Updated 1 July 2007

Leanne Manthorpe

Politics and Public Administration Section

Introduction

This background note provides a survey of parliamentary debate during the establishment of the parliamentary pension scheme for senators and members. The scheme was introduced by the Parliamentary Retiring Allowances Act in 1948, now called the Parliamentary Contributory Superannuation Act 1948. The E-Brief was originally written to assist parliamentarians debate changes made to the scheme in 2004, by outlining the basis upon which the Parliamentary Retiring Allowances Bill 1948 was introduced.

A selective chronology of legislative amendments since 1948 is provided to assist senators and members in their understanding of the scheme's development. A review of subordinate legislation has not been conducted.

Since 1952, several Committees have inquired into parliamentary entitlements, including superannuation benefits. Committees recommendations are listed to give a complete picture of the impetus for legislative change. The Remuneration Tribunal does not determine on superannuation benefits, but has, in its annual reviews, commented on superannuation s place in the remunerative framework. These comments have been included.

Lastly, the section entitled Recent Events summarises policy developments and recent legislative change.

A companion Background Note, Superannuation Benefits for Senators and Members, explains superannuation arrangements under the Parliamentary Contributory Superannuation Act 1948 in place for parliamentarians elected prior to 2004.

Parliamentarians elected for the first time on 9 October 2004 are subject to superannuation arrangements under the Parliamentary Superannuation Act 2004. The government will pay a 15.4 per cent employer contribution into the complying superannuation fund chosen by each new parliamentarian. This E-Brief does not explain the new arrangements in detail. readers are referred to Parliamentary superannuation arrangements for new Members of Parliament at the website of the Department of Finance and Administration.

Terminology

The Parliamentary Retiring Allowances Act established both the Parliamentary Retiring Allowances Trust (the Trust) and the Parliamentary Retiring Allowances Fund (the Fund). The Act, and the scheme it administered, changed name with the enactment of the Parliamentary Contributory Superannuation Amendment Act 1978. The phrases the Act and the Scheme should be read to encompass pre-1978 and post-1978 legislation. The term member is used to refer to both senators and members who are contributing to the Scheme. Current terminology has been used for phrases that have been superseded so retiring allowance is used for pension and annual allowance used for parliamentary allowance or basic salary.

Retiring allowances are held to be payable under Section 48 of the Constitution that allows for the remuneration of Members of Parliament until the Parliament otherwise provides . [1]

Parliamentary Retiring Allowances Bill 1948

The Labor Government under Ben Chifley introduced the Parliamentary Retiring Allowances Bill 1948 (the Bill) on 1 December 1948. The Bill proposed to provide a retiring allowance to members who ceased parliamentary service after 30 November 1948. A Cabinet sub-committee had examined twenty Australian and international superannuation schemes before the government submitted the Bill. In the sub-committee s view, it was desirable to introduce legislation into the House of Representatives before the planned expansion of Parliament in 1949. [2]

The second reading debate on the Bill is not available online, however senators and members may obtain a copy of the 1948 debates from the Parliamentary Library.

Reason for introduction

In its submission to the 1997 Senate Select Committee on Superannuation, the Department of Finance identified the following reasons for the scheme's establishment in 1948:

when elected, parliamentarians often gave up potential superannuation payouts from previous employers when they left employers prior to retirement age;

electoral and parliamentary demands reduced members chances to re-establish careers when their parliamentary term was over; and

there was a need to entice people to enter Parliament who would not otherwise come. [3]

Prime Minister Chifley

The general purpose for the introduction of the scheme can be found in statements made by Ben Chifley in his second reading speech to the Bill in 1948:

Chifley stated that it frequently occurred that members faced hardship at retirement. Through and in the course of their service to Parliament , careers were interrupted, earning power lost and private means reduced. Increasing workloads made it impossible for members to maintain connexion with any other activity . [5]

In Chifley s opinion, most potential recipients of the proposed retiring allowance were not drawn from the wealthy classes and had no substantial private means . [6] In 1948, senators and members received a salary of 1500 per annum while the basic wage was about 6 per week , or 312 per year. [7] The average period of service in Commonwealth Parliament was said to be about ten years . [8]

Chifley felt that the Commonwealth lagged behind other jurisdictions in establishing parliamentary superannuation benefits. He referred to the limited parliamentary schemes introduced in the United Kingdom in 1939, Western Australia in 1941, New South Wales and Victoria in 1946 and South Australia in early 1948.

Mr Eric Harrison, MP (Lib) Acting Leader of the Opposition

The Opposition supported the principle of a retiring allowance. In Harrison s second reading speech on 9 December 1948, he spoke of the difficulty of comparing the proposed scheme with other pension schemes given there is no retiring age in the case of members of parliament whilst their average age upon entry is higher, for instance, than in the Public Service . Importantly, he recognised that, by not linking contributions with the amount of benefit to be received, the scheme presented a vital departure from customary superannuation policy in that it provides for flat rate contributions and not for contributions which increase according to the age of entry into the scheme . [9]

Harrison revealed that the average age of entry to Parliament then stood at 45 years, the same age at which benefits could become payable. The average age at entry to the 40th Parliament following the 2001 federal election was 41.3 years. [10]

Harrison criticised the generosity of the benefits to be paid to serving members of the 18th Parliament defeated at the next general election. He noted that the size of parliament would increase by 72 members to 183 after the next election and they would, along with any new members elected, be contributing to meet part of the cost of the favoured ones . This retrospective application was without precedent in any Public Service pensions scheme . [11]

As future critics have noted, Harrison reminded the members that they were legislating on their own benefits. He moved an amendment calling for the Bill to be referred to an all-parliamentary committee with a view to reducing benefits for non-contributory members currently serving.

Mr Arthur Fadden, MP - Leader of the Country Party

Fadden fully supported the principle of retiring allowances and agreed with Harrison s objection to the benefits potentially available to current members. Fadden estimated that, after the next election, the initial deficit in the Fund would be 500 000. He lamented the absence of a means test in the bill and called for its withdrawal. The whole scheme should be withdrawn , he said, and reconsidered on the basis of equality and benefits . [12]

Fadden measured the generosity of the Scheme against the existing public service scheme. For a payment of 3 a week , Fadden said, a public servant is entitled to receive a pension of 8 per week on retirement at age 60, provided he has contributed for a minimum period of twelve years. In other words he would have to be aged 48 years when his superannuation contributions commenced. The proposed parliamentary scheme was far more liberal giving a member over 45 years of age a pension of 8 after 12 years service, but not necessarily after twelve years payment of contributions, even if he retires voluntarily. [13]

The Australian Country Party supported the amendment put by the Opposition.

The amendment was negatived by the House.

Second Reading Debate on the Parliamentary Retiring Allowances Bill 1948

It is pertinent to reflect on other points raised by senators and members during the second reading debate.

Mr Rupert Ryan, MP (Lib), Flinders

I regard the benefits proposed to be granted under this bill as unduly generous many additional benefits have been granted to honourable members and senators. We have been provided with secretarial assistance we have been granted living away from home allowances we have received a 50 per cent increase in our parliamentary allowance .at one end of the age scale it proposes to give too much to too little to youth, and at the other end of the scale it proposes to give too little for too much to age. [14]

Mr Arthur Calwell, MP (ALP), Melbourne, Minister for Information and Minister for Immigration

It [the scheme] should have been introduced years ago. Of the various superannuation or provident fund schemes that other Parliaments have adopted for their members, this is the first to be supported by a certificate of actuaries There may not be a deficit. The Government will contribute 60 per cent and members of the Parliament will contribute 40 per cent to the total cost That principle is embodied in the superannuation acts of the Commonwealth and the States .

There is nothing wrong with members of this Parliament deciding that, should they die in the service of Parliament, provision should be made for their widows The wives of members of Parliament will be the chief beneficiaries of this legislation, I think.

In the Public Service scheme, contributions begin at a low rate and increase as the risk increases because of advancing age. The Government has decided against asking members to contribute on an age basis because it considers that young and old should be treated alike .

Hon Sir Thomas White MP (Lib), Balaclava

'After an election, jobs are found for defeated candidates as trade commissioners and members of boards appointed by the Government. A properly devised scheme for retiring allowances would put an end to that.' [16]

Senator Reg Murray (ALP), Tasmania

I believe that members of the opposition parties have approved the principles of the present measure for years, but they did not have the temerity to encounter what they believed to be the political risks associated with the introduction of such a measure. Quite frankly, if I were not prepared to assert my own rights, then I should not consider myself fit to assert the rights of others. [17]

Senator the Hon Neil O Sullivan (Lib), Queensland, Deputy Leader of the Opposition

People in private industry, occupying positions carrying salaries equal to the allowances of honourable senators, cannot be sacked overnight without due compensation and

I am willing to share with the Government the responsibility for the introduction of a pension scheme however I am not satisfied with certain of its details . [18]

In the Senate, O Sullivan moved the amendment put by Fadden in the House. It was negatived.

Senate Amendments and Enactment

In committee, the Senate agreed on amendments that enabled the Governor-General in Council to appoint trustees until the bill was enacted. This measure was agreed by the House of Representatives and the Parliamentary Retiring Allowances Act 1948 received assent on 21 December 1948, coming into operation on 1 December 1948.

The Trust was constituted with five trustees the Treasurer plus two Senators and two Members of the House of Representatives appointed by the each Chamber. These last four appointed trustees comprised two members of the government and two of the opposition.

The Fund consisted of contributions and repayments (for example under s. 20 re-election) by members and former members pursuant to the Act, money paid into the Fund by the Commonwealth, and income derived from the investment of money from the Fund.

Attributes of the 1948 Scheme

A summary table of benefits follows a description of the 1948 scheme's attributes.

Membership of the scheme was compulsory.

Originally the scheme was framed along the lines of the public service scheme introduced by the Superannuation Act 1922. The government rejected linking the retiring allowance to a member s age at retirement and their length of service, thereby asking long-serving members to carry the cost of pensions received by members whose careers were abruptly and prematurely terminated . [19]

Funding of the Scheme

The scheme was funded to the extent of member contributions, along with a government contribution set at 60 per cent. The notional government contribution rate to ensure that the Scheme commenced without any liabilities for past service, had been calculated by actuaries to be 56 per cent of total salaries. Calculations were based on the average parliamentary tenure experienced during recent years. Chifley said this equated to a retirement rate of 30 per cent of members every three years and was considered the best method of estimating Commonwealth liability because it spread the risks of retirement . [20] The Government considered that the four per cent buffer in the proposed and notional government contribution rates would probably be sufficient to counter the expected initial deficiency when the current crop of serving members retired without contributing substantial amounts to the fund. Chifley felt that a further deficiency in the Fund could arise if the retirement rate in the future should prove to be lower than has been the case in the past . The government planned to hold the first complete actuarial investigation when the scheme had been operating for seven years. [21]

The Opposition disputed the Government s calculations, concerned that parliamentarians defeated at the 1949 election could receive substantial retirement benefits over their lifetime after a total contribution to the Scheme of a mere 156. Harrison said that a member aged 45 years who was defeated after eight years service and lived until they were 70 years could receive up to 10 400 over their lifetime. He cited actuarial work estimating the expected initial deficiency in the Fund to be rather staggering . The Opposition felt that in order to provide pensions benefits for its members who are defeated at the next election, the Government has devised a pension benefit scheme whose solvency will not be known for seven years . [22]

Contribution Rate and Fixed Benefit

Contributions were 3 per week, or 156 per annum, payable from 1 December 1948 around 5 per cent of weekly salary. A fixed annuity of 8 per week was payable to all members who qualified for a pension. Chifley regarded this limit of 8 per week as much less than the maximum pension provided under many private and public superannuation schemes . [23]

Eligibility and Qualification for Benefit

Members who retired involuntarily, through loss of seat at election for example, qualified for a retiring allowance after 8 years of service and became eligible for a benefit immediately upon retirement or at age 45 if they retired before that age. For involuntary retirements at less than 8 years of service, the member received a refund of contributions plus a supplement equal to one and one-half times the amount of those contributions. Chifley explained that these members were contributing about 40 per cent of their own retirement benefit.

Eligibility for a retiring allowance through voluntary retirement was set at 12 years service and 45 years of age or over. In all other voluntary retirements, the member received only a refund of contributions.

Taxation

Retiring allowances were subject to income taxation.

Future and Prior Service

The retiring allowance of a member, who subsequently received a pension or salary after entering state parliament or gaining government employment, was reduced by the amount of remuneration or pension received from that employment.

For those who received a refund of contributions and a supplement upon retirement, and then re-entered parliament, prior service counted toward any future benefit as long as the refund was repaid.

Those who re-entered parliament after receiving a pension were required to again contribute to the scheme and their retiring allowance was suspended until they again ceased to be a member.

Specific provisions in the Act allowed members of the 18th Parliament to draw benefits for periods of non-contributory service before the scheme came into operation.

Reversionary benefits

Prior to the enactment of this legislation, widows, orphans, and former members in indigent circumstances, had been supplied with ex gratia payments at the discretion of the Commonwealth.

The scheme gave 5 per week to the widow of a deceased member who had been in receipt of a retiring allowance.

5 per week was allowed to the widow of a member who died in service.

A discretionary payment of 5 per week was allowed to a female member s husband, if that husband was totally dependent on her because of mental or physical incapacity . [24]

The scheme provided a refund of contributions to the estate of a deceased member who had been in receipt of a pension and was unmarried at the time of death.

The Act in summary

Section Description s.12, Periodical actuarial investigations on 30 June, seven years after the commencement of the Act, an investigation by the Commonwealth Actuary will be held, as to the state and sufficiency of the fund . An investigation will be conducted at not more than seven-yearly intervals s.13, Contributions by members every person receiving an annual allowance (parliamentary allowance or basic salary) shall contribute to the Fund at the rate of 156 per annum s.16, The Commonwealth supplement shall be one and one-half times the contributions paid during the last eight years of service s.17, Meaning of voluntary retirement a member who ceases to receive an annual allowance, and has reached 70 years of age, shall be deemed to have retired involuntarily for the purposes of the Act a member who satisfies the Trust that he has retired on account of ill-health is deemed to have retired involuntarily a member who satisfies the Trust that he has retired for the purposes of re-election is deemed to have retired involuntarily s.18, Benefits to members involuntary retirement: retiring allowance of 8 per week if i) has served not less than eight years ii) has attained the age of 45 years involuntary retirement and less than eight years of service: a refund of contributions (without interest paid) and payment of the Commonwealth supplement voluntary retirement: retiring allowance of 8 per week if i) has served not less than 12 years ii) has attained the age of 45 years voluntary retirement and less than 12 years of service: a refund of contributions (without interest paid on contributions) for any member entitled to a retiring allowance and less than 50 years of age at retirement, may take in lieu of the retiring allowance: a refund of contributions plus a payment of the Commonwealth Supplement (s.16) s.19, Benefits on death of a member Reversionary benefit to spouse of member who dies in office or while receiving a retiring allowance i) benefit of 5 per week during widow s lifetime but ceasing on her remarriage or ii) member s contributions plus Commonwealth supplement, less amount of retiring allowance received or accrued by deceased member a reduced benefit, or no benefit, at the discretion of the Trust to a widow more than 10 years younger than the member or who married him within five years of his death or within five years of his entitlement to the retiring allowance no benefit payable to a widow who married the member after they became entitled to a retiring allowance benefit of 5 per week to totally dependent widower for a discretionary period a refund of contributions (without interest) to personal representatives of deceased member who dies without a widow or totally dependent widower, less any benefit already received by the deceased member s.21, Government employment or membership of state parliament For person entitled to a retiring allowance and subsequently holding such employment the retiring allowance payable shall be reduced by the salary or other pension being received s. 22, Certain disqualifications Members shall be entitled to a refund of contributions but no other benefit if their place becomes vacant because they become subject to the following Constitutional disabilities: s. 44(i) Is under any acknowledgement of allegiance, obedience, or adherence to a foreign power, or is a subject or a citizen or entitled to the rights or privileges of a subject or citizen of a foreign power: or s. 44 (ii.) Is attainted of treason, or has been convicted and is under sentence, or subject to be sentenced, for any offence punishable under the law of the Commonwealth or of a State by imprisonment for one year or longer: or s. 45 (iii.) Directly or indirectly takes or agrees to take any fee or honorarium for services rendered to the Commonwealth, or for services rendered in the Parliament to any person or State s.23, Exemption of Trust from taxation Income, property and operations of the Trust are not subject to any Commonwealth or State rates, taxes or charges .

Chronology of selected amendments to the Parliamentary Retiring Allowances Act 1948 [25]

When entitlements under the Act were changed by amendments, the accrued benefits of members under existing arrangements have been protected. This approach, often called grandfathering, is consistent with the treatment of changes to benefits in other superannuation schemes.

Read about the Report of the Committee of Enquiry into the Salaries and Allowances of Members of the National Parliament (Nicholas Report, 1952)

Parliamentary Retiring Allowances Act 1952

Date of assent: 13 March 1952

s.18 an additional pension of 2 per week given to members receiving a retiring allowance who have reached 65 years of age.

s.19A, inserted an additional pension of 1200 per annum given to eligible prime ministers and 750 per annum to their widows. [26]

1955

Parliamentary Retiring Allowances Act 1955

Date of assent: 15 June 1955

s.13 contributions increased to 234 per annum (four and one half pounds per week)

s.14 and s.18 retiring allowance increased to 12 per week; an additional pension of 3 per week given to members receiving a retiring allowance who have reached 65 years of age for a total of 15 per week.

s.18 three occasions rule inserted for involuntary retirement, that is, not less than eight years or he has, on at least three occasions ceased to be a member by reason of the dissolution or expiration of the House of which he was a member or by reason of expiration of his term of office

s.19 reversionary benefit to widow increased from 5 to 10 per week.

1959

Read about the Report of the Committee of Inquiry into the Salaries and Allowances of Members of the Commonwealth Parliament (Richardson Report, 1959)

Parliamentary Retiring Allowances Act 1959

Date of assent: 24 April 1959

s.13 contributions increased to 260 per annum or 5 per week (increased from 234 per annum or 4.10s.per week)

s.17 voluntary retirement deemed to be involuntary if the member has attained 60 years of age (lowered from 70 years).

s.18 the age at retirement now fixed the rate of retiring allowance as follows:

Age Retiring Allowance per week

s d 40 yrs 10 10 41 yrs 12 42 yrs 13 10 43 yrs 15 44 yrs 16 10 45 yrs or more 18

s.18 member eligible for involuntary retirement after serving not less than eight years, or had ceased to be a member on at least three occasions, and had attained 40 years of age (age lowered from 45 years).

s.18 member eligible for voluntary retirement after serving not less than 12 years and had attained 40 years of age (age lowered from 45 years).

s.18 for a member entitled to a retiring allowance and less than 50 years of age at retirement, could choose to take the following in lieu of the retiring allowance: a refund of contributions plus a payment of the Commonwealth Supplement for involuntary retirement; a refund of contributions plus a payment of one-half of the Commonwealth Supplement for voluntary retirement (compared to 1948 where no distinction was made between voluntary and involuntary retirement).

s.18 if retired voluntarily and not eligible for a retiring allowance, would receive a refund of contributions plus a payment of one-half of the Commonwealth Supplement (change from 1948 where the benefit was merely a refund of contributions).

s.18 the additional pension of three pounds per week given to members receiving a retiring allowance who had reached 65 years of age, was now extended to those who received a retiring allowance of 18 per week as described in the table above for a total of 21 per annum.

s.19 Widow s benefit increased to 15 per annum (from 10 per annum).

s.19 payment now made to personal representatives of deceased female member or a member who had not left a widow: payment of member s contributions plus Commonwealth Supplement, less the amount of any retiring allowance received by the member before death.

s.19A period of service for Prime Minister to attain eligibility reduced from three years (1952) to two years. Additional retiring allowance for Prime Minister ranged from 2000 per annum for two years aggregate service to 3000 per annum for six years aggregate service and over. New benefit to widow of deceased Prime Minister: rate equalled one-half of the Prime Minister s retiring allowance per annum, payable until remarriage.

s.19AA new benefit payable to orphaned children under 16 years of age: 3 per week in most circumstances.

s.21(d) ss.2A for subsequent employment in government position or state parliament (not including a minister of state), the retiring allowance currently being received shall be reduced by not more than half (compared to 1948 where retiring allowance could be reduced by the full amount).

1964

Parliamentary Retiring Allowances Act 1964

Date of assent: 30 October 1964

s.9 retiring allowances could be paid from the Consolidated Revenue Fund (CRF), as well as from the Parliamentary Retiring Allowances Fund. This section was deemed to have come into operation on 1 December 1948.

s.13 contributions now moved from an amount of pounds to a percentage of the annual allowance ie 11.5 per cent of the annual allowance.

s.14 Commonwealth paid 70 per cent of each retiring allowance paid into the Fund (60 per cent in 1948).

s.16 Commonwealth supplement increased to two and one-third times a member s contributions (increased from one and one-half times the contributions).

s.18 retiring allowance changed from a fixed amount, to a percentage of the annual allowance as follows:

Age at retirement Retiring allowance: percentage of annual allowance 40 yrs 30 per cent 41 yrs 34 per cent 42 yrs 38 per cent 43 yrs 42 per cent 44 yrs 46 per cent 45 yrs or more 50 per cent

Note that the annual allowance in 1964 was 3500 per annum or just over 67 per week.

s.18 the additional retiring allowance of 3 per week, given to members receiving a retiring allowance who have reached 65 years of age (introduced in 1959), was now extended to those who receive a retiring allowance and are aged 45 years and over.

s.19 reversionary benefit paid to spouse changed from amount of pounds to a rate equal to five-twelfths of the rate of the annual allowance, ceasing upon remarriage.

Part V Ministerial Retiring Allowances Fund established with the Commonwealth paying 70 per cent of each retiring allowance paid into the Consolidated Revenue Fund (CRF).

Contributions

Ministerial Office Contribution per week

s d Minister or Leader Opposition in House of Representatives 4 5 0 Leader of Opposition in Senate / Deputy Leader of Opposition in House of Representatives 2 2 6 Deputy Leader of Opposition in Senate 1 1 3

Benefits

Period of Service as Minister Retiring Allowance per week

s d 8 years or on 3 occasions 9 0 0 9 years 10 10 0 10 years 12 0 0 11 years 14 0 0 12 years 16 0 0 13 years 18 10 0 14 years or more 21 0 0

Widows received five-sixths of this retiring allowance until remarriage.

1965 68

Parliamentary Retiring Allowances Act 1965

Date of assent: 2 June 1965

Parliamentary Retiring Allowances (Decimal Currency) Act 1965

Date of assent: 18 December 1965

Parliamentary Retiring Allowances Act 1966

Date of assent: 29 October 1966

Parliamentary Retiring Allowances Act 1968

Date of assent: 29 November 1968

s.13 contributions equalled 11.5 per cent of the monthly amount of salary paid which was, in turn, one-twelfth of the annual allowance.

s.19 retiring allowance for orphaned children the higher of either: a) $520 per annum or b) an amount calculated on the benefit payable in various instances divided by four, or by the number of children if that was greater than four.

s.22 ministerial contributions reckoned on monthly, not weekly, amounts calculated as 11.5 per cent; 5.75 per cent; and 2.875 per cent of monthly ministerial salaries, depending on the office held. Presiding officers were added to definition of office-holder . A distinction was made between basic ministerial salary and senior ministerial salary .

s.22 benefits now ranged from 21 per cent of basic ministerial salary for eight years of service to 50 per cent of basic ministerial salary for 14 or more years of service.

s.24 Ministerial retiring allowances now accrued daily.

Schedule to Parliamentary Retiring Allowances Act 1966: Amendments in relation to decimal currency imperial currency replaced with decimal currency as appropriate.

1973

Date of assent: 8 June 1973

s.7 Parliamentary Retiring Allowances Fund abolished and all assets vested in the CRF. Contributions are paid to the Commonwealth .

s.14 Contributions by the Commonwealth repealed

s.15 the word pensions replaced with retiring allowance or annuities .

s.18 retiring allowances linked to the rate of parliamentary allowance (annual allowance) for the time being payable in effect, this is indexation of the retiring allowance against increases in the annual allowance.

s.18 the maximum retiring allowance payable to a member increased from 50 per cent to 75 per cent of the annual allowance payable. Retiring allowances calculated on the length of service rather than age at retirement (1964 provision) as follows:

Complete years of service Percentage of annual allowance paid as Retiring Allowance 8 50 per cent 9 52 per cent 10 54 per cent 11 56 per cent 12 58 per cent 13 60 per cent 14 62 per cent 15 64 per cent 16 66 per cent 17 68 per cent 18 70 per cent 19 72 per cent 20 or more 75 per cent

s.18A inserted provision made for invalidity retiring allowance (bone fide invalidity previously regarded as an involuntary retirement for the purposes of the Act).

s.18 the minimum age requirement of 40 for eligible involuntary retirees removed; and the minimum age on voluntary retirement raised from 40 to 45 years (had been lowered from 45 years to 40 years in 1959; eventually removed altogether in 1978).

s.19 widow s retiring allowance or pension was called an annuity . It was equal to five-sixths of the retiring allowance, ceasing upon remarriage.

eligible child defined.

s.19A surviving spouse of deceased Prime Minister paid an annuity equal to one-half of the retiring allowance (given as 750 per annum in 1952).

s. 20A inserted provided recognition of prior state parliamentary service when calculating eligibility in certain circumstances.

ss.21(1)(a) removed the requirement that a retiring allowance be reduced when member subsequently holds a Commonwealth or state office, that is, an office of profit .

however, the requirement for reduction of retiring allowance when member subsequently enters state parliament was retained.

Part VA repealed the Ministerial Retiring Allowances Fund was abolished for new members and assets vested in the Commonwealth.

Date of assent 19 December 1973

Established the Remuneration Tribunal with the power to report on the additional salaries of ministers of state and the power to determine particular allowances, including the annual allowance for senators and members. The Tribunal s deliberations affected retiring allowances in that they were now calculated as a percentage of the annual allowance, or a ministerial salary, at the time of retirement.

s.7 empowered the Tribunal to inquire into, and determine, the allowances (including allowances in accordance with section 48 of the Constitution) to be paid out of the public

moneys of Australia to members of parliament by reason of their membership of the Parliament or by reason of their holding particular offices, or performing particular functions in, or in relation to, the Parliament or either House of the Parliament.

Read about the first Remuneration Tribunal review in 1974.

1978

Date of assent: 12 June 1978

Parliamentary Retiring Allowances Act 1948 became the Parliamentary Contributory Superannuation Act 1948. The Parliamentary Retiring Allowances scheme became the Parliamentary Contributory Superannuation scheme.

These amendments generally aligned the scheme more closely with current provisions of the state parliamentary schemes.

s.13 members contributions: up until 18 years service 11.5 per cent of monthly amounts of annual allowance payable; after 18 years service contributions dropped to 5.75 per cent.

office-holders contributions: 11.5 per cent of monthly amounts of additional salary payable.

s.18 voluntary retirement eligibility 45 years of age requirement removed to become: 12 completed years of service or if ceased to be a member on four occasions, ie the four occasions rule .

s.18 retiring allowance rates amended as follows:

Completed years of service Percentage of annual allowance paid as retiring allowance 8 50 per cent 9 52.5 per cent 10 55 per cent 11 57.5 per cent 12 60 per cent 13 62.5 per cent 14 65 per cent 15 67.5 per cent 16 70 per cent 17 72.5 per cent 18 or more years 70 per cent

ss.18(7) introduction of pro rata increase of retiring allowance by .00685 per cent for every additional complete day served between 8 and 18 years.

s.13 and s.18 provided additional contributory retirement benefits for ministers and office-holders after abolition of the Ministerial Retiring Allowances Fund in 1973. The Prime Minister, a minister or office-holder was now required to contribute 11.5 per cent of additional salary to the scheme. Ministerial or office-holder service was included in calculations of the retiring allowance by means of a formula described in ss.18(9).

s.18B inserted to allow commutation of up to 50 per cent of a retiring allowance to a lump sum. The lump sum shall be the specified percentage of the retiring allowance payable, multiplied by a factor of ten or a factor ascertained by a formula dependent upon the number of months served after the ages of 65 and 66 years. Put another way, the lump sum was calculated by multiplying the annual amount of a retirement benefit by ten if the senator or member was under 66 years of age or had reached 66 but retired from Parliament at the end of the term of office during which they reached that age. In other cases, the multiplication by ten was reduced by one twenty-fourth for each month by which the senators or members age at retirement was over 65. [27]

s.19A repealed and discreet prime ministerial benefit discontinued and included in s.18, Benefits to members.

1979

Date of assent: 19 November 1979

s.18B commutation to lump sum increased. Commutation was allowed for up to 100 per cent of the retiring allowance, increased from 50 per cent (1978).

1981

Date of assent: 21 April 1981

s.18(9) & (10) formula changed to fix an anomaly whereby the additional retiring allowances for ministers and office-holders were reduced the longer they held office. Both contributions and benefits by ministers and office-holders was expressed as a percentage of the additional salary of office paid. Contributions: 11.5 per cent of additional salary. Additional retiring allowance per annum: 6.25 per cent of additional salary for each year served to a maximum of 75 per cent of additional salary.

s.18B time period allowed for commutation extended to include the three months before a member became entitled to a retiring allowance. The Trust now allowed to defer commutation if a member was likely to re-enter Parliament within twelve months.

s.13 contributions by ministers and office-holders will now reduce to 5.75 per cent when the maximum additional retiring allowance is reached.

s.20 commutation and subsequent service: any subsequent allowance will be reduced by the amount previously commuted.

s.20A benefits received by virtue of prior service in a state parliament: extended to include Northern Territory Legislative Assembly. s.20A is repealed and s.21 included to allow regulations to modify and adapt those parts of the Act that deal with membership of the parliament of a state or the Northern Territory.

1983

Date of assent: 3 November 1983

s.4 Ministers of State and Office-holders now separately described in definitions.

s.18B reduced the 100 per cent commutation (1979) option back to up to 50 per cent of the retiring allowance. The changes sought to address the public s perception of generosity . [28]

s.19 widow or widower benefits: the annuity may now be reduced where a deceased member had previously made a decision to commute.

s.21B section called Effect of holding offices of profit inserted. This is a reintroduction of the 1973 provision reducing a retiring allowance by the remuneration or pension received from any subsequent Office of Profit under the Crown. The section does not appear to have included a reduction for those who previously commuted part of retiring allowance to a lump sum.

1992

Date of assent: 17 December 1992

This Act amended provisions in Commonwealth legislation that allowed discrimination on the basis of marital status or sex in Commonwealth superannuation schemes.

s.4 amended to include definitions of marital relationship and surviving spouse .

s.21AA where there is more than one surviving spouse, the retiring allowance payable is to be allocated by the Trust.

1994

Date of assent: 29 June 1994

s.2 service in the ACT Legislative Assembly included; abolished the rule that restricted widowed spouse access to benefits if the spouse became a member of the scheme.

s.2 a) provided a monetary threshold for the reduction of benefits payable to former members who subsequently held offices of profit as follows: where fortnightly pay for an office of profit exceeded 20 per cent of the fortnightly annual allowance currently paid to parliamentarians, then the fortnightly office of profit remuneration was reduced by 50 cents for each dollar in excess;

b) provided for the grossing-up of tax-free salaries when calculating the reduction of benefits payable to these members;

c) abolished the rule requiring the reduction of benefits payable to those who received pensions arising out of service in offices of profit .

d) abolished the rule requiring the reduction of benefits payable to those who received pensions, or salary, arising out of subsequent service in state and territory parliaments

s.4 and s.16A superannuation guarantee safety-net amount defined.

s.4D and s.15 the introduction of invalidity retirement classifications linked to a percentage measure of incapacity.

s.18 (s.18A repealed), s.19, s.20, s.22 benefits amended to include superannuation guarantee safety-net amount in particular circumstances; benefits now included separately-defined invalidity benefits as follows:

Retiring allowance of 50 per cent of annual allowance for invalids a) with more than eight years service, or less than eight years but ceased to be a member on at least three occasions b) a member who was determined a Class 1 invalid; Retiring allowance of 30 per cent of annual allowance for those who were determined a Class 2 invalid; For those who were determined a Class 3 invalid, the greater of: a refund of contributions together with a payment of the Commonwealth supplement; the superannuation guarantee safety-net amount; Invalidity benefits could not be commuted to a lump sum.

s.26 new section ensured that members of the scheme were now subject to the preservation rules applying to other schemes under the Superannuation Industry (Supervision) Act 1993. New members were required to preserve part of any lump sum benefit.

1995

Date of assent: 29 March 1995

s.20 the Trust could grant a longer period for re-elected Members of Parliament to contract to repay any previously received lump sum ie from six to 12 months; and provided that the amount to be repaid would reflect any changes in the annual allowance since the member had left parliament.

1996

Date of assent: 9 July 1996

s.22T to prevent a decrease in accrued parliamentary pension entitlements of current and former members or their spouses resulting from new ministerial salary arrangements and any salary reductions in the future . [29] This was achieved by specifying a preserved rate of ministerial salary that would continue to apply for the purposes of calculating additional retiring allowances for currently serving and former ministers.

1997

Read about The Parliamentary Contributory Superannuation Scheme & the Judges Pension Scheme, 25th Report of the Senate Select Committee on Superannuation, September 1997

Date of assent: 7 December 1997

The Act ensured that the superannuation contributions surcharge applied to members of parliament.

All benefits were subject to surcharge reduction provisions. Members and recipients of reversionary benefits could now pay a surcharge debt out of a commutation lump sum.

The Trust, with advice from the Australian Government Actuary, determined the surcharge deduction amount before conversion to a retiring allowance. The determination was gazetted.

2001

Date of assent: 18 July 2001

Part VA deferred the payment of retiring allowances for senators and members until they attained age 55 years, became invalids or died. Deferring members were those who were elected to parliament at or after the 2001 general election. Those already in receipt of a retiring allowance may have become subject to deferral if re-elected

lump sum commutation also deferred

deferral did not apply to invalidity retirement

provided for the payment of the deferred benefit on compassionate grounds or in circumstances of severe financial hardship.

Minister Fahey s second reading speech to the Parliamentary Contributory Superannuation Amendment Bill 2001:

the bill imposes a higher standard of preservation on MPs than applies to other Australians who receive pensions. However, it will closely align the superannuation for MPs with the majority of Australians who receive lump sum benefits, which must be preserved until at least age 55 in most circumstances. MPs whose pensions are deferred will receive no superannuation payments between leaving parliament and age 55. This loss of superannuation will mean that the cost to the taxpayer of their benefits will reduce. [30]

Read about the Report on the Provisions of the Parliamentary (Choice of Superannuation) Bill 2001, Senate Select Committee on Superannuation and Financial Services, August 2001.

Committees of Inquiry and Reviews

Since 1952, parliamentary committees, committees of inquiry and the Remuneration Tribunal have examined parliamentary superannuation benefits to recommend changes to keep the scheme workable and appropriate to the standards of the day. Selected recommendations and useful observations made in these reports follow. This material is abridged, please consult the published reports for a full list of recommendations.

To give the reader a complete picture, notable reviews of parliamentary entitlements are listed, even though they may not have specifically examined retirement benefits.

1952

Report of the Committee of Enquiry into the Salaries and Allowances of Members of the National Parliament (Nicholas report)

14 January 1952

Recommendations

Senators and Members The present pension of 8 per week to be raised to 10 per week in respect of a member or former member of either House who has ceased to be a Member of Parliament but with no further contribution from the individual member concerned. [recommendation not accepted]

Prime Minister After 2 years continuously or 3 years intermittently in office as Prime Minister (either before or after this Act) upon retiring from the Parliament and reaching 45 years of age 1200 per annum. Widow 750 per annum. In the cases of both the Prime Minister and the widow of a Prime Minister the pension to be in addition to that otherwise payable under the Parliamentary Retiring Allowances Act 1948 but without any additional contribution by the Prime Minister. [recommendation accepted]

1956

Report of the Committee of Inquiry into the Salaries and Allowances of Members of the Commonwealth Parliament (Richardson Report)

18 April 1956

Superannuation benefits not included in terms of reference.

1959

Report of the Committee of Inquiry into the Salaries and Allowances of Members of the Commonwealth Parliament (Richardson Report)

13 March 1959

Comments

For former members or widow drawing a retiring allowance if they obtain private employment then they will receive full retiring allowance, but if they obtain any kind of government employment, the pension is reduced or extinguished by the income therefrom. This is too drastic a difference and should be modified. [31]

No useful comparisons can be made between the benefits provided under the Parliamentary Retiring Allowances Act 1948-1955 and the benefits provided by the Superannuation Act (for the Commonwealth Public Service) or any State or non-governmental superannuation scheme. [32]

Recommendations

That the present meaning of voluntary retirement be amended so that a member shall not be deemed to have retired voluntarily if he has attained the age of 60 years at the time he ceases to become a member. [recommendation accepted]

The retiring allowance for those members aged 40 years and over who qualify, shall be on a scale (described) based on age at retirement. [recommendation accepted]

That there be payable to a person attaining 65 years, and who is entitled to a retiring allowance of 18 per week as per the scale above, an additional 3 per week. [recommendation accepted]

That lump sum commutation option for those who qualify for pension and are under 50 years of age, be modified to: refund of contributions plus one-half of the Commonwealth Supplement if retires voluntarily refund of contributions plus the Commonwealth Supplement if retires involuntarily[recommendation accepted]

Those who fail to qualify for a retiring allowance be entitled to receive: a refund of contributions plus one-half of the Commonwealth Supplement if retires voluntarily, or a refund of contributions plus the Commonwealth Supplement if retires involuntarily. [recommendation accepted]

That a person entitled to a retiring allowance, who subsequently accepts Government employment as described in Section 21 of the Act, be entitled during the period of such employment to a retiring allowance equal to one-half the rate that would otherwise have been payable. [recommendation accepted]

Widow benefit increased to 15 pounds per week or a refund of contributions plus the Commonwealth Supplement less any amount of the retiring allowance already drawn.[recommendation accepted]

Appropriate arrangements be made to provide for the payment of 3 pounds per week for the care and maintenance of each dependent child under the age of 16 years [recommendation accepted]

For a male member dying without a widow, or a female member dying without a totally dependent widower a refund of contributions to personal representatives plus the Commonwealth Supplement less any amount of retiring allowance already drawn. [recommendation accepted]

Benefits to personal representatives of deceased members: the totally dependent widower of a female Member be repealed so that, in effect, a widower will be left to his rights as a beneficiary in the estate of his deceased wife .[recommendation accepted]

That the contribution of each member to the Fund be increased to 5 per week and that the Commonwealth should make up such balance as will be needed to keep the Fund solvent. [33] [recommendation accepted]

Prime ministers retiring allowances: to be dependent upon aggregate years of service as Prime Minister [recommendation accepted] with service as Acting Prime Minister not to be taken into account.

Section 19A be extended to provide, without further contribution on their part, retiring allowances for ministers of state, Leader or Deputy Leader of the Opposition in the House of Representatives, Leader or Deputy Leader of Opposition in the Senate, as follows:

for periods amounting in aggregate to not less than 6 years a retiring allowance at:-

Years of service Additional retiring allowance pounds per annum 6 years or over but less than 7 years 624 7 years or over but less than 8 years 702 8 years or over but less than 9 years 780 9 years or over but less than 10 years 858 10 years or over 936

with certain provisos that minimum periods of particular offices shall apply for purposes of calculating the above periods of service.

Widow of these office-holders shall receive a benefit equal to five-sixths of retiring allowance to cease when they remarry. [Recommendation not immediately accepted similar policy legislated with the introduction of the Ministerial Retiring Allowances Fund in 1964]

1971

Salaries and Allowances of Members of the Parliament of the Commonwealth: A Report of Inquiry by Mr Justice Kerr

8 December 1971

Superannuation benefits not included in terms of reference. Report not implemented.

1974

Remuneration Tribunal 1974 Review

19 July 1974.

The Tribunal s determinations were disapproved.

In its first review, the Tribunal did not report on retiring allowances, but indicated that representations about the Scheme had been received from interested parties. The Tribunal indicated that it would examine these provisions and the possibility of a severance payment, in a future review . [34]

1975

Remuneration Tribunal August 1975 Review

9 September 1975

The Tribunal s determinations were disapproved.

The Tribunal was given an opinion from the Attorney-General s Department to the effect that the Remuneration Tribunal Act 1973 does not appear to enable the Tribunal to make determinations with respect to superannuation or parliamentary retiring allowances .

The Tribunal said: In determining salary levels for all groups within our jurisdiction we have had regard to existing pension and superannuation entitlements, as forming a part of the benefits, attractions and disadvantages of the particular positions . [35]

1976 78

Remuneration Tribunal 1976,1977 and 1978 Reviews

16 August 1977

On 4 March 1976, the Minister for Administrative Services, requested advice on certain aspects of retiring allowance/superannuation for members of parliament (including ministers).

In the 1977 review, the Tribunal reported that it sent a letter to the Minister seeking a detailed reference which to date has not been received . [36]

In 1978, the Tribunal noted in its Review that legislation amending the Scheme had been passed and it was presumed that the Government would not refer the matter back to the Tribunal.

Remuneration Tribunal 1979, 1980, 1981 and 1982 Reviews

in 1979, the Tribunal sought opinion from the Attorney-General in relation to its powers under the Remuneration Tribunal Act 1973 with regard to superannuation for part-time office-holders. The advice mirrored that received in 1975, that is, the Tribunal is not empowered to make determinations in relation to superannuation.

the 1980 review advised that a statutory body whose public-office salaries were determined by the Tribunal, had been provided with similar legal advice. The Tribunal, however, had also been furnished with opinions of counsel expressing a contrary view and suggested that the government consider the issue. [37]

the 1981 review reported that the Government said the matter raised serious issues that were being given further consideration.

in June 1982, the Government asked the Tribunal to consider superannuation matters, but only with regard to holders of public office (as indicated by legal advice sought and reported in the 1979 review), not senators and members.

1988

Report on Pay and Allowances for Members of Parliament prepared by Cullen Egan Dell Ltd for the Remuneration Tribunal

November 1988

Although not specifically addressed in the report, Cullen Egan Dell Ltd made the following statement:

we believe the government and the Tribunal should give consideration to a severance payment for parliamentarians serving less than eight years, equivalent to 15-20 per cent of their annual pay during each year of membership of parliament. This could form a once-off resettlement grant to be preserved for use as a supplement for future retirement purposes

After eight years service in the Australian Parliament, the existing superannuation plan adequately compensates for the uncertain tenure. [38]

1992

Remuneration Tribunal 1992 The Entitlements of Members of the Australian Parliament

8 April 1992

Briefly observed two things in relation to superannuation entitlements:

if the entitlements accrue, they may be substantial ;

Experience has shown that of Members entering the Parliament since 1950 approximately 70 per cent have become entitled to indexed superannuation benefits: the remainder have, on leaving Parliament; received their contributions with a variable lump sum benefit.

Comments and recommendations of the Committee

Change to the Scheme is desirable as it is now out of step with superannuation practice in the wider community. There is convincing evidence that it is excessively generous to a small group of retiring parliamentarians

There are difficulties associated with a parliamentary committee reviewing their own entitlements. Inevitably, charges of conflict of interest will arise. The Committee believes there is a lack of transparency in parliamentary superannuation, and that this lack of transparency gives rise to much of the criticism of the scheme

Evidence given by the Australian Government Actuary indicates that fully funding the Scheme would not produce any savings for many years. In the long term the Committee believes that the Scheme should move toward becoming a fully funded scheme. This would provide for greater transparency of superannuation with other parliamentary entitlements

The Committee recommends that survivor and invalidity benefits continue to be paid with the rules under which these benefits are paid to be reviewed by the Remuneration Tribunal, in accordance with standards adopted in other private and public sector superannuation schemes

The new preservation rules announced by the Government apply to contributions by Parliamentarians to the Scheme. The Committee recommends that contributions made by parliamentarians attract interest in accordance with normal superannuation practice

Coalition senators and Labor senators published separate views in the report. The Australian Democrats published a dissenting view.

Coalition senators favoured superannuation as part of a remunerative framework considered by the Remuneration Tribunal under guidance from the government of the day. This guidance would have the following principles:

the separation of retirement and redundancy functions

benefits should be proportional to years of service

contribution rate should be flexible and benefits adjusted accordingly

benefits to be received at age 55 years

new parliamentarians to be offered choice of fully funded accumulation scheme or retirement savings account.

Labor senators:

saw the Remuneration Tribunal as the appropriate body to make recommendations for the reform of the scheme

recognised the potential conflict of interest in Parliament determining changes to the scheme

recommended that any review of the scheme be conducted independently by the Remuneration Tribunal.

The Australian Democrats recommended that the Remuneration Tribunal be asked to determine reduced superannuation benefits for parliamentarians taking into account standards prevailing in the community at large and the unusual nature of parliamentary life. The Democrats suggested that the Remuneration Tribunal be asked to redesign the scheme in specific ways including:

that government contributions cease after 18 years service

that government contributions becomes an appropriate multiple of a parliamentarians 11.5 per cent contribution

parliamentarians to make additional contributions with interest paid on those contributions

membership of the scheme remain compulsory, but that a member may opt out of the Scheme, thereby forfeiting the benefit of the government contribution, if they satisfy the Trustees that they already have adequate retirement savings.

Remuneration Tribunal 1997 Decisions and Reports

The Tribunal noted that the Senate Select Committee recommended that the Tribunal have a future role with regard to parliamentary superannuation and considered:

there is merit in there being a single determining authority for parliamentarians remuneration , given that superannuation is increasingly recognised as a major component of senators and members remuneration package . [39]

1999

Remuneration Tribunal

In the future, the Tribunal will consider options for introducing a total remuneration approach for senators and members, including salary packaging. The Tribunal recognises that this may take time, as it will need to consider a range of complex issues, including the constraints posed by the current parliamentary superannuation scheme, public accountability and transparency. Nevertheless, the time has come to align parliamentary remuneration with broad community practice. Consistent with the approach adopted by the Tribunal for other public offices, it will also consider productivity and performance issues. [40]

2001

On 5 March 2001, the Parliamentary (Choice of Superannuation) Bill was introduced by Peter Andren MP. Among other things, the bill sought to give members of parliament the ability to opt out of the now-compulsory scheme and roll over any accrued superannuation benefit into a complying fund or Retirement Savings Account (RSA) of their choice. Any Commonwealth contributions would then be paid into the fund of choice or RSA. The Bill was referred to the Senate Select Committee on Superannuation and Financial Services for examination.

The Committee

The Committee did not support the bill noting that while the Act requires parliamentarians to contribute to the scheme, they are also free not to receive benefits available to them under it.

The Committee recommended that in order to achieve a cohesive and consistent approach, the issue of parliamentary superannuation be considered by the Remuneration Tribunal as part of a consolidated package comprising salaries, superannuation and allowances. [41]

Australian Democrats Dissenting View

The Australian Democrats again issued a dissenting report outlining their suggested reforms and proposed amendments to the Act made over time. They said:

The Democrats are of the view that the recently passed reform to preserve entitlements to age 55 for new parliamentarians does not go far enough. We support this Bill although it too does not constitute proper reform of the system. [42]

ANAO

In 2001, by resolution of the Senate, the Australian National Audit Office (ANAO) undertook a performance audit on parliamentary benefits. This is the most recent review of parliamentarians entitlements conducted by the Auditor-General. While ANAO did examine retirement travel, the Audit Report No 5 2001-2002 Parliamentarians' Entitlements: 1999-2000, did not include any recommendations about the administration or superannuation benefits under the Parliamentary Contributory Superannuation Act 1948.

Recent events

2001 - redundancy

As listed in the Chronology, the Parliamentary Contributory Superannuation Amendment Act 2001, came into force on 18 July 2001. These changes were a response to the perception that parliamentary superannuation is overly generous and not aligned with community standards. [43] In practical terms, the amendments meant that parliamentarians elected for the first time in 2001 cannot access any superannuation benefit until the age of 55, or until they become invalids or die when benefits would be paid to beneficiaries.

Media reports suggest that a severance payment was proposed to compensate parliamentarians affected by the changes. Both severance payments and the new preservation requirements were discussed in the Coalition party room in June 2001 there was no formal motion in Parliament. Following this, government focus shifted so that the impetus for a severance-type payment then came from a recognition that former MPs found it difficult to re-enter the workforce. [44]

On 18 September 2001, the Minister for Finance and Administration wrote to the President of the Remuneration Tribunal asking the Tribunal to inquire into the provision of a redundancy-type benefit to assist newly elected senators and members re-establish themselves in the workforce. The Minister also asked the Tribunal to consider a benefit for those whose pension was deferred or who only qualified for a preserved lump sum under the new arrangements.

2003

The Tribunal reported in August 2003 with Members of Parliament resettlement grant : Response to Government request to inquire into a redundancy-type benefit for new Senators and Members. A resettlement grant was proposed with the primary purpose being to assist those new parliamentarians who retire involuntarily to re-establish themselves in the community. [45] Features of the grant were:

available to those elected, at or after the 2001 general election, who retired involuntarily;

the grant of a one-off lump sum equivalent to eight weeks of the basic parliamentary salary;

the dollar value would change over time as the annual allowance is adjusted;

consistent with community redundancy benefits, a payment of four weeks salary to those who have only served one parliament;

a concomitant reduction in the severance travel entitlement provided to these parliamentarians.

On 15 October 2003, the Government indicated it would not ask the Remuneration Tribunal to make a determination on the grant. [46]

A Resettlement Allowance was determined by the Remuneration Tribunal on 22nd December 2006 and came into effect on 12th January 2007. Please refer to the description of the allowance in the 2007 section below.

8 September 2003

Mr Andren MP introduced the Parliamentary (Choice of Superannuation) Bill 2003 that again sought to allow members of parliament to make their own retirement and pension arrangements in line with broader community standards . [47] The bill was not debated and has been removed from the Notice Paper.

2004

Statement by the Leader of the Opposition

On 10 February 2004, Mark Latham MP, announced that a future Labor Government would introduce legislation to close down the scheme to new members. Closure would be achieved consistent with existing practice for closure of defined benefit funds where no retrospectivity is involved. However, closing the schemes to new entrants will, over time, phase out these [existing] arrangements .

In Labor s view, the scheme was well outside the community standard in Australia and [has] become out-of-date . [48]

Mr Latham also stated his intention to reduce his superannuation benefit if he became Prime Minister. He would achieve this by capping the rate of additional salary calculated for superannuation purposes to that of Cabinet Ministers. Retiring allowances for Ministers and Office-holders accrue at a percentage of the additional salary paid. Currently a Cabinet Minister receives an additional salary equal to 72.5 per cent of the annual allowance or basic parliamentary salary currently $127 060 per annum (from 1 July 2007). The Prime Minister, Deputy Prime Minister, Leader of the House, Leader of the Government in the Senate and the Presiding Officers all receive additional salaries in excess of 72.5 per cent of $127 060. Under the Labor plan, the maximum additional superannuation additional salary allowed would be capped at the 72.5 per cent rate, thereby reducing the retiring allowance for these offices.

The Prime Minister

On 12 February 2004, Mr John Howard MP, announced that the government would:

legislate immediately to close down the existing Commonwealth Parliamentary superannuation scheme to people elected at the next parliament and it will be replaced by a scheme that attracts a government contribution of nine per cent which is the community standard . [49]

The Prime Minister stated the new scheme will be a fully-funded accumulation scheme applying to those elected for the first time at the 2004 general election. Mr Howard felt that there would be no compensating pay increase for parliamentarians, but agreed that the salary levels of Ministers in particular are not commensurate with their responsibilities. The Prime Minister stressed that new MPs would not be paying the contribution rate of 11.5 per cent of the annual allowance after tax which is now paid by serving parliamentarians.

Minister for Finance and Administration

Senator Minchin issued a press release on 23 March 2004 confirming that the new arrangements had received the endorsement of the Coalition Party Room. He confirmed that the scheme for new members of parliament will be an accumulation scheme with government contributions of 9 per cent to be paid into a complying superannuation fund of the member s choice. There will be a default fund for those who do not nominate a fund.

The new scheme will also have these features:

sitting members of parliament will not be given the option to transfer to the new accumulation scheme;

the salary base for the proposed 9 per cent government contribution should be the annual allowance and additional salaries of office for ministers and office-holders;

former members who return to parliament will be required to join the Accumulation scheme as new members;

if a returning former member is in receipt of a retiring allowance, it should be suspended while they remain in parliament;

former State MPs who are elected to the Federal Parliament will join the accumulation scheme;

the new arrangements will allow salary sacrificing into superannuation up to a limit of 50 per cent of the annual allowance of new members.

2004 legislation

The Parliamentary Superannuation Bill 2004. The Parliamentary Superannuation and Other Entitlements Legislation Amendment Bill 2004.

On 1 April 2004, these bills were introduced into the House of Representatives by the Parliamentary Secretary to the Minister for Finance and Administration. The bills proposed new superannuation arrangements for parliamentarians elected at the next general election. Readers are referred to Bills Digest No 132 of 2003-04 for further information.

The Senate referred the bills to the Senate Finance and Public Administration Legislation Committee for examination. The Committee's June 2004 Report contained two recommendations:

that the Senate pass the bills;

that early in the life of the new Parliament, the Remuneration Tribunal be asked to review the complete package of parliamentary entitlements, including salary, other entitlements and retirement benefits...any such review and the recommendations that may flow from it, would need to conform to the principle of non-retrospectivity.

The Parliamentary Superannuation Act 2004 received assent on 23 June 2004 and establishes superannuation benefits for Senators and members elected for the first time at the next general election. The Parliamentary Superannuation and Other Entitlements Legislation Act 2004 received assent on 25 June 2004.

2006

2006 legislative changes

The Prime Minister indicated that the changes followed "a joint approach by the Chief Government and Opposition Whips to the Remuneration Tribunal". He also stated that the Leader of the Opposition agreed to and supported the proposals.

Legislation was introduced to Parliament on 11 October 2006 and the Parliamentary Superannuation Amendment Act 2006 (PSAA) received Royal Assent on 26th October 2006. A description of the provisions of the bill can be found in Parliamentary Superannuation Amendment Bill 2006, Bills Digest, no. 42, 2006 07,17 October 2006 by L. Nielson.

The PSAA amends the Parliamentary Superannuation Act 2004 (the 2004 Act) which provides superannuation benefits for parliamentarians elected for the first time at the 2004 general election and subsequently, and for those re-elected in 2004 after a break in service. The amendments increase the superannuation contributions payable from 9 per cent of parliamentary salaries to 15.4 per cent of parliamentary salaries. The increase in the contribution rate will apply to the contributions payable from 1 October 2006. The fiscal impact is projected to be less than a million dollars in each of the financial years to 2010 11. [50]

2007

Resettlement Allowance

On the 11th January 2007, the Remuneration Tribunal registered Determination 2006/23 Remuneration and Allowances for Holders of Public Office and Members of Parliament on FRLI. The determination came into operation on 12th January 2007. Determination 2006/23 amended Determination 2006/18 Members of Parliament Entitlements (the consolidated determination) to include an entitlement to a Resettlement Allowance for eligible senators and members. On 11th May 2007, Determination 2007/03 again amended Clauses 8.7 and 8.8 in Determination 2006/18.

Determination 2006/18 Clauses 8.6 - 8.8.--

Resettlement Allowance 8.6 Subject to clauses 8.7 and 8.8, a senator or member who retires involuntarily from the Parliament will be paid a Resettlement Allowance equal to 12 weeks of the basic parliamentary salary. 8.7 Senators and members eligible for the Resettlement Allowance are those who:

(a) have joined the Parliament at or since the November 2001 election; and

(b) are not able to access a pension or superannuation benefit (related to their service in the Parliament) immediately upon ceasing to be a Member of the Parliament; and

(c) have retired involuntarily through:

(i) electing not to stand for re-election following loss of party endorsement, for reasons other than misconduct, or

(ii) through defeat at an election (including defeat at an election where he or she has campaigned to be elected to represent a different electoral division or to the other House of the Parliament). 8.8 The Resettlement Allowance will be payable:

(a) only after the senator or member ceases to be a senator or member; and

(c) at the rate of basic parliamentary salary that is current on the date the Parliament is prorogued prior to the election.

Administration

The Resettlement Allowance will be administered and paid by the Chamber Departments. The allowance is not a redundancy payment - it is an amount determined as appropriate to provide re-skilling and re-employment assistance to those MPs who do not have access to superannuation benefits at the point of losing office. It is expected that the allowance will be fully tax assessable.

Conclusion

Parliamentary superannuation receives media and public attention. Useful discussion can be hindered by financial complexities inherent in the topic. This e-brief has attempted to assist debate by giving an overview of legislative developments and by placing parliamentary superannuation in an historical context.

Endnotes

1. P. Prince, Analyst, Law and Bills Digest Section, Parliamentary Library, oral advice. Mr Prince states that here a Constitutional power allows a provision to apply until the Parliament otherwise provides, the High Court [Attorney-General of the Commonwealth (Ex. Rel. McKinlay) v. The Commonwealth (1975) 135 CLR 1] has found that such power should be given wide meaning and has expressed its unwillingness to intervene with such a decision of the Parliament so long as it is consistent with the existence of representative democracy.

2. J. J. Dedman MP, Parliamentary Retiring Allowances Bill 1948, Senate and House of Representatives, Debates, 9 December 1948, p. 4271.

3. Department of Finance, Submission No. 46 to Senate Select Committee on Superannuation, Attachment A, p. 1.

4. B. Chifley MP, Parliamentary Retiring Allowances Bill 1948, Senate and House of Representatives, Debates, December 1948, p. 3738.

5. ibid.

6. ibid., p. 3739.

7. A. Calwell MP, Parliamentary Retiring Allowances Bill 1948, Senate and House of Representatives, Debates, December 1948, p. 4263.

8. ibid., p. 4265.

9.E. J. Harrison MP, Parliamentary Retiring Allowances Bill 1948, Senate and House of Representatives, Debates, 1 December 1948, p. 4260.

10.M. Lumb, of the Politics and Public Administration Section, Department of Parliamentary Services.

11.Harrison, op. cit., p. 4261.

12.A. Fadden MP, Parliamentary Retiring Allowances Bill 1948, Senate and House of Representatives, Debates, 9 December 1948, p. 4267

13. ibid, p. 4269

14.R. Ryan MP, Parliamentary Retiring Allowances Bill 1948, Senate and House of Representatives, Debates, 9 December 1948, p. 4280.

15.Calwell, op. cit., p. 4262 66.

16.Hon. Sir T. White MP, Parliamentary Retiring Allowances Bill 1948, Senate and House of Representatives, Debates, 9 December 1948, p. 4282

17.Senator R. Murray, Parliamentary Retiring Allowances Bill 1948, Senate and House of Representatives, Debates, 9 December 1948, p. 4237

18.Senator the Hon. N. O Sullivan, Parliamentary Retiring Allowances Bill 1948, Senate and House of Representatives, Debates, 9 December 1948, pp. 4235 and 4237.

19.B. Chifley MP, Parliamentary Retiring Allowances Bill 1948, Senate and House of Representatives, Debates, 1 December 1948, p. 3738

20.ibid., p. 4259.

21. ibid., pp. 3740 1.

22.Harrison op. cit., p. 4261, citing a report by Mr Gastineau-Hills, Actuary.

23.Chifley, op. cit., p. 3739.

24. ibid.

25.Chronology developed by reading legislation and using the chronology in the 25th Report of the Senate Select Committee on Superannuation The Parliamentary Contributory Superannuation Scheme & The Judge's Pension Scheme, 1997, p. 10.

26.Annuities to the families of former Prime Ministers who died, had previously been legislated in the Special Annuities Acts of 1923, 1934, 1935, 1936, 1939 and 1945.

27.I. Ireland, Superannuation Laws Amendment Bill 1994, Bills Digest, No. 103/1994.

28.Department of Finance, Submission to Senate Select Committee on Superannuation, Attachment A, p. 2. Cited in the 25th Report of the Senate Select Committee on Superannuation, op cit., p. 4.

29. J. Fahey MP, Parliamentary Contributory Superannuation Amendment Bill 1996, House of Representatives, Debates, 30 May 1996, p. 1894.

30.J. Fahey MP, Parliamentary Contributory Superannuation Amendment Bill 2001, House of Representatives, Debates, 27 June 2001, p. 28640

31.Report of the Committee of Inquiry into the Salaries and Allowances of Members of the Commonwealth Parliament, 1959, p. 39.

32.ibid.

33.ibid., p. 45.

34.Remuneration Tribunal, 1974 Review: other matters for future consideration, p. 22.

35.Remuneration Tribunal, August 1975 Review, p. 77.

36.Remuneration Tribunal, 1977 Review: statement, p. 19 20.

37.Remuneration Tribunal, 1980 Review, p. 22.

38.Cullen Egan Dell Ltd, Report on Pay and Allowances for Members of Parliament: prepared for the Remuneration Tribunal, November 1988, p. 4.

39.Remuneration Tribunal, 1997 Decisions and Reports, Attachment A, p. 9.

40.Remuneration Tribunal, Report on Senators and Members of Parliament, Ministers and holders of Parliamentary Office salaries and allowances for expenses of office December 1999, p. 11.

41.Senate Select Committee on Superannuation and Financial Services, Report on the Provisions of the Parliamentary (Choice of Superannuation) Bill 2001, August 2001, p. 20.

42.Senator L. Allison, Report on the Provisions of the Parliamentary (Choice of Superannuation) Bill 2001, Senate Select Committee on Superannuation and Financial Services, August 2001, p. 24.

43.Hon J. Fahey MP, Parliamentary Superannuation Amendments, media release, 26 June 2001.

44.L. Dodson, Coalition MPs angered by new restrictions on super, The Age, 27 June 2001.

45.Remuneration Tribunal, Members of Parliament resettlement grant : Response to Government request to inquire into a redundancy-type benefit for new Senators and Members, August 2003, p. 1.

46.The Hon. K. Andrews MP, Australian Government will not ask Remuneration Tribunal to make a determination on redundancy proposal, media release, 15 October 2003.

47. P. Andren MP, First reading: Parliamentary (Choice of Superannuation) Bill 2003, House of Representatives, Debates, 8 September 2003, p. 19397.

48.M. Latham MP, Parliamentary Superannuation, statement issued 10 February 2004.

49.Hon John Howard MP, Transcript of Press Conference, Parliament House Canberra, 12 February 2004.

50. L.Nielson, Parliamentary Superannuation Amendment Bill 2006, Bills Digest No. 42, 2006-07

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