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Contents |
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| Senator or Member |
Mode of Retirement |
Benefit |
Eligibility Requirements |
| Senator or Member |
Voluntary— expiration of term |
Retiring allowance—a pension payable for life [1] |
12 or more years' service or if has ceased to be a Senator or Member on four occasions. |
| Senator or Member |
Voluntary— and has attained the age of 60 years |
Retiring allowance |
Deemed to
be involuntary retirement. |
| Senator |
Involuntary— due to the loss of preselection or loss at an election |
Retiring allowance |
8 or more years' service or if has ceased to be a Senator on three occasions. |
| Member |
Involuntary— due to the loss of preselection or loss at an election |
Retiring allowance |
8 or more years' service or if has ceased to be a Member on three occasions. |
| Senator or Member |
Retiring allowance 50% of the Parliamentary Allowance payable |
Senators and Members who do not qualify for a retiring allowance under the above conditions may be entitled to a retiring allowance if the Parliamentary Retiring Allowances Trust (the Trust) is satisfied that the retirement is due to ill–health 8 or more years' service or if he or she has ceased to be a Senator or Member on three occasions. |
|
| Senator or Member |
Ill-health |
Retiring allowance 50% of the Parliamentary Allowance payable |
Eligibility in Row 4 does not apply and he or she is classified as a Class 1 invalid by the Trust |
| Senator or Member |
Ill-health |
Retiring allowance 30% of the parliamentary allowance payable |
Eligibility in Row 4 does not apply and he or she is classified as a Class 2 invalid by the Trust |
| Senator or Member |
Ill-health |
The greater of the following: Refund of his or her contributions together with a payment of the Commonwealth Supplement |
Eligibility in Row 4 does not apply and he or she is classified as a Class 3 invalid |
| Senator or Member— if not entitled to retiring allowance |
Involuntary |
Lump sum comprising the higher of— a refund of contributions plus a supplement or a lump sum representing the superannuation guarantee safety-net amount |
|
| Senator or Member— if not entitled to retiring allowance
or superannuation benefit; |
Involuntary |
equal to 12 weeks of the annual allowance that is current on the date Parliament is prorogued prior to the election |
Payable only after ceases
to be a senator or member. Involuntary retirement when: did not stand for re-election due to loss of party endorsement for reasons other than misconduct; was defeated at an election, including when stood for different electorate or Chamber. |
| Senator or Member— if not entitled to retiring allowance |
Voluntary |
Lump sum comprising the higher of— a refund of contributions plus a supplement or a lump sum representing the superannuation guarantee safety-net amount |
|
| Senator or Member— entitled to retiring allowance except for reasons of ill-health |
Voluntary or involuntary as per above |
Commutation of retiring allowance. Up to 50 percent of the retiring allowance may be commuted to a lump sum. The lump sum is equal to the annual amount of retiring allowance commuted, multiplied by the commutation factor |
|
| Spouse— of a serving Senator or Member who dies while entitled to a Parliamentary Allowance [2] or would have been entitled to a retiring allowance had they not died. 'Spouse' is defined as someone who had a marital relationship with a Senator or Member. 'Marital relationship' is defined as living with the Senator or Member on a "permanent and bona fide domestic basis"..."whether or not legally married" for a continuous period of at least 3 years (or less in some circumstances) [3] |
If a serving Senator or Member has served less than 8 years at the time of death, the annuity is calculated on the benefit that would have been payable had 8 years service been completed |
Annuity 5/6 of the rate of the retiring allowance which would have been applicable. Commutation is allowed to pay surcharge liability |
Irrespective of length of service. The spouse and deceased having had a marital relationship |
| Spouse— of a retired Senator or Member who dies. |
Annuity 5/6 of the rate of the retiring allowance which would have been applicable. Commutation is allowed to pay surcharge liability |
Deceased Senator or Member was in receipt of a retiring allowance and: Marital relationship commenced before retirement; or commenced at least 5 years before death; or commenced prior to parliamentarian attaining 60 years of age [4] |
|
| Orphaned children |
Annuity The rate of annuity payable is an amount calculated by dividing the spouse's annuity that was, or would have been payable, by four— or by the number of children in respect of which an annuity is payable, if there are more than four children |
Deceased Senator or Member was in receipt of, or eligible for, a retiring allowance or Deceased spouse was in receipt of an annuity and A child must be under 16, or under 25 if a full-time student, and have been dependent on the Senator or Member, or former Senator or Member, or spouse, at the time of death. There are also other qualifications see Section 19AA of the Act |
An 'occasion' occurs on the dissolution or expiration of the Senate or House of Representatives or at the expiration of a Senator's or Member's term of office.
Senators who have 6 year terms achieve an 'occasion' after the completion of 3 years of that term, as well as when their term expires.
Members achieve an 'occasion' when they cease to be a Member upon the dissolution or expiration of the House or upon the expiration of the Member's term of office.
Involuntary retirement—the supplement is 2 ⅓ times the member's contributions
Voluntary retirement— the supplement is 1 1/6 times the member's contributions
A retiring allowance is paid as a percentage of the minimum annual allowance payable at the time of retirement, currently $127 060 per annum. The applicable percentage is linked to a parliamentarian's years of service as follows:
| Years of Service |
Percentage of Parliamentary Allowance (%) |
Years of Service |
Percentage of Parliamentary Allowance (%) |
| 8 |
50 |
14 |
65 |
| 9 |
52.5 |
15 |
67.5 |
| 10 |
55 |
16 |
70 |
| 11 |
57.5 |
17 |
72.5 |
| 12 |
60 |
18 or more |
75 |
| 13 |
62.5 |
The table represents an additional retiring allowance of 0.00685 per cent of the annual allowance for each additional day's service between 8 and 18 years.
The Scheme provides an additional retiring allowance for those parliamentarians paid a salary of office. This means that these parliamentarians may become eligible, in effect, for two retiring allowances—the first may be gained by virtue of being an eligible Senator or Member in the manner described above, the second accrues by way of being a Minister, or holding a parliamentary office such as chair of a committee. Offices are determined by the Remuneration Tribunal and can be found in Determination 2006/21 Parliamentary Office-holders – additional salary. The Tribunal also reports on Ministerial salary, see Report No 1 of 2007 Report on Ministers of State-salaries additional to basic parliamentary salary. For an explanation of the status of these reports, readers should consult the relevant section in the Library's publication, Parliamentary Allowances, benefits and salaries of office.
The additional retiring allowance is expressed as a percentage of the additional salary paid. It accrues at the rate of 6.25 per cent of the additional salary for each year the office is held. Put another way, each day as an Office-holder attracts a benefit of 0.0171 per cent of additional salary. [5] Where a Senator or Member has served in more than one office, the additional pensions in respect of those offices are aggregated.
A 'maximum additional pension entitlement' limit applies to additional retirement benefits. This is a limit whereby a Senator's or Member's additional retiring allowance must not total more than 75% of the salary payable for the highest paying office they have held. Note that if a parliamentarian holds more than one office concurrently, only the highest salary of office is paid.
A retiring parliamentarian who has not qualified for a retiring allowance under the Act may gain entitlement if their retirement is caused by ill-health. The retiring parliamentarian can write to the Trust and ask for a determination to be made on invalidity retirement. Section 15A of the Act requires the parliamentarian to provide a medical certificate and any other documentation the Trust requires. The medical certificate must include a statement setting out the medical practitioner's opinion about the percentage of the person's incapacity in relation to non-parliamentary employment. To issue a determination, the Trust must be satisfied that the member is unlikely ever to be able to again perform the duties of a parliamentarian because of physical or mental impairment. The determination on invalidity must specify the nature of these impairments.
The Trust must also classify the member's invalidity in terms of the percentage of the person's incapacity in relation to non-parliamentary employment. Classifications and associated benefits are as follows:
| Percentage of Incapacity in relation to non-parliamentary employment |
Classification |
Benefit if have served less than 8 years' or three occasions |
Amount |
| 60% or more |
Class 1 invalid |
Retiring allowance |
50% of annual allowance |
| 30% or more but less than 60% |
Class 2 invalid |
Retiring Allowance |
30% of annual allowance |
| Less than 30% |
Class 3 invalid |
Lump sum |
The greater of the following: Refund of his or her contributions together with a payment of the Commonwealth Supplement |
| Percentage of Incapacity in relation to non-parliamentary employment |
Classification |
Benefit if have served not less than 8 years' or three occasions |
Amount |
| Not applicable in terms of benefit |
Not applicable in terms of benefit |
Retiring Allowance |
50% of annual allowance |
The annual allowance [6] is currently $127 060.
The Commonwealth Supplement is defined in Section 16 of the Act as 2 ⅓ times the contributions paid during parliamentary service or, if service exceeds 8 years, the contributions paid in the last 8 years of that service. This explanation simplifies the operation of Section 16. Readers should consult the Act for further information.
The Superannuation guarantee safety-net amount is described in Section 16A of the Act. It is the sum of—certain member contributions, plus interest earned on contributions, plus any government-funded 'top-up' benefit provided for under the Superannuation Guarantee (Administration) Act 1992 designed to cover potential superannuation guarantee shortfalls. It is, in essence, a minimum benefit or 'vested benefit'.
Retiring allowances are increased in line with increases in the annual allowance for serving Senators and Members.
Senators and Members who joined Parliament on or after the 2001 election and become eligible for a retiring allowance have the benefit deferred until they reach 55 years of age, or until they reach their deferring day, commonly called 'preservation age'. Benefits commuted to a lump sum are also deferred until the retiring allowance is paid.
Up to 50 per cent of a retiring allowance can be commuted to a lump sum. The lump sum is equal to the amount of retiring allowance commuted, multiplied by the commutation factor.
The commutation factor, for ages up to and including 65 years, is 10. The commutation factor reduces by 0.5 per year until reducing to zero at age 85. The commutation factor applicable at selected ages is as follows:
| Age |
Factor |
| 65 or less |
10.0 |
| 70 |
7.5 |
| 75 |
5.0 |
| 80 |
2.5 |
| 85 or over |
0.0 |
Parliamentarians who were elected for the first time at the 2001 election and become eligible for a retiring allowance, are required to preserve any lump sum commutation benefit until their preservation age. The amounts commuted and preserved will naturally vary in each case.
Parliamentarians who retired after 1st July 1999, but before the 2001 election, could commute fifty per cent of their retiring allowance to a lump sum, but were required to preserve part of this amount until their preservation age.
Parliamentarians who retired before 1st July 1999, except for reasons of ill-health, had the option of taking a full retiring allowance or commuting up to fifty per cent of this amount to a lump sum that was immediately accessible. In other words the preservation age rules do not generally apply to those elected prior to 1st July 1999. If the retired parliamentarian is subsequently re-elected, however, the rules may apply.
Deferral of benefits is not required if retirement is on invalidity grounds, regardless of the age of the member.
In 1994, the Parliamentary Contributory Superannuation Act 1948 was amended to make the Scheme subject to the same preservation age rules applying to members of other superannuation funds. [7] In effect, this meant that many members of the Scheme were required to preserve any lump sum benefit, but were still able to access a retiring allowance immediately after retirement. From 2001, certain retiring parliamentarians became 'deferring members' under the Act and they are required to preserve all benefits, including their retiring allowance, until their 'deferral day', generally the day they reach age 55.
Preservation is a prudential regulatory requirement under the Superannuation Industry (Supervision) Act 1993 (SIS Act) and associated Regulations whereby certain superannuation benefits (superannuation contributions, including member contributions, and superannuation fund investment earnings) must be maintained either in a superannuation or roll-over fund until permanent retirement, or until the member reaches preservation age.
Preservation age is that at which a member can gain access to preserved benefits that have accumulated in their superannuation fund or Retirement Savings Account, provided that they have permanently retired from the workforce.
In the 1997 Commonwealth Budget, the Howard Government announced that the preservation age would be increased from 55 to 60 years on a phased-in basis. By 2025, the preservation age will be 60 years for anyone born after June 1964, with the preservation age being reduced by one year for each year that a birthday occurs before 1 July 1964. This means that persons born before 1 July 1960 will continue to have a preservation age of 55 under the SIS Act. [8]
| For a person born |
Preservation age (years) |
| before 1 July 1960 |
55 |
| 1 July 1960 - 30 June 1961 |
56 |
| 1 July 1961 - 30 June 1962 |
57 |
| 1 July 1962 - 30 June 1963 |
58 |
| 1 July 1963 - 30 June 1964 |
59 |
| after 30 June 1964 |
60 |
The Trust can determine to allow early payment of part of a deferred retiring allowance in circumstances of severe financial hardship or on compassionate grounds. When the retiring allowance ultimately becomes payable at age 55 it will be reduced to take account of these payments.
The resettlement allowance is determined by the Remuneration Tribunal in Determination 2006/18 Clauses 8.6 to 8.8.--
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.
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 parliamentarians 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.
For further information, please refer to the 2006
and 2007
sections in the Background Note, The Parliamentary Retiring Allowances Act
1948: Debates, Committee Reports, Remuneration Tribunal Reviews and a
Chronology of Legislative Amendments.
Benefits payable to the spouse
of a deceased parliamentarian under the Scheme are outlined in Part V,
Sections
19 to19AB of the Act.
Upon the death of a serving MP, their spouse receives an annuity equal
to 5/6 of the rate of the retiring allowance which
would have been payable had the MP not died.
If the MP has served less than 8 years at the time of death, the retiring
allowance is calculated as if they had served 8 years.
Upon the death of a former MP already in receipt of a retiring allowance,
the spouse receives 5/6 of the rate of the retiring
allowance being paid.
Annuities continue to be paid if a spouse remarries. Annuties are also
paid if the spouse is subsequently elected to Commonwealth Parliament.
In summary, a spouse will be paid an annuity for their lifetime, equivalent to 5/6 of the retiring allowance to which the deceased parliamentarian would have been entitled.
For the purposes of the Act, a person is a spouse if the person has, or had, a marital relationship with the deceased person at the time of the death of the deceased person.
Where the deceased was a retired member at the time of death, a spouse
is one where:
If a deceased parliamentarian has no spouse, orphan children are entitled to an annuity equal to— ¼ of an annuity that would have been payable to a spouse, or equal to the spouse's annuity divided by the number of children if there are more than four. In effect the annuity payable to orphaned children is ¼ of 5/6 of the deceased parliamentarian's retiring allowance. Orphan children are also eligible for an annuity if the spouse of a deceased parliamentarian dies while in receipt of a reversionary benefit—they are eligible to receive ¼ of the annuity their parent had received upon the death of the parliamentarian.
Ss19AA(5)
--
Certain other conditions surround the position of the deceased MP’s surcharge debt account and the payment of any benefit.
Since 18 May 2004 [12] , the Scheme has allowed for the splitting of superannuation when marriages break down. Under Part VAA, with some exceptions, former spouses may become entitled to their own superannuation benefit.
Where former Senators and Members who are entitled to a retiring allowance—or their spouses in receipt of an annuity—are held to be the 'holders of an office of profit' under a State or the Commonwealth, their benefit may be reduced. Section 21B of the Act defines the 'holder of an office of profit' as:
In these circumstances, the retiring allowance is reduced, above a threshold of 20 per cent of backbench salary, at the rate of 50 cents in the dollar. The maximum reduction that may apply is 50 per cent of the retiring allowance before commutation.
Section 21B does not apply to members of state parliaments. In Section 21, however, the Act does allow for reductions in benefit for those who subsequently serve in other legislatures.
Those parliamentarians who become eligible for a retiring allowance under the Scheme—and who are already in receipt of a retiring allowance or annuity by virtue of prior service in a state legislature—have their retiring allowance reduced by the amount already received. Those parliamentarians in receipt of a retiring allowance under the Act, who are subsequently elected to a state legislature, will have this benefit reduced by the amount of any state retiring allowance they later receive. Former parliamentarians who are re-elected to federal Parliament are required to repay any lump sum benefit received. See The Parliamentary Contributory Superannuation Act 1948, Part V Sections 20, 20A, 21 and 21B
A notional employer contribution rate is actuarily calculated to illustrate the effective cost of the superannuation benefits being provided by the employer in unfunded schemes, the Commonwealth, as a percentage of the salaries of scheme members. It represents the contribution rate that would be required if benefits were fully funded and is presented as a percentage of the total salaries of Scheme members.
The Australian Government Actuary reports to the Department of Finance and Administration (Finance) on the long–term cost of benefits provided under the Parliamentary Contributory Superannuation Act 1948. At each of these reviews, the notional employer contribution rate is reported. In accordance with common practice this advice is normally provided every three years. Full actuarial reviews were undertaken in 1995, February 1997, December 2000 and for the period 2002 to 2005. This information is not publicly reported but is published in the Scheme's Annual Report provided to Senators and Members. The most recent figure available to the author was given as evidence to the Senate Finance and Public Administration Legislation Committee on 31 May 2004. The notional employer contribution rate to the Parliamentary Contributory Superannuation Scheme is quoted at 67.6 per cent. [13] At 30 June 1996, the rate stood at 69.1 per cent of the total members' salaries. [14]
A comparative table of rates for other commonwealth schemes is provided:
| Scheme |
Legislation |
Calculation date |
Notional contribution rate—% of salaries |
| Parliamentary Contributory Superannuation Scheme (PCSS) |
30 June 2002 |
67.6 |
|
| Judge's Pension Scheme |
30 June 2002 [15] |
55.3 |
|
| Public Sector Superannuation Scheme (PSS) [16] |
30 June 2005 [17] |
15.6 |
|
| Commonwealth Superannuation Scheme (CSS) [18] |
30 June 2005 [19] |
28.2 |
|
| Military Superannuation and Benefits Scheme (MSBS) |
30 June 2005 [20] |
24.7 |
|
| Defence Force Retirement and Death Benefits Scheme (DFRDB) [21] |
30 June 2005 [22] |
33.5 |
|
| Superannuation Guarantee |
Superannuation Guarantee Charge Act 1992 and Superannuation Guarantee (Administration) Act 1992 |
from 1 July 2002 [23] |
9 |
[1] Parliamentarians elected for the first time at the 2001 general election cannot access the retiring allowance until age 55. Those members of the scheme elected prior to 2001 are eligible to receive the retiring allowance immediately after retirement.
[2] Essentially an 'annual allowance' or 'salary of office' see Parliamentary Contributory Superannuation Act 1948 Section 4 Interpretation
[3] Parliamentary Contributory Superannuation Act 1948 Section 4B Marital relationship
[4] Parliamentary Contributory Superannuation Act 1948 Section 4C Spouse who survives a deceased person
[5]
[6] The annual allowance is set as a reference salary in the Principle
Executive Office Classification Structure determined by the Remuneration
Tribunal. The Tribunal examines the reference salary annually and usually
reports on the matter to Parliament in July each year. Note that the
Remuneration Tribunal only advises and reports to Parliament, it does
not determine the annual allowance. See
[7] Section 26B of the Parliamentary Contributory Superannuation Act 1948 was inserted by the Superannuation Laws Amendment Act 1994.
[8] Summary courtesy of Kehl, ibid, 2001, p. 9
[9] The Parliamentary Contributory Superannuation Act 1948 Section 4C ss 2(a) and ss 3(d).
[10] Department of Finance and Administration, Parliamentary Contributory Superannuation Scheme: Handbook October 2005, p. 11
[11] op. cit.,
[12] Superannuation Legislation Amendment (Family Law and Other Matters) Act 2004
[13] C. J. Stevenson, Principal, Mercer Human Resources Consulting Pty Ltd, Evidence to Senate Finance and Public Administration Legislation Committee, 31 May 2004, p. 21.
[14] House of Representatives, Debates, answer to QON 2425, 4 June 2001 p. 27231
[15] Senate, Debates, Answer to QON no 1516, 13 August 2003, p. 13591
[16] The government announced changes to the PSS on 17 October 2003, with an exposure draft of proposed changes being issued in December 2003. The proposed changes will apply to new members of the scheme from 1 July 2005.
[17] Mercer Human Resource Consulting Pty Ltd, Report on long-term costs of the PSS and CSS at http://www.finance.gov.au/super/docs/PSS___CSS_LTCR_2005.pdf pp 3 and 29.
[18] Now closed to new entrants
[20] Australian Government Actuary, Military Superannuation and Benefits Scheme and Defence Force Retirement and Death Benefits Scheme (MSBS and DFRDB): A report on long-term costs carried out by the Australian Government Actuary using data to 30 June 2005 p. vi
[21] Now closed to new entrants
[22] Australian Government Actuary, op cit..
[23] see D. Kehl, Superannuation Guarantee Charge Amendment Bill 2002, Bills Digest no 160, 2001-02.
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