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House of Assembly - Fifty-First Parliament, Second Session (51-2)
2007-11-14 Daily Xml
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Parliamentary Procedure

SUPERANNUATION SCHEMES

The Hon. S.W. KEY (Ashford) (11:01): I move:

That the Economic and Finance Committee investigate and report on the principles and application of ethical and sustainable superannuation investment options for state public sector and parliamentary superannuation schemes.

I am very pleased to move this motion. I have been interested in this matter for quite some time. It was interesting to look at what schemes could be included in such an investigation. Super SA administers the following schemes: the Triple S, the Lump Sum Scheme, the Pension Scheme, Allocated Pension, Flexible Rollover Product, the South Australian Ambulance Service, the Parliamentary Superannuation Scheme, including—and I know this is a sore point with many members in this house—the PSS1 (which some of you are on), the PSS2 (which is the scheme that I am on), and, for our new members, the PSS3 (which is under some discussion at the moment by our newer members of parliament).

I am advised that, in addition, there are the police schemes. The police have their own superannuation schemes, including the Police Pension Scheme, the Police Occupational Superannuation Scheme called POSS, and the Police Lump Sum Scheme. In addition, the fire service has its own superannuation scheme which is the South Australian Metropolitan Fire Service Superannuation Scheme. I guess the point I am making is that a number of schemes would be covered under what I have stated as the state public sector superannuation schemes, and by no means is that an exhaustive list.

One of the reasons why I am pleased to have the opportunity to talk to this issue is that, as many in this chamber would know, huge chunks of our superannuation (which is now worth more than a trillion dollars) are invested in companies involved in industries such as old-growth forestry logging, uranium mining, and products that cause greenhouse gas pollution. A number of schemes, including state government schemes, invest hundreds of millions of dollars of employees' money (including ours) in gambling, cigarette and oil companies.

While this may not be the case in the South Australian schemes that I have just mentioned, it would certainly be good for members of those schemes to be able to get information about how the funds that they contribute, as well as their employer, are invested and to make sure that the investments take into account labour standards, and social, ethical and environmental considerations, just to name a few.

It has been a bit of a moving feast in regard to what is the definition of ethical and sustainable investment but, basically, ethical investing is about investment approaches that reflect the ethical preference of the investor, and sustainability (in this sense) refers to the concept that humanity should act in a manner that does not undermine options available to present and future generations. I would suspect that many people in this place would be interested to know where our money is invested and to make sure that those principles as far as possible can be sustained.

What I am saying is nothing that is particularly revolutionary. A number of private funds around Australia have ethical and sustainable investment and may also engage firms that do the investment for them to make sure that those principles are observed. Some examples of this include: AMP Capital Sustainable Share, Australian Ethical Super Equities, BT Institutional Australian Sustainability Share, BT Institutional Ethical Share, Challenger Socially Responsive Share, Hunter Hall Australian Equities, ING Sustainable Investment Australian Share, Perpetual Ethical SRI, SAM Sustainability Leaders Australia Fund, and Benchmark ASX 200 Index.

There are a number of others, which I will not mention this morning, but I think if people are interested in following up on this, a lot of information is now available. I noticed as recently as yesterday that there also has been considerable discussion on an international level. I refer members to the United Nations environment program GEO4 Environment for Development, in which there is much discussion about making sure that financial mechanisms channel money into ethical and sustainable investments. This is not merely something that progressive people think is an important principle: this is something that has been taken up at an international and, certainly, a national level.

I have to say that my interest in superannuation grew because, as a trade union official, I was in the position of having to convince members that they should have some investment in superannuation. I remember very clearly, in 1988, when the Australian Council of Trade Unions and the local branch (the United Trades and Labour Council) ran a campaign to convince members that they should think about superannuation as a reasonable retirement option and not just to assume that there would be an age pension to support them, maybe with the addition of some of the savings they might have acquired.

This was a very difficult task because people's understanding of superannuation was very poor. I remember speaking to my girlfriends, who were of a similar age to me, and asking them what their superannuation investments were. They looked at me with absolute horror because they had absolutely no idea what superannuation was available to them and wondered why I would be asking such a question. In fact, I remember sharing a podium a number of times with Diana Laidlaw and talking about women and superannuation. I made the point, which I must say went down very well with the women in the audience, that superannuation was something a bit like menopause—until you actually had to deal with it you really did not want to know about it. Most of the women and quite a few men in that room understood exactly what I was saying.

I also found that, when we looked at the state public sector (and, again, I am talking about the late 1980s) that—surprise, surprise—because women in particular had broken their service to take time off to raise children, which was mainly their responsibility and still seems to be mainly their responsibility, fewer than 16 per cent of the women in the state sector in South Australia had any reasonable superannuation provision. That has gradually increased, but I would say that there are still a number of workers over the age of 30 who would have very poor superannuation prospects when they hope to retire.

The other point that is really interesting arose when I had responsibility for negotiating equity in some of the weekly paid areas. In addition to women doing very poorly in the state public sector superannuation schemes, the other issue that was raised was that the weekly-paid workers (the blue collar and pink collar workers) had less retirement benefits available to them than the white collar workers or the staff or executives in the state public sector. Although, because of the percentage in which superannuation is still developed, that would still be the case, the inequities were quite breathtaking.

For example, in the Electricity Trust of South Australia (ETSA), the weekly-paid workers were on a gratuity scheme and all the staff were on quite a comprehensive superannuation scheme. So, in the 1980s, even in a place like ETSA, those inequities were very much in evidence. Again, ETSA female employees, although they mainly held administrative and clerical positions, had very poor superannuation provisions available to them, even though they had access to the salaried officers superannuation scheme.

So, as I have said, although the issue of superannuation was not something I really wanted to specialise in, because of the inequities in the way in which the provision of superannuation for workers in their old age started to appear, it is something I became very interested in.

As I mentioned earlier in my contribution, the other point I make that is particularly relevant to superannuation is that, when I became a member of parliament, I soon found out that we had two classes of superannuation in this place—and now we have three classes of superannuation. I must say that I have great concerns about it, particularly for those members who are in the third scheme. They have my absolute support to try to make sure that we reform that area. However, the other point is that, despite the very helpful people in the superannuation management area that you can talk to, it was very difficult to get information about whether there was an opportunity to look at sustainable and ethical superannuation investment.

I know that, because of the way in which our schemes are set up—certainly for us as members of parliament—there are some limits as to how far this investment policy could go. However, my reason for referring this matter to the Economic and Finance Committee is that I am a very strong supporter of the parliamentary committees in this place; I think that they do a lot of good work. What the motion is really saying is that we should investigate the options. It is a fairly mild motion, and I think the Economic and Finance Committee would be just the committee to find out what are the possibilities with regard to state public sector and parliamentary superannuation. Then, when we have the facts, after people have had an opportunity to make submissions before the committee, and in an informed way, as we do with other parliamentary committee reports, we, as a group of parliamentarians—and, hopefully, people in the state public sector—can think about what the options may be for the future.

I urge members in this place—as the constituents of Ashford have indicated to me—to make sure that we invest the money put aside for our retirement in ethical and sustainable investments. I urge members in this house to support this motion so that we can determine the detail of what is possible from our all powerful Economic and Finance Committee.

Mr GRIFFITHS (Goyder) (11:15): I commend the member for Ashford on bringing this motion before the house. In my previous role in local government I am quite confident that the superannuation options there actually gave people the ability to make a choice between cash, growth, high growth or ethical superannuation investment options. While it is probably true that the take-up rate of the ethical options is relatively low, there is certainly a number of people in the community at large who wish to make that conscious choice. For me, it is a little bit similar to those people who want to purchase green energy: they make a conscious decision to incur a slightly additional cost to do their bit for the climate, and that is why they decide to purchase green energy.

It is possible, on the basis of this motion being supported and the Economic and Finance Committee resolving to undertake the investigation, that it may be seen that the return on the investment from the ethical options is not quite as great as the other options that are available to, certainly, the Triple S scheme members, where I know there are options and choices that exist. It is probably not available in the first two parliamentary schemes that the member for Ashford referred to, but in Triple S I am actually quite confident that it is there, and it is probable that people will take that up.

I know—in the research that the opposition was doing on the Statutes Amendment (Transition to Retirement—State Superannuation) Bill that came before this place about six weeks ago and is intended to come back next week to be finalised—we in the opposition had submissions from at least one person, and I think there might have been another, who posed that direct question to us: was there an opportunity within the scope of that bill to include the option for ethical investments options for the existing superannuation? I posed that question to the government advisers and was told it was not in scope at the moment, and that is where they actually provided me with the information that very few people do take up that investment choice. It will be interesting to see what happens.

It seems to me that superannuation is something that people do not respect enough. The member for Ashford referred to the fact that many people choose not to become contributory members. I think that is craziness. My philosophy, since I entered the workforce in 1979, has always been to contribute to my own retirement and, therefore, while the employer, through a variety of requirements, is now contributing up to 9 per cent, as it is for me, I think we also have a responsibility to invest. In some of my previous roles I have actually invested up to 20 per cent in my superannuation. That is a choice I was able to make at that time. Financial commitments at the moment do not allow that level of personal investment to be made, but it is there.

When people buy a house, whether it be for $300,000 or whatever they have to pay for it, they do a considerable amount of research on such things as buying in the right area, and they consider their ability to repay the debt. However, when it comes to superannuation they are too prone to just let it go in the default account. I think that is silly. You have to make a conscious choice. It depends upon your personal circumstances, but consider your superannuation to be equally as important as a decision that you make on a house. Superannuation needs to keep you going financially for many years beyond retirement, so it is an absolutely critical decision to make.

There will be people in the community at large who wish to make an ethical decision, so I think it is important that this motion be supported in the house and then considered by the Economic and Finance Committee to see if it is possible for the 79,000 public servants who may be members of a superannuation scheme, and parliamentary members, to determine whether they want to support an ethical choice. I commend the motion.

The Hon. L. STEVENS (Little Para) (11:19): I, too, congratulate the member for Ashford on her initiative in relation to this motion. I think it is a very admirable thing for her to have done, but I also think it is timely for the Economic and Finance Committee, which is the appropriate committee, to investigate the issues concerned. Consideration of topics such as ethics, sustainability, and social considerations, together with economic considerations, is something that we are now hearing more about and wanting to be part of. It is something that has come of age in terms of what large numbers of people think are important considerations in the way that we conduct our lives and do our business. In fact, from my way of thinking, it is the triple bottom line approach to life in general that we should consider all aspects of what we do and how we do it.

I am very much looking forward to the results of this investigation. I will be pleased to know what the status quo is and, indeed, we may find, as the member for Goyder has mentioned, that already there are some ways that people can exercise choice in these areas. However, what is the status quo and what do we actually mean by ethical, social and sustainable options in terms of investment? It is really important for that to be clear. Then, of course, what are the options in the schemes themselves and the people within those schemes to exercise? Congratulations to the member for Ashford. I look forward to the deliberations of the committee on this important matter.

Mr VENNING (Schubert) (11:21): I commend the member for Ashford the Hon. Steph Key for this motion. Again, as we expect from this member, it is a very well thought out and commonsense motion. I and many members on this side of this house have a lot of time for the member for Ashford, and we are sad that she is no longer on the front bench, but that is an argument for another day. The member put forward a very good and cogent argument in relation to this difficult subject of superannuation. We find that it is always very difficult to discuss MP and public servant remuneration, whether it be salaries and/or superannuation, or a mixture of both. As the member said, the superannuation is a hotchpotch the way it currently is because we have three schemes.

I am very lucky to be in the original scheme (the old one), which is arguably the most attractive one. Of course, there are schemes 2 and 3, and I believe that the second scheme is still quite attractive. When we had the option of going from one to two, I did not choose the option. I think the third scheme is the leftover of Latham's pollies' purge. As a member who has been here for some years, there is no incentive at all to encourage people in private enterprise, business or in the community to represent the state when the salary level is basic or probably less than what they are earning. Can I say—and I say this reservedly—that the salary the member for Goyder got before he came here would be far superior to that which he is receiving here. Members would think that superannuation would make up for that, but in his case it does not.

I heard what the honourable member had to say and he was speaking with a fair bit of personal conviction because he is here for the love of it and to serve. Certainly he is not here for the financial gain because he was better off before he came here and he had job security, which we do not have because we are on four-year contracts. His job security is fairly safe, mind you, because, like me, he has one of the dream seats. Our electorates are probably the electorates about which members dream. I commend him for the service he is doing for his community and for this parliament.

I am very fortunate in that I have another income. I had another lifestyle before I came here—and will have, hopefully, after I go—which supports me in here, but I would hate to be a new member of parliament today, coming into this place with a generous spirit, because with the costs involved and with children, a new member would not bank a cent—and I know many do not. Just as well members have partners with good jobs because the salary would not sustain them. People laugh at me when I say that, but I know full well how often members have their hand in their pocket. There is no such thing today as freebies for MPs.

In fact, when a member goes to a function not only do they pay full price at the door, they are usually the first to buy the high-priced item at the auction. Whether or not you bid you end up with it. It is quite common for me to walk out of a function having spent $200 or $300 on top of the entrance fee. I do that because I am the local member and it is all in good spirit, but it is expensive. The bottom line is that it is the dollars that matter.

It is always a difficult question. I agree with the members for Ashford and Goyder: we all should be encouraged always to contribute to our own retirement—that is the whole meaning of superannuation. I am also very fortunate to have been here for 17 years-plus; my superannuation maximised five years ago. I am paying in now and the scheme is benefiting from my being here, but I am not going to pick it up. The member for Stuart would have paid in a lot more dollars than he will get out of it. Members of the media do not recall that. Members over the years have been paying in money but they will not collect because they are here to serve; and that is not the number one reason for being here. I am over 60, so it is not a problem for me.

I believe that we need to change our superannuation rules to reflect what is available outside. I always thought it was difficult that I was able to access my superannuation at any age whereas outside it is 55. There are various categories which ought to be clarified. Several former colleagues of mine came into this house and were one-term members of parliament. Well, it is a bit tough for them because I believe they got their payments back plus bank interest—and that is all. Members would know that it is difficult for former members of parliament when they go back onto civvy street, particularly the women, to get back into the workforce. It is probably easier for school teachers but it is a lot harder for others in professional areas.

This whole area needs to be tidied up. The member for Ashford is right when she says that this matter should be sent to the Economic and Finance Committee to let it deliberate over it. The committee is apolitical; it has members from both sides. At the end of the day, it should come out as being fair. It needs to be unique. Members of parliament need to be looked after, particularly when through no fault of their own they get caught up in an electoral swing and out they go. It is a bit rough that they get their money back, plus bank interest. There should be some encouragement.

How do we get people to come in here? I have been here for some years. When I do decide to go—and that decision has not been made; at this stage I will be standing at the next state election—one of my chief duties is to find a person who is suitable to represent my electorate. I think a chief responsibility of a member is to leave the seat in good hands. It could be a person from the Labor Party because they have some good people over there, but we need to encourage them to put their name forward so people in the electorate can choose from quality candidates.

When I run into someone who I think would make a good MP, I get into dialogue with them about this career. I usually know them fairly well. When it comes to the dollars and cents—the salary—I know the person is probably earning more than an MP's salary—as was the member for Goyder. Since Mark Latham vandalised and brutalised our superannuation scheme it no longer provides the encouragement that it used to provide. Anyway, an MP has to be here for three terms for it to maximise. Why would a person in business—the leaders out there whom we want here—come in here when the incentive is not there? Whether in government or opposition, the better the people we have in here, the better the parliament we will have.

I think the member for Ashford has put forward a very good motion. She has the unanimous support of everyone in the house. I regret that she is no longer on the front bench because we appreciated her there. She never got any flak from me when she was there and I do not think she ever will. I congratulate the member and I support the motion.

The Hon. R.B. SUCH (Fisher) (11:30): Like other members, I commend the member for Ashford for introducing this motion. There are several aspects to it that are important, the first of which is focusing on ethical and sustainable investment options. If one follows international events, one will see what is happening in places such as Indonesia and South America where forest areas are being raped in order for people to make a quick dollar. One would hope that none of the money from any of our superannuation funds is going in any way to support or sustain the environmental carnage that is occurring in those parts of the world.

In terms of the ethical aspect, it is not simply about degradation of the environment, it is also ensuring that we are not party to exploiting people through sweatshops or other activities. One would hope that, in relation to all the public and private superannuation funds, there is no involvement in any of those sorts of practices, which we do not regard as acceptable here in Australia and which should not be practised elsewhere. In terms of sustainability, I guess that relates more to the environmental aspect but, in my view, the two are clearly related—the ethical and the sustainable aspects.

Members have spoken about the various schemes that MPs have been able to access over time, depending on when they came into this place. Like the member for Schubert, I am in the first scheme, and in the ridiculous situation where I would get more money if I retired. To me, that is bizarre. I will get more in my pocket if I retire, because—

Mr Pisoni interjecting:

The Hon. R.B. SUCH: —that is the way the system is structured. For a start, I would not have to pay the 11.5 per cent of my gross contribution. The other aspect that is very unfair is that there is a surcharge on the superannuation scheme in which we are involved. It does not apply to judges. I read the argument from the taxation office (reported in The Advertiser) as to why judges are exempt. I think it said something like 'Judges are powerful people.' I thought that was a ridiculous argument. The imposition of a surcharge on superannuation is either right or wrong in principle, and I think it is quite wrong.

The other aspect about judges is that they do not contribute towards their superannuation at all; they do not have to. So, they receive a double benefit. We do not want to crucify judges and magistrates today (we will do that another day), but I think the system is very unfair. The system is also very unfair to those who have come into this place recently. I have tried over time to achieve a bit of justice for the recent members of this place, and I hope that the state government and the opposition will work to ensure that they receive a better deal than what they currently receive under PSS3.

As the member for Schubert pointed out, it is one of the lasting contributions—a negative one—of Mark Latham. I was disappointed that, at the time, the Prime Minister (and I have said this before) did not take a more considered view and put the issue to a panel of experts to resolve, rather than have a knee-jerk reaction to Mark Latham—who, incidentally, retired on the higher pension arrangement, or the higher payout, which he, by his actions, helped to deny to more recent MPs. It is a rather bizarre provision.

We as members of parliament (like other working people) should be reimbursed, or paid through our salary, not through the hope of a superannuation bonus type scheme. That was the old system, PSS1, which has now been deleted as an option for MPs. It is quite ludicrous that people would be renumerated through their superannuation rather than through their pay; that is a bizarre concept. However, the member for Schubert is right: if we do not have a fair, just and equitable superannuation scheme, we will not attract people in here who have to give up a career midway through. Why would someone come in here and sacrifice their income earning capability and then suffer the indignity of not being able to eventually retire and have a reasonable lifestyle?

The question of the surcharge that applies to our superannuation is being challenged in the courts at the moment by the former member for Enfield, and I think someone else, and I fully support them in that. I hope they are successful, because I think it is ridiculous to encourage people—or require them, in our case—to have superannuation under PSS1 or PSS2 and then put a surcharge on their superannuation.

The Parliamentary Superannuation Fund does very well. It is managed by Funds SA. I do not know whether members have had a chance to read the report from yesterday, but with respect to the crediting rates (which, under the act, are required to be published), the board has to determine the rate of return to be credited to members' accounts, which is based on the investment earnings achieved by Funds SA, the scheme's investment manager. The crediting rates for the most recent financial year, ending 30 June this year, were 19.47 per cent; for the previous year they were 19.40 per cent; and, in 2004-05, they were 15.20 per cent. That is a pretty good return to members from the actions of Funds SA.

As I said at the start of my speech, one would hope that that return—which is a very good return—is coming from ethical and sustainable investments, which I am sure the member for Ashford would also be keen to ensure is happening. We often hear that, when members of parliament retire, they go out with this super golden handshake. The report tabled yesterday in this house shows that, as at 30 June 2007, the average annual rate of pension, after allowing for any commutation that was paid to former members of parliament (and this includes former premiers, ministers and speakers) is $67,992 for voluntary and involuntary retirements.

This will get people really excited, but the average payment for a spouse of a member of parliament where, obviously, that member has deceased is $40,111. It is hardly what people often suggest is paid to a member's surviving spouse. It is not huge money at all. As I said, that is the average. A lot of people are clearly below that and some would be above it. It needs to be borne in mind that, whilst on paper the PSS1 scheme is generous (particularly for people who have had higher office), it is not all that generous overall, and neither is PSS2, and PSS3 is anything but generous.

The government recently supported moves by the commonwealth to allow people who work part time to access some of their super, and I fully supported that. I think it should be extended. People who want to work full time should at least be able to access or commute some of their super with proper safeguards so that, when they eventually retire, they are not left penniless. If they meet, say, the age criteria of 55 or 60, it is their money. Why should they not be able to access some of the cash component, commute some of it, enjoy the benefit of it and keep on working?

At the moment we have the ridiculous situation where we literally encourage people to retire early in a whole lot of occupations—not just in politics—simply because people want to get the maximum benefit from their superannuation scheme. What we ought to be doing is making sure that, if they are able to, people can contribute and enjoy some of the money they have contributed. This is a very good motion. I think all the superannuation scheme arrangements need to be looked at. I am very keen that eventually we get justice for the newer members who are currently under the PSS3 scheme, because in my view it is a very unfair scheme. I commend the member for Ashford for this excellent motion.

The Hon. S.W. KEY (Ashford) (11:39): I thank members for their contributions on this important issue. As I said, in my view I think it is most appropriate that the parliament's Economic and Finance Committee take up this reference. I have had some indication from some members that they would like to look at this area. That will probably happen next year. I think it will also be important for people at a public level—particularly for people in the state public sector schemes and maybe different members of parliament—to make their views known to the Economic and Finance Committee.

It is a good opportunity for the issue of ethical and sustainable superannuation to be raised. As members have indicated here (and I agree with them), it does raise the issue of some equity for us in the parliamentary scheme, which we believe also needs to be introduced into the schemes. My main aim, of course, is to look at the investment possibilities. The member for Goyder made a very important point with regard to the return on the investment of different schemes. I am very aware that part of the responsibility of fund managers is to maximise the investment we get on this money.

Also, as the member for Little Para said, most of us have a view that there needs to be a triple bottom line approach to everything we do. Certainly in the area of investment, a number of us feel very strongly. I know from representations made to me by constituents in the electorate of Ashford who are employed in the state public sector that they feel very strongly about having the opportunity to decide where their funds are invested. I am merely saying: let us look at the options; let us investigate what is possible; and, with an informed view and giving people an opportunity to contribute their views, if possible make some changes to the parliamentary schemes and the state public sector schemes.

Motion carried.

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