Kelvin Thomson (Wills, Australian Labor Party, Shadow Minister for Public Accountability and Human Services) Share this | Hansard source

The Parliamentary Superannuation Amendment Bill 2006 proposes amendments to the Parliamentary Superannuation Act 2004 that include superannuation arrangements for the members of parliament who were elected at the 2004 general election and subsequently. It does not apply to members elected prior to the 2004 general election.

The 2004 act, in respect of the members whom it covers, provides that a government contribution of nine per cent of parliamentary salaries is payable to a complying superannuation fund other than a self-managed fund, a retirement savings account chosen by the member or, where no choice is made, to the default fund declared by the Minister for Finance and Administration.

The amendments included in the bill increase the superannuation contributions payable under the 2004 act from nine per cent of parliamentary salaries to 15.4 per cent of parliamentary salaries. The increase in the contribution rate will apply to the contribution payable under the 2004 act for the month in which the bill receives royal assent.

The amendments proposed in the bill give effect to the Prime Minister’s announcement on 7 September that the government would introduce legislation to adjust the level of superannuation for parliamentarians elected at the 2004 election and subsequently so that it is the same as that paid to Commonwealth public servants—that is, 15.4 per cent. The cost of the measure has been estimated by the government to be $200,000 for the 2006-07 financial year, $500,000 for the 2007-08 financial year, $700,000 for each of the next two financial years and $900,000 for the 2010-11 financial year. The cost is due to the increase in the expense of funding an additional 6.4 per cent in government superannuation contributions.

To shed a little more light on this decision and this bill, I will make reference to some correspondence from the Remuneration Tribunal to the whips. It notes that the superannuation arrangements introduced in 2004 for new senators and members entering federal parliament for the first time were a considerable departure from the previous scheme, the Parliamentary Contributory Superannuation Scheme. However, such changes are not unique to federal parliamentarians. Accumulation schemes have been introduced in all state parliaments, and previous defined benefit schemes have been closed to members. Similar developments have occurred in the federal public sector. Until 1 July 2005, new employees entering the Australian Public Service joined the Public Sector Superannuation Scheme defined benefit plan. Since that date, they have joined the PSS accumulation plan, which provides fully funded accumulation benefits based on an employer contribution of 15.4 per cent of salary or ordinary time earnings. The tribunal notes that this contribution rate matches the notional employer contribution rate under the superseded Public Sector Superannuation Scheme defined benefit plan. The fact that different schemes have contemporaneous application, with membership differentiated on the basis of the date of commencing employment or some other factor, is therefore not unique or unusual.

However, the tribunal goes on to say that it has been conscious that, in deciding the old scheme should be closed to new members and that a fully funded accumulation scheme should be introduced for new members, the parliament also decided that the employer contribution should be nine per cent of a member’s parliamentary allowance and any additional salary received as a result of the member holding a parliamentary office. The tribunal notes that the Department of Finance and Administration, in its submission to the 2004 inquiry by the Senate Finance and Public Administration Legislation Committee into the Parliamentary Superannuation Bill 2004 and the Parliamentary Superannuation and Other Entitlements Legislation Amendment Bill 2004, drew attention to the fact that, while contributions at a rate of nine per cent, based on salary alone, would ensure the same superannuation salary base for the old scheme and the then proposed accumulation scheme, contributions at that rate and on that basis will provide most new members with superannuation contributions that are less than the contribution an employer would be required to provide in accordance with superannuation guarantee legislation based on ordinary time earnings. The tribunal considers that, as the accumulation scheme made a complete break with the past, there are sound arguments to support placing the employer contribution to the accumulation scheme on a footing which is wholly consistent with that anticipated by the superannuation guarantee legislation. This would entail taking a member’s electorate allowance into account as a component of ordinary time earnings.

The tribunal goes on to say that its fundamental role is to determine or advise on remuneration for officers in the federal public sector. It notes that remuneration in the public sector tends to be fixed at rates that are materially less than the levels applying to jobs of comparable responsibility in the private sector. The concept of tenure was once perceived as a counterbalance to the lower levels of remuneration in the public sector, but that is no longer relevant to senior public sector officers and indeed has never been relevant to parliamentarians.

The Senate Select Committee on Superannuation observed in its 25th report:

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.

In the tribunal’s view, this observation has considerable weight. The tribunal endorses the Senate select committee’s view 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.

3.16 If the superannuation portion of parliamentary remuneration is substantially reduced without compensation elsewhere in the remuneration package, it is possible that such a deterrent may become substantial.

Apart from the level of remuneration, parliamentarians’ entitlements share other significant attributes with the federal public sector. Their entitlements are subject to detailed specification and prescriptive administrative guidelines, and lack flexibility. Indeed, it can be said that in these regards the remuneration of parliamentarians generally lags behind the public sector.

The base salary of parliamentarians has been linked for a considerable period directly to one point or another point in a federal public sector salary structure. That continues to be the case. In reaching its decision on the appropriate contribution rate for the new parliamentary accumulation superannuation scheme, the parliament took a broad view of an appropriate community standard and accorded less weight to considerations arising from the overall balance of parliamentarians’ remuneration and longstanding affinities with the federal public sector.

In the conclusion to the report on its 2004 inquiry, the Senate Finance and Public Administration Legislation Committee referred to the 15.4 per cent employer contribution rate then proposed to apply to the PSS accumulation plan. It stated that it believed:

... there is merit in considering setting the employer contribution rate for the proposed parliamentary superannuation at a comparable level.

In the tribunal’s view, the committee, in drawing this conclusion, struck the appropriate balance. There may well be some public criticism of this change—no increase to MPs’ entitlements is popular—but I invite people, before engaging in knee-jerk groans of the snouts-in-the-trough kind, to reflect on two things. The first is the fact that Australia as a country is relatively corruption free. This is a wonderful thing and the importance of it cannot be overstated or rated too highly. One of the reasons for it—not the only reason by a long chalk—is that a significant number of MPs in this country enjoy a measure of financial security courtesy of superannuation arrangements and do not give much attention to their personal financial affairs. The vast majority of my colleagues on both sides of the House are not on the lookout for opportunities for personal financial enrichment. I hope that in the years ahead we maintain that good fortune.

The second thing we ought to reflect on is that superannuation is one of the elements of MPs’ pay and conditions of service, which in turn is relevant to the issue of candidate quality. We have a situation in which ministers, parliamentary secretaries, committee chairs and the like give instructions to public servants, who in some cases are earning two or three times what they are. It is perverse and it would not be tolerated in the private sector. In a private company, it is the CEO who is paid the most; no other arrangement makes sense. In an ideal world, there would be a limitless supply of public-spirited individuals willing to put themselves forward for elected office without any regard to the impact of that on their personal finances; they would cheerfully work day and night without regard to the impact of that on their family life and would be without a care as to the impact of politics on their reputation, future job prospects et cetera.

In practice, people do not work like that, and people of talent and ability will choose other callings with higher remuneration, a lesser workload, less impact on family life and less wear and tear on the soul. You cannot have it both ways: you cannot on the one hand complain about the quality of your elected representatives and on the other oppose any and all efforts to provide pay and conditions which will encourage our best people to put themselves forward for public office. The opposition supports the bill.

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