It is with great pleasure that I rise to speak on the Superannuation Legislation Amendment Bill 2019. Superannuation of course is a great Labor Party legacy to this nation. It has been the Labor Party that has driven the agenda on retirement income from every corner of this great nation. The bill before us today continues with those aspirations, long held by the Labor Party, to ensure that working people have the best retirement income schemes they can possibly have. Before I get onto the terms of the bill I think it is probably worthwhile to just go back. Mr Rich-Phillips covered a little bit of ground in his contribution in terms of public sector superannuation here in this state, and I have touched on Labor’s values when it comes to retirement income. Of course the house would know that it was the Keating Labor government that made superannuation compulsory in 1992 with the Superannuation Guarantee (Administration) Act 1992, initially commencing at a rate of 3 per cent. Mr Barton interjected.
Mr GEPP: Could you imagine having a superannuation rate of 3 per cent today, Mr Barton? I think it would be a very brave politician that would run that number up the flagpole today. But it had risen to 9 per cent by 2000. The aim was to have a superannuation rate of 12 per cent, but that was subsequently frozen by the then Howard government. Today, just to underscore the importance of the retirement superannuation scheme, some 1.9 million Australians over 65 are partly or fully self-funded retirees. Could you imagine the drain on the public purse if that was not the case, if this enormous economic reform was not introduced almost 30 years ago? Interestingly the Association of Superannuation Funds of Australia state that in order to: … have a ‘comfortable’ retirement, single people will need $545 000 in retirement savings, and couples will need $640 000. Without Labor’s commitment to retirement income in this state and in this nation those sorts of numbers would not be available to working people across this nation.
They would be simply out of reach. I have a number of quotes from members of the Liberal and National parties at the time that the debate was held in the federal Parliament, but it may well be a little bit churlish for me to repeat some of those statements because they were lost on nobody at the time—claims of mass unemployment permeating the country, that it was nothing more than a tax on business and that it would be the undoing of this nation. Of course none of that has proven to be the case; in fact quite the opposite. It is one of the great Labor economic legacies that this country, I predict, will have for many, many, many, many years to come and will only be improved. That is what this bill does today. In February 2017 the government undertook to review certain aspects of the emergency services defined benefit scheme. It had terms of reference for that review, and they were: a review of design elements of the ESDB scheme, such as the maximum multiple; the calculation of death and disability benefits; the calculation of the resignation benefit; the feasibility of introducing a transition-to-retirement pension; and also a review of gender equity. Now, I will not run through all of the mechanics and differences of the accumulation systems vis-a-vis the defined benefits.
Mr Rich-Phillips did that and explained that very eloquently. I suspect that many in the chamber understand the difference between those two schemes, but this is a particular scheme for, of course, our emergency service workers. This bill seeks to amend the Emergency Services Superannuation Act 1986 to improve the benefits provided to members of the ESDB scheme. I should say at this point that arising from that review in 2017 the government during the election campaign made a commitment to support certain recommendations arising from that review, and this bill fulfils that commitment. It maintains faith with those workers about the changes that we said if we were re-elected we would make to this scheme upon the resumption of the new Parliament.
This bill, as I said, keeps faith with that commitment, and in particular the reforms include that where a member of the ESDB scheme has reached the maximum benefit multiple the employer shall pay contributions to an accumulation account in respect of the employee at 3 per cent commencing in the 2019–20 year, rising to 12 per cent by 2026–27. That is a particularly important point, because once you reached the maximum—and often that took around about 30 years, as I understand it—the only time your benefit then adjusted was in line with salary increases. Of course across this nation we are living in a time when there is very low salary growth, so this is a very important aspect of the reforms being proposed by the government to ensure that those workers are not leaving our emergency services early because there is no real retirement income benefit to them by remaining in that employment. We would have a mass exodus of experienced people out the door, but rather this ensures that there is a continued contribution that is made to their retirement income through an accumulation account that rises over the next few years.
That is providing that a member’s superable salary is maintained following a salary reduction, unless otherwise advised by the member. Again, that is very, very important. I talked about transition to retirement, and there can be other aspects of that transition to retirement—not just financial. When in a workplace a worker decides to take a different set of duties, or it might be different hours of work, that may have an impact overall on their salary. These reforms seek to maintain that salary level for the purposes of superannuation without their longer term retirement being impacted unnecessarily. The reforms also include that contributions payable for the financial year will be fixed and based upon the superable salary at the start of the financial year, allowing members, as I said, to take a transition-to-retirement pension. The reforms will also include allowing members on unpaid parental and carers leave to choose the level of their contribution and subsequently their benefit accrual. It is most important.
These changes actually recognise that the workplace is changing and that the circumstances that exist in the modern Victorian workplace are very different to those that existed at the time that this scheme was first enacted. It has been amended over time, and the reforms will also include the provision for members with the opportunity to make higher catch-up contributions. It will also change the method of calculating the death benefits in respect of police recruits who do not have dependants. That is a particularly important point, because at the moment they are not eligible, but these reforms will ensure that that anomaly is removed and that police recruits will have the method of calculating death benefits for those without dependants. Those barriers are removed. On paying additional accumulation contributions for certain members, at present ESDB scheme members can accrue a maximum benefit of 8.4 times their average salary.
As I said, a member contributing at 7 per cent of their salary will reach this maximum after 30 years. The last thing that we want in our emergency services sector is a plethora of emergency services workers, because they have reached the maximum under the defined benefit scheme, exiting the workplace, because there really is no financial advantage for them remaining at work, and moving into retirement earlier than they otherwise would have. Of course the work and experience that we have amongst our emergency services workers is very, very valuable, and these reforms will assist those workers to perhaps remain in the workforce longer and continue to make the wonderful contribution that they make to this state, and it will allow for a scheme that will ensure that, financially, they continue to benefit from the retirement income. Mr Rich-Phillips talked about some house amendments, and I will very quickly go over those.
Others may wish to make a contribution on those as well. People will recall, of course, that the first determination of the Victorian Independent Remuneration Tribunal recently took effect in line with other reforms made by the Victorian Independent Remuneration Tribunal and Improving Parliamentary Standards Act 2019. It was passed by the Parliament earlier this year. Following this determination some inconsistencies have emerged in relation to the operation of the Parliamentary Contributory Superannuation Fund, and the bill as amended will remove those inconsistencies. It does so by inserting new definitions to clarify provisions dealing with the calculation of contributions to the fund, as well as benefits payable by the fund. The amendments will ensure that all relevant calculations are based on the basic salary portion amount that was determined by the independent remuneration tribunal specifically for the purposes of the fund.
The amendments will preserve the previous superannuation arrangements for members of the fund while ensuring that there are no unintended windfall gains. This reflects the intention of the reforms to the fund passed by the Parliament earlier this year. The bill as amended will also ensure that the provisions to fix the contributor’s contributions for a financial year and maintain a member’s salary for the purposes of the emergency services defined benefit scheme are operational from 1 July 2019. This is achieved by changing the commencement date of clause 4(5) to 1 July 2019 and making the consequential amendment to clause 3. The combined effect of these two amendments will ensure that all the proposals to improve the benefits of the members of the emergency services defined benefit scheme are operational in this financial year. As I said, it was with great pleasure that I rose today to support this bill. Superannuation is in the DNA of the Australian Labor Party.
It was the Australian Labor Party back in 1992 that introduced this most magnificent of economic reforms that will be a lasting legacy to not only Victorians but all of this nation, and you can think of no finer group of workers than emergency services workers, who put themselves on the line for our community every day. The improvements that I have outlined in this bill before the house today will ensure that those workers who give so much to this fantastic state receive something back by way of a better and well-supported retirement income scheme for emergency services workers in this state. I commend the bill to the house.