Welcome to the latest edition of the CPSU Super eNews
In this edition:
CPSU win on governance structures for ARIA and Military super boards
Where to now for PSSap administration?
Union action on indexation
The Cooper review
The Henry tax review
How is your fund performing?
Should I change from fortnightly contribution salary to ordinary time earnings
ACTU wants super guarantee raised to 15%
The CPSU improves governance structure for the amalgamated ARIA and Military superannuation boards
The government announced in 2008 it intended to amalgamate the superannuation boards that administer Federal Public Sector and Military Superannuation. There was no proposal that the specific schemes would amalgamate.
ARIA administers $17b and has close to 500,000 current, preserved and retired members. Military Super has about 130,000 members and administers about $3b.
As a result of the CPSU’s concerns, the initial proposal for the structure of the amalgamated board has been revised to improve governance and ensure that there is proportional representation of government, military and employee representatives on the board. This was achieved by:
increasing the number of ACTU-nominated representatives from 2 to 3.
increasing the minimum number of directors required to resolve a decision. A vote of nine trustees is required to establish a decision.
giving the ACTU the authority (consistent with superannuation industry fund arrangements) to nominate its representatives without the government having a right of veto.
It is expected that legislation will be presented to parliament in February 2010, with the amalgamated board coming into operation on July 1, 2010.
Government decision on outsourcing the PSSap administration
ComSuper currently provides administration services to ARIA and Military Super. In late November 2009 the government announced its intention to direct ComSuper to outsource the administration of the PSSap. This decision followed a review by PriceWaterhouseCoopers of the current administrator of funds including the CSS, PSSdb and PSSap, ComSuper.
This decision will only affect employees who are in the PSSap. These are generally employees who have moved from the CSS and PSS or those who commenced employment in the Australian Public Sector after July 1, 2005, and have not chosen another superannuation fund.
Effectively this decision means that ComSuper is sub-contracting out the administration of the PSSap. It is important to note that the administration of the CSS and PSSdb remains under the direct control of ComSuper.
The outsourcing is scheduled to commence on July 1, 2011 and the CPSU will be seeking to ensure that there is no reduction in performance standards as a result of this outsourcing.
The CPSU continues to push for indexation changes to Commonwealth superannuation pensions
The CPSU and a number of other organisations including SCOA have campaigned and lobbied over a number of years to change the indexation methodology. It is currently being based on the consumer price index (CPI) and we believe it would be better to base it on the method used to establish the age pension indexation, i.e. the better of the CPI or MTAWE (male total average weekly earnings).
The government announced an independent review of indexation on June 26, 2008. A number of organisations, including the CPSU, provided submissions to the review. The review was completed in December 2008, but the review report was not released by the government until August 2009.
Whilst this result is disappointing, the CPSU and other organisations, including the Superannuated Commonwealth Officers Association (SCOA), will continue to campaign for this change.
The Cooper review of Australia’s superannuation system
In May 2009, the then Minister Nick Sherry announced a review of Australia’s superannuation system. The review’s focus is on ‘governance, efficiency, structure and operations’ of the system. The CPSU has worked with the ACTU in providing submissions to this review. The final report is due to be provided to the Government by June 30, 2010.
Review of Australia’s taxation system - the Henry review
Although this review delivered to the government late last year is primarily focused on taxation arrangements, there are some important issues associated with superannuation that are also being considered by this review.
This includes the taxation arrangements that apply to superannuation contribution, superannuation earnings and pensions. The concessional taxation arrangements that apply around salary sacrificing and lump sum contributions in superannuation are also on the agenda.
The CPSU provided a submission to this review which recommended:
the importance of providing adequate funding to the public sector must be acknowledged by the review and included in any resulting changes to the taxation system.
the CSS and PSSdb legislation should be amended to allow for employees to salary sacrifice into those funds.
the government should separately assess, for taxation purposes, superannuation income streams and additional assessable income.
the government should ease present restrictions on salary sacrificing childcare costs in the interests of work/life balance.
The review report has been provided to the government and we now await their response.
The most recent quarterly data (as at December2009) can be found on the SelectingSuper website.
It is clear that superannuation returns are now back in the positive but it is important to remember that superannuation is a long term proposition and short term results can vary significantly.
Changing the method of calculating your salary for superannuation purposes
Within the Federal public sector in the CSS and PSS schemes an employee’s salary for superannuation purposes is calculated based a method called ‘fortnightly contribution salary’ or FCS. This method is enshrined in the Federal Acts of Parliament or associated instruments that administer these schemes.
More broadly in the general community ‘ordinary times warning’ or OTE is the method used.
In the PSSap scheme, employers by default calculate based on FCS. This can be changed to OTE in an enterprise agreement.
There are some significant differences in what is included and not included when comparing these two methods.
Where an employer proposes to move from FCS to OTE we will be ensuring that employees are not disadvantaged by this change and are informed about the differences. To visit the ARIA website which has information on superannuation salary for PSSap click here
Intergenerational Report is a wake-up call - time to increase super to 15%
Unions will push for the superannuation guarantee to be raised to 15% following the release of a new government report on the economic impact of Australia’s rapidly ageing population.
Unions welcomed the Intergenerational Report, which outlines the challenges posed for retirement incomes as the proportion of the population aged 65 and over doubles over the next 40 years.
ACTU President Sharan Burrow said it gave impetus to union calls for the superannuation guarantee to be increased to 15% by 2015, along with more incentives to encourage workforce participation by women and older people. Read more from the ACTU
