EXPLANATORY STATEMENT
Issued by authority of the Minister for Finance and Administration
Superannuation Act 1990
Twenty-Fourifth Amending Deed to the Trust Deed to establish an occupational superannuation scheme for Australian Government employees and certain other persons pursuant to section 5 of the Superannuation Act 1990
The Minister for Finance, for and on behalf of the Commonwealth, established an occupational superannuation scheme to provide benefits for certain of the Commonwealth’s employees and for certain other people by Trust Deed dated 21 June 1990 under section 4 of the Superannuation Act 1990 (1990 Act). The occupational superannuation scheme is known as the Public Sector Superannuation Scheme (PSS).
Section 5 of the 1990 Act provides that the Minister for Finance and Administration may amend the Trust Deed by signed instrument, subject to obtaining the PSS Board’s consent to the amendment where necessary.
On 23 March 2004, the Minister for Finance and Administration, Senator the Hon Nick Minchin made an instrument amending the Trust Deed (the Twentieth Amending Deed) to provide for changed superannuation arrangements for new employees who join the PSS from 1 July 2005 under that they would be provided with fully funded accumulation benefits under a PSS accumulation plan. The Twentieth Amending Deed will take effect on 1 July 2005.
The purpose of the Twenty-fourifth Amending Deed is to include in the PSS accumulation plan (PSSAP) arrangements to facilitate the splitting of a superannuation interest in the PSSAP on marriage breakdown under the family law arrangements and to address a number of other matters to facilitate the introduction of the PSSAP. The Twentieth Amending Deed (signed on 23 March 2004) did not address family law “superannuation splitting” as the amendments to the 1990 Act to enable this change did not come into force until 18 May 2004.
On xx June 2005 the Minister for Finance and Administration amended the Trust Deed and the Rules for the administration of the PSS set out in the Schedule to the Trust Deed by signed instrument. That instrument is called the Twenty-fifthfourth Amending Deed in this statement.
The PSS Board has consented to these amendments. The Community and Public Sector Union was also consulted about these amendments.
Details of the Twenty-fifthfourth Amending Deed are set out in the Attachment.
The Twenty-fifthfourth Amending Deed is a legislative instrument for the purposes of the Legislative Instruments Act 2003.
The amendments to the Trust Deed and Rules made by the Twenty-fifth fourth Amending Deed come into effect immediately after the commencement on 1 July 2005 of the Twentieth Amending Deed.
ATTACHMENT
DETAILS OF THE TWENTY-FOURTH FIFTH AMENDING DEED
Amendments to the Trust Deed
Clause 1 provides for the Twenty-fifthfourth Amending Deed to come into effect immediately after the commencement of the Twentieth Amending Deed, which is to come into force on 1 July 2005. This timing of commencement is necessary as the Twenty-fifthfourth Amending Deed amends certain provisions inserted in the Trust Deed by the Twentieth Amending Deed (to establish the PSSAP within the PSS).
Subclause 2.1 substitutes in the Trust Deed a new paragraph 3.2(i), that clarifies that the Board is empowered to effect policies with insurers to provide income protection cover, as well as policies for death and invalidity cover. The previous paragraph 3.2(i) only made reference to death and invalidity cover policies. The Rules require the Board to arrange both types of cover with insurers.
Subclause 2.2 substitutes in the Trust Deed a new paragraph 3.2(k), that empowers the Board to arrange for the purchase of “income products, including retirement income products”, by former members and their beneficiaries and members who wish to transition to retirement as provided for in the Rules”. The previous paragraph 3.2(k) was the same as the new paragraph 3.2(k), except that it referred to the purchase of “retirement income products” only and did not cover “transition to retirement” arrangements for members.
Subclause 2.3 adds new paragraphs 3.2(l) and 3.2(m) to the Trust Deed. New paragraph 3.2(l) clarifies that the Board may establish a trust for the purpose of investing the PSS Fund. New paragraph 3.2(m) allows the Board to charge members, former members and non-member spouses reasonable administration fees, including in relation to member investment choice and family law “superannuation splitting”, in accordance with the Rules.
Amendments to the Rules
Subclause 3.1 adds a new row to the “Guide to the Rules” table following Rule A1.1.1 to provide a brief explanation of Part A7, a new Part inserted by subclause 3.42, that deals with family law superannuation splitting of a superannuation interest in the PSSAP.
Subclause 3.2 inserts a note under the definition of “former category A member” in Rule A1.2.1 to explain that, in accordance with new Rule A2.1.2A (see subclause 3.11), a person who was a category A member (i.e. a member of the PSSAP for whom employer contributions are made) employed by two or more designated employers would not become a former category A member entitled to apply for a PSSAP benefit where the person ceased to be an employee of one or more but not all of those designated employers. The note also explains that a person who was a category A member with one designated employer would not become a former category A member where the person upon ceasing to be an employee of that designated employer, immediately became an employee of another designated employer.
Subclauses 3.3 to 3.8 amend Rule A1.2.1 by inserting definitions of “cashed”, “non-commutable allocated annuity”, “non-commutable allocated pension”, “non-commutable annuity”, “non-commutable pension” and “preservation age” respectively. These definitions relate to provisions in the Rules (at subparagraph A3.1.1(a)(v), Rule A3.1.8A, paragraph A3.1.12(e) and Rule A3.1.16A) in support of “transition to retirement” measures to allow a person who has reached their preservation age prescribed under the Superannuation Industry (Supervision) Regulations 1994 (age 55 to 60, depending on the person’s date of birth) to access their superannuation through a non-commutable income stream without having to retire permanently from the workforce.
Subclause 3.9 amends Rule A1.2.1 by substituting a new definition of “remuneration determination” so that it includes a determination made under the Remuneration Tribunal Act 1973 and a determination made under another Commonwealth Act or law of a Territory for a person holding a statutory office, not being a determination of remuneration made under the Public Service Act 1999 or the Parliamentary Service Act 1999. Previously, “remuneration determination” covered a determination applying to the holder of a statutory office and a determination made by the Remuneration Tribunal. The new definition will allow a broader range of determinations to specify ordinary time earnings as the superannuation salary of a category A member in accordance with Rule A2.2.4.
Subclause 3.10 amends Rule A1.2.1 by inserting a definition of “shortfall component” referred to in new paragraph A2.4.1(c) (see subclause 3.12).
Subclause 3.11 inserts a new Rule A2.1.2A to make it clear that a person who was a category A member (i.e. a member of the PSSAP for whom employer contributions are made) employed by two or more designated employers would not become a former category A member entitled to apply for a PSSAP benefit where the person ceased to be an employee of one or more but not all of those designated employers. The rule also makes it clear that a person who was a category A member with one designated employer would not become a former category A member where the person upon ceasing to be an employee of that designated employer immediately became an employee of another designated employer.
Subclause 3.12 substitutes a new paragraph A2.4.1(c) that clarifies that an amount of “shortfall component” (as defined in the Superannuation Guarantee (Administration) Act 1992 (SG Act)) payable to or in respect of a person in accordance with the SG Act may be transferred to the Board as a transfer amount. The previous provision was unclear as it referred to “amount” rather than “amount of shortfall component”.
Subclause 3.13 inserts a new subparagraph A3.1.1(a)(v) that will facilitate the transition to retirement arrangements. The Rules provide that a benefit application may be made to the Board by a PSSAP member who has reached their preservation age (age 55 to 60, depending on the person’s date of birth) and is applying for an amount of benefit to be cashed as a non-commutable allocated annuity, a non-commutable allocated pension, a non-commutable allocated annuity or a non-commutable pension (these are all non-commutable income streams) under Rule A3.1.8A (see subclause 3.14).
Subclause 3.14 inserts a new Rule A3.1.8A that provides, in accordance with transition to retirement arrangements, that after receiving a benefit application under Rule A3.1.1(a)(v), the Board, in accordance with Rule A3.5.1, must enter into arrangements with an income product provider to provide a non-commutable income stream of the type specified in the member’s benefit application, unless the category A member has made a roll-over application under new Rule A3.1.12(e).
Subclauses 3.15 and 3.16 amend paragraphs A3.1.12(c) (deletion of “or”) and A3.1.12(d) (substitution of “; or” for “.”) as a consequence of the insertion of new paragraph A3.1.12(e) by subclause 3.17.
Subclause 3.17 inserts new paragraph A3.1.12(e) that provides, in accordance with the transition to retirement arrangements, that a roll-over application may be made by a category A member who has attained their preservation age for the purpose of the category A member being able to access a non-commutable income stream.
Subclause 3.18 substitutes a new Rule A3.1.16 that operates when the Board receives a roll-over application under Rule A3.1.12(d) from a category A member whose personal accumulation account contains accumulated member contributions or a transfer amount. The Board must roll-over such part of the person's total benefit as requested, provided that the amount does not exceed the sum of the person’s accumulated member contributions and employer-funded component of any transfer amounts, adjusted for any interest credited or debited in respect of fund earnings or losses on those amounts, as decided by the Board. The previous rule did not involve an interest adjustment.
Subclause 3.19 inserts a new Rule A3.1.16A that provides that, on receiving a rollover application from a category A member who has attained their preservation age under new paragraph A3.1.12(e), the Board, in accordance with transition to retirement arrangements, must roll-over such part of the person’s total benefit as is requested by the member.
Subclause 3.20 substitutes a new Rule A3.4.3 that provides that a member may choose to have payments from their income protection cover paid as a non-commutable income stream either directly to them by the insurer or from the PSS Fund after the payments have been made to the Fund by the insurer. Under the previous rule, the latter option only was available.
Subclause 3.21 substitutes a new Rule A3.4.4, as a consequence of the substitution of Rule A3.4.3, that provides that an amount paid under Rule A3.4.3 directly to a category A member (as well as into the PSS Fund) does not form part of the person’s personal accumulation account.
Subclause 3.22 substitutes a new Rule A3.5.1 that allows the Board before 1 July 2006, and requires it from that date, to enter into arrangements with a life insurance company to offer members income products, rather than being restricted (as was the case under the previous rule) to arrangements with life insurance companies to offer them only retirement income products. This change recognises that the PSS Board will need to provide income products to facilitate transition to retirement by members and that it will need some time to become properly licensed to arrange for the provision of these products to members.
Subclause 3.23 amends Rule A3.5.2 to provide that a person in receipt of benefits under the PSSAP may use those benefits to purchase an income product, rather than being restricted, as previously, to purchasing a retirement income product. This will allow income products to be purchased in transition to retirement situations.
2. Subclause 3.24 amends Rule A4.1.1 to provide that the terms and conditions of a basic death and invalidity cover policy may include circumstances as agreed between the Board and the relevant insurance provider. The previous Rule referred to terms and conditions without specifying circumstances. The amended rule recognises that there are circumstances where an insurance provider may not provide basic death and invalidity cover for category A members. These circumstances may include members being over a particular age, eg, age 70, members being on leave without pay for extended periods and members working overseas for extended periods (usually more than 2 years).
Subclause 3.25 substitutes a new Rule A4.1.2 that provides that a category A members isare to be provided with basic death and invalidity cover, subject to the terms and conditions of a basic death and invalidity cover policy taken out pursuant to Rule A4.1.1, unless the life insurance company does not provide cover in respect of the category A member under that policy.and new Rule A4.1.8 (concerning the time and circumstances of cessation of a basic death and invalidity cover policy – see subclause 3.28). The previous rule provided that all category A members would be provided with basic death and invalidity cover without qualificationin all circumstances, which would not necessarily be the case under amended Rule A4.1.1 and new Rule A4.1.8.
Subclause 3.26 amends Rule A4.1.4 to make it clear that the claim against the insurance policy referred to in Rule A4.1.4 is made under Rule A4.1.3.
Subclauses 3.27 and 3.28 amend Rule A4.1.6 and insert a new Rule A4.1.7 respectively to provide that where the amount of premium payable for basic death and invalidity cover is greater than the amount in the personal accumulation account of a category A member, the Board is not required to deduct the premium from the member’s personal accumulation account.
Subclause 3.28 also inserts the heading “Cessation of basic death and invalidity cover” and new Rule A4.1.8 that provides that basic death and invalidity cover ceases on the earliest of the occurrence of certain events. These events are the date that a category A member becomes a former category A member, death or invalidity retirement of the category A member, the day after the day when cover ends under the terms of the cover policy because the premium was due but not paid or the date the insurer, in accordance with the basic death and invalidity cover policy, ceases to provide basic death and invalidity cover in respect of the category A member.
Subclause 3.29 replaces Rule A4.2.8 with new Rule A4.2.8, that provides for two events (in addition to those previously specified, at the earliest of which supplementary death and invalidity cover will cease), namely: a category A member becoming a former category A member and cover ending under the terms of the cover policy because the premium for supplementary death and invalidity cover is not being paid by the due date. The new rule also makes it clear that the cover ceases when the insurer ceases to provide such cover “in respect of the category A member”, not members generally. It also adds the requirement that the existing provision in the rule for cover to cease the day after the day a premium was due but not paid has to accord with the terms of the cover policy.
Subclauses 3.30 and 3.31 amend Rule A4.2.12 and insert a new Rule A4.2.13 respectively to provide that where the amount of premium payable for supplementary death and invalidity cover is greater than the amount in the personal accumulation account of a category A member, the Board is not required to deduct the premium from the member’s personal accumulation account.
Subclauses 3.32 and 3.33 amend Rules A4.3.1 and A4.3.2 respectively to provide that the terms and conditions of a basic income protection cover policy may include circumstances as agreed between the Board and the relevant insurance provider. The previous Rule referred to terms and conditions without specifying circumstances. The amended rule recognises that there are circumstances where an insurance provider will not provide basic income protection cover for category A members. As well as the circumstances referred to in subclause 3.24, these circumstances may include members working part-time or casual hours (less than 15 hours per week) and members employed on contract for less than 3 months.
Subclause 3.33 also amends Rule A4.3.2 to provide that category A members are to be provided with basic income protection cover, subject to the terms and conditions of a basic income protection cover policy taken out pursuant to Rule A4.3.1, and Rule A4.3.3 (concerning the time and circumstances of cessation of a basic income protection cover policy – see subclause 3.34). The reference to Rule A4.3.1 did not appear in the previous rule.previous rule provided that all category A members would be provided with basic income protection cover in all circumstances, which would not necessarily be the case under amended Rule A4.3.1 and new Rule A4.3.3.
Subclause 3.34 replaces Rule A4.3.3 with new Rule A4.3.3, that provides for two events (in addition to those previously specified, at the earliest of which basic income protection cover will cease), namely: a category A member becoming a former category A member and cover ending under the terms of the cover policy because the premium the premium for basic income protection cover is nnot being paid by the due date. It also adds the requirement that the existing provision in the rule for cover to cease the day after the day a premium was due but not paid has to accord with the terms of the cover policy The new rule also makes it clear that the cover ceases when the insurer ceases to provide such cover “in respect of the category A member”, not members generally..
Subclauses 3.35 and 3.36 amend Rule A4.3.5 and insert a new Rule A4.3.6 respectively to provide that where the amount of premium payable for basic income protection cover is greater than the amount in the personal accumulation account of a category A member, the Board is not required to deduct the premium from the member’s personal accumulation account.
Subclause 3.37 replaces Rule A4.4.8 with a new Rule A4.4.8 that provides for two events (in addition to those previously specified, at the earliest of which supplementary income protection cover will cease), namely: a category A member becoming a former category A member and cover ending under the terms of the cover policy because the premium for supplementary income protection cover isnot being not paid by the due date. It also adds the requirement that the existing provision in the rule for cover to cease the day after the day a premium was due but not paid has to accord with the terms of the cover policy.. The new rule also makes it clear that the cover ceases when the insurer ceases to provide such cover “in respect of the category A member”, not members generally.
Subclauses 3.38 and 3.39 amend Rule A4.4.10 and insert a new Rule A4.4.11 respectively to provide that where the amount of premium payable for supplementary income protection cover is greater than the amount in the personal accumulation account of a category A member, the Board is not required to deduct the premium from the member’s personal accumulation account.
Subclause 3.40 replaces Rule A5.4.3 with a new rule A5.4.3 to clarify that the Board may determine fees to be paid from a person’s personal accumulation account in relation to member investment choice, including fees in connection with the investment of contributions, the realisation of those investments, the choice of an investment strategy and changes to an investment strategy.
Subclause 3.41 inserts a new Division (Division 6: Incorrectly paid amounts) in Part A5 of the Rules, that requires the Board to take corrective action where amounts have been incorrectly paid into or withdrawn from the PSS Fund or the personal accumulation account of a category A member or category A preserved benefit member.
Subclause 3.42 inserts a new Part in the Rules (Part A7: Family Law Superannuation Splitting), that defines a number of relevant terms (Rule A7.1.1) and specifies the powers and duties of the Board in relation to a PSS accumulation interest that is the subject of a splitting order or superannuation splitting agreement under the Family Law Act 1975. Under Part A7:
- the Board is required to give notice and provide certain information to the member spouse and the non-member spouse where a PSS accumulation interest becomes the subject of a Family Law payment split; (Rules A7.2.1 to A7.2.4);
- the Board, at the request of the non-member spouse under Rule A7.3.1, must create a non-member spouse interest (Rules A7.4.1 to A7.5.13), roll-over an amount to another regulated superannuation fund, an approved deposit fund, an exempt public sector superannuation scheme or a retirement savings account (Rules A7.6.1 to A7.7.3), or pay a lump sum (Rules A7.8.1 to A7.8.4). The value of the interest, roll-over amount and lump sum amount paid are all equal to the value of the non-member spouse entitlement in accordance with the Family Law (Superannuation) Regulations 2001. The member spouse interest is reduced accordingly (Rules A7.5.4, A7.7.2 and A7.8.3);
- where no request is received from the non-member spouse, the Board may create a non-member spouse interest or roll-over an amount as above. If the Board decides to roll-over an amount and the non-member spouse does not nominate a fund to which the amount is to be rolled over, the Board may roll-over the amount to an eligible roll-over fund (Rules A7.9.1 to A7.9.7);
- where the Board creates a non-member spouse interest, it is required also to create a non-member spouse interest account to which the value of the non-member spouse interest is to be credited (Rule A7.5.2);
- where a non-member spouse with a non-member spouse interest account becomes a category A member or is already a category A member or a category A preserved benefit member, the Board is to effectively include the amount in the non-member spouse interest account in the member’s personal accumulation account (Rule A7.5.5);
- the rights of a non-member spouse or their legal personal representative claiming benefits in relation to a non-member spouse interest are the same as those of a category A preserved benefit member or their personal legal representative claiming benefits in relation to the preserved benefit of the category A preserved benefit member (Rule A7.5.7);
- the rights of a person claiming benefits upon the death of a non-member spouse in relation to their non-member spouse interest are the same as the rights of persons claiming benefits of a deceased category A member in relation to the preserved benefit of the deceased category A member (Rule A7.5.8).
Subclause 3.43 amends paragraph B2.1.1A(b) of the Rules to clarify that a statutory office holder who becomes a PSS member on or after 1 July 2005 becomes a PSS defined benefits plan member, if the person made an election during a term of appointment that included 30 June 2005.
Subclause 3.44 amends paragraph B2.1.1A(c) of the Rules to clarify that a temporary employee in relation to particular employment who becomes a PSS member on or after 1 July 2005 becomes a PSS defined benefits plan member, if the person made an election during a term or period of employment that included 30 June 2005.
Subclause 3.45 amends paragraph B2.1.1A(d) of the Rules to clarify that a temporary employee who becomes a PSS member after 1 July 2005 becomes a PSS defined benefits plan member if the person made an election that took effect during a term or period of employment that included the date the election was made.
Subclause 3.46 deletes the note after Rule B2.1.1A and inserts a new note that is the same as the previous note except that it takes account of the changes referred to in subclauses 3.42 to 3.44.