Chapter 4
Labor and Australian Democrat Senators' Majority Report
4.1 Labor and Australian Democrat Senators believe that the Government's
choice of superannuation model will severely disadvantage many existing
Commonwealth Public Servants and all prospective Commonwealth Public Servants.
4.2 What the Government has labelled as an attempt to introduce choice
of superannuation fund into the Australian Public Service is actually
nothing more than another broken promise by the Prime Minister, Mr Howard.
4.3 Many provisions of this legislation breach the personal undertaking
given in writing to all public servants by the Prime Minister before the
1996 election:
I give you my rock solid guarantee that the Coalition will not cut and
destroy public sector superannuation schemes or the entitlements of existing
and prospective Commonwealth Government employees. [1]
Attached to this letter was the statement:
A Coalition Government will:
- guarantee all accrued superannuation entitlements and retain separate
agreements for public sector superannuation;
- review vesting and portability issues which inhibit movement between
Federal and State public services and the private sector. [2]
4.4 If the Government was seriously interested in introducing choice
of fund, it would not close the Public Sector Superannuation Scheme to
new Commonwealth public servants and would not be trying to force workers
to choose a fund offered by their employer.
4.5 The Government seems intent on driving choice into the public sector
to suit ideological reasons rather than reflecting genuine demand from
employees.
4.6 In addition, the Government has shown little commitment to a public
education campaign which would allow workers to make an informed choice
of fund, after weighing up all of the facts which could affect their decision.
4.7 Under the Government's bills, employees who either cannot join the
PSS or opt out of either the CSS or PSS should be completely aware that
they would or will be disadvantaged in the following ways:
- Potentially lower levels of contributions from the employer, as departments
and agencies are only obliged to contribute the statutory superannuation
guarantee (SG) minimum. This will impact on final retirement incomes,
which will be correspondingly lower.
- The shifting of a considerable investment risk from the employer,
who currently bears the investment risk inherently in the defined benefit
scheme – to the employee who, through joining an accumulation fund
will directly bear the investment risk;
- Lower death and disability insurance cover at greater cost; and
- The shifting of administration costs from the employer, via Comsuper,
to the employee's via their chosen fund.
There are other relevant concerns also raised in Chapter 3 of the report.
4.8 There is currently significant mobility within the Public Service,
but given that different departments will offer different superannuation
options, those employees who transfer will either have to:
- open a new fund and maintain their existing fund at greater administration
cost; or
- transfer their monies from their existing fund to one of the new options
prescribed by the employer. The transfer of monies (consolidation) may
not be possible without significant financial penalty due to exit fees.
Recommendation
- Labor and Australian Democrat Senators recommend that, consistent
with recommendations made in the Senate Select Committee's Twenty Eighth
Report on Choice of Fund:
- employees should not be adversely disadvantaged by the move to choice
of fund;
- if any proposed model of choice of four funds is proceeded with, genuine
agreement should be reached with employees;
- the PSS should not be closed but instead should continue to be offered
as a fund choice to new members of the Australian Public Service;
- the start date for choice of superannuation fund should be delayed
until 1 July 2000 for both new and existing employees;
- any default fund arrangements should be based on the fund to which
the majority of employees at a worksite belong, provided they are eligible
to join;
- the default fund must meet minimum standards in the areas of insurance
and investment choice.
Labor Senators recommend that the bills not be passed unless substantially
amended to address the concerns outlined above.
Senator the Hon. Nick Sherry Senator Stephen Conroy
Deputy Chairman
Senator Chris Evans Senator Lyn Allison
Footnotes
[1] Letter dated 28 February 1996, by the then
Leader of the Opposition, the Hon. John Howard MP.
[2] Extract from Coalition superannuation and
public administration policy released February 1996.
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