Ursula Stephens (NSW, Australian Labor Party, Parliamentary Secretary for Social Inclusion and the Voluntary Sector) Share this | Link to this | Hansard source

I table revised explanatory memoranda relating to the bills and move:

That these bills be now read a second time.

I seek leave to have the second reading speeches incorporated in Hansard.

Leave granted.

The speeches read as follows—

Governance of Australian Government Superannuation Schemes Bill 2010

The Governance of Australian Government Superannuation Schemes Bill 2010 (the Bill) is part of a package of Bills to improve and modernise governance arrangements for the main Commonwealth civilian and military superannuation schemes.

The Bill gives effect to the Government’s announcement, in October 2008, to merge the trustees for the Commonwealth’s main civilian and military superannuation schemes–that is, the Australian Reward Investment Alliance, the Military Superannuation and Benefits Board and the Defence Force Retirement and Death Benefits Authority–to form a single trustee body from 1 July 2010.

The Bill establishes the Commonwealth Superannuation Corporation (CSC) as the single trustee. CSC is a Commonwealth authority for the purposes of the Commonwealth Authorities and Companies Act 1997.

Importantly, the Bills do not impact on the design of the schemes or on members’ entitlements, which are protected by separate scheme legislation that cannot be changed by the trustee. There is also no change to the existing features and benefits that reflect the special nature of military service in the Australian Defence Force, such as death and disability arrangements.

The Government’s decision to merge the civilian and military trustee boards was made with the aim of improving member benefits and service levels.

In particular, the ability of a single trustee to consolidate scheme funds will provide access to higher service levels and better investment opportunities, which will allow members of all of the schemes to benefit through lower investment costs and higher investment returns.

Members of the Military Superannuation and Benefits Scheme–which comprises the bulk of serving Defence Force personnel–stand to gain substantial benefits from the merger. This is because of the relatively smaller size of this scheme when compared with the civilian schemes. There is clear industry experience that members of smaller superannuation schemes have the most to gain when their scheme funds are consolidated into a larger pool of funds.

In line with this industry experience, modelling by the Department of Finance and Deregulation suggests a new MSBS member under the single trustee, who joins the Air Force at age 18 as an Officer Cadet and retires at the rank of Group Captain after serving 37 years, could achieve an increase in superannuation benefit of some $95,000 over a full career. This would amount to a 9 per cent increase in the member’s superannuation savings.

Similarly, a new MSBS member under the single trustee, who joins the Navy at age 18 as a Seaman, and retires as a Warrant Officer after serving 37 years could achieve an increase in superannuation of some $67,000 over a full career. This would amount to a 10 per cent increase in the member’s superannuation savings.

All scheme members will also ultimately benefit through a highly skilled and innovative trustee being responsible for their superannuation schemes. This includes the ability for the single trustee, due to its increased presence in the superannuation industry, to attract and retain quality and experienced board members and staff.

An important consideration when preparing the Bill was to recognise the special nature of military service under the single trustee framework. In finalising the Bill, the Government welcomed the opportunity to hear the views of military stakeholders and made changes to the Bill that are consistent with the views put forward by the ex-service community. This includes providing for greater consultation in relation to the nomination and appointment of directors to the governing board of the trustee.

Both military and civilian interests will be represented on the governing board of CSC. The Chief of the Defence Force will be responsible for nominating two employee directors and there will be consultation between the Finance and Defence Ministers on suitable candidates for the five employer director positions. Three other employee directors are nominated by the President of the ACTU.

In relation to the employee directors on the board, the consent of the nominating party, either the Chief of the Defence Force or the ACTU, is required in some circumstances to terminate the appointment of a director who has been nominated by that party. This arrangement already applies in the civilian schemes and is underpinned by the equal representation rules in the superannuation prudential framework.

However, the consent of the Chief of the Defence Force or ACTU is not required in all circumstances. Importantly, this includes where an appointment would be inconsistent with superannuation fitness and proprietary standards or where the appointment automatically terminates due to the person being disqualified under the superannuation prudential rules, for example, where the director is bankrupt.

As I have mentioned previously, the Bill does not change the existing features of military superannuation that reflect the special nature of military service. Rather, the Bill complements these features while providing opportunities for members of all the schemes to benefit from better practice trustee operations.

Overall, the implementation of the Bill will better secure the superannuation arrangements for Commonwealth civilian employees and military personnel for the long term. It will also allow substantial benefits to flow to members, while retaining the individual scheme benefits and entitlements.

The Bill evidences the Government’s ongoing commitment to provide efficient and sustainable superannuation arrangements for Commonwealth employees and military personnel, together with its strong commitment to protect those features of military superannuation that recognise that military service is unique and different from civilian employment.

ComSuper Bill 2010

The ComSuper Bill 2010 (the Bill) is part of a package of bills to improve and modernise the governance arrangements for the main Commonwealth civilian and military superannuation schemes.

This Bill will establish ComSuper and provide that it is a statutory agency for the purposes of the Public Service Act 1999 consisting of a Chief Executive Officer (CEO), as head of the agency, and staff. The Bill will also provide that ComSuper will be a prescribed agency for the purposes of the Financial Management and Accountability Act 1997.

The Bill will modernise the governance structure of ComSuper as a statutory agency, and clarify ComSuper’s functions. The Government’s decision to improve superannuation administration was made with the aim of improving service levels for current and former members.

The function of the CEO will be to provide administrative services to the Commonwealth Superannuation Corporation (CSC), which will be established as the trustee of the main Australian Government civilian and military superannuation schemes from 1 July 2010 by the Governance of Australian Government Superannuation Schemes Bill 2010. The CEO will be responsible for providing administrative services to CSC.

The CEO will be appointed by the Minister for Finance and Deregulation in consultation with the Minister for Defence.

Overall, the implementation of the Bill will better secure the superannuation arrangements for Commonwealth civilian employees and military personnel for the long term. The Bill evidences the Government’s ongoing commitment to provide efficient and sustainable superannuation arrangements for Commonwealth employees and military personnel, which includes investment of some $22.4 million to improve ComSuper’s administration systems.

Superannuation Legislation (Consequential Amendments and Transitional Provisions) Bill 2010

The Superannuation Legislation (Consequential Amendments and Transitional Provisions) Bill 2010 (the Bill) supports significant reforms to the governance of Commonwealth superannuation that are included in the Governance of Australian Government Superannuation Schemes Bill 2010 and the ComSuper Bill 2010.

The Bill makes consequential amendments to a range of other Commonwealth Acts of Parliament to take account of the changes to governance arrangements for Commonwealth superannuation schemes. It also puts in place transitional arrangements necessary for the reforms.

The Bill amends the Superannuation Act 2005 to facilitate public sector employees being able to consolidate their superannuation savings under the management of one trustee.

Importantly, the Bill also amends the Defence Force Retirement and Death Benefits Act 1973 to allow the single trustee to establish a dedicated Defence Force Case Assessment Committee. The establishment of the Committee would provide for the continuation of the current role and function of the Defence Force Retirement and Death Benefits Authority (DFRDB Authority) within the framework of the single trustee.

While the Bill sets out the role of the Committee and provides for military representation in respect of its membership, the establishment of the Committee by the trustee has not been not been mandated in legislation. This approach has been adopted in line with the overwhelming majority view of military stakeholders that flexibility should be maintained, both now and in the future, for the trustee to be able to establish arrangements that best serve the needs of members of the military schemes.

As I have mentioned, the Bill provides for the Committee to have military representation. This includes representation from each of the three services. The Bill also prescribes the Chair as being one of the directors of the Commonwealth Superannuation Corporation who was nominated by the Chief of the Defence Force.

The arrangements for the Committee set out in the Bill evidence the Government’s commitment to respond to the views of military stakeholders on issues that are important to them and its commitment to recognise the special nature of military service.

Debate (on motion by Senator Stephens) adjourned.