Nick Sherry (Tasmania, Australian Labor Party, Shadow Minister for Banking and Financial Services) Share this | Hansard source

The Senate is considering the Parliamentary Superannuation Amendment Bill 2006. The bill proposes amendments to the Parliamentary Superannuation Act 2004, which includes 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 general contribution of nine per cent of parliamentary salaries is payable to a complying superannuation fund other than a self-managed fund or a retirement savings account chosen by the member or, where the member does not make a fund selection, to a 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 contributions payable after the act which results from this 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—and I want to emphasise 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 to be $200,000 for 2006-07, $500,000 for 2007-08, $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 reflect to a greater degree on decisions made in respect of this bill, let me make reference to some correspondence from the Remuneration Tribunal to the parliamentary whips of the respective parties in this and the other place. 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. Whilst it is difficult to obtain precise figures, what are known as defined benefit funds, covering both the public and private sector in this country, over the last 15 years have almost all been shut down. That shutdown is invariably done by way of a date from which new members are not able to enter the defined benefit funds. There are only very few defined benefit funds that are still open funds in this country. Overwhelmingly they have been shut down.

In this context I do want to say that some of the media reporting of the week in which the Prime Minister made his announcement was inaccurate. Some of the media reports described the Prime Minister’s announcement as restoring the position that existed up until 2004. That is simply not correct. It is simply not correct for some in the media to claim that. The defined benefit fund that was shut for parliamentarians in 2004 had an average contribution level from the employer of around 50 per cent. It varied, but there was about a 50 per cent employer contribution. So 50 per cent is clearly not the same as 15.4 per cent. It did also, by the way, have a compulsory employee contribution—in this case for the members of parliament—of 11 per cent for anyone who had been here for 18 years or less.

Accumulation schemes have been introduced in all state parliaments for almost every category of employees who were in previous defined benefit schemes which have been closed to members. It is not easy to get figures—in fact I cannot get any accurate figures about the number of employees in closed defined benefit funds. I would think it would be approximately 10 per cent of the workforce or about one million Australians. So, again, it is not unique for new employees to work side by side with employees who are in an old, closed and more generous defined benefit scheme. That is not unique in Australia. That is not unique to parliamentarians and it is certainly not unique to the public or the private 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 ordinary time earnings. I did some research last night. It is not easy to get precise figures but, according to independent research organisation Rainmaker, the average level of contributions to superannuation in Australia is running at between 15 and 15.5 per cent. It is not easy to get figures, but the average level of employer contribution over and above the statutory nine per cent minimum is running at between two and three per cent. It is not easy to get a breakdown of that but, certainly for employees on above-average weekly earnings, the average employer contribution is running at three per cent or better—and that is up to individual employers.

The average level of employer contribution, in whatever form, is running at between two and three per cent, hence the figure of 15 to 15.5 per cent. As I said, there are no published statistics on that, but we do have data from Rainmaker; and a speech on superannuation was made to the Sydney Colloquium of Superannuation Researchers by an officer of the Treasury, and that gave some analysis—admittedly, not of the entire sector—of a survey carried out in this area. So the proposal to increase the contribution to 15.4 per cent is not unique to members of parliament.

The tribunal notes that the contribution rate matches the notional employer contribution rate under the superseded Public Sector Superannuation Scheme defined benefit plan. As I have said, it is, therefore, not unique or unusual that different schemes should have contemporaneous application, with membership differentiated on the basis of the date of commencing employment or some other factor. The tribunal goes on to say that, in deciding the old scheme should be closed to new members, it has been conscious 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 Senate Finance and Public Administration Legislation Committee inquiry 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 base for the old scheme and the then proposed accumulation scheme, contributions at that rate and on that basis would provide most new members with superannuation contributions that were less than the contribution that an employer would be required to provide in accordance with the superannuation guarantee legislation, based on ordinary time earnings.

I think it is important to emphasise this point: the definition of base salary for the purposes of the superannuation guarantee—the nine per cent—would, in the non-parliamentary sense, include the electorate allowance. That is excluded from the notional base in respect of the current nine per cent contribution range; whereas it is included in other private sector and public sector superannuation funds as part of the notional contribution base. So that is an added argument for the legislation to increase the effective employer contribution above nine per cent.

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—but that is not what we are considering here today. 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, once perceived as a counterbalance to the lower levels of remuneration in the public sector, is no longer relevant to senior public sector officers and, indeed, it has never been relevant to parliamentarians.

The Senate Select Committee on Superannuation observed in its 25th report—indeed, I think I was its deputy chair when this report was prepared—that 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 had considerable weight. The tribunal endorsed 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 higher 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.

If the superannuation portion of the 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 public sector. Parliamentarians’ entitlements are subject to detailed specifications and prescriptive administrative guidelines, and they lack flexibility. Indeed, it can be said that in this regard the remuneration of parliamentarians generally lags behind that of the public sector. The base salary of parliamentarians has been linked for a considerable period directly to one point in the federal public sector salary structure, and this continues to be the case. In reaching its decision on the appropriate contribution 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 its report on its 2004 inquiry, the Senate Finance and Public Administration Legislation Committee referred to the 15.4 per cent employer contribution 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, did strike the appropriate balance.

There has been some public criticism of this change. As I have referred to earlier, I think there has been some inaccurate reporting in the media. Of course, the often stated concern by some in the community that there should be no increase to MPs’ entitlements in any way, shape or form is often a popular position for some to advocate. But I would draw attention in this debate to the fact that, as a country, Australia is, comparatively, almost totally corruption free. That is a good thing for our society and for our body politic. The importance of that cannot be overstated or rated too highly. One of the reasons for this—it is not the only reason—is that a significant number of MPs in this country enjoy a measure of financial security with respect to superannuation.

The vast majority of colleagues on both sides of the Senate are not in the position of being able to personally financially benefit when they leave this place as a consequence of their financial career. Indeed, they make considerable sacrifices—for many, not just financial but with respect to hours of work and demands on their families, particularly their spouses and children.

The second area we ought to reflect on is that superannuation is one element 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. So it is a little perverse. That would not be tolerated in the private sector. Certainly there are senators here—Senator Murray, for instance—who appear before parliamentary committees and subject parliamentarians to varying degrees of scrutiny, some would argue to a grilling at times. Yet, in many cases, we earn considerably less than those persons we are scrutinising.

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 on their personal finances, life and circumstances. However, it is not an ideal world. There are issues that need to be taken into consideration when entering public life and in looking at the impact of politics in general. There is a strong argument that we do, to an extent, ensure that the overall remuneration attracts talent and ability so that people will offer themselves for parliamentary office. In many cases in parliamentary life, remuneration is considerably lower; there is a greater workload, a greater impact on family life and general wear and tear.

The Labor opposition supports the bill before the parliament. We believe that the appropriate balance has been struck, taking into account the expectations in the community of a reasonable level of superannuation contribution, particularly when compared to the general public sector level of 15.4 per cent. In this case a conclusion based on comparison with respect to the general public sector is appropriate.