Legislative Council Fifty-Second Parliament, First Session (52-1) 52 1 Parliament of South Australia Legislative Council published Bills Statutes Amendment (Members' Benefits) Bill STATUTES AMENDMENT (MEMBERS' BENEFITS) BILL Introduction and First Reading Introduction and First Reading Received from the House of Assembly and read a first time. Second Reading Second Reading The Hon. P. HOLLOWAY Legislative Council Minister for Mineral Resources Development, Minister for Urban Development and Planning, Minister for Industrial Relations, Minister Assisting the Premier in Public Sector Management The Hon. P. HOLLOWAY (Minister for Mineral Resources Development, Minister for Urban Development and Planning, Minister for Industrial Relations, Minister Assisting the Premier in Public Sector Management) (18:03): I move: That this bill be now read a second time. I seek leave to have the second reading explanation inserted in Hansard without my reading it. Leave granted. This Bill seeks to make amendments to the Parliamentary Remuneration Act 1990 and the Parliamentary Superannuation Act 1974. The legislation contained in this Bill, if enacted, will increase the government’s level of support under the PSS 3 division of the Parliamentary Superannuation Scheme; provide an option for all members of the Parliament to sacrifice salary for additional superannuation; provide a new lump sum involuntary retirement payment for those members who have their service as a member involuntarily terminated; and provide an option for members to take out voluntary additional death and disability insurance through the government’s Triple S scheme. At the present time the level of government support for members in the PSS 3 accumulation scheme is generally 9 per cent of salary. The level of support can be 10 per cent of salary where a member elects to make a personal after tax contribution of at least 4.5 per cent of salary into the scheme. However, most members in the PSS 3 scheme are only receiving a government superannuation contribution of 9 per cent of salary. This level of government support for members in PSS 3 represents a significant disparity with the level of support for those members who entered the Parliament at an earlier time and are members of the now closed PSS 1 and PSS 2 schemes. In early 2004, the Commonwealth Parliament closed its defined pension scheme and established an accumulation scheme for future members, with a level of government support of 9 per cent of salary. Most other State Parliaments followed the Commonwealth in changing their schemes and reducing the level of government support in the new accumulation schemes that were established. However, in October 2006, the Commonwealth Parliament, in realising it had gone too far in reducing the level of government superannuation support for the new and future members of the Parliament, passed legislation that increased the level of government support to 15.4 per cent of salary. This Bill therefore proposes that the level of government support for members covered by the PSS 3 scheme be increased from the existing levels to 15.4 per cent of salary. The government believes it is important that there be consistency in the level of superannuation support between that provided to members of the South Australian Parliament and members of the Federal Parliament. Without such consistency, South Australia will be at a disadvantage in attracting suitable persons to stand for the South Australian Parliament. If the remuneration packages including superannuation are significantly higher in the Federal Parliament, this State and this Parliament will be disadvantaged by having potential suitable candidates for the State Parliament having a preference to stand for the Federal Parliament. It is therefore for the sake of creating consistency with the Commonwealth’s level of superannuation support for Members of the Federal Parliament that the Bill proposes the level of support for those members covered by the Parliament’s PSS 3 scheme be increased to 15.4 per cent of salary. The Bill proposes that the higher government contribution apply from the date of the General Election in March this year. The Bill also includes a proposal that the existing salary sacrifice option available to PSS 3 members of the Parliament be extended to all members. The Parliamentary Remuneration Act 1990 currently provides an option for members of the PSS 3 scheme to elect to have sacrificed salary directed into either the member’s PSS 3 scheme or where the member is having their government contribution directed into some other scheme, that other scheme. In terms of the current provisions of the Parliamentary Remuneration Act, those members of the Parliament who are members of either the PSS 1 or PSS 2 scheme are not able to sacrifice salary for additional superannuation. The legislation contained in the Bill will if enacted, enable any member of the Parliament to elect to sacrifice salary for the purpose of accumulating additional superannuation. For all members, and in particular those members of the PSS 1 and PSS 2 schemes, the salary sacrificed contributions will be accumulated together with investment earnings as an additional accumulation benefit in the PSS 3 scheme. For PSS 1 and PSS 2 members, salary sacrificing under these proposed new provisions will have no impact on the member’s existing superannuation arrangements. Salary sacrificing as an option for additional superannuation is now generally available for employees in the private sector, as it is for government employees, and Members of Parliament should not be denied the same option. The third main proposal included in the Bill involves an amendment to the Parliamentary Remuneration Act, for the purpose of introducing a new involuntary retirement benefit for those members of PSS 3 who have their service as a member involuntarily terminated. Involuntary retirement, as defined under the Parliamentary Superannuation Act, generally occurs where a member loses his or her seat at an election. The Commonwealth has a similar involuntary lump sum benefit available for those members who involuntarily leave the Parliament and are not entitled to a pension benefit from the superannuation scheme. The Commonwealth benefit, which is referred to as a 'Resettlement Allowance', is a lump sum payment of 12 weeks of basic salary. The legislation contained in the Bill also proposes a lump sum payment of 12 weeks of basic salary to a member of the PSS 3 scheme who involuntarily loses his or her seat. The benefit will not be payable to any member who has been re-elected to the Parliament and is entitled to a pension benefit as a consequence of a period of previous service in the Parliament. The benefit will also not be payable in the situation where a member is taken to have involuntarily retired in terms under the Parliamentary Superannuation Act, because the member has resigned to contest a seat in another Parliament, and the member is elected to that other Parliament. The fourth main proposal included in the Bill involves an amendment to provide an option for any Member of the Parliament to elect to take out voluntary additional death and disability insurance. On the basis that there are only 69 members of the Parliament, it is considered that the most appropriate arrangement is to provide an option for a member who wishes to have additional insurance cover, to be able to access the additional cover through the government’s Triple S scheme. The Triple S scheme operates its own insurance scheme for government employees. Therefore, under the proposal included in the Bill, a Member of Parliament will be able to access the Triple S insurance scheme for additional death and disability cover. The Bill also includes several minor amendments that address administrative matters or deficiencies in existing provisions. One of these minor amendments deals with co-contribution accounts. At the present time there is no provision under the Parliamentary Superannuation Act, that would enable the Parliamentary Superannuation Board to accept and credit to an account in the name of the relevant member, a Commonwealth co-contribution payment. The Bill therefore includes a provision that will provide for the Board to accept a co-contribution amount and credit to a co-contribution account established and managed in the name of the relevant member. An amendment is also proposed to the provisions of Section 23 of the Parliamentary Superannuation Act, to address a deficiency in the current provisions of that section. Section 23 provides for a guaranteed minimum benefit to be paid to or in relation to a member to address the situation where a former member and his or her spouse die in the short term. It has been identified that the current provision does not deal with the possibility of there being no spouse entitled to a spouse pension on the premature death of a former member before the guaranteed pension payment period of 4.5 years has expired, but there being dependent children who become entitled to a pension benefit. Therefore the Bill proposes an amendment to Section 23 to more adequately deal with all possible scenarios on the death of a member or former member of the Parliament. The Bill also includes several transitional measures to deal with the consequences of some of these measures being introduced with effect from the date of the 2010 General Election. I commend the Bill to Members. Explanation of Clauses Explanation of Clauses Part 1—Preliminary 1—Short title This clause is formal. 2—Commencement Operation of the majority of the measure is to commence on assent. Subsections (1) and (2) of clause 14 are to be taken to have come into operation on 20 March 2010. Clause 18 will come into operation on a day to be fixed by proclamation. 3—Amendment provisions This clause is formal. Part 2—Amendment of Parliamentary Remuneration Act 1990 4—Amendment of section 3—Interpretation Section 3 of the Parliamentary Remuneration Act is amended by the insertion of definitions of non-participating member and PSS 3. Both terms are currently defined in section 4B of the Act. The definitions are to be moved to section 3 (the interpretation provision) because the terms are used in the new section to be inserted by clause 6. 5—Amendment of section 4B—Salary sacrifice for superannuation purposes Section 4B currently allows PSS 3 members and non-participating members to salary sacrifice. The section as amended by this clause will permit all members of Parliament to salary sacrifice for superannuation purposes. Contributions made for superannuation purposes under the section will be paid into PSS 3. 6—Insertion of section 5A This clause inserts a new section. 5A—Involuntary retirement payment Under proposed section 5A, an eligible member (that is, a PSS 3 member or a non-participating member) who retires involuntarily will be entitled to an involuntary retirement payment equal to 12 weeks of basic salary. The question of whether a former member has retired involuntarily is linked to whether or not the person is taken to have retired involuntarily for the purposes of the Parliamentary Superannuation Act 1974. Part 3—Amendment of Parliamentary Superannuation Act 1974 7—Amendment of section 5—Interpretation This clause amends section 5 of the Parliamentary Superannuation Act 1974 by the insertion of definitions of co-contribution and co-contribution account. A co-contribution is a payment made to the South Australian Parliamentary Superannuation Board in respect of a person by the Commissioner of Taxation pursuant to the requirements of the Superannuation (Government Co-contribution for Low Income Earners) Act 2003 of the Commonwealth. A co-contribution account is an account established and maintained by the Board as a co-contribution account in accordance with the requirements of the Act (see proposed section 13D, to be inserted by clause 12). 8—Amendment of section 7F—Special provisions relating to rollovers for PSS 1 and PSS 2 members This amendment is consequential on the insertion of new provisions that will permit PSS 1 and PSS 2 members to become PSS 3 members for salary sacrifice purposes. A PSS 1 or PSS 2 member for whom both a rollover account and a Government contribution account have been established will be taken for the purposes of the Act to be a member of PSS 3 by virtue of both sections 7F and 7G. In some sections of the Act, the question of whether a PSS 1 or PSS 2 member is a member of PSS 3 by virtue of section 7F or 7G, or a combination of both, is relevant. 9—Insertion of section 7G This clause inserts a new section. 7G—Special provisions relating to salary sacrifice by members This proposed section requires the Board to establish a Government contribution account for a PSS 1 or PSS 2 member who has elected to make a superannuation salary sacrifice. Certain provisions of the Act that operate in relation to PSS 3 members will not apply to PSS 1 and PSS 2 members who are members of PSS 3 by virtue of section 7G. 10—Amendment of section 13—The Fund Section 13, as amended by this clause, will require the Superannuation Funds Management Corporation of South Australia to establish a distinct part of the Parliamentary Superannuation Fund proportioned to the aggregate balance of co-contribution accounts. 11—Amendment of section 13AB—Rollover accounts Section 13AB, as amended by this clause, will require the Board to maintain a rollover account for a PSS 1 or PSS 2 member who is also a member of PSS 3 by virtue of section 7G if an amount of money is carried over from another fund or scheme for the member. 12—Insertion of section 13D This clause inserts a new section. 13D—Co-contribution accounts The Board will be required under this new section to establish a co-contribution account for a member in respect of whom a co-contribution has been paid to the Board. The terms and conditions on which the balance of a member's co-contribution account is payable to the member (or to his or her spouse or estate) are to be determined by the Board, subject to the operation of the Superannuation Industry (Supervision) Act 1993 of the Commonwealth. 13—Amendment of section 14B—Contributions by members of PSS 3 Section 14B(1) of the Act currently permits PSS 3 members to elect to make contributions to the Treasurer at a specified percentage (between 1 per cent and 10 per cent) of the combined value of the basic salary and additional salary payable to the member. The subsection as recast will permit PSS 3 members to make contributions at any whole number percentage of the combined value of basic and additional salary. 14—Amendment of section 14C—Government contributions Section 14C of the Act currently requires the Treasurer to pay 9per cent of a member's basic and additional salary into the PSS 3—Government Contributions Division of the Parliamentary Superannuation Fund (unless the member's superannuation contribution rate is at least 4.5per cent, in which case the Treasurer is required to pay 10 per cent of the member's basic and additional salary into the Fund). As amended by this clause, section 14C will require the Treasurer to pay 15.4per cent of a member's basic and additional salary into the Fund. (Section 14C(1) does not apply in relation to a PSS 1 or PSS 2 member who is a member of PSS 3 by virtue of section 7G.) 15—Amendment of section 14D—Government contribution accounts This amendment makes it clear that the Board is required to maintain a Government contribution account for a PSS 1 or PSS 2 member who is a member of PSS 3 by virtue of section 7G. 16—Amendment of section 21AC—Interpretation The amendments made by this clause are consequential on the proposed insertion of section 7G. 17—Amendment of section 23—Pension paid for limited period This amendment corrects a deficiency in section 23 of the Parliamentary Superannuation Act. Currently, section 23 does not take into account the possibility of a pension being paid to an eligible child following the death of a member of PSS 1 or PSS 2. The section is therefore amended by the insertion of appropriate references to eligible children. Changes consequential on the recognition of eligible children as potential beneficiaries are also inserted by this clause. 18—Insertion of section 36 Proposed section 36, to be inserted by this clause, provides that PSS 3 members may elect to take out invalidity/death insurance provided under the Southern State Superannuation Act 2009. (This option is not available for a PSS 1 or PSS 2 member who is a member of PSS 3 only for the purpose of establishing a rollover account.) Schedule 1—Transitional provisions 1—Member contributions—Parliamentary Superannuation Act 1974 This transitional provision is relevant to the amendment made by clause 13. If a member of Parliament was making contributions to the Treasurer at a rate of 4.5 per cent of salary before the commencement of that clause, the member will be taken to have made an election to vary the rate of contribution to 4 per cent. The variation will operate from the first day of the month following the month in which clause 13 commences. This is because the option of contributing at 4.5 per cent will no longer be available. 2—Increased Government contribution—Parliamentary Superannuation Act 1974 This transitional provision relates to Government contributions payable for the period commencing on 20 March 2010 and ending on the last day of the month in which the amending Act is assented to by the Governor. This provision is necessary because of the retrospective commencement of parts of clause 14. Debate adjourned on motion of Hon. D.W. Ridgway.