Bills Digest no. 65,
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Purpose of the Bill
The PSSAP scheme
Figure 1: PSSAP membership, 2011–12
Related superannuation policy
Policy position of non-government
Position of major interest groups
Statement of Compatibility with Human
Key issues and provisions
Existing and potential PSSAP members
Restrictions on remaining a
Date introduced: 1
House: House of
Commencement: The substantive
provisions of the Bill commence on the earlier of a day to be fixed by
Proclamation or six months after Royal Assent.
Links: The links to the Bill,
its Explanatory Memorandum and second reading speech can be found on the
Bill’s home page, or through the Australian
When Bills have been passed and have received Royal Assent,
they become Acts, which can be found at the Federal Register of Legislation
All hyperlinks in this Bills Digest are correct as
at February 2017.
The Bill amends the Superannuation Act
2005 to provide that certain Commonwealth public servants who are
covered by the Public Sector Superannuation Accumulation Plan (PSSAP)
superannuation scheme can continue to contribute to the scheme when they leave
the Australian Public Service (APS).
The proposal to allow PSSAP members to continue to
contribute to the scheme when they leave the APS was announced in the 2016–17
The announcement was general in nature and did not make mention of any
restrictions on allowing former PSSAP members to continue to make
contributions. The Government’s rationale for the change was to provide for
comparable arrangements to other industries and for consistency with broader
This will align [PSSAP] arrangements with superannuation
arrangements available in the broader industry and is consistent with the
Government’s wider reforms and initiatives to lower administrative costs borne
In the 2014–15 Mid-Year Economic and Fiscal Outlook (MYEFO)
in December 2014, the Government announced that PSSAP administration fees would
be recovered from PSSAP members rather than being paid for by the Commonwealth.
At the time of the MYEFO announcement, the Government noted:
The new arrangements will bring PSSAP into line with private
sector superannuation funds where members pay for the administration of their
accounts. The PSSAP administration fees will be determined by the PSSAP
trustee: the Commonwealth Superannuation Corporation.
This change, implemented through the levying of administration
fees on PSSAP members from 1 July 2015, has facilitated the proposal included
in the Bill.
The PSSAP superannuation scheme is established by the Superannuation
Act 2005 and is the main superannuation fund for APS employees who joined
the APS after 1 July 2005. As its name suggests, the PSSAP is an accumulation
scheme, whereby the retirement savings of a member are related to the sum of
employer and member contributions and investment earnings.
The trustee for the PSSAP is the Commonwealth
Superannuation Corporation (CSC). The CSC manages a number of superannuation
funds and arrangements for Commonwealth public servants, including defined
benefit funds such as the Public Sector Superannuation (PSS) scheme and
Commonwealth Superannuation Scheme (CSS) (which also has an accumulation
component and is sometimes referred to as a ‘hybrid’ fund).
As at 30 June 2016 the value of assets in the PSSAP scheme totalled almost
$9 billion, with around $1.4 billion in contributions received in the
2015–16 financial year.
As at 30 June 2016, the PSSAP scheme had over
80,000 members who made or had contributions made to the scheme on their
behalf and around 40,000 members who had money preserved in the scheme.
Membership in the scheme has broadly remained at these levels for the past five
years (Figure 1).
Figure 1: PSSAP membership,
2011–12 to 2015–16
Source: Commonwealth Superannuation Corporation (CSC), Annual
report 2015–16, p. 56.
The Superannuation Act 2005 sets out the
eligibility requirements for membership of the PSSAP scheme. In broad terms, a
person is eligible to be a member of the scheme if they commenced employment in
the APS after 1 July 2005.
Importantly, a PSSAP member who leaves the APS is not able
to continue to have contributions paid into the scheme. Upon leaving the APS, a
PSSAP member can continue to have their benefit preserved in the PSSAP scheme
or have this balance rolled into another superannuation fund.
PSSAP members have the choice of several investment
options including ‘cash’, ‘balanced’ and ‘aggressive’.
While fund performance can be measured in several different ways, the PSSAP
scheme overall has generally produced favourable returns for members and was
rated as a ‘best value for money’ superannuation fund by industry research
Comparative information published by industry analysts
Selecting Super based on performance to 31 December 2016 ranked the
PSSAP MySuper product 17th (10‑year return 5.2%) in investment returns
over a 10-year period and 28th over a three-year period (three-year return
7.3%) against other default products reviewed.
The fund ranked highest in the three-year period, StatewideSuper, achieved
returns of 8.8 per cent.
Comparative performance information published in the
RateCity website as at 31 October 2016 noted that the PSSAP MySuper product had
lower than industry average fees (based on certain assumed levels of account
balance) and had annual investment performance that was generally in line with
industry averages (Figure 2).
Figure 2: PSSAP Fund comparative performance as at 31
Source: RateCity, ‘CSC
PSSap—MySuper’, RateCity website, [30 November 2016].
superannuation policy developments
As noted previously, part of the Government’s broader
rationale for the changes proposed by the Bill include that the arrangements
were ‘consistent with the Government’s wider reforms and initiatives to lower
administrative costs borne by members’.
While the Government has not specified what these ‘wider reforms and
initiatives’ are, they are likely to include policies relating to:
for choice of fund for individuals who are limited to funds nominated in an
applicable enterprise agreement
implementation of a ‘dashboard’ for a broader range of products—a simplified, standardised
information document about a superannuation product that allows for easier
comparison with other product offerings
up a broader range of default funds for selection by employers.
Standing Committee for the Selection of Bills
The Senate Selection of Bills Committee decided at its
meeting of 9 February 2017 not to refer the Bill to a committee for inquiry.
Senate Standing Committee for the
Scrutiny of Bills
The Senate Scrutiny of Bills Committee had no comment on the
position of non-government parties/independents
It does not appear that non-government parties and
independents have made any comments on the Bill.
major interest groups
There does not appear to have been any public comments by
major interest groups, such as the Community and Public Sector Union, nor
superannuation industry groups, on the Bill.
As noted in the Explanatory Memorandum, the Bill does not
have any financial impact on the budget.
Statement of Compatibility with Human Rights
As required under Part 3 of the Human Rights
(Parliamentary Scrutiny) Act 2011 (Cth), the Government has assessed the
Bill’s compatibility with the human rights and freedoms recognised or declared
in the international instruments listed in section 3 of that Act. The
Government considers that the Bill is compatible.
At the date of publication the Bill had not yet been
considered by the Parliamentary Joint Committee on Human Rights.
The PSSAP scheme is currently available only to certain
serving APS employees. This is effected by a combination of provisions in the Superannuation
Act 2005 that restrict membership to persons who meet the definition of
‘ordinary employer-sponsored member’, as defined in section 18 of the Act, and
employers who are a ‘designated employer’ under section 19 of the Act. The
proposal to allow former APS employees who are members of the PSSAP to remain
contributing members of the scheme is largely achieved by adding new provisions
to these sections of the Act, particularly by inserting a definition of a
‘former Commonwealth ordinary employer-sponsored member’,
although there are some limits that are proposed to apply (see below).
The Explanatory Memorandum contains a summary of each of
the items included in the Bill and readers are referred to pages 5–8 for an
explanation of each provision.
The measure proposed by the Bill has several implications
for existing and potential PSSAP members and for the PSSAP fund as a whole.
and potential PSSAP members
Allowing PSSAP members to remain as contributing members
when they leave the APS provides these individuals with a greater range of
choice in managing their superannuation arrangements. These individuals will
benefit to the extent that the member would have chosen to continue in the
PSSAP but was previously prevented from doing so.
The capacity of members of the PSSAP to remain
contributing members when they leave the APS provides for some competitive
discipline on the PSSAP fund to provide superannuation products that have a
cost and performance offering to retain these members. This discipline may
provide benefits in terms of lower fees to existing PSSAP members. By attracting
or retaining PSSAP members who move to employment outside of the APS, the PSSAP
fund may also benefit from any additional economies of scale that relate to a
larger membership base or higher funds under management.
on remaining a contributing member
As noted previously, the 2016–17 Budget announcement did
not include any detail on limitations of former APS employees who were PSSAP
members to continue to contribute to the scheme. However, the Bill includes
some specific restrictions based on the length of time that an individual was a
member of the PSSAP and the type of employment arrangement that the individual
who leaves the APS is in.
Item 2 and item 7 amend the Act to include a
new definition—‘former Commonwealth ordinary employer-sponsored member’—which
forms the basis for determining the conditions under which a person who was a
member of the PSSAP can continue to remain a contributing member of the scheme
after they leave the APS.
Some restrictions to remaining a contributing member are that
the person who was previously eligible to be a PSSAP member must have must have
been engaged by the APS for a continuous period of at least 12 months (proposed
and that the person works for an employer who is obligated to make contributions
under the Superannuation Guarantee (Administration) Act 1993 (proposed
It has been reported that these restrictions may make it difficult for some
contractors and sole traders to be able to remain contributing members.
In addition to these restrictions, some flexibility has been
included for the Minister to exclude a class of persons determined in a
disallowable legislative instrument (proposed subsections 18(9) and (10)).
To avoid doubt about whether the arrangements apply to a
member of the defence force, proposed subsection 18(8) provides that a
person who is a member of the defence force is not eligible to be a PSSAP
contributing member when they leave the APS.
They will instead be covered by the relevant Australian Defence Force
The changes proposed by the Bill appear to be relatively
uncontroversial given that the policy has attracted little commentary or
comment. The change to allow members of the PSSAP to remain as contributing
members when they leave the APS may benefit some people who would like to
retain their superannuation within the PSSAP fund. There may also be some
benefits to members and potential members of the PSSAP fund to the extent that
competitive pressures may lead to improved administrative efficiency or
2: Expense measures’, Budget measures: budget paper no. 2: 2016–17,
Hockey (Treasurer) and M Cormann (Minister for Finance), Mid-year
economic and fiscal outlook 2014–15, p. 145.
Superannuation Corporation (CSC), ‘Who we are: your superannuation
trustee’, CSC website.
report 2015–16, pp. 193–194.
requirements are set out in detail in sections 13 to 16 of the Superannuation
product dashboard’, CSC website, [30 June 2016].
‘Compare PSSap: how we rate’,
tables: performance to 31 December 2016: top 50 workplace super—MySuper /
default investment options, Rainmaker Information, Sydney, 2016.
2: Expense measures’, Budget measures: budget paper no. 2: 2016–17,
measure was included in the Superannuation Legislation Amendment (Choice of
Fund) Bill 2016, which lapsed at prorogation of the Parliament in April 2016
(Parliament of Australia, ‘Superannuation
Legislation Amendment (Choice of Fund) Bill 2016 homepage’, Australian
the dashboard requirements for MySuper products have been in place for some
time, the implementation of requirements for ‘choice’ products (which are
essentially non-MySuper products offered by superannuation funds) have been
deferred until July 2017 (Australian Securities and Investments Commission
update on Stronger Super regime, media release, 16-130, 4 May 2016).
MySuper products are intended to be simple and low-cost superannuation accounts
broadly aimed at individuals who are less interested in managing their
. The Productivity
Commission is undertaking an inquiry into a workable model or models that could
be implemented by Government if a new model for allocating default fund members
to products is desirable. A draft report on the inquiry is due by March 2017
(Productivity Commission (PC), ‘Current inquiries:
superannuation’, PC website).
of Bills Committee, Report,
1, 2017, The Senate, Canberra, 9 February 2017, p. 3.
Standing Committee for the Scrutiny of Bills, Scrutiny
digest, 1, 2017, The Senate, Canberra, 8 February 2017, p. 29.
Memorandum, Superannuation Amendment (PSSAP Membership) Bill 2016, p. 3.
Statement of Compatibility with Human Rights can be found at page 3 of the
Explanatory Memorandum to the Bill.
2 and 7 of Schedule 1 of the Bill.
extent of any economies of scale for superannuation funds has been examined in
several studies and the results are mixed on the benefits of scale. See for
example, J Cummings, Effect
of fund size on the performance of Australian superannuation funds, Working
paper, Australian Prudential Regulation Authority (APRA), Sydney, March 2012; and
H Higgs and A Worthington, ‘Economies
of scale and scope in Australian superannuation (pension) funds’, Pensions:
An International Journal, 17(4), November 2012, pp. 252–259.
. D Donaldson, ‘Superannuation
mobility on the cards for APS’, The Mandarin, 2 December 2016.
Memorandum, Superannuation Amendment (PSSAP Membership) Bill 2016, pp. 7–8.
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