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Legislative Council - Fifty-Second Parliament, Second Session (52-2)
2012-09-05 Daily Xml
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ELECTRICITY INDUSTRY SUPERANNUATION SCHEME

The Hon. R.I. LUCAS (17:23): I move:

That this council:

1. notes general community concern regarding the Electricity Industry Superannuation Scheme (EISS) and the set of documents providing the basis of that concern provided to members of parliament by the organisation SA Superannuants and Mr Richard Vear, a pensioner of EISS;

2. refers the following matters to the Ombudsman, pursuant to Section 14 of the Ombudsman Act 1972 for investigation and report:

(a) determine whether or not the method used to calculate EISS taxed-source pensions is designed to reduce employer costs for those pensions compared to what the cost would be if the pensions continued as untaxed-source pensions; and

(b) if it is a method designed to reduce employer costs, determine:

(i) whether or not the EISS Board and the Department of Treasury and Finance knew this, or ought to have known this, at the time the rule was authorized for use;

(ii) whether or not, since the time of the rule's authorization, the EISS Board and the Department of Treasury and Finance have dealt honestly with the representations being made to them about the validity of the rule; and

(iii) whether or not it is a method that complies with the Electricity Corporations Act 1994 (as modified by the Electricity Corporation (Restructuring and Disposal) Act 1999) and the Heads of Government Agreement on Superannuation;

(c) if the method does not comply with the Electricity Corporations Act 1994 (as modified by the Electricity Corporation (Restructuring and Disposal) Act 1999) recommend a method for calculating taxed-source pensions that does comply with that act and with the Heads of Government Agreement on Superannuation;

(d) review the Mercer Strategy reports (Review of Taxation Status of the SA Government Superannuation Funds) of 1998 and 2004, commissioned by the Department of Treasury and Finance and determine whether or not these strategy reports underpin the method of reducing EISS pension benefits to its members, as it has been applied since July 2002:

(i) in this matter include a review of the decision to provide the Crown Solicitor with a copy of the 2002 Mercer Explanatory Memorandum on EISS rule changes, but not copies of the 1998 and 2004 Mercer Reports on Taxation Status of SA Government Superannuation Funds. This advice was sought on the legality of the EISS pension reduction method, due to a request from the EISS Trustees, to the Treasurer Hon K. Foley.

(ii) in this matter, review also the advice given to the Minister for Finance that the 1998 and 2004 Mercer reports were only relevant to the State Pension Scheme and its possible transfer to the taxed superannuation environment but not to the transfer of the EISS pensions, from the untaxed arrangements that applied to the ETSA Superannuation Schemes, prior to privatisation.

(e) review the EISS submission, dated 4th August 2006, made as part of the 2006 public consultation process conducted by the Federal Government on its 'Plan to simplify and streamline superannuation' to determine if:

(i) this submission shows that the EISS Trustee was aware, or should have been aware, that its pension reduction method had been designed to reduce employer costs for taxed-source pensions below that for untaxed-source pensions and deliver an advantage to employers.

(ii) the EISS Trustees' changes to its 'Taxation Rules' 29 to 31 that became effective in July 2007 were made to ensure that employers continued to receive an advantage at the expense of EISS pension division members.

(f) review the appropriateness of allowing the organisation, Mercer, to continue for so long as the sole provider of actuarial advice to EISS and the Department of Treasury and Finance on the matter of transferring untaxed funds into the taxed superannuation environment, when Mercer had compared the rights of fund members and employers in such a transfer by saying, on page 63 of its 1998 report:

'The government may need to cope with demands from members of the pension scheme that they, as well as the Government, should share in the gains achieved. An important part of the response would be that these people are still members of schemes, which have been closed because of their generosity, and yet their benefits have been continued. Thus they should have little to complain about if the advantage of applying the PJFC [pre-July 1988 Funding Credit] is not passed through to them, so long as they are not detrimentally affected. A critical point is that the benefit reductions should be such as to remove the windfall gains, but not to the extent of causing detriment to any members'; and

(g) any other relevant matter.

Members interjecting:

The Hon. R.I. LUCAS: As some members, by way of interjection, have noted, this is a very lengthy and detailed notice of motion which I do not propose to repeat for the Hansard record. There is a debate that continues in the parliament on the Statutes Amendment and Repeal (Superannuation) Bill 2012. That debate has concluded in the House of Assembly and is now with the Legislative Council. I am indebted to my colleague, the member for Davenport, who has had carriage of the bill and who, in a most comprehensive way for those avid readers of Hansard, in May of this year outlined the Liberal Party's position on the bill, which I do not intend to repeat.

More importantly, he outlined a very detailed statement of the concerns of a small number of persons potentially impacted by aspects of the legislation. As all members in the Legislative Council, I am sure, will be aware, a number of those persons (Mr Ray Hickman, Mr Richard Vear, and a number of others) have been active in lobbying members in relation to aspects of both the superannuation bill and the subject of this particular motion that I am moving on behalf of the Liberal Party but which has been negotiated by my colleague the member for Davenport.

Perhaps to put it as simply as I can, this small group of persons has argued that the EISS (Electricity Industry Superannuation Scheme) tax-sourced pensions were being calculated by a method, in their view, designed to reduce the cost to their employers, when the relevant act (Electricity Corporations Act 1994) required that the method go no further than avoid or reduce an increase in employer costs. Their concerns are much more comprehensive and detailed than that, but that is a critical part of the difference of opinion that has gone on for some considerable period of time between these persons acting on behalf of Electricity Industry Superannuation Scheme members and the current government, a couple of treasurers and those within Treasury who advise the treasurers; and that disagreement continues until this particular point.

In the debate in the House of Assembly, there seemed to be the basis of almost an agreement, and that was that, the member for Davenport having read out all of the concerns, the Minister for Finance indicated that he would agree to an independent review of the questions being raised by the member for Davenport on behalf of the EISS members and that he and the Minister for Finance would ensure that the independent review was undertaken and that he would determine the terms of reference for that review on the basis of the matters raised by the member for Davenport both in his letters and in the course of the debate this morning.

What then ensued was that the Minister for Finance outlined a proposed independent review, the actuary being proposed by the Minister for Finance was opposed by the EISS members and some of the proposed terms of reference were opposed by the EISS members as well. What ensued then was a detailed negotiation and discussion between the member for Davenport and the EISS members and that is what we essentially have before us now; that is, rather than just having the independent review that was to be established by an actuary who the Minister for Finance had nominated, the proposal that is before this chamber is now to seek an independent inquiry by the Ombudsman. As I said, the terms of reference, if this house approves it, are quite detailed and cover all the issues that the EISS members would wish to see canvassed by an independent inquiry.

Can I say at the outset that I make no specific comment in relation to the particular actuary who the Minister for Finance had nominated. I do not wish to be associated with any particular criticism of that particular individual. I think in fact that the particular individual may well be an acquaintance of mine from 20 or 30 years ago from Mount Gambier High School. He is a well known and respected actuary. As I said, I do not wish to be associated publicly with any criticism of that particular individual. Nevertheless, the EISS asked members for their own reasons and they essentially relate to what they believe to be a conflict of interest, and that person had given advice in relation to these schemes some years ago. That is why this council is now being asked to consider an Ombudsman's inquiry into these issues.

I also indicate, in moving this particular motion, that I do not wish to go through all of the details because they are really quite complicated and complex. They are well understood by the EISS members. The member for Davenport has worked very hard in terms of understanding the detail of the concerns, but I do not believe it is essential for this council to go through the detailed argument at this stage.

It is essentially a simple principle that these EISS members, acting on their own behalf and on behalf of members, had considerable expertise in relation to this because they pursued this issue for many years. They have a disagreement with the government and the government's advisers. The principle we are being asked to support (potentially) is what is an appropriate process to try to establish in an acceptable way the difference of opinion.

I think an Ombudsman's inquiry, and certainly this is the proposal from the member for Davenport, is an appropriate process to go through. I am interested to see the results of an independent inquiry, independent to the degree that everyone on all sides can accept that it is independent so that ultimately when it comes back and if it finds against the EISS members in some respect, or in a number of respects, then the understanding we have is that they will be prepared to accept the independent umpire's decision.

I think that is an important part of a resolution of this quite difficult issue, that they have respect for the independent umpire. If the independent umpire finds against them on the complicated case they have put then I hope they will accept the independent umpire's decision. I hope that is the case, if it goes down that particular path. Equally, I would hope the government, if there is an independent inquiry, would accept the independent umpire's decision as well.

In concluding my remarks, in a lot of the correspondence members have received on this particular issue there is quite specific criticism of a senior government officer who has provided advice to the government over a period of time. The correspondence does not mention the name of the individual and I am not going to mention the name of the individual. I think we all know to whom they are referring, but I can only speak on behalf of my colleagues on this side of the political fence.

I have certainly had some dealings with him, as a former treasurer. I hold the person in high regard. I certainly hold his corporate knowledge and expertise on the issue of superannuation in very high regard. He is not often, if ever, wrong in relation to superannuation issues, but I hasten to say that no-one is infallible. No-one can claim 100 per cent accuracy on every issue. As I said, on behalf of the member for Davenport and the Liberal Party in moving this particular motion, I in no way would want this to be interpreted as any criticism, direct or indirect, of that senior officer who has advised the Treasurer, the Minister for Finance and the government on this complicated and complex issue. With that, I urge members of this chamber to support this motion which, as I said, is a vehicle to try to resolve what is a difficult process and a disagreement between the EISS members and the Treasurer, the Minister for Finance and the government.

Debate adjourned on motion of Hon. B.V. Finnigan.

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