Sent:	Sunday, 28 January 2007 10:58 PM
To:	super.sen@aph.gov.au
Subject:	Benefit design of Commonwealth Public Sector and Defence Force unfunded superannuation funds and schemes
The Secretary
Senate Select Committee on Superannuation and Financial Services

This submission deals with aspects of benefits available under the
Commonwealth Superannuation Scheme (CSS).

Much has been said by various commentators over a number of years about the
apparent generosity of benefits available on retirement from the CSS scheme,
particularly in respect of the benefits available on resignation just prior
to age 55 and preserving benefits until retirement at 55 or later.

While accepting that on the surface the benefits available to CSS members on
retirement is generous this needs to be examined in comparison with benefits
available to members of the more usual funded 'accumulation' style
superannuation schemes or funds.

The maximum benefits available under the CSS scheme are available to a
'career' public servant who resigns just prior to age 55 after service of 30
to 35 years and preserves their benefit in CSS until retiring at age 55.  An
'average' public servant in this situation may receive a lifetime pension of
$30 000 to $35 000 per annum indexed to CPI.

Assuming that the member has no other income, income tax and medicare
payable on a pension of $35 000 will be $7 405 leaving an after tax income
of $27 595.  There are no tax concessions available to recipients of CSS
indexed pensions and on this income level no concessions on health care such
as is available to those who qualify for the social security aged pension.
This situation does not change as the CSS pensioner ages and reaches age
pension age.  If the CSS member has a dependant spouse they may qualify for
a dependant spouse rebate.

This pension will be indexed to CPI therefore at age 65 will have the same
relative purchasing power as at age 55.

Compare this with a couple retiring at age pension age (65 for a male and
61.5 for a female) who are members of an 'accumulation' style superannuation
fund with a modest combined superannuation benefit of approx $200 000.  This
couple will be able to take advantage of taxation and social security
benefits to achieve an income from superannuation and the social security
age pension of approx $30 000 pa.  This can be achieved through the use of
complying pensions to meet the social security assets test and the use of
'deductible amounts' to meet the social security income test.  On this
income this couple will pay no tax due to deductible amounts and the
superannuation pension rebate thus achieving an after tax income of $30 000
pa or $2405 pa more than the CSS member with a dependant spouse who has no
choice but to accept the 'generous' CSS pension.  In addition to these
benefits the member of the accumulation superannuation fund will qualify for
social security health benefits which are not available to the CSS member.

The basic CSS pension described above cannot be commuted and rolled over to
allow the member to access some of the benefits available to those members
of accumulation style superannuation funds.

The purpose of this submission is not to complain that the CSS scheme is
inadequate but to point out that the generosity of the scheme is tempered by
the inability of CSS members to gain access to taxation and social security
benefits which are available to other superannuation members.  Once these
other factors are taken into consideration the benefits available from CSS
are on a par with those available to members of other 'funded'
superannuation schemes.

I am concerned that due to the perception in some quarters that the CSS
scheme is too generous that there may be pressure to reduce or in some way
'cap' benefits available to CSS members.  If this were to be done CSS
members would be placed at a disadvantage compared with members of other
superannuation schemes and could result in the after tax retirement incomes
of CSS members being significantly lower than equivalent counterparts in
other schemes.

Shane Rashleigh

Phone Bus (07) 3213 3209
	AH  (07) 3207 8598
Address: 5 Jordan Drive
	    Victoria Point Qld 4165