Statutes Amendment (Fund Selection and Other Superannuation Matters) Bill

Second Reading

Adjourned debate on second reading.

(Continued from 1 December 2020.)

The Hon. S.C. MULLIGHAN (Lee) (16:06): In my earlier remarks on the bill, I outlined that the three aims of this bill are:

to provide a choice of fund for members of the Southern State Superannuation Scheme, the Triple S scheme;

to provide an opportunity for partial choice, if I can put it like that, a portability—moving a member's accrued superannuation benefits out of the Triple S scheme into another eligible scheme of their choice; and

to facilitate a change of employment arrangements of the staff of Super SA, to be done not by the Treasurer but instead directly by the Super SA Board.

I do not propose to go through the detail of that again, but I want to talk about the implications of each of those changes. I must admit that when I was initially briefed on this bill late last week, despite the reservations about a change in these superannuation arrangements, as I said yesterday, potentially pricking the ears of the commonwealth and putting at some threat the tax-exempt status of the scheme and the implication for the 180,000 members of the state government's Triple S scheme, it seemed in isolation that what the bill was proposing to do, while not everyone might be fulsomely supportive, was perhaps reasonably uncontroversial.

However, since being briefed on the bill, I have had a chance to consult with several people about the bill, in particular some public sector leaders or representatives, to try to seek their views about this bill. Without wanting to put words in their mouth, I will try to best represent my understanding of their and their organisation's view.

There is a particular concern of representatives of South Australia Police and, to a similar but perhaps lesser extent, representatives of members of the Ambulance Service. With regard to the police, it is worth the house bearing in mind that there are slightly different superannuation arrangements in place for police.

In fact, I think it was about 10 or 15 years ago that an agreement was reached between the then government and the police during the course of an enterprise bargaining arrangement that in order for police and their representatives, the Police Association of South Australia at the time, to feel comfortable that police would be adequately catered for financially in their retirement, an arrangement be entered into where police would pay an additional 4.5 per cent of their salary post tax into the superannuation scheme to make sure that they not only had enough financial capacity to provide for their retirement but also had enough capacity to provide for additional income protection and total and permanent disability insurance through the scheme. I think I have those details right.

So a change to those arrangements would be met with considerable interest from South Australia Police and their representatives. Initially, I understand their view was significant hesitation about a move to choice of fund because the immediate reaction was that it might put those arrangements and the future financial security of police officers at some risk. Notwithstanding, of course, that you might take the view that it is a 'buyer beware' world and that if people want to make decisions on their own behalf about their own superannuation arrangements they should go into those decisions with their eyes wide open and so on.

Notwithstanding that, as a state, we have sought to provide protections for our police, including with regard to their financial and superannuation arrangements. Certainly, the initial view, as I understand it from the Police Association, was that this sort of bill should not put those sorts of arrangements at risk. What I understand is that the government has tried to reach an arrangement through this bill with police that, rather than having full choice of fund, as is proposed for members of the Triple S scheme, there be a partial capacity.

This concept of portability, which is spoken about in the second reading contribution from the Deputy Premier which I have tried to reflect in my comments to date, is that a member can only move a portion of their accrued superannuation balance from the Triple S scheme to outside that scheme to an eligible fund and leave some funds in the Triple S scheme and that will provide a sufficient basis for the costs of having that insurance cover into the future. That leaves open the question of how a police officer, in this case, would know how much to retain in their Triple S account and hence how much they would have available to them to move out if they wanted to participate in this. Nonetheless, that is the arrangement.

On my discussions with the ambulance services representatives, I understand that they believe that, in the event that their members had those concerns about having sufficient insurance coverage, that sort of arrangement should ensure that they can have choice of fund and still be sure that they have sufficient access to government provided insurance coverage. But I should say that there is no great strong desire for a move to choice of fund from those two groups within the public sector or at least their representatives.

I am very sure, as there would be across all cohorts of the public sector, that there will be people—perhaps several, perhaps many—who desire a choice of fund regime because they would like to have the freedom to control the investment of their own superannuation funds; I am sure of that. Those representatives trying to represent the overall interests of their membership were not greatly enthusiastic, if I can put it like that.

Of course, the organisation which represents the greatest cohort of members of the public sector is the Public Service Association. I think the term that I can use is that their representatives are reluctantly resigned to this move. They do not necessarily see that there are additional benefits available for their members. They do understand that there is potential risk with this move for their members, including a potential loss of that tax-exempt status, that constitutional protection I spoke about, as well as of course the risk that people may move their funds to an underperforming superannuation fund—retail or industry or otherwise. They are concerned about the insurance arrangements, and I will come back to those in a moment.

Perhaps speaking in the government's favour about this, there is one public sector group that is very strongly in support of this, and I think I should be up-front enough to admit that, and that is the Australian Nursing and Midwifery Foundation. They are a strong proponent of this move. The reason being, as it has been communicated to me, is that roughly 60 to 70 per cent of their membership have other employment outside the public sector, for example in private hospitals—so they may be a member of a fund like HESTA, for example—or in an aged-care facility and so on. I understand it has been a frustration to their members and hence to their leadership that this has not been available for them. It is a significant example, I will admit. I think we have in excess of 20,000 nurses in South Australia, maybe even more; it is a significant number of people.

Aside from that, it has been put to me that by and large the remainder of public sector representatives are unfazed, reluctant or resigned to this but certainly not enthusiastic. I must say, though, that my approach to this bill did start to change quite significantly when I was told in the course of those conversations that the Super SA Board had considered and approved a move to stop directly offering insurance products to Triple S members and instead move to have those insurance services provided to its members through a private insurance company—that is, to outsource or privatise the provision of insurance services to Triple S members. Again, I am talking about those income protection and TPD-type insurance policies. That, I think, is alarming.

I do not necessarily want to delve into the politics, as we have been during the course of question time, about the merits or otherwise of privatisation, but I will say that if I was a public servant with an insurance policy, income protection or even TPD, should something really terrible happen and I was making a claim against that policy I imagine that I would feel far more comfortable about that insurance policy being directly managed and administered by the public sector rather than a private company.

Insurance companies certainly do not do any better reputationally than banks in Australia, and for good reason. There is a reason why they have grown like a chemistry experiment over the last 30 or 40 years in Australia, and that is that quite often they have been managed in a way that has exploited their customers. Despite selling all sorts of products, usually at relatively high costs, they have quite often delivered very few benefits against those products.

The concept of moving insurance arrangements from Super SA, the body charged with administering public sector superannuation funds, to a private sector provider should alarm everyone. The reason that has been put to me in the course of these discussions is that there is a view, apparently, at a board level and an executive level within Super SA, that the provision of these insurance services is becoming too burdensome for the organisation. It has been put to me that there are an increasing number of claims and hence an increasing cost of providing benefits against those claims and so on.

I have had a quick look at the last three or four years of financial statements for the Triple S scheme and at the balance of the insurance reserves and the claims against those insurance reserves. Barring the performance in 2019-20, where the return on investment for those insurance reserves was lower than it had been in previous years—and I think we all understand that; the share markets for superannuation funds across the country have not been particularly great—it seems like the insurance reserves have continued to grow and Super SA has been receiving more income each year for its insurance fund than it has had to pay out in insurance payments.

I am happy to be corrected if there is something that the financial statements are not pointing out to me as a reader of them, but it does not seem to me that there is anything structurally wrong with the insurance fund. We have to bear in mind, of course, that I think it was either a year ago or two years ago that the cost of these insurance products was increased slightly, and that has obviously provided the ability for Super SA to continue providing these products in a manner that has allowed Super SA to continue building up that insurance reserve.

So I am alarmed at the plan to privatise these insurance services. As I said, an examination of those financial statements suggests to me that there is about $160 million in the insurance reserve. Each year, there has been roughly $45 million of income that has come in and about $40 million or $43 million of claims that have been paid out. If you rewind the clock by three or four years, that insurance reserve was about $140 million, so we have had a $20 million increase in that insurance fund reserve. That was the first thing that started ringing alarm bells.

Then I recalled, as I made mention of in the first part of my second reading contribution, that there is forecast to be a very significant increase in the number of staff in Super SA over the next four years. I think it is a 45 per cent increase in staff. That raised some alarm bells. I cannot recall whether I made mention of this yesterday—certainly I did during the estimates process—but there has been an extraordinary increase in the last 18 months in particular in the number and cost of consultancies that Super SA has undertaken.

I understand that perhaps the board would have sought some additional advice in order to prepare for a move like this. Even so, looking at the description of those consultancies, the breadth and expense of them, it seems like something bigger is being worked up here by the board. If you take that in conjunction with the move to directly employ staff, it seems like here we have another piece of the jigsaw puzzle fitting together. I think the picture of this jigsaw puzzle is a gradual move of this fund—starting with this bill and continuing with the change to employment arrangements and the hiving off of the insurance responsibilities to a private sector entity—seeking to operate in a competitive market.

We have already been told during the briefings from Super SA that it has something of the order of, I think it was, 214,000 members. There is not a number in the most recent Auditor-General's Report, but looking in the 2018-19 Auditor-General's Report, I think he says that there is something of the order of about 180,000 members. I assume the disparity between those two is total members: the 214,00 and active members that the Auditor-General refers to—perhaps actively contributing members, members who are employed in some role in the public sector where there are superannuation guarantee contributions being actively paid into those funds.

Under a choice of fund arrangement, we are told that Super SA has done some scenario analysis about what might happen to its membership. How many people do they think are going to make use of this choice and either move their arrangements entirely out of Triple S, or do it partially through this portability arrangement? The advice I have been provided in my briefing is that they expect somewhere between 5 and 10 per cent of members to leave.

I should have asked—and did not—over what time frame that is, but let's assume it is over two or three years, perhaps, when the knowledge of this capacity and ability becomes known throughout the membership, and so on. Maybe somewhere of the order of 15,000 or so members might choose to move their superannuation arrangements elsewhere.

The difference between that number of active members—that 180,000 and the 214,000—seems to me roughly to be 30,000 or 35,000, and I get the impression that that is the pool of dormant Super SA accounts, those inactive Super SA accounts, presumably held by members, the majority of whom are still working somewhere else in the workforce that Super SA, through the changes in this bill, will seek to try to attract back—so, lose 5 to 10 per cent and then try to get some of the inactive members back.

Under the terms of this bill, once that pool is exhausted—and you could say that once those 30,000 or 35,000 members have all made their way back into Super SA, they are all actively contributing, and that has more than offset the potential 5 to 10 per cent loss of the membership who have been exercising choice of fund—then that is it for growth.

The only other source of growth that is available for Super SA is the public sector hiring new workers, hiring workers who are either coming in from the private sector and choosing to establish an account, but perhaps rolling over existing private sector accounts into the Triple S, or even the public sector offering roles to workers who have not worked before; and perhaps we have all done that as MPs through our trainee schemes in our electorate offices.

It seems to me, to be clear, that there is a significant risk that this choice of fund move could potentially diminish significantly the number of people in the scheme rather than provide the capability either to try to even things up and retain numbers in the system or even grow the membership.

If Super SA is seeking to hive off those parts of the business that it might deem as being too labour intensive, too risky or too much effort—that is, the insurance arrangements—and if they are seeking to increase their workforce by 45 per cent over the next four years, and if they are also seeking to change the terms of the employment of people in Super SA, these all seem to me to be an inevitable move to a market competitor in the Triple S scheme, a scheme which is actively out in the market, able to lose its own members to competitors but also able to attract members from its competitors.

People will have their own views about whether or not that is a good idea. People will have their own views about whether Super SA is capable of getting into that market and succeeding or risking being in that market and getting towelled up, and no-one knows the answer. We would actually have to see it unfold before our eyes until we could truly know of course, but it is a risk. It is a risk to the scheme because, as the Productivity Commission's inquiry into the superannuation schemes in Australia in 2018 found, there is a correlation between the size of superannuation schemes and their investment performance: the bigger the scheme, the better the performance of those schemes.

That comes back to the argument I put earlier in my second reading contribution about the benefits of scale in the industry. I think there is something in the order of $2.9 trillion in the Australian superannuation scheme. The biggest player in the scheme is the MySuper federal government arrangement they have put in place. After that, I think the top 10 are rounded out and dominated by industry and public sector superannuation funds, with a couple of retail funds.

If I remember rightly—or, as Geoff Jansz would say, 'Here's one I prepared earlier'—those fund names would not be a surprise to members. Australian Super, which is the largest outside the MySuper arrangement, has $172 billion of funds under management, with 2.15 million member accounts. This is followed by QSuper, the Queensland public sector superannuation arrangement; First State Super, the New South Wales public sector superannuation arrangements; and the federal government's Public Sector Superannuation Scheme is the next one, with $83 billion. Then we start getting into another industry fund, UniSuper, representing tertiary education.

It is not until you get out of the top five that you start to see some of the retail funds like MLC and Colonial First State, which come in at numbers 6 and 7. These are very big funds. By and large, they have very strong performance in terms of investment returns and they have extraordinary scale. According to the Productivity Commission, this enables them to exercise the benefits of their size and deliver investment returns.

The Triple S scheme has I think $19 billion worth of assets under management, which is nothing to sneeze at by any stretch of the imagination, but you have to get well out of the top 20 funds in Australia before you get out of the funds that have $20 billion. As large as the Triple S superannuation scheme is, it is a relative minnow compared with the size of these other superannuation funds.

Why do I go through what you might regard as tedious detail? If the plan is for Super SA to open itself up to allow members to exercise choice of fund and to start competing in the market in a very limited way under the terms of this bill, by trying to woo back, if I can put it like that, former Triple S members or members who have inactive Triple S accounts, they will be starting the process of competing in a market.

It raises the risk that the commonwealth will say, 'You can't have it both ways, South Australia. We have been asking you for 20 years to come to an arrangement with us so that we can get rid of your constitutional protection, your tax-exempt scheme status.' That is a massive risk of roughly $100 million a year to the state's Public Servants. In an environment where the Super SA Board is seeking to have legislative changes so that they can directly employ Super SA staff to manage the superannuation schemes on their own terms, it does not take Nostradamus to foresee what is likely to happen in the future.

A chief executive officer or chief investment officer will put to the board, 'I have responsibility for a $20 billion fund. You only need to look at what CEOs or CIOs at other $20 billion funds are getting paid around the rest of the country. I think it's time for a remuneration review.' That is very unlikely to happen under the current arrangements, where these employment terms are set and agreed to by the Treasurer of the day.

I am not pretending that a future chief executive or CIO of Super SA is going to go and chase what the top remunerated staff at UniSuper or AustralianSuper or First State Super or Commonwealth Superannuation Corporation get paid. The lowest paid out of all those gets paid $1.26 million and the highest paid gets $1.7 million, but certainly, even if it was a jump in the order of hundreds of thousands of dollars up to what seems to be the median remuneration for a CEO or a CIO of a large superannuation fund, you are talking somewhere in the mid-800s. That is an enormous salary to be paid.

Of course, I am sure the government may argue that there is precedent for this. Funds SA, the actual investment arm of public sector funds available for investment of the various agencies, has a similar arrangement but, as you can see, in my way of thinking all these differing factors seem to come together to suggest that this is the first step in a move to take the Triple S scheme into a market where it will be actively competing for members. For that reason, contrary to my initial thoughts that this is a bill the Labor opposition could support, after consideration over the weekend we have arrived at a position where we will be opposing this bill because we do not think this is a risk worth taking.

I acknowledge that this will be an unsatisfactory position for the hundreds, potentially thousands, of superannuation scheme members who would desperately like the choice to be able to invest their funds elsewhere, but I think that the arrangement we are arriving at here poses a risk that is much greater than the benefits those individuals would enjoy. That risk is one that would expose all members of the Triple S scheme, rather than a benefit for those just wanting to actively manage their superannuation arrangements.

I know that this is not the gut reaction I provided during the course of my briefing from the Treasurer's office and Super SA but, in consideration of all those different factors, I just do not think this is a move this house should be supporting; however, I will seek to assist in resolving some of the concerns that have been put to me by some of those public sector representatives.

I have, presumably reasonably belatedly in the eyes of the Deputy Premier (it has probably only just lobbed with her in the last 20 minutes or so) filed an amendment seeking to provide some comfort to those scheme members and their representatives about how they can be sure that, if they want to port out part of their superannuation accrued balance, they are leaving enough in the Triple S scheme to adequately provide for their insurance arrangements.

That amendment, which I will be moving about two-thirds of the way through the bill, basically requires two things: it requires Super SA to continue to be responsible directly for providing these insurance services to scheme members and it also requires that each year Super SA or its successor notifies formally in writing those scheme members who have chosen the portability arrangement how much they need to retain in their Triple S balances in order to sufficiently provide coverage for their insurance needs.

Even if this bill is passed, I hope that this amendment is able to be supported by government. Yes, it is a burden on Super SA. They will be asked to do something that will take a bit of effort, depending on how many people take up this choice, but it should provide sufficient comfort to those members of the scheme that they will know whether they are appropriately managing their superannuation balances so they have the insurance coverage they understand they have. With those words, I conclude my contribution. I am not sure that we have any further contributors, so I will conclude my remarks there.

The Hon. V.A. CHAPMAN (Bragg—Deputy Premier, Attorney-General, Minister for Planning and Local Government) (16:39): I do wish to make a few comments. I am disappointed to note that the opposition has indicated that they will be opposing this bill. Whilst there has been some reservation by the Ambulance Employees Association and the Police Association, it is fair to say that other significant unions representing the public sector, including the Public Service Association, the Australian Education Union, the ANF—which has already been referred to by the member—the Commissioner for Public Sector Employment, and also the acting equal opportunity commissioner, have all received the material that is proposed in this legislation and have not identified any objection.

I think some of the 105,000-odd public servants in South Australia will be very disappointed to hear the opposition's position on this matter, especially as the two dissidents who seem to have been the basis upon which the opposition have reached their decision to oppose this legislation have acknowledged, on the advice I have received, that portability could, however, operate without impacting mandatory insurance in circumstances where the choice of fund is not offered in respect of funds outside of Super SA.

In any event, I will just traverse a couple of matters that I think are important. There are significant issues that have been raised by the member that deal with that, some of which are quite valid to raise but others of which have not been accurately outlined. I should acknowledge—and this is not a disclosure of any conflict of interest—that I am not a big fan of superannuation and never have been. I pay insurance when it is mandatory and I pay superannuation because the law says I have to. But, frankly, if we are really talking about choice of savings for retirement, or later in life post-employment, I can think of a lot of other ways that we could invest. In any event, we are within the envelope of the law that tells us that we must contribute in an employment circumstance, and employers have obligations, etc.

In relation to a couple of the matters that have otherwise been raised, I first refer to the 2018 Productivity Commission report, which I think the member has quite accurately outlined suggests there is some weakness in lower sized super funds and their strength and performance in the market, and the benefits that are then available to their membership. It always makes me chuckle when I see an Industry SuperFunds advertisement on television that produces two people with the same job and same salary, and someone who is in the industry fund totes up $3,465,000 when they retire and the person who is on an average of all other super funds will end up with $2,050,000.

The Hon. S.C. Mullighan interjecting:

The Hon. V.A. CHAPMAN: But it is the average of all these others. Of course, the opposition lead on this matter makes the point, and he is absolutely right, that size does matter in this world: the bigger funds are clearly the bigger performing and have the bigger and more generous benefits to their members. But if you take all the super fund world outside from the big ones, including all the little ones that may not be performing as well and even some medium-sized ones that may not be performing as well, and average them out—well, hello, no surprise—you end up with something that is underperforming compared with a large industry super fund.

I have never actually referred that matter to the ACCC to see whether that is fair advertising. In any event, I am not really here to get stuck into Industry SuperFunds; I simply make the point that there is a way that you can present this to represent a circumstance where there is a very competitive industry out there in this mandatory market. There are some very high performing operators. I would not go so far as to say that it is a carnivorous competitive environment, but there is a lot of money that goes into these funds—it is mandated by law—and they have a very powerful position in the commercial world, so let's not underestimate the significance of what we are dealing with here.

The initiative of the government to deal with both portability and choice factors that have been outlined I think, on the face of it, will enable the state Super SA products to really come into the 21^st century and not only be of benefit to their members, which the overwhelming membership wants to happen, but also be competitive in this environment. I commend the Treasurer for bringing the initiative.

I understand the opposition spokesman is correct in saying that apparently previous treasurers had been requested by then Treasurer and now Prime Minister, Scott Morrison, back in 2016 when he wrote to treasurers, including here in South Australia because we are the last reservoir of cement-based super funds as far as I am concerned, asking them to consider this matter. I am not sure whether there was ever any response.

On my advice, that that is the extent of the lobbying. It seems that when Mr Morrison went on to other things, subsequent treasurers did not pick that up as a mantle of reform. The consequences of this move are not to be underestimated, but I think they need to be put into perspective.

In relation to the risk of losing protection, firstly by fund selection, the information I have—and I will quickly outline it so that it is there for the record—is that the constitutional protection is preserved as we are adopting a state-based fund selection regime whereby we are maintaining the state's existing exemption from commonwealth choice of fund laws.

Secondly, the existing exemption is by virtue of the government employer contributing via a law of the state, and this is maintained under the proposed amendments to the Southern State Superannuation (Triple S) Act, thus compelling the employer to contribute to Triple S or to another fund of the member's choosing. Thirdly, Super SA cannot adopt a full choice of fund regime under its current structure. Triple S is not capable of being a default MySuper product. This would require Super SA to be a regulated fund and not a constitutionally protected exempt public sector scheme.

The second area of, I suppose, loss of benefit or constitutional protection relates to this question of the limited public offer. I am advised as follows: first, Triple S is prescribed as a constitutionally protected fund under the income tax assessment regs—and I think the member mentioned that in his contribution. The basis of the protection is the commonwealth's inability to tax the property of the state as per section 114 of the constitution.

For the purposes of this protection, Super SA and Funds SA, through managing public servants' superannuation entitlements, are 'the state' and Triple S funds are the property of the state. Whether Funds SA continues to be 'the state' following limited public offer (LPO) depends on the nature of its investments. If the majority of its funds remain Crown assets—that is, Triple S and other constitutionally protected untaxed funds—as opposed to funds originating from outside of government, then the risk of being more like a business corporation and not the state is greatly minimised. Currently, Super SA schemes total $33 billion of funds under management, of which $27 billion resides in the untaxed environment. I think the member mentioned $19 billion.

The Hon. S.C. Mullighan: That was just Triple S.

The Hon. V.A. CHAPMAN: Yes, that is in the $27 billion, as distinct from the total. The risk is also minimised in that the proposed LPO regime only applies to those employees who are Triple S members, inactive members or members working both in government and in the private sector. Further, the external contributions for these members will be allocated to Super SA's taxed fund, Super SA Select, and not the constitutionally protected Triple S scheme.

Finally, any less-limited public offering—that is, for those who never held public sector employment or who no longer retain a balance arising from previous public sector employment—increases the risk of having no link to government, and this is certainly not contemplated in this proposal. Thank you, Mr Patrick McAvaney. He is the genius here from Super SA, who has got advice on this matter and provided that summary for the benefit of the parliament—for those people who I can see are riveted by this debate.

Can I also add that the member had outlined what I think he saw as some inconsistency (a matter that he traversed in estimates) between the risk to a fund in losing some of its membership—he refers to 5 per cent to 10 per cent over possibly a couple of years—and what seems to be the incongruous development of employment within Super SA, that is, more employees over the next three or four years and what would be the risk of losing membership.

I indicate that what happens here is that when Super SA, by virtue of this development, in some ways comes into the real world, it clearly will no longer be a fixed, closed environment where you have an audience who does not have a choice. Clearly, these schemes run by Super SA are going to have to provide a level of service to their clients, their members, to be able to retain their commitment to that fund. There will be a level of transportability and a level of choice for a number of the membership, so it clearly is going to have to offer that.

I am advised that, for example, the services that will need to be provided—which will of course require staff to actually initiate and develop these options for Super SA to remain competitive as it enters that choice of fund environment—will include a new online member education hub; new online digital calculators; an upgrade of the Super SA contact centre, including a new phone call and email management system, and I think there is also to be an outbound call centre; an upgrade of the Super SA website; and a new financial advice model for members. There will be business development managers, and obviously there will be seminars and workplace provision of updated information.

Then, of course, there is the enhanced data analytics and marketing capability, and this really is coming in to the choice of fund environment. It is no longer going to be a sort of protected species—perhaps in a sort of dinosaur envelope—but is going to have to be in that full choice of fund environment. Frankly, it is going to have to provide the services that the others do. I am advised that it will be necessary for them to develop a staffing arrangement over the years in this transition. How long that stays I do not know—I am not privy to that—but I do make the point that that is a necessary aspect.

Let's face it, I think there is, as the member describes, a cohort within this membership who are dormant members, or their fund or investment is dormant, and they might be someone, for example, who is one of the nurses the member has referred to, who works in a public hospital and also does some shifts at St Andrew's Hospital and has a different fund for that.

Then he or she may want to be encouraged if Super SA is to connect with that group and say, 'Okay, you have finished your shifts now at the Royal Adelaide Hospital, you have this investment here. I know now you have moved over to the St Andrew's system and you have an opportunity there. We want you to come back and be a full-time customer with us and we will provide the product and service that is competitive to attract you back.' Whether they lose some and win some, or whether they get a lot more in, either way it is going to require them to get up to speed, so that is going to take some people to do it and they are going to need to be competitive.

In short, it may be that previous governments have been reluctant to introduce choice of fund. They might have been scared off by this idea that it is going to take away the protection that this fund has had. But we are in the 21^st century and we do need to look at how we can provide a good service—an even better service than public servants currently have—to ensure they have an investment which will genuinely make provision for them in retirement or post their adventure with the public sector. In that regard, we need to move it ahead.

I cannot answer for what previous governments have done in this regard, but hiding under a bush is not going to resolve this issue. We live in the real world and we want to have the membership in our public sector properly provided for in an environment where they have some choice and where we give the capacity for Super SA to modernise so that it can provide the best service there can be for the membership.

With those few words, I will just address the foreshadowed amendments I have received. They are identified in 96(2). Those amendments request three things, and the member has just briefly referred to them, so I will make a comment on them before we go into committee because there are a number of amendments to be dealt with. As I understand it, the proposed 10A insertion in section 22 is to include (4),(5) and (6), and subparagraph (iv) is to somehow or other protect against any provision of a service being outsourced for some apparent fear that this is going to occur.

Obviously, Super SA sits under a board. It is chaired by Mr Greg Boulton. In fact, one of the outstanding people who have provided a service to this parliament for many years, Mr Richard Dennis, as parliamentary counsel, sits on that board. I am sure the others are all meritorious, but I simply make the point that it is a structure which has its own board. Whatever deviousness the member representing the opposition, the member for Lee, might think about what they have paid their consultancies for or what work they have undertaken in their budget for expenditure as to whether there is some devious process there, I think at this point there is no action by government to deal with this matter.

The board obviously can look at these things and they may be, but I will have to leave that to the Treasurer in another place to outline if there is some circumstance in that regard. Proposed new subsections (5) and (6) really require the production of either annual information and/or information when the board becomes aware of a member proposing a transfer. I am not quite sure how that will actually work. Both simply relate to the provision of extra information.

It may be that the annual data on the statements provided to the 200,000-odd members is easily extracted, especially when they get all their data and analytics up to speed, and it may be made available on their annual statement. I have no idea how they could possibly know or what the proof level would be for a person proposing to transfer amounts to credit. Again, this seems to be information which is reasonably entitled to be made available to a member, if they ask for it, and to have it extracted.

That may need to be done annually or on the basis that the board might just happen to hear in the tearoom that somebody is leaving. If a board member overhears that, will there be some obligation to do it? The process is something we will obviously have a look at. I am sure the Treasurer will have a look at it. I am not sure what ill this will cover or whether it is of concern only to the opposition and not to the members.

To the best of my knowledge, the unions representing a number of members have not raised the issue of statutory protection. I am looking to the experts about whether this information needs to be provided either on an annual basis or as production of information. I am advised that this is not something put to them to say that this would help them feel at ease and that they want to have some statutory protection on this. However, if it is not an unreasonable offer and it is something that the board can consider and accommodate, I am sure the Treasurer will be happy to follow it up.

I understand the chief executive, Dacia Bennett, is relatively new and has had some professional life in the superannuation world. Again, she might be able to provide advice to the board and/or the Treasurer on these matters. It is the provision of information. Is this an onerous expectation in these amendments? I do not know the answer to that, but if it is something that can be available on a sensible threshold of entitlement obviously that can be looked at in the other place. But, for the purposes of today's debate, I have no capacity to indicate any consent to those amendments.

With that contribution, I am happy for the bill to be read a second time. We have amendments from the government in addition to those being tabled by the opposition to progress the matter.

Bill read a second time.

Committee Stage

In committee.

Clauses 1 to 3 passed.

Clause 4.

The Hon. V.A. CHAPMAN: I move:

Amendment No 1 [AG–1]—

Page 3, after line 15—Insert:

(a1) Section 3(1), definition of employing authority—delete 'member' wherever occurring and substitute in each case:

person

I understand this amendment is to ensure that we accommodate people who leave the fund. They are no longer a member but they are a person still, hence we are correcting that to be inclusive of all.

Amendment carried.

The Hon. V.A. CHAPMAN: I move:

Amendment No 2 [AG–1]—

Page 4, after line 6—Insert:

(9) Section 3(3)—delete 'member' wherever occurring and substitute in each case:

person

I move this amendment for exactly the same reason.

Amendment carried; clause as amended passed.

Clause 5.

The Hon. V.A. CHAPMAN: I move:

Amendment No 3 [AG–1]—

Page 4, after line 7—Insert:

(a1) Section 5(1)—delete 'member' and substitute:

person

(a2) Section 5(2)—delete 'member' and substitute:

person

(a3) Section 5(3)—delete 'of a member' and substitute:

of a person

(a4) Section 5(3)(a)(i)—delete 'member (other than a prescribed member)' and substitute:

person (other than a prescribed person)

I move this amendment for the same reasons outlined for amendment No. 1.

The Hon. S.C. MULLIGHAN: I preface my comments by saying I understand that all the Attorney's amendments are relatively straightforward, besides the egregious nature of the bill, and it is wholly known that I was joking there. I did have a question about clause 5. I understand the current act requires that it is formally the Treasurer who has to make the employer contributions into the accounts of Triple S scheme members and that the bill itself changes that arrangement.

I acknowledge this is a relatively minor concern but, on the basis that somebody chooses to move their superannuation arrangements out of the Triple S scheme and into, for example, an industry fund or a retail fund, obviously the Treasurer will not be making those contributions. My question is: who will be responsible for maintaining the records of those superannuation contributions so that, in the event that a public sector employee wants to query or take some umbrage at the amount being paid into their superannuation account, there is a definitive single source of knowledge? Who will that be?

The Hon. V.A. CHAPMAN: I am advised that it moves from the Treasurer to the actual employer. As you might appreciate, in the Attorney-General's Department, say, there are a very significant number of people who are employed not by me or by the Treasurer but by the chief executive on behalf of the department. It is the employer of that person who is responsible.

The Hon. S.C. MULLIGHAN: If there were some sort of concern or even dispute that the employee had with that amount, how would they know to whom to direct their queries or dispute? Will they be informed who their employer is? I could imagine that people might think, 'Shared Services processes my pay. Maybe I will contact them.' We all know in legislation that it is the Treasurer, but how will people know technically who their public sector employer is?

The Hon. V.A. CHAPMAN: Probably within the 105,000-odd public servants we have, if you ask any of them who actually employs them, they may not know. Probably most of them would not think the Hon. Robert Lucas actually employs them. They might think, 'Somebody in Treasury over there pays me, but I work for the Attorney-General's Department,' if you asked them technically that. Obviously, if there is a dispute and they end up in the South Australian Employment Tribunal, then the identified employer is there for that purpose, whether it is unpaid wages or whatever the issue might be. I think what is relevant here is whether the change—that is, the removal of the words 'to the Treasurer' being proposed by clause 5—will make a difference. Probably not, but it is reasonable to say that, obviously, all members—some of them soon to be ‘persons’—will be informed, and that should occur.

Amendment carried.

The Hon. V.A. CHAPMAN: I move:

Amendment No 4 [AG–1]—

Page 4, after line 8—Insert:

(1a) Section 5(3)(a)(ii)—delete 'member' and substitute:

person

Amendment No 5 [AG–1]—

Page 4, after line 9—Insert:

(3) Section 5(3)(a)—delete 'of the member' and substitute:

of the person

(4) Section 5(3)(b)—delete 'member' and substitute:

person

(5) Section 5(4), definition of prescribed member—delete the definition and substitute:

prescribed person means—

(a) a police member (other than a police cadet or a police officer employed on a contract having a fixed term); or

(b) a person—

(i) who has ceased to be a member of the scheme by virtue of section 19(2)(b); but

(ii) who would, if they were a member of the scheme, be a member to whom paragraph (a) applies; or

(c) a person or a class of persons prescribed by the regulations for the purposes of this definition.

I move these amendments for exactly the same reasons that I referred to in amendment No. 1. However, I should explain that in amendment No. 5 we have obviously had to change 'prescribed member' to 'prescribed person'. That is the explanation for that. I am happy to move amendments Nos 4 and 5 in my name.

The Hon. S.C. MULLIGHAN: With regard to amendment No. 5, and the insertion of subsection (5), I understand that the Deputy Premier has addressed part of it by saying that it is really to pick up 'prescribed person', but then it goes into some detail about police, and then the descriptions in proposed paragraphs (b) and (c). Could the Attorney, for my benefit, walk us through what specifically this seeks to address?

The Hon. V.A. CHAPMAN: Firstly, I have dealt with paragraph (b), which is the person who ceased to be a member, or would be a member in the scheme, and that is to deal with people who leave; so ‘a person or a class of persons prescribed by regulations' is obviously a general catchall.

In relation to paragraph (a), I will just check whether that relates to a matter that was raised by police. If in the future police choose or are required to contribute—and this relates to the 4.5 per cent side deal, if I can describe it as that, and that is not being disrespectful, to try to paraphrase it—then that would make provision for that.

The Hon. S.C. MULLIGHAN: Yes, I think this reflects the particular arrangement for police, which was put in place some time ago. Are there further regulations, or are there further matters that need to be attended to for police, if not other similar classes of contributors?

The Hon. V.A. CHAPMAN: In relation to police, I think that will cover them, on the advice that I have. In relation to 'other class of persons', the member for Lee did raise in his contribution the concern about ambulance. It may be that they need some provision. I do not know the answer to that yet, but, in case they do, obviously that is the type of class that could be covered by that if it is needed.

With respect to the Police Association, when it came to their entitlements outside the enterprise bargaining agreement, I certainly recall that there were a few little extras there when we got into government. I am just trying to remember. I think there is another. It might be one of the emergency services that has some other provision. It may only be related to the reverse onus on the balance of probabilities in relation to cancerous conditions.

Certainly, some of those categories of persons who are in the firing line, so to speak, have been given some special provisions. I do not have those particulars before me. Obviously, should there be an identified issue in relation to particular group within the membership of the fund, then provision can be made by regulation. To the best of my knowledge, there are no other known ones.

Amendments carried; clause as amended passed.

Clauses 6 to 10 passed.

New clause 10A.

The Hon. S.C. MULLIGHAN: I move:

Amendment No 1 [Mullighan–1]—

Page 13, after line 27—After clause 10 insert:

10A—Amendment of section 22—Insurance benefits

Section 22—after subsection (3) insert:

(4) Insurance and income protection under this Act must be provided by the government agency or body primarily involved in assisting in the administration of public sector superannuation schemes within the State (and may not be provided through outsourcing arrangements with a non-government organisation).

(5) The Board must advise each member in writing annually of the minimum amount the member is required to retain in accounts maintained by the Board on behalf of the member in order to maintain an entitlement to insurance and income protection under this Act.

(6) If the Board becomes aware that a member is proposing to transfer amounts standing to the credit of 1 or more accounts maintained by the Board on behalf of the member to another fund under Part 3A, the Board must advise the member in writing of the effect (if any) the proposal will have on the member's entitlement to insurance and income protection under this Act.

This amendment seeks to deal with this concern about the maintenance of insurance benefits for those members of the scheme that have such insurance members but then seek to exercise choice of fund and do it in a way which is done by virtue of that portability arrangement which the bill seeks to introduce.

It seeks to address this concern, which has been raised with me by public sector representatives, that the Super SA Board has considered and approved a move to outsource the insurance arrangements, the management of the insurance arrangements and the provision of insurance products to those scheme members.

As I said in my earlier contribution—and I will not rehash it all now—I think that is a poor move. It does not seem to be based on the financial status or performance of the insurance scheme and merely seeks to do away with an important product and service which many thousands of scheme members rely on.

Suffice to say, if I or perhaps anyone else in this place had to make a claim against such an insurance policy for income protection or for total and permanent disability benefits, it is easy to see why you would prefer a public sector agency managing that claim rather than one of the private sector entities, including those which have proven themselves over recent years—and even outed at a recent royal commission—to be voracious for premiums and miserly when it comes to making good on those policies. That is really new subsection (4) of what is proposed.

In relation to proposed new subsections (5) and (6), the Attorney raises the concern—it may be possible and the government may be willing to support it, and I think we should recognise that the Attorney is not ruling it out. Although I do not expect her to support it here, I think she is intimating that she may support it elsewhere, in the other place. I do not think it would be that onerous at all.

As Super SA have advised me, their best modelling suggests that only 5 per cent to 10 per cent of the current membership will make use of choice of fund or portability. We are not talking about a couple of hundred thousand people here: we are talking about perhaps 10,000 or 15,000 or thereabouts.

As the Deputy Premier pointed out, Super SA already communicate with all their members on an annual basis. They communicate with them to record fund performance, for example, in communication and also if somebody was making an election or a nomination to transfer some of their accrued balance to another fund. It does not take much imagination to foresee the exchange of correspondence that would acknowledge the receipt of that request and the verification that that request has been actioned, so in the course of that correspondence, requiring Super SA or its successor to ensure that it is adequately advising their members in this regard is really important.

In moving this, to try to assuage or deal with some of those concerns that have been put to me about the preservation of a reasonable balance or a necessary balance in order to preserve access to those insurance products, I will say that the argument that Super SA has relied on, that the constitutional protection the Triple S scheme enjoys will not be under threat, is a red herring or a bogus argument. There is nothing the state can do via its own legislation, regulation or other instruments that determines whether this constitutional protection or tax-exempt status is conferred on any of our superannuation schemes.

What we can do is make sure that we are not stepping over the mark that the federal government requires us to stay within in order not to directly threaten that status, but there is no assurance or guarantee that can be provided from anyone at state level, whether it is a minister, the Super SA board or someone else, that can confirm that we will not lose this tax-exempt status.

It remains at risk and it has been continually at risk for the last 20 years. The letters started coming from Peter Costello and they continued right up until Scott Morrison. Maybe Josh Frydenberg has been otherwise occupied trying to steer the national economy through the coronavirus, but you can bet that this remains of concern to the commonwealth, and if they believe the parameters of the scheme are changing, as they will be, you can certainly bet there is a risk they will pay further attention to this.

In one sense, I congratulate the government on moving this bill, because I know that there are public servants—members of this scheme—who do want to have control over their own superannuation arrangements and that is not unreasonable. That is absolutely not unreasonable that people might want to have the choice. Then there is the remainder of the superannuation industry, outside of that small number of schemes that enjoy constitutional protection, and there are not many. Across the jurisdictions, they are basically judges' pension schemes or governors' pension schemes or, dare we say, parliamentary superannuation schemes—

The Hon. V.A. Chapman: The Solicitor-General.

The Hon. S.C. MULLIGHAN: —and the Solicitor-General. I do not see that in South Australia, but I am sure that is elsewhere. There is the Magistrates' Court of Victoria and public prosecutions—they look after their legal practitioners well—and indeed the Attorney-General and Solicitor-General Act 1972 in Victoria and the Supreme Court Act as well.

But you can bet there will be enlivened interest if the commonwealth thinks for one moment that changes to this scheme are bringing the Triple S scheme closer to what the Attorney calls the real world. The real world does not have tax-exempt status and does not have constitutional protection and does have exposure to another layer of federal legislative requirements, including different levels of APRA regulation and so on.

The argument put by Super SA, which was repeated by the Deputy Premier, is that we are only making changes within our own legislation to stay within the bounds we have currently agreed with the commonwealth not to breach. But we are certainly moving right to the edge of those bounds. In other states, some of those funds that I read out before as being the largest funds in the country—including schemes such as QSuper, for example, which I think is the second largest scheme in Australia and certainly the largest public sector scheme in Australia—have moved similarly. As a result, they had to reach an arrangement with the commonwealth where that constitutional protection was stripped away. So that is a risk.

I realise that what we are doing here is deciding whether we should give fund of choice to a number of people who desire it and potentially put at risk the tax benefits of the entirety of the Triple S scheme. I have reached a different judgement from the Deputy Premier. She has her own views about the benefits of superannuation. She believes, perhaps in more of a liberal or even maybe libertarian view, that superannuation is not the best way to provide for retirement savings.

It is fine for her to have her view, and it is fine for her to have the view that we should have a scheme where people can use it as a basis to go and choose other funds and participate in the market more fully. I would like to hold that view, but I just think the risk to our tax-exempt status for the majority, for the remainder, is too great.

I do not buy the argument that the increase in staff for Super SA over the next three to four years is to offer more products, because we know there is a major product that is not going to be offered in the future if the Super SA Board convinces the government of what it has already resolved, that is, to outsource the insurance functions of Super SA. That is fewer products. Saying that there are going to be better member services like a better website and super fund calculator—well, please: a superannuation fund calculator is a tarted-up Excel spreadsheet put into HTML format. That is not a service that requires a 45 per cent increase.

However, I am slightly persuaded by the need to have additional staff, which might assist those members understand what sort of balance they need to retain in their accounts in order to maintain their insurance products. But I do note that, while the Deputy Premier has been as assiduous as she always is in addressing those concerns that other members have put to this place, the one she has not directly addressed is to confirm or otherwise whether the Super SA Board has considered and resolved that matter about the provision of insurance in the future.

She has palmed that off to the Treasurer in what might be remarked on by Dennis Cometti as a 'hospital ball'. That is something that apparently he has to answer for, rather than her getting some confirmation in here about this. Nonetheless, the fact that the Attorney has not thumped the table and said that that is an outrageous slander on the Super SA Board, and they would never consider doing such a thing, I think tells us all we need to know: that this is a live issue within Super SA that we should be concerned about.

For those reasons, I move this amendment. I thank the Deputy Premier for her willingness to consider it, if not here by supporting it, then perhaps by leaving it with the Treasurer to consider between the houses and arriving at a position upstairs. I do think this provides a level of comfort within the act if it is passed, and the bill is passed, that those members concerned about maintaining minimum balances will get that direct assistance and advice from Super SA.

The Hon. V.A. CHAPMAN: Formally, as I have outlined previously, I indicate that whilst it has been brought to our attention during the course of this debate that if subsections (5) and (6) are matters that the board can accommodate, I think drafting needs to be improved, clearly, because (6) has a bizarre process about how someone would be informed about that.

In any event, if information that ought to be available to members is able to be provided or should be provided, particularly if it is to identify an entitlement or an obligation upon a transfer, then of course that is probably already the member's right to have that information but, in any event, let's ensure that that is made available.

As to proposed subsection (4), I do not know and I confirm that I am not aware of what decisions the Super SA Board has made. I can confirm that government have not made a decision in relation to the issue or the ills the member is purporting to protect against in relation to this. In any event, I am sure that the relevant minister, the Treasurer, can provide further contribution on those matters in the other place because the board is accountable to him and I am sure there would be some reporting process there.

I am ashamed to say I have not read their annual report. Has Super SA tabled one yet? I understand from Mr McAvaney it has not been tabled yet, so that is probably why I have not read it—because I usually love to read these things.

Mr Boyer: So do I, but it is December and we don't have it.

The Hon. V.A. CHAPMAN: Well, I don't know. I have no reason to suggest that there is anything improper in relation to that. Some of them have annual reports. Is it the end of December that the Super SA Board reports and it is tabled here, usually in February and March? There are certain reports I am responsible for that have to be provided by 30 June. In fact, the courts data report comes to me at the end of the calendar year, so there are some that are in that calendar year category rather than the financial year.

The Hon. S.C. Mullighan: This is not.

The Hon. V.A. CHAPMAN: This is not—apparently the member for Lee knows. I am sure the Super SA representative who is here will get his pen and note that the member for Lee is keen to receive it and read it as a member of the parliament. I am sure that can be attended to. In any event, it seems that at least at the budgetary level there has been provision of information because the member for Lee made a comment on some level of payment of fees for consultants, which is usually outlined either in Auditor-General reports and/or budgets. Obviously there must be some information for the financial year that is already available, which would certainly be available, I think, through the Auditor-General's Report. Again, they are matters I am sure the member for Lee can follow up, but otherwise I indicate that I cannot support the amendment.

New clause negatived.

The Hon. S.C. MULLIGHAN: I had a query regarding the insertion of part 3A, which I think is clause 10, page 7 of the bill.

The CHAIR: My apologies, we have passed that. That is how we got to new clause 10A.

The Hon. S.C. MULLIGHAN: That is okay. We can deal with it in the other place, that is fine. I do not have further queries.

The Hon. V.A. CHAPMAN: I do not usually jump to the defence of the member for Lee, but I think part 3 is clauses 15, 16, 17 and 18 and, if it is an area he is seeking a question on, then I think he is entitled to do so.

The Hon. S.C. MULLIGHAN: I misspoke and confused you. I meant to say division 3 or division 2. In any event, it was before 10A.

Remaining clauses (11 to 18) and title passed.

Bill reported with amendment.

Third Reading

The Hon. V.A. CHAPMAN (Bragg—Deputy Premier, Attorney-General, Minister for Planning and Local Government) (17:35): I move:

That this bill be now read a third time.

Bill read a third time and passed.

At 17:35 the house adjourned until Thursday 3 December 2020 at 11:00.