NEW SOUTH WALES STATE SUPERANNUATION SCHEME
The Hon. P. T. PRIMROSE:
I ask the Special Minister of State, and Assistant Treasurer whether he is aware that members of the New South Wales State Superannuation Scheme who are in receipt of an invalidity pension may be severely disadvantaged by requirements to comply with the Commonwealth Superannuation Industry Supervision Act.
The Hon. J. J. DELLA BOSCA:
I am aware that members of the New South Wales State Superannuation Scheme, which was the superannuation scheme available to New South Wales public servants until 1985, appear to be disadvantaged because of the requirements of the Commonwealth Government’s superannuation industry supervision regulations, particularly those relating to the preservation of superannuation benefits.
Honourable members would be aware that following the signing of the heads of agreement between the Commonwealth and the States in 1996, State superannuation schemes have complied with the broad requirements of Commonwealth policy. As part of this process, New South Wales schemes were amended in 1998 in line with the new Commonwealth requirements for benefit preservation.
Compliance with the Commonwealth's rules protects the concessional taxation treatment of members’ benefits. Some members of the New South Wales State Superannuation Scheme receiving invalidity pensions could be significantly disadvantaged by the new Commonwealth rules when they wish to take a large component benefit as a lump sum at a later time. In those circumstances, people in receipt of an invalidity pension could be required to preserve a very large proportion of their pension until they reach the relevant preservation age, namely, 55 to 60 years. This places considerable financial pressure on some members and arises in part because of the cashable amount of benefits in the scheme. Under the new Commonwealth rules, retrenchment benefits can be considerably less than the invalidity benefit.
In circumstances where the pensioner wishes to commute the pension to a lump sum at a later time, this can mean a member of the scheme would be required to preserve a proportion of his or her pension that is in excess of the retrenchment benefit. This issue is of particular concern to the Teachers Federation, which has a significant number of members in this scheme. Calculations show that a member aged 41, in the circumstances I have described, would have his or her pension reduced from $893 per fortnight to $122 per fortnight; the remaining amount would be preserved in the scheme until the relevant preservation age.
Following representations the SAS Trustee Corporation wrote to the Commonwealth regulator, the Australian Prudential Regulatory Authority [APRA], asking that authority to grant exemption under the preservation standards. This would permit the value of an invalidity pension, rather than a retrenchment benefit, to be deemed the maximum amount available. I inform the House that the response from the APRA to the SAS Trustee Corporation has been positive. Following further discussions between the New South Wales Government and the Commonwealth Treasury, the SAS Trustee Corporation has been advised to commence payment of invalidity pensions in accord with its proposal to APRA.
The New South Wales Government has formally sought agreement from the Commonwealth Minister for Financial Services and Regulation, the Hon. Joe Hockey, that the New South Wales approach is consistent with the Heads of Government agreement signed in 1996. I am also aware of the several other matters raised regarding superannuation, including the question of the effect of part-time leave without pay on superannuation. I am considering how best to rectify any perceived anomalies and will take appropriate action if necessary by legislative amendment.