This Digest is prepared for debate. It reflects the legislation as
introduced and does not canvass subsequent amendments.
This Digest was available from 17 June 1996
Date Introduced: 30 May 1996
House: House of Representatives
Commencement: Schedule 1 provisions will be taken
to have commenced on 2 March 1996. Other provisions will commence
on Royal Assent.
To ensure the accrued retirement benefits of serving members and
pensioners are not reduced as a consequence of the Government's
post-election decision to cut some Ministerial salaries.
The Parliamentary Contributory Superannuation Scheme (PCS)
provides benefits for members of Parliament who have contributed to
the scheme and have served the waiting period. Eligibility is based
on the number of years of service in the Parliament, whether
retirement is voluntary or involuntary, and whether the person has
retired due to ill health.
If retirement is voluntary, the person will be eligible if they
have completed 12 years of service in Parliament or have ceased to
be a Member or Senator on four occasions due to the dissolution or
expiration of the term for their Chamber (ie. they have been
re-elected a minimum of three times).
If retirement is involuntary, a person will be eligible for a
benefit if they have completed 8 years of service or have ceased to
be a Member or Senator on three occasions due to the dissolution or
expiration of the term for their Chamber.
Where retirement is due to ill health attributable to their
service in the Parliament, they will also be eligible even if their
service is less than eight years.
Calculating the rate
The rate of benefit depends on the length of service and the
position/s held by the former Member or Senator.
- Benefits are based on a percentage of the person's
Parliamentary allowance (which includes salary) and range from 50%
for 8 years service to 75% for 18 years or more, with increases of
2.5% per year of service over 8 years.
- Where retirement is due to ill health, the person is deemed to
have served for 8 years.
- If the person has served as a Minister or in another office in
which they received additional salary (eg. as a Committee Chair),
the rate of benefit is increased by 6.25% of the additional salary
for each year the person served in that office.
- The PCS also provides for the commutation of part of the
benefit to a lump sum (to a maximum of 50%); and for benefits to be
payable to spouses where the person dies while a Member of
- If a member of the PCS is ineligible for a benefit, they
receive a return of their contributions and a supplement, which is
generally 2.33 times their contributions.
- Members and Senators are required to contribute to PCS, with
the rate of contribution being 11.5% of their Parliamentary
allowance where service is less than 18 years and 5.75% for people
with 18 or more years serve.
Back after a break
Where a person has left Parliament and subsequently been
re-elected, the following apply:
- if the person only received their contributions and a
supplement on leaving Parliament (ie. they were not eligible to
receive a benefit) and returns that amount to the Trustees, their
previous service will be taken into account in determining any
benefit they may be eligible for on subsequently leaving Parliament
(in such a case they must enter an agreement within 3 months, or
six months if the Trustees allow, to repay the amount within 3
- if the person received a benefit, the benefit will be cancelled
and the person will again become a contributor; and
- if part or all of the benefit was commuted, they will retain
the lump sum and any benefit subsequently payable will be reduced
by the amount commuted or the annual value of the amount commuted
if the person receives an annual benefit.
The scheme's critics
The PCS scheme has been criticised on a number of grounds. For
example, former Independent member, Ted Mack, is reported as saying
... the parliamentary superannuation scheme is a rip-off,
allowing politicians to get out after serving only seven or eight
years with generously indexed pensions of $50,000 or more a year
... some people who enter Parliament in their early 20s can
achieve financial security for life by the time they reach 30 with
fully-indexed pensions for life under the generous superannuation
Once a politician is elected, they can sit back for three years
if they want. There is no other job that could provide such
Arguments put forward by supporters of the PCS include that the
generous pension payments are:
...compensation for a risky career that could be cut short at
the whim of a fickle electorate.(2)
The Prime Minister, in supporting the PCS has said:
The MPs' pension scheme is generous, there's no doubt about
that. It's also true that, in relation to salaries paid in the
private sector, the salaries paid to people in politics are not
While it is very difficult to make direct comparisons with
private sector superannuation schemes, as levels of contributions
differ and the benefits available under private sector schemes
depend on the level of earnings of the fund, it is worth noting
- the availability of a 50% pension after 8 years contribution
greatly exceeds the benefits available from most general private
- the maximum rate of a 75% pension after 18 year contribution is
very generous compared to most general private sector schemes;
- the PCS scheme provides a pension from the time an eligible
member leaves Parliament while most private sector schemes require
benefits to be preserved until at least age 55;
- the actuarial value of pensions available under the PCS scheme
exceeds the reasonable benefits limits; and
- in addition to benefits under the PCS scheme, former
politicians may be eligible for other benefits, such as a Gold Pass
for restricted free travel.
The objective given by the Government in the Second Reading
Speech is to 'prevent a decrease in accrued parliamentary pension
entitlements of current and former members or their spouses
resulting from the new Ministerial salary arrangements, and any
salary reductions in the future.'
The reference above to 'the new Ministerial salary arrangements'
is a reference to a post election decision of the Howard Government
to reduce the salaries payable to ministers not in Cabinet. The
proposed reductions have resulted in a two-tiered pay structure
under which the 15 Cabinet ministers receive a base ministerial
salary of $52,862 (drawn from amounts payable under the
Ministers of State Act 1952) on top of the rate payable as
a Member or Senator, approximately $80,000 (drawn from amounts
payable under the annual Appropriation (Parliamentary Departments)
Act).(4) The 13 members of the outer ministry are to receive a
ministerial salary of approximately $122,000, approximately $10,000
less than Cabinet minsters.
The Prime Minister is reported to have made the cuts because of
differing workloads for Cabinet Ministers and their junior
colleagues and as a demonstration of the Government's zeal for a
A new section 22T, dealing with the calculation
of retiring allowance where there has been a decrease in
parliamentary allowance and salary, is inserted in the
Parliamentary Contributory Superannuation Act 1948 by
item 5 of Schedule 1.
The retiring allowance payable to a member is based on a
calculation of their parliamentary allowance and salary (the salary
component based on the pay of comparable office holders). 'The
effect is that benefits are linked, at any point in time, directly
to the salaries payable at that time.'(6)
Proposed section 22T provides that where there is a reduction in
the rate of allowance payable to a member, salary payable to a
Minister of State and allowance by way of salary payable to an
office holder (the underlying payment) after 2 March 1996, the rate
of underlying payment is taken to be that applicable before the
decrease (the preserved rate). The preserved rate will operate
until the underlying payment eventually catches up with it (ie
through statutory pay rises etc).
The Bill is designed to protect the accrued benefits of
pensioners and serving members from a reduction due to the cut in
some Ministerial salaries.
For example, comparable Ministers who have retired would lose
money if this Bill fails to pass. The reduction in actual salaries
would have meant that they would be paid with reference to the
lower rate, rather than the higher rate operating before the
The Explanatory Memorandum to the Bill explains:
'Where a parliamentary salary is reduced, as occurred to the
salary payable to Ministers not in the Cabinet after the 2 March
1996 Election, the actual dollar amount paid to pensioners based on
that salary is reduced. Members who had previously held such
offices and are still servicing in the Parliament could also suffer
a loss of accrued benefits on retirement.'
(1) The West-Australian, 8 June 1996.
(3) The Sun-Herald, 9 June 1996.
(4) The Sydney Morning Herald, 16 April 1996.
(5) The Sydney Morning Herald, 16 April 1996.
(6) Parliamentary Contributory Superannuation Amendment Bill
1996, Explanatory Memorandum.
Ian Ireland Ph. 06 277 2430
Bronwyn Young Ph. 06 2772699
20 June 1996
Bills Digest Service
Parliamentary Research Service
This Digest does not have any official legal status. Other
sources should be consulted to determine whether the Bill has been
enacted and, if so, whether the subsequent Act reflects further
PRS staff are available to discuss the paper's contents
with Senators and Members and their staff but not with members of
© Commonwealth of Australia 1996
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Last updated: 24 June 1996
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