointment in
the expectation of lifetime service to the judiciary.
3.26 On the matter of age, Justice Mullane of the Family Court said he
had confirmed with six judges of that court that they were appointed before
age 40:
The youngest among them was 36 years of age. One was appointed
at 38 and four were appointed at 39. There are also four fairly recent
appointees who I suspect were also under 40 years of age. They were
all ladies and I have not had the time or courage to attempt to have
them confirm their age at appointment.
All of the people appointed before age 40 have to serve more
than 20 years before they become entitled to any retirement benefit
under the Judges' Pensions Act. [19]
3.27 The Attorney-General's Department, however, was more supportive
of stability in the judiciary and less enamoured with the flexibility
view. They thought there was a risk that independence could be at risk
if the judiciary were seen as 'merely a stepping stone in a person's career'.
[20] Also, it would seem undesirable
to encourage active and able judges to retire earlier than they do now,
'when the aim of the government clearly would be to keep experienced,
able and active judges on the bench for as long as possible'. [21]
Mr Moss told the Committee that:
In general - although of course there are occasional exceptions
- a judicial career should be seen as the pinnacle and the end of the
career, with a guaranteed retirement income after that, so that there
can be no question of there being any lack of independence. [22]
Golden handcuffs?
3.28 The Committee noted a perceived problem of judges being effectively
restrained in their retirement plans. While the majority of the population
enjoys access to benefits on retirement at age 55, judges cannot access
their retirement benefits until age 60.
3.29 The effect was described by Chief Justice Nicholson of the Family
Court as judges being 'chained to the job until they reach the age of
60, unless they are particularly wealthy or have some other lucrative
offer which they cannot refuse'. He said:
in the normal course of events, a judge would really feel, even
though they might want to retire and perhaps should retire, that they
cannot afford to retire until the age of 60. They may well have given
20 years service. [23]
3.30 The Chief Justice also indicated this was not a desirable outcome
from the public's point of view in that 'the golden chain of superannuation
is used to tie them into a position'. [24]
3.31 Justice Davies of the Federal Court had a different view, at least
in regard to his court. While he indicated that courts did differ in relation
to their needs, he said of the Federal Court Judges:
Those who have been appointed will certainly go through to age
60, and we would hope that they would stay longer. But we would not
want on the Federal Court judges appointed at age 45 and leaving at
age 55. [25]
3.32 The Committee considered this question further in Chapter 2 in relation
to the recruitment of judges.
Comparison with other schemes
3.33 The provisions of the Federal judicial pension scheme correspond
closely with judicial pension schemes operating in the states (see table
below [26]).
| Jurisdiction |
Contribution |
Pension as a % of Salary |
Spouse pension as a % of Salary |
Child's pension |
| Com/wealth |
Nil |
60 |
37.5 |
Yes |
| N SW |
" |
" |
30 |
" |
| Vic |
" |
" |
37.5 |
" |
| Qld |
" |
" |
30 |
" |
| SA |
" |
" |
40 |
" |
| WA |
" |
" |
37.5 |
" |
| Tas |
5% of salary |
50 |
33.3 |
No |
| NT |
Nil |
60 |
37.5 |
Yes |
3.34 The qualification for a pension is generally attaining 60 years
of age and ten years service, except for Tasmania where it is 15 years
service. [27]
3.35 It is clear from the above that there is significant consistency
between the schemes for Federal and State judges.
The Canadian scheme
3.36 The Committee regards Canada as a suitable country with which to
compare Australia's judicial pension scheme. [28]
3.37 Section 42 of the Canadian Judges Act provides for the granting
of a pension equal to two-thirds of the salary of the office of a judge
at the time of his or her resignation, removal or ceasing to hold office,
to a judge who:
(a) has continued in office for 15 years and has attained the age of
65, if he or she resigns his or her office; (b) has continued in office for 15 years but has not attained the age
of 65, if his or her resignation is conducive to the better administration
of justice or is in the national interest; (c) resigns or is removed as a result of becoming afflicted with a
permanent disability preventing him or her from executing his or her
office; or (d) has reached the mandatory retirement age of 75, if he or she has
held office for at least 10 years.
3.38 If a judge reaches the mandatory retirement age without having served
for 10 years, the pension entitlement is based on years of completed service
as a proportion of 10.
3.39 Prior to 1975, federally appointed judges made no contribution toward
their pensions. In 1975 the Judges Act was amended to require contributions
of 1.5 per cent of salary for judges appointed before February 17, 1975.
Judges appointed on or after this date must contribute at a rate of 6
per cent of salary.
3.40 In a report of the 1992 Commission on Judges Salaries and Benefits,
the Commission supported judges' contributions. They noted that 'even
at the current rates of contribution, the judges are actually paying for
about one-fifth of the overall cost of their pensions. About 80% of the
cost is born by Canadian taxpayers.' [29]
In the UK
3.41 The Judicial Pensions and Retirement Act 1993 (UK) governs
the payment of pensions to judges in the United Kingdom. [30]
A life time pension is paid to a judge who has retired on or after age
65 and completed at least five years service. An actuarially reduced pension
is paid to a judge retiring after age 60 but before 65, and has at least
five years service. A judge who retires before 65 (on completion of five
years service) because of infirmity of mind or body, is entitled to a
pension without reduction.
3.42 The rate of pension payable depends on length of service. Where
a judge has completed 20 years service the appropriate rate is 50 per
cent of the pensionable pay. For less than 20 years service, the appropriate
rate is two and one-half per cent for each year (or part) of service.
Lump sum payments
3.43 On retirement, a judge is entitled to a lump sum payment of two
and one-quarter times the annual rate of pension in addition to the pension
the judge would normally receive.
3.44 If a retired judge should die so soon after commencement that the
aggregate of the lump sum paid or payable, and the sums paid or payable
under the pension, is less than five times salary before death, the legal
representative will be entitled to a lump sum equal to the deficiency.
3.45 Where a judge dies while in service, a lump sum equal to twice pensionable
pay is payable to a person nominated by the judge or, in default, to the
legal representative.
Spouses and children's pensions
3.46 A surviving spouse is entitled to 50 per cent of the judicial pension.
The marriage must have taken place before the judge retired. If the surviving
spouse remarries, the Treasury may direct that the pension cease.
3.47 There are various provisions for children's pensions, the rates
depending on the number of children and whether there is or is not a surviving
spouse.
Contributions and other matters
3.48 The Regulations may prescribe the level of contributions to be made
which shall be deducted from judicial salaries. Additional voluntary contributions
may also be provided for in the Regulations.
3.49 A judge may elect not to have the judicial pension scheme apply,
but instead arrange to have a personal pension scheme. That election is
irrevocable, except where the judge gives written notice to the appropriate
Minister of a desire to again be covered by the scheme's provisions. Service
during the period of membership of the personal pension scheme is not
counted for purposes of the Pensions Act.
3.50 Judges are entitled to a benefit from only one judicial pension
scheme, but this does not prejudice any entitlements a judge may have
under any other retirement arrangements.
3.51 Any entitlements accrued under any other judicial pension scheme
can be transferred to the scheme provided for under this Act. In that
case the judge's benefit under this Act will be determined having regard
to the amount transferred and the service period that represents.
Lessons from the history
3.52 The Committee found that the historic trend has been to increase
the generosity of the pension scheme for judges. However, evidence to
the Committee in this inquiry has not generally sought greater generosity.
3.53 The Committee noted in particular the pension provision in the 1948
Bill which provided for a pension after ten years service of 27.5 per
cent of salary, increasing by 2.5 per cent for each additional year up
to a maximum of 40 per cent of salary at retirement.
3.54 The Committee submits that some consideration could be given to
an increased pension in the current scheme for those judges who continue
in service beyond the age of 60. This would provide an incentive for judges
to remain on the bench beyond the age when the pension first becomes available,
and be consistent with the proposition that the Federal judiciary be encouraged
to be a long term career.
3.55 There is also the a question of discounted pensions in the event
of retirement prior to the age of 60, but with the requisite 10 years
service. In this regard, the Committee takes a lead from the British scheme
to make the following recommendation.
Recommendation 3.1
The Committee recommends that the Judges' Pensions Act 1968 be
amended to provide for an actuarially reduced life pension to be paid
to a judge who retires under age 60 after ten or more years service, but
who has attained the age of 55.
[Return to Table of Contents]
Footnotes
[1] Submission No. 1, The Hon. Chief
Justice W.J.E. Cox, Chief Justice of the Supreme Court of Tasmania, p.
1.
[2] Section 4(1)
[3] Submission No. 41, Attorney-General's
Department, p 1.
[4] Second reading speech, House of Representatives,
Hansard, 17 November 1948, p. 3071.
[5] Second reading speech, House of Representatives,
Hansard, 17 November 1948, p. 3071.
[6] House of Representatives, Hansard,
17 November 1948, p. 3071-2.
[7] House of Representatives, Hansard,
16 May 1968, p. 1539.
[8] The salary that a retired judge would receive
if still serving as a judge.
[9] Submission No. 41, Attorney-General's
Department, p. 2.
[10] Submission No. 41, Attorney-General's
Department, p. 2.
[11] Judges' Pensions Act 1968, s 6(2).
[12] Submission No. 41, Attorney-General's
Department, p. 3.
[13] Judges' Pensions Act 1968, s 8.
[14] Judges' Pensions Act 1968, s 14.
[15] Submission No. 41, Attorney-General's
Department, p. 3.
[16] Submission No. 42, Australian Government
Actuary, p. 13.
[17] Submission No. 42, Australian Government
Actuary, p. 12.
[18] Submission No. 42, Australian Government
Actuary, p. 11.
[19] Evidence, Justice Mullane, p. 4.
[20] Evidence, Mrs Maggie Jackson, p.
68.
[21] Evidence, Mr Richard Moss, p. 68.
[22] Evidence, Mr Richard Moss, p. 69.
[23] Evidence, Chief Justice Nicholson,
p. 44.
[24] Evidence, Chief Justice Nicholson,
p. 44.
[25] Evidence, Justice Davies, p. 39.
[26] Submission No. 42, Chief Justice
Cox, p. 11.
[27] Submission No. 42, Chief Justice
Cox, p. 11.
[28] Details taken from the Report and Recommendations
of the 1992 Commission on Judges Salaries and Benefits, March 31,
1993.
[29] Report and Recommendations of the 1992
Commission on Judges Salaries and Benefits, March 31, 1993.
[30] Information about the UK system is drawn
from a submission by The Hon. Justice Stephen O'Ryan, Submission No.
47 Supp.
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