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FACT SHEET
Public Sector Superannuation Reform Amendment Bill 2019
A strategic review of the former Retirement Benefits Fund was undertaken in 2013 to
identify the most appropriate means to provide superannuation services to public sector
employees and members of the RBF into the future.
The Government’s reforms to public sector superannuation had a number of key
objectives, including to:
- protect the interests of members;
- minimise the financial risks to the Government; and
- ensure the efficient and effective provision of Government superannuation
services in the future.
On 17 June 2016, the Public Sector Superannuation Reform Act 2016 received Royal Assent.
The legislation:
- provided for a new default fund to be selected for Tasmanian public sector
employees;
- provided for the transfer of Tasmanian Accumulation Scheme accounts from the
RBF to Tasplan;
- created a Superannuation Commission of up to three persons; and
- provided for the ongoing member administration and investment management
services of the defined benefit schemes by the Superannuation Commission.
In April 2017, the RBF’s Tasmanian Accumulation Scheme accounts were transferred to
Tasplan, with administration of the defined benefit schemes being managed by the
Superannuation Commission.
There are currently five defined benefit sub-funds:
- Retirement Benefits Fund Defined Benefit (Contributory) Scheme;
- State Fire Service Superannuation Scheme;
- Tasmanian Ambulance Service Superannuation Scheme;
- Parliamentary Retiring Benefits Fund; and
- Parliamentary Superannuation Fund.
Since the commencement of the new operating framework, a number of issues have
arisen that are impacting on the efficiency and effectiveness of the new arrangements. The
Government proposes to make a number of amendments to the Public Sector
Superannuation Reform Act to more effectively support the administration arrangements
for public sector superannuation in Tasmania.
Currently, the Public Sector Superannuation Reform Act provides that the Superannuation
Commission must comply with the Heads of Government Agreement in relation to
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superannuation. The effect of this drafting is to place a higher obligation on the
Commission to comply with the principles of the Agreement than the obligations of the
State as a party to the Agreement. This includes reporting and compliance responsibilities
to the Australian Prudential Regulation Authority, which are not considered to be relevant
in the context of a government guaranteed defined benefit scheme.
It is noted that the States and Territories are required to conform with the principles of
the Heads of Government Agreement to the best of their endeavours and ensure that
members’ accrued benefits in exempt public sector superannuation schemes are
protected.
The Public Sector Superannuation Reform Amendment Bill will amend the functions and
powers of the Superannuation Commission to provide that the Commission must have
regard to the Heads of Government Agreement rather than adhere to strict compliance,
which is the intent of the Agreement in respect of exempt public sector superannuation
schemes.
The Public Sector Superannuation Reform Act currently provides that the Superannuation
Commission must ensure that proper accounts and records of the transactions and affairs
of the Commission are kept, as well as any other records that sufficiently explain the
financial operations and position of the Commission. It was intended that, as part of the
implementation of the structural reforms, Treasury would undertake the accounting
functions on behalf of the Commission, including the preparation of financial statements
in accordance with the Audit Act 2008 as the “accountable authority” for the Commission.
In order to clarify the roles and responsibilities for audit and reporting, the Public Sector
Superannuation Reform Act will be amended to make the Secretary of the Department
of Treasury and Finance the accountable authority of the Superannuation Commission for
the purpose of financial reporting pursuant to section 14 of the Audit Act.
The Public Sector Superannuation Reform Act will be amended to facilitate the closure
of the Tasmanian Government Insurance Office Reserve Account and to require the
employer share of benefits to be met by the Government on an emerging cost basis,
consistent with the Retirement Benefits Fund Defined Benefit Scheme.
The TGIO Reserve Account was established in 1993 following the sale of TGIO. In
accordance with the Tasmanian Government Insurance Office (Sale) Act 1993, a lump sum
amount was paid to the former RBF Board to cover the expected employer share of the
liability of all current and former members of the RBF Defined Benefit Scheme who were
previously employed by the TGIO. This was paid into a separate TGIO Reserve Account.
Since 1 April 2017, the TGIO Reserve Account has been maintained separately by the
Superannuation Commission in accordance with the Public Sector Superannuation
Reform Act and the Public Sector Superannuation Reform Regulations 2017.
Currently, there is only one active former TGIO member with a Compulsory Preservation
Account and 12 members with Life Pensions. The balance of the TGIO Reserve Account
as at 30 June 2018 was $4.2 million.
Under the current legislative framework, the State Actuary is required to review the
adequacy of the TGIO Reserve Account prior to any surplus being transferred to the
Crown. This is a costly exercise and, as there is only one active member, the cost of
maintaining the Account in terms of administration fees and charges, outweighs any benefit
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from having separate accounts. Further, as the legislation requires the Government to
guarantee the payment of pensions, there is no reason that TGIO pensions could not be
managed on the same basis as other RBF pensions.
The Public Sector Superannuation Reform Amendment Bill will facilitate the closure of
the TGIO Reserve Account and provide for the balance of the Reserve Account to be
transferred to the Public Account. The employer share of benefits would be met by the
Government on an emerging cost basis, as with the RBF Defined Benefit Scheme.
Following the commencement of the new arrangements under the Public Sector
Superannuation Reform Act, a number of issues have arisen with some of the definitions
in that Act.
The Public Sector Superannuation Reform Amendment Bill will amend the current
definitions of “agency” and “agency manager” to ensure that the definitions capture
Government Business Enterprises within the meaning of the Government Business
Enterprises Act 1995.
In addition, the definition of “salary” will be amended to correct a drafting anomaly to
ensure that it includes only “payments made in lieu of notice on the termination of
employment” rather than all payments made on the termination of employment. This is
to ensure consistency with Australian Tax Office Ruling SGR/2009/2 that specifies that
termination payments in lieu of notice are included as Ordinary Time Earnings.
The amendment to the definition of salary in section 4(1) of the Act was intended to
address this inconsistency by inserting subclause (e) to include “any other payment made
on the termination of employment”. However, the current drafting in the Public Sector
Superannuation Reform Act is broader than intended as it encompasses all other
payments that may be payable on the termination of employment, such as Employment
Termination Payments, which are specifically excluded from the meaning of Ordinary
Time Earnings under the ATO Ruling.
This amendment will have effect retrospectively from 31 March 2016. As agencies have
continued to calculate superannuation based on the advice from the Department of
Treasury and Finance, there will be no financial impact as a result of this amendment.
The Public Sector Superannuation Reform Amendment Bill will also incorporate the
Tasmanian Ambulance Service Superannuation Scheme Trust Deed and the State Fire
Commission Superannuation Scheme Trust Deed in the Public Sector Superannuation
Reform Regulations.
The Trust Deeds, as currently drafted, duplicate provisions prescribed in the Act and
Regulations, and contain a number of drafting errors and anomalies. In addition, each time
there is an amendment to the Regulations, the Trust Deeds also require amendment to
ensure that they remain consistent.
As part of the amendments proposed to the Public Sector Superannuation Reform Act
to incorporate the Trust Deeds in the Regulations, a provision will be included to provide
that Regulations must not be made unless the relevant unions have been consulted on
the proposed Regulations. This will include any amendment, revocation or substitution of
the provisions. This is consistent with the current requirement regarding amendment to
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the Trust Deeds.
No changes are proposed to the benefits and entitlements under either of these schemes.
In addition to the amendments to the Public Sector Superannuation Reform Act, the
Public Sector Superannuation Reform Regulations will also be amended to:
- amend the definition of salary to exclude allowances paid in lieu of a motor vehicle,
with the effect that such an allowance would, therefore, not be taken into account
in determining future superannuation benefits;
- include terminal illness as a condition of early release, with the
Superannuation Commission to determine whether a contributor is suffering from
a terminal medical condition in line with the circumstances prescribed in the
Superannuation Industry Supervision Regulations 1994 of the Australian Government;
- allow the Superannuation Commission to pay an additional lump sum benefit to a
contributor who has retired on the grounds of total and permanent incapacity,
consistent with the existing provisions for the early release of benefits on
compassionate grounds;
- clarify that the Superannuation Commission must periodically determine whether
an interim invalidity pensioner, who has not attained his or her preservation age, is
eligible to continue to receive the whole or part of his or her interim invalidity
benefit;
- allow the Superannuation Commission to reduce or suspend an interim invalidity
pension in certain circumstances. This amendment will give the
Superannuation Commission the discretion to reduce or suspend an interim
invalidity pension where an invalidity pensioner is engaged in any business or
occupation on his or her own account or is undertaking gainful employment, as well
as in the situation where the pensioner has recovered from his or her bodily
infirmity, physical incapacity or mental illness, so as to be able to undertake gainful
employment;
- introduce a new “interim surviving partner pension” to allow a surviving partner of
a pensioner to be paid an interim pension immediately following the death of the
member-partner, where the member-partner had a reversionary life pension;
- provide greater clarity to the Superannuation Commission and scheme members in
the determination of surviving partners, by amending the test for the determination
of surviving partner to allow the Commission to determine a person to be a
surviving partner in the case where a spouse of a Fund member is not living with
the Fund member due to medical or other care reasons;
- ensure that the Superannuation Commission cannot allow a person to become a
contributor to the defined benefit schemes through claiming lost rights by extending
the operation of subregulation 101(3), which prevents the Commission from
enabling a person who is a not a State Service employee from becoming a
contributor, to include current State Service employees;
- allow the Superannuation Commission to deduct, from a pension payable under the
Regulations, bank fees associated with the payment of that pension to an overseas
bank account, as well as other associated fees and charges as determined by the
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Commission. This will ensure that the higher costs associated with the payment of
pensions to overseas bank accounts, as well as any other special arrangements as
elected by a member, can be recovered from the pension paid to that member,
rather than being paid from the assets of the Fund; and
- incorporate the relevant provisions of the Trust Deeds for the
Tasmanian Ambulance and State Fire Commission Superannuation schemes. It is
not proposed to change any of the benefit entitlements or the design of either of
the schemes.
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