Gary Humphries (ACT, Liberal Party, Shadow Parliamentary Secretary for Defence Materiel) Share this | Link to this | Hansard source

asked the Minister for Finance and Deregulation, upon notice, on 16 November 2010:

In both the submissions from the department and the Australian Government Actuary (AGA) to the Matthews Review, there is an explicit assumption made that the 'take up rate of pensions' would be greater under improved indexation arrangements as analysed, which subsequently affected (significantly) the financial estimates generated:

(1) On what historical basis have these assumptions been made.

(2) What hard historical data can be provided to support the assumptions.

(3) Given that the AGA's assumption that the take up rate of pension for the employer component would be from 75 per cent to 90 per cent for officers and 60 per cent to 80 per cent for other ranks (AGA submission, page 2) and that the implied take up rate of civilian schemes would be 50 per cent (department's submission, page 27), what would the estimates be if this assumption was completely removed from the analysis.

Penny Wong (SA, Australian Labor Party, Minister for Finance and Deregulation) Share this | Link to this | Hansard source

The answer to the honourable senator's question is as follows:

(1) and (2) Mercer (Australia) Pty Ltd (Mercer), the actuary for the civilian superannuation schemes and the Australian Government Actuary (AGA) assumed that enhanced indexation arrangements would result in a higher proportion of Public Sector Superannuation Scheme (PSS) and Military Superannuation and Benefits Scheme (MSBS) benefits being taken as a pension because pensions would become relatively more valuable and therefore relatively more attractive than lump sum benefits.

The updated estimates of the cost of alternative indexation arrangements for Commonwealth superannuation pensions that is available on the Department of Finance and Deregulation website includes copies of the Mercer and AGA recent actuarial advice. That advice sets out information in relation to the assumptions they have made including in relation to the take-up rate of pensions in the PSS and MSBS.

(3) There would be an increase in the cash payments over the forward estimates, which is a negative impact on the underlying cash balance. There would be a small reduction in the increase in unfunded liability.