Superannuation Amendment (PSSAP Membership) Bill 2016

Bills Digest no. 65, 2016–17                                                                                                                                                    

PDF version [573KB]

Kai Swoboda
Economics Section
16 February 2017



Purpose of the Bill


Policy development
The PSSAP scheme
Figure 1: PSSAP membership, 2011–12 to 2015–16
PSSAP performance
Related superannuation policy developments

Committee consideration

Policy position of non-government parties/independents

Position of major interest groups

Financial implications

Statement of Compatibility with Human Rights

Key issues and provisions

Possible implications
Existing and potential PSSAP members
PSSAP fund
Restrictions on remaining a contributing member

Concluding comments


Date introduced:  1 December 2016
House:  House of Representatives
Portfolio:  Finance
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 Parliament website.

When Bills have been passed and have received Royal Assent, they become Acts, which can be found at the Federal Register of Legislation website.

All hyperlinks in this Bills Digest are correct as at February 2017.

Purpose of the Bill

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).


Policy development

The proposal to allow PSSAP members to continue to contribute to the scheme when they leave the APS was announced in the 2016–17 Budget.[1] 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 reforms, noting:

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 by members.[2]

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.[3] 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.[4]

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 scheme

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).[5] 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.[6]

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.[7] 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

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.[8]

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 performance

PSSAP members have the choice of several investment options including ‘cash’, ‘balanced’ and ‘aggressive’.[9] 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 house SuperRatings.[10]

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.[11] The fund ranked highest in the three-year period, StatewideSuper, achieved returns of 8.8 per cent.[12]

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 October 2016

PSSAP Fund comparative performance as at 31 October 2016.

Source: RateCity, ‘CSC PSSap—MySuper’, RateCity website, [30 November 2016].

Related 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’.[13] While the Government has not specified what these ‘wider reforms and initiatives’ are, they are likely to include policies relating to:

  • providing for choice of fund for individuals who are limited to funds nominated in an applicable enterprise agreement[14]
  • the 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[15] and
  • opening up a broader range of default funds for selection by employers.[16]

Committee consideration

Senate 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.[17]

Senate Standing Committee for the Scrutiny of Bills

The Senate Scrutiny of Bills Committee had no comment on the Bill.[18]

Policy position of non-government parties/independents

It does not appear that non-government parties and independents have made any comments on the Bill.

Position of 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.

Financial implications

As noted in the Explanatory Memorandum, the Bill does not have any financial impact on the budget.[19]

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.[20]

At the date of publication the Bill had not yet been considered by the Parliamentary Joint Committee on Human Rights.

Key issues and provisions

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’,[21] 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.

Possible implications

The measure proposed by the Bill has several implications for existing and potential PSSAP members and for the PSSAP fund as a whole.

Existing 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.

PSSAP fund

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.[22]

Restrictions 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 paragraph 18(7)(c)[23]) and that the person works for an employer who is obligated to make contributions under the Superannuation Guarantee (Administration) Act 1993 (proposed paragraph 18(7)(g)[24]). It has been reported that these restrictions may make it difficult for some contractors and sole traders to be able to remain contributing members.[25]

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)[26]).

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.[27] They will instead be covered by the relevant Australian Defence Force superannuation arrangements.[28]

Concluding comments

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 performance.


[1].         Australian Government, ‘Part 2: Expense measures’, Budget measures: budget paper no. 2: 2016–17, p. 95.

[2].         Ibid.

[3].         J Hockey (Treasurer) and M Cormann (Minister for Finance), Mid-year economic and fiscal outlook 2014–15, p. 145.

[4].         Ibid.

[5].         Commonwealth Superannuation Corporation (CSC), ‘Who we are: your superannuation trustee’, CSC website.

[6].         CSC, Annual report 2015–16, pp. 193–194.

[7].         Ibid., p. 56.

[8].         Eligibility requirements are set out in detail in sections 13 to 16 of the Superannuation Act 2005.

[9].         CSC, ‘Investments: product dashboard’, CSC website, [30 June 2016].

[10].      CSC, ‘Compare PSSap: how we rate’, CSC website.

[11].      SelectingSuper, Performance tables: performance to 31 December 2016: top 50 workplace super—MySuper / default investment options, Rainmaker Information, Sydney, 2016.

[12].      Ibid.

[13].      Australian Government, ‘Part 2: Expense measures, Budget measures: budget paper no. 2: 2016–17, op. cit.

[14].      This 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 Parliament website).

[15].      While 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 (ASIC), Further 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 superannuation.

[16].      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).

[17].      Selection of Bills Committee, Report, 1, 2017, The Senate, Canberra, 9 February 2017, p. 3.

[18].      Senate Standing Committee for the Scrutiny of Bills, Scrutiny digest, 1, 2017, The Senate, Canberra, 8 February 2017, p. 29.

[19].      Explanatory Memorandum, Superannuation Amendment (PSSAP Membership) Bill 2016, p. 3.

[20].      The Statement of Compatibility with Human Rights can be found at page 3 of the Explanatory Memorandum to the Bill.

[21].      Items 2 and 7 of Schedule 1 of the Bill.

[22].      The 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.

[23].      Item 7.

[24].      Ibid.

[25].      D Donaldson, ‘Superannuation mobility on the cards for APS’, The Mandarin, 2 December 2016.

[26].      Item 7.

[27].      Ibid.

[28].      Explanatory Memorandum, Superannuation Amendment (PSSAP Membership) Bill 2016, pp. 7–8.


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