STATUTES AMENDMENT (POLICE SUPERANNUATION) BILL

Second Reading

Adjourned debate on second reading.

(Continued from 2 April 2008. Page 2259.)

The Hon. P. HOLLOWAY (Minister for Police, Minister for Mineral Resources Development, Minister for Urban Development and Planning) (17:22): I again thank honourable members for their contribution to this bill and for indications of support. On 1 April, during debate on the second reading, the Hon. Rob Lucas asked a series of questions. The answers to those questions are as follows. First, the honourable member asked how many police officers were in the Triple S Scheme. The answer is 2,117. The Hon. Rob Lucas then asked how many individuals were still in the Police Pension Scheme. I am advised that there are 1,846 police officers and 187 former police officers in the Police Pension Scheme. The former officers have a preserved benefit.

The Hon. Rob Lucas asked why the government has chosen to continue with the Police Superannuation Board. The government believes that there continues to be a role for the Police Superannuation Board whilst just over 2,000 members remain and 1,234 pensioners are in the Police Pension Scheme.

The Police Pension Scheme is quite different from the State Pension Scheme and, therefore, whilst it remains a scheme with a relatively large number of members, there is justification in continuing with a separate administrator. The Police Association supports this position. The need for a separate board can, however, be reviewed as the number of active members in the scheme continues to decline.

The Hon. Rob Lucas then asked how much individual board members are paid and how many board members are paid a fee. Three members of the board are paid a fee: the presiding officer receives a fee of $6,600 per annum, and an ordinary board member receives $1,650 per annum. Payment to the third member has commenced only recently due to the member's retirement from government employment.

The Hon. Rob Lucas then asked whether all existing police officers who are members of the Triple S Scheme will be provided with a new option of accessing their accrued Triple S benefit on termination of their service at age 50. I am advised that members of both the police pension and police lump sum schemes have a special option to take a lump sum benefit on terminating service as a police officer between the ages of 50 and 55. This option is additional to the normal preservation option.

The lump sum option was introduced into both the police pension and lump sum schemes as part of the significant restructure of police superannuation in 1990. It was introduced as part of a strategy to reduce the high numbers of invalidity claims that prevailed in the 1980s. It was introduced as a special benefit option to meet the special needs of police work.

At the request of the Police Association, the age 50 to 55 access option is being maintained for members of the police lump sum scheme being transferred to Triple S. In addition, the option is being made available generally to all police officers in Triple S. It is being maintained as a means of enabling police officers between age 50 and 55 who feel they are burnt out but not sick enough to claim an invalidity benefit to leave the police force voluntarily and with grace.

Whilst taking the benefit at age 50 to 55 incurs a tax penalty, it provides the opportunity for a member to take the benefit and use it as a means of re-establishing oneself in alternate employment. The option still serves a purpose, as in the past financial year 13 members took the benefit and, so far in the current financial year, 11 members have elected to take their benefit between age 50 and 55.

The next question that the Hon. Rob Lucas asked was: what is the cost to the government in providing the age 50 to 55 benefit option? I am advised that there is no additional or new cost to the government in providing the age 50 to 55 access option to existing police officers in the Triple S Scheme. He then asked whether an indication could be given as to the benefit that would be available to a person under the existing provisions of section 4(6b) of the Police Superannuation Act and under the proposed legislation. I am advised that, using the actual example given by the Hon. Rob Lucas, there would be no difference in the entitlement under the current and proposed legislation. This is because the example given by the Hon. Rob Lucas assumes that there is no movement or change in salaries over 40 years' membership in the scheme.

This of course is an unrealistic situation. The problem with the existing wording of the act relates to the very issue of changes in salary over time. Using the scenario given of a police officer returning to SAPOL for the last 10 years before retirement, in a real life example the salary payable on returning to SAPOL after an absence of 10 years working for another police force or prescribed body would be higher than when the member left to work for that host body. The formula and wording in the act caters for the first 20 years of service with SAPOL being based on the highest salary paid by SAPOL or payable by SAPOL if the member was still actively working for SAPOL on the date of retirement.

The problem is, however, that the wording does not provide for the salary paid by the other police force or prescribed body to be maintained in real terms or adjusted according to the rate of inflation during the period of time the police officer has been returned to SAPOL. This means that in the example given by the Hon. Rob Lucas the salary of $140,000 paid by the association would remain as a fixed input to the weighted average salary to be determined in the formula in section 4(6b)(d) of the Police Superannuation Act.

The disadvantage for the member is that the real value of that salary would have been eroded by inflation over the 10 years since the member had left the host body. The government has recognised that this outcome is unintended and would be unfair, particularly since the fund would have been reaping the benefits of investment returns on the money the member and host body had contributed during the period the member had been working for the host body.

Using the Hon. Rob Lucas' example as a basis, but assuming that salaries moved at a consistent rate of 3 per cent per annum over the last 20 years of membership of the scheme, the expected SAPOL salary to be input into the average salary formula would be $126,427, and the association salary $188,148. This produces a salary of $141,857 in terms of the formula. In terms of the existing legislation, the association salary of $140,000 would not be adjusted, resulting in a salary of $129,820 from the application of the formula in section 4(6b)(d) of the act.

The Hon. Rob Lucas then asked whether Funds SA had any direct exposure to the problems as they relate to the sub-prime crisis. I refer the honourable member to an answer tabled by the Treasurer in another place on 14 November 2007 (and I have a copy here if he wishes to receive that). Finally, the Hon. Rob Lucas asked whether any criticism or concern had been expressed about margin lending strategies as they relate to the operation of Funds SA and Super SA and the funds that have been invested on behalf of South Australian public servants and police officers. I am advised that Funds SA does not employ margin lending within its portfolios and is not associated with any margin lending strategies or operations. I thank members for their contributions and look forward to the resumption of debate on this bill next week.

Bill read a second time.