CPSU helps members digest the vast amount of information on superannuation with regular, concise updates on how changes to super are likely to affect them.
Superannuation is complicated, and we don't pretend to be the experts. There
is no substitute for independent financial advice. CPSU members get a free
referral to a financial planner with expertise in superannuation. Contact the
Member Service Centre on 1300 137 636 for more information.
Types of superannuation – defined benefit and defined
contribution/accumulation
There are different ways in which an employee superannuation benefit
accumulates in Australia. In defined benefit schemes the superannuation
benefit the employee receives is determined in advance, based on a formula. For
example, in the defined benefit component of the PSS (Public Sector Scheme )
benefits are based on a formula based on final average salary the level of
employer and employee contributions and years of service. The employee is
guaranteed a ‘defined benefit’ which is guaranteed regardless of the investment
performance of the scheme. In effect, employers underwrite the employee’s
superannuation benefit.
Defined benefit schemes are mostly closed in Australia and around the
world. Within CPSU membership areas the CSS, PSS(db), one of the Telstra Super
Schemes, the Australia Post Super Scheme and a Northern Territory Government
Scheme are all defined benefit schemes. None of these schemes are open to new
employees.
Accumulation schemes were established with the introduction of the
superannuation guarantee in the early 1990s. These schemes provide a
superannuation benefit based on investment return (either positive or negative)
and any employee contribution, less fees and taxation. The employer generally
has no role other than to provide their contribution to the employee’s
superannuation scheme. The employee’s benefit is directly linked to the
superannuation scheme’s performance.
What's happening in super right now?
Over the last 12 months the Government has delivered on its promise to
increase superannuation guarantee rate from 9% to 12% by 2019, and abolish the
age restriction on employer superannuation contributions which meant employers
did not have to pay superannuation for employees over 75.
In addition the Government expects its ‘Stronger Super’ initiatives will
provide enhancements and potential saving in superannuation costs with the
introduction of ‘MySuper’, ‘SuperStream’ and increased governance obligations
for superannuation funds, including
for superannuation trustees that direct funds to operate in the best
interest of members,
strengthening management of conflict of interests and
increasing the standard of care, skill and diligence required of a
trustee.
The Government has also announced its intention to introduce legislation
which will require superannuation funds and unions to report on payment made to
Directors. The CPSU document
here explains the CPSU position on Directors fees and benefits that are
provided to CPSU officials and staff.
Bargaining for superannuation improvements
Superannuation is a very important employment condition, second in value only
to members’ pay. In recent bargaining agreements in the Australian Public
Service, CPSU has secured 15.4% employer contributions for staff in the PSS
accumulation fund. Through bargaining we have also gained increased employer
contributions in a range of non APS Australian Government agencies and i private
sector employers where staff previously received only a 9% employer
superannuation contribution. e.g. Australian Hearing, the ABC, and Brisbane
Airport Corporation.
Federal Public Sector Schemes
Many CPSU members and former members belong to the Commonwealth
Superannuation Scheme (CSS), the Public Sector Superannuation Scheme defined
benefit plan (PSSdb) or the Public Sector Superannuation accumulation plan
(PSSap). The first two of these schemes are now closed to new members, while the
PSSap is the “default” scheme for most federal public sector employees,
including those in the Australian Public Service.
Over the last couple of years the CPSU has argued for, and Government has
agreed to improvements which will directly benefit members in the CSS and PSSdb.
These improvements have:
removed the same sex discrimination which previously prevented same sex
partners receiving a pension on the death of a CSS or PSSdb member,
allowed employees in the PSSdb to continue to receive an employer
superannuation contribution to the age of 75
allowed CSS and PSSdb members to salary sacrifice into the PSSap
introduced a pension arrangement for PSSap members who retire.
In regard to scheme governance, on 1 July 2011 the Australian Reward
Investment Alliance (ARIA) Board which previously administered the CSS, PSSdb
and PSSap merged with Military Super to form the Commonwealth Superannuation
Corporation (CSC). The Board of the CSC contains 11 people, 5 nominated by the
‘employer’, 3 by the ACTU, 2 by the Chief of the Defence Force, and an
independent chair.
Other issues
Superannuation reforms needs to be considered against a whole range of other
pay and condition improvements that the CPSU pursues across the APS, including
maintaining public sector jobs and services to the community. Outstanding issues
in relation to superannuation include:
Allowing employees in the CSS and PSSdb to ‘Transition to Retirement’.
The capacity for superannuation funds to allow Transition to Retirement (TTR)
was introduced in 2005. Subject to the particular superannuation fund’s
rules, transition to retirement allows an employee over the minimum
retirement age to access a superannuation pension whilst still working.
These schemes are not fully funded, i.e. the employer contribution is funded
out of the Federal Budget every year, and contrasts with accumulation funds
which require employers to pay an agreed percentage of salary regularly into
each member’s superannuation account. Transition to retirement would be a
significant enhancement to the CSS and PSSdb scheme and because of the
unfunded liability would come at significant additional cost to the federal
budget.
Changing CSS and PSSdb pension indexation from CPI to Male Total
Average Weekly Earnings (MTAWE). In 2009 the Government commissioned an
independent report which recommended that indexation arrangements should not
be changed. Read more
here. This change would also have significant cost to Government. In the
last 12 months the Dept. of Finance has costed this change for CSS and PSSdb
pensioners to be ‘$614 million for the period 2011-12 to 2014-15 with an
immediate increase in unfunded superannuation liabilities of $47.8 billion.’
Read more
here
changes to the taxation arrangements that will apply to ‘untaxed’
superannuation funds (including the CSS and PSSdb). The Senate Economics
committee unanimously recommended that the unfunded ‘untaxed’ component of
benefits paid to members of these schemes be treated separately from any
other taxable earnings. Read the Senate report (pages 30-320)here
