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

Alan Cadman (Mitchell, Liberal Party) Share this | Link to this | Hansard source

I want to thank my colleague Kelvin Thomson for his comments and the way in which he presented this matter, because it is a matter that concerns all members of parliament, on both sides of the House. We rely of course on the Remuneration Tribunal for general guidance in this area. The uncertainty of tenure for a member of parliament and the need to have some sort of benchmark by which to set our superannuation has already been raised in this debate. The Parliamentary Superannuation Amendment Bill 2006 adopts a Public Service guideline, a Public Service setting. In order to bring into line the two sets of conflicting conditions of superannuation for members of parliament that currently apply, following the 2004 amendments, the benchmark which should be applied should be the Public Service benchmark of a contribution of 15.4 per cent. I think there is agreement in the House that this is a reasonable matter, and I have pleasure in supporting the legislation.

Peter Andren (Calare, Independent) Share this | Link to this | Hansard source

I have a few significant points to make about this amendment to the superannuation scheme for MPs elected in the 2004 and subsequent elections, as contained in the Parliamentary Superannuation Amendment Bill 2006. Since the 2004 election, I believed it would only be a matter of time before we saw some movement in this area or in other aspects of members’ and senators’ pay to compensate for the two-tiered remuneration system that was a result of the original incomplete reform of MPs’ superannuation. This was brought about only by the former opposition leader pulling his head out of the sand and recognising the extent of public outrage over the then outrageously generous scheme, which in turn forced the Prime Minister to act, as he said, to bring the system into line with acceptable community standards—or words to that effect.

This situation would have been avoided if the reform had been applied to all MPs, existing or new, at the time of the changes post the 2004 election, with payments made to an accumulation fund of the MP’s choice equivalent to what they would have been paid under the existing PCSS. The Parliamentary Contributory Superannuation Act 1948, which provides the legislative basis for the old overgenerous MPs’ superannuation scheme, also provides under section 16A a mechanism by which a superannuation guarantee equivalent amount can be calculated for those members and senators who wish to opt out of the old scheme and have this amount deposited into an accumulation fund or retirement savings account of their choice. This has also been done many times with the closure of other unfunded superannuation schemes, such as the Western Australian parliamentary superannuation scheme, and done quite successfully.

The Australian public know there is little will among the pre-2004 members and senators to support such a change to their superannuation. The superannuation scheme is so far out of touch with the community standard, and that has been acknowledged by all those who have spoken in support of the need for change after it was put on the public agenda by the former opposition leader in response to consistent raising of this issue via private members’ bills and other processes through the public. I well remember something in the order of 2,000 submissions to a Senate inquiry into a private member’s bill that I put before the House prior to the changes in 2004. To accommodate those members and senators who have a conscientious objection to being part of a superannuation scheme so far out of touch with community standards, I will again move in the consideration in detail stage an amendment that will provide the opportunity for sitting MPs to opt out of the Parliamentary Contributory Superannuation Scheme.

The idea of being in touch with the community standard was part of the Prime Minister’s reasoning for the introduction of the new accumulative superannuation arrangements for new MPs. On 12 February 2004 the Prime Minister said when announcing the changes:

... the Party Room has approved the Cabinet’s decision to legislate immediately to close down the existing Commonwealth Parliamentary superannuation scheme to people elected at the next parliament and it will be replaced by a scheme that attracts a government contribution of nine per cent which is the community standard.

This statement was widely welcomed in a community that had become very cynical about processes whereby their elected representatives put in place standards of office that benefit them which were out of kilter—completely out of kilter in this case—with the expectations of the legislative program they put in place for their constituents.

Let us not try to preach equivalence between MPs and senators and corporate income and corporate payments. Let us have a debate on remuneration for members of parliament, and all the benefits and entitlements should be put on the table at the time that we are debating that. Let us have a proper debate and strike a salary that is completely transparent and includes all of the add-ons and all of those entitlements which should really be called privileges. Are we truly suggesting that we should look at parity with the private sector and the often obscene payments and post-retirement benefits for executives? We are volunteers and represent the community and should abide by the standards we set for the vast majority of our constituents.

This bill before us again puts MPs out of touch with the community standard when it comes to superannuation, raising the employer contribution from the nine per cent superannuation guarantee level to 15.4 per cent. To maintain equality between members and senators and other working Australians, which will better inform debate on superannuation issues in general in the community and in this place, I will also move an amendment to ensure the employer contribution for MPs is equal to that specified in the Superannuation Guarantee (Administration) Act 1992. It is simple: if members of parliament need increased contributions to their superannuation accounts, then so too do the rest of the community. It is unacceptable that we legislate one deal for ourselves and another one for other working Australians.

The only argument put by the Special Minister of State in support of this increase is that our public servants receive an employer contribution of 15.4 per cent. By the same token, if the Australian Public Service receives 15.4 per cent and therefore MPs deserve 15.4 per cent, then so too does everyone else. If we wish people to provide for themselves in their retirement, then we need to get serious about what we legislate with regard to superannuation and the superannuation guarantee in particular.

On the other side of the coin, the co-contribution for low- to middle-income earners to encourage them to make their own contributions to their super accounts is a good start, but people on these income levels, especially with the high levels of household debt we encourage in this country at the moment, would find it incredibly difficult to find anything extra to throw at their superannuation accounts. This would doubly apply to those households relying on part-time or casual employment to meet their needs—remembering, as we all should, that in this country in this day and age it requires but one hour of work for a person to not appear in the unemployment figures. There is a gross underemployment of many people in this community, probably in the order of 15 to 20 per cent.

Short of mandating employee contributions to superannuation, a more generous co-contribution would go a long way towards encouraging people to put some of their pay into savings for their retirement. The streamlining and simplification of superannuation introduced this year is certainly beneficial for those with a lazy million of post-tax contributions to put into superannuation, but what about the rest of the country’s workers? My position basically comes down to this: it is essential that those of us making the laws to determine if Australians are to be able to provide for themselves in their retirement are subject to the same conditions and market pressures for our retirement savings as the rest of the community. My amendments will provide for this and allow that opt-out clause as well for those, like me, who object to benefiting from the earlier discredited arrangement. I do not support this bill in its current form unless it were to include those amendments.

Roger Price (Chifley, Australian Labor Party) Share this | Link to this | Hansard source

I rise to support the Parliamentary Superannuation Amendment Bill 2006. As indicated by the shadow minister, the honourable member for Wills, the Labor Party will be supporting the bill. This bill changes the quantum of the contribution of parliamentary salaries from nine per cent to 15.4 per cent to a complying superannuation fund other than a self-managed fund or a retirement savings account chosen by a member. This change is consistent with the Public Sector Superannuation Accumulation Plan, with a similar non-contributory amount of 15.4 per cent.

I am inordinately proud of the Labor class of 2004: the quality of the members—and senators for that matter—and the contribution they are making to this place. They have relished being members of parliament and have got on with their responsibilities of representing the hopes and aspirations of their constituents. That said, there is a gross disparity between the entitlements of those elected prior to 2004 and the class of 2004. As a whip, I have a responsibility for the welfare of members on my side of the House.

It is for this reason the Chief Government Whip and I wrote a letter in general terms to the Remuneration Tribunal in March of this year. I wish to thank the tribunal for the advice they have provided and the assistance in progressing this matter to this second reading stage of the bill. But let me state that while this bill narrows the disparity it is only incremental. I would like to repeat some of the words my electorate’s namesake Ben Chifley used when he first introduced parliamentary superannuation on 1 December 1948:

In its general purpose the scheme aims to meet the situation, long recognised by members of all parties, that men or women who serve in parliament often sacrifice opportunities to provide against the day when their parliamentary careers come to an end. It has frequently happened that members who have made great contributions to the work of the Parliament have, upon retirement, faced a condition of hardship. Very many others have had to contemplate the results of interrupted careers, earning power lost and private means reduced, through and in the course of their service in the Parliament. The longer and better the service that has been given, the more often has this been the case.

There are various reasons why this has been so. Service in the Parliament has become more exacting as the years have gone by. Unlike the more leisurely conditions of perhaps 50 years ago, parliamentary life now makes heavy and increasing demands on the time and capacities of all who take part in it.

If that was the case in 1948, nearly 60 years ago, it is even more the case today. I think we need to understand that we have changed parliamentary service fundamentally by the changes we made to superannuation. No longer will members of parliament have the financial security to retire after some 10 or 12 years of parliamentary service without their families suffering financial hardship. In fact with these changes, and still with this bill, we have encouraged a mirror of the UK system where we see members of the House of Commons serving up to 30 or 40 years, unable to retire because of the financial impact of retiring. I am not convinced that this is a positive development in our Australian democracy.

The other thing that I would say—it is not a present danger but a future danger—is that, whilst members on both sides have from time to time done some very silly things, you cannot buy a member of parliament. His vote is not for sale. But I fear that in the future a member faced with the possibility of retirement and not the means to retire may very well be tempted, where no member has been tempted in the past. I strongly support this bill. As I say, it goes some way to ameliorating the significant difference between the conditions of service that members prior to 2004 and the conditions of service that the class of 2004 enjoy. I think it is still unfair, but this bill goes some small way to close the gap. More needs to be done.

Gary Nairn (Eden-Monaro, Liberal Party, Special Minister of State) Share this | Link to this | Hansard source

in reply—In summing up this debate, I thank the various members who contributed to it. The Parliamentary Superannuation Amendment Bill 2006 will amend the Parliamentary Superannuation Act 2004 to increase the rate of superannuation contribution for members of parliament elected in the 2004 general election and subsequently, from nine per cent to 15.4 per cent. It will give effect to the Prime Minister’s announcement of 7 September 2006 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. If a member of the federal parliament is not the equivalent of a Commonwealth public servant, I do not know who is.

Increasing the contribution rate as proposed in this bill will align the rate of contribution for these members of parliament with the rate for the Public Sector Superannuation Accumulation Plan. That scheme provides superannuation benefits for Commonwealth public servants and for staff of members of parliament. It is simply bringing those members of parliament elected after 2004 in line with Commonwealth public servants and staff of members of parliament. That is pretty fair I think.

The point apparently has been made during this debate on the bill that it will provide more generous superannuation than is available generally. This is referring to the superannuation guarantee, which is a minimum mandated contribution for Australian workers. This bill will align the contribution rate for parliamentarians elected at the 2004 election and subsequently with that available to many Commonwealth public servants and to the staff of members of parliament, as I have said. It is aligning it with what is effectively the industry standard for the equivalent.

The Prime Minister has emphasised the importance of attracting a cross-section of talented candidates to the parliament. As he has observed, you can do that only if the remuneration they would receive has some relationship to the remuneration they could earn if they did not enter politics. The possible voluntary transfer to the revised accumulation arrangements has also been raised. Allowing existing members of the PCSS to transfer to the revised accumulation arrangements would raise a number of significant issues. If longer serving MPs who have already qualified for the maximum benefit or who are approaching the maximum benefit are allowed to transfer to the revised accumulation arrangements, they could accrue more superannuation than they would under the existing arrangements. This could be seen as double-dipping, because MPs in this situation would receive extra superannuation at a cost to the taxpayer, and they would not have to pay the member contributions that membership of the PCSS would require. For MPs who have not qualified for a pension but who may have qualified if they had remained in the PCSS, allowing them to transfer may result in an undervaluing of their accrued benefits when they transfer. This could be seen as a retrospective change to their existing entitlements, and the Prime Minister made it very clear in 2004 that the new accumulation arrangements would not be retrospective, as is the case for all superannuation legislation irrespective of who it might affect. That has always been the case, and there is absolutely no reason to change it.

This is a simple bill. It is simply changing the contribution from nine per cent to 15.4 per cent to bring it into line with other Commonwealth public servants and the staff of members of parliament. I commend the bill to the House.

Question agreed to.

Bill read a second time.

Message from the Governor-General recommending appropriation announced.