Our RBF Superannuation Pension

1. Who really does pay our RBF Superannuation pension?

This information was previously published in theMay 2009 Super-News (Tony Haig Ed.)

From time to time in the press one reads of the enormous superannuation debt that is carried by the State Government. This so called ‘unfunded liability’ is the present value of all the superannuation payments that will be made in future years. This results in very large numbers and seems intended to frighten the public at large. And yet this liability is of the Governments own making. The more appropriate method is to look at the annual payment, as a budget item, which it is, and then as a percentage of the total budget. This is a dramatically lower and more realistic figure.

Our superannuation pension is also often represented as if it is a gift from a generous government to its previous staff, following their retirement. Let us consider if it is indeed a `generous gift' rather than `a return on investment'. Each of us who were employed in either the State Public Service or in one of the semi-governmental authorities (Hydro., Forestry etc.), were required to pay 5.5% of our salary throughout our working lives of up to 40 years. These compulsory, personal contributions were paid into the RBF which did not invest within a dedicated, taxed superannuation fund, but partly in Tasmanian State infrastructure. Over the last 40 years or so, these funds have appreciated significantly in value.

The employer was also required to set aside an amount equivalent to about 13% of each person's salary as the employer's contribution to the future superannuation payout. Again however, as for example the old Hydro-Electric Commission, contributions were not paid into a dedicated taxed superannuation fund, instead used by the then H.E.C. to fund various power station development projects around our State. Employer superannuation contributions were therefore used to develop the State for the benefit of all Tasmanians. A quick look at the H.E.C annual reports will show these funds as `Provision for Superannuation'. It may be of interest to note that in the year 1997 this figure was $M247 and by 2007 had grown to $M407. This is superannuation money belonging to Hydro employees following their retirement, which normally would have been invested in a dedicated taxed superannuation fund. Instead these superannuation moneys have been used to benefit State development.

The State Government made a deliberate decision to pay its future superannuation liabilities, as these fell due, from Consolidated Revenue, that is by way of a budget item. This is because the Government decided to lock superannuation contributions into State infrastructure rather than in a dedicated, taxed superannuation fund.

Let us consider the return government and semi-government authorities’ superannuation contributions, paid for periods up to 40 years, might have made had they been invested at normal commercial rates of return. As an approximation, each $1000 invested in 1961 would, with compound interest, be worth in excess of $60,000 in 2009. A person on a salary of $3,000 in 1961 would have paid $165 and the employer earmarked $390 in contributions, the total being $555. With compound interest this would have grown to a 2009 value of $33,300. This is the 2009 value of the employee and employer combined contributions for only one year in a career of up to 40 years. For the remaining 39 years, individual salaries increased due to increased responsibility and also inflation, however the term for the compound interest decreases for each subsequent year. If as a very rough estimate we simply multiply the $33,000 by say 30 we get a present value of approximately $1M.

This illustrates that the superannuation payments are not a generous gift from the taxpayers but a return on employer and employee contributions invested over a large number of years to develop our State for the benefit of all Tasmanians. In Tasmania, it was the State Government which decided to use the superannuation contributions for State development (i.e. creating an unfunded superannuation liability) rather than create a separate superannuation fund with contributions on which Federal contributions tax would have been paid, and invested in the general market place (ie. creating a fully funded superannuation liability ). Victoria and New South Wales some years ago decided to fully fund their superannuation liability. Tasmania has not contemplated this action.

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2. General Government Superannuation Liability, August 2012

TASS has received permission from Treasury to post one of their occasional papers, "General Government Superannuation Liability, August 2012", which can be downloaded as a PDF here.

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3. Security and Regulation of the RBF Contributory Scheme Pension

Originally published in Super News in March 2009

The following is a summary of a meeting with RBF requested by TASS and attended by executive members, Rob. van Schie, Tony Robinson and Brian Richardson.

The Life Pension

Public sector employees who were employed prior to 15 May 1999 were, or still are, in a Contributory Scheme, which is a defined benefit scheme. Benefits are based on a formula which takes into account salary, length of contributory service and contribution rates. The Contributory Scheme was closed to new employees from 15 May 1999. Superannuants who were in a Contributory Scheme receive a Life Pension.

This Life Pension is a legislated obligation of the RBF ("guaranteed by the Government and the RBF" according to the RBF website) and is indexed by the Consumer Price Index twice per year.

The Life Pension is made up of a taxed component managed by the RBF, which represents Contributions and their investment returns, plus an untaxed component which is provided to the RBF by the Government from consolidated revenue, and from semi government agencies such as the Hydro and Forestry Tasmania.

The untaxed/taxed proportion of the Fund is determined by the Actuary based on the contributions flowing into the fund and their investment returns. If there is a significant and sustained decrease in contributions and/or their investment returns, the untaxed/taxed ratio would increase, i.e. the Government's liability would increase. This is how the Government's guarantee works. It is therefore in the interest of the Government that the RBF invests its funds wisely and responsibly.

Cash

The Tasmanian Government's investment arm TASCORP is one of the several investment managers which the RBF contracts to manage its funds, in this case its pure cash fund. Some of the other managers also have investments in cash but only as a component of their overall fund.

TASCORP charges no management fee: while it guarantees the basic bank bill rate any premium earned above this is retained.

The RBF will transfer funds to and from TASCORP to meet its cash flow needs. All liabilities of TASCORP are guaranteed by the State through the operation of Section 15 of the Tasmanian Public Finance Corporation Act 1985.

Australian Prudential Regulation Authority (APRA)

The APRA is the prudential regulator of the Australian financial services industry. It is funded largely by the industries that it supervises. It is responsible for regulating bodies in the financial sector in accordance with the laws of the Commonwealth, ie promoting financial stability in Australia and
protecting the interests of depositors, insurance policy holders and superannuation fund members.
It was established in 1998, but the Government has only recently agreed for the RBF to be supervised by APRA.

Superannuation Industry (Supervision) Act 1993 (SIS)

The SIS Act 1993 was a major initiative of the Keating Labor Government to regulate superannuation schemes throughout the country. The Commonwealth Government proposed, and all State and Territory Governments supported, an exemption from the provisions of the Act for certain public sector superannuation schemes. This exemption recognises the special circumstances that apply to public sector schemes. Part 2 of schedule IAA of the SIS Regulations 1994 specifies those schemes that are Exempt Public Sector Superannuation Schemes (EPSSS) for the purposes of the SIS Act.

The Tasmanian Schemes that are classified as an EPSSS are those established under the following legislation

Governor of Tasmania Act 1992
Judges' Contributory Pension Act 1968
Solicitor-General Act 1983
Retirement Benefits Act 1993

The Parliamentary Superannuation Act 1973 and the Parliamentary Retirement Benefits Act 1985 are also listed as EPSSS's in the SIS Act. These pieces of legislation were repealed on 31 December 2002 and since 1 January 2003 the PSF and the PRBF have been sub funds of the RBF. It is expected that the Commonwealth Government will amend the schedule at some time in the future to reflect the revised legislative reference for these schemes. Even though the above schemes are listed as EPSSS's all State Governments have signed a Heads of Government Agreement to comply with the principles of the SIS Act.

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4. Who is the surviving partner of an RBF member?

This information was previously published in theMay 2009 Super-News (Tony Haig Ed.)

Is there a surviving partner?

When an RBF member dies, RBF is required by legislation to carefully consider whether the member has a surviving partner who may be eligible to receive any benefit arising from the member's death. Provided a member has not already elected for their benefit to be paid directly to their estate, RBF will try and identify a surviving partner.

An RBF member includes current and past employees of the State Government, those receiving RBF Life Pensions and/or RBF Allocated Pensions.

A surviving partner is the spouse of an RBF member who was either:

• living with the RBF member on a genuine domestic basis at the time of the member's death; and/or
• was receiving significant financial support from the member.

The definition of "spouse" includes a person with whom an RBF member is in a significant relationship, within the meaning of the Relationships Act 2003. In general terms, this includes legally married couples, de facto and same sex relationships or a registered carer under the Act.

How is the surviving partner identified?

RBF will request that the surviving partner provide some information to assist in verifying their identity. The requested information will need to be accompanied by a sworn Statutory Declaration stating:

All pension payments will cease on the death of a member and no further payments can be made until the surviving partner has been verified. This includes RBF Life Pension, RBF Allocated Pension, Interim Invalidity Pension and Temporary Incapacity Pension. (Note surviving partner needs to have/arrange access to sufficient funds until superannuation payment recommences)

RBF will request that the surviving partner provide some information to assist in verifying their identity. The requested information will need to be accompanied by a sworn Statutory Declaration stating:

1. Whether they were married to the RBF member at the time of the member's death. Documentary evidence to support this claim can include a certified copy of a marriage certificate (or an extract). Where the surviving partner was not married to the RBF member they would need to describe the nature of the relationship and, where relevant, provide evidence of the registration of the relationship under the Relationships Act 2003;
2. Details of the principal place of residence for both the deceased and themselves and whether they were living together or maintaining separate residences at the time of the member's death.
   Documentary evidence to support this statement can include a certified copy of any of the following which detail the residential address of both the deceased and themselves:
   • A drivers licence;
   • Motor vehicle registration;
   • Council rates notice; or
   • Utilities accounts.
3. Details of significant financial support from the RBF Superannuant
   Documentary evidence of such support may include:
   • details of financial support provided by the deceased to them.
   • Copies of bank statements relating to joint loans or bank accounts; and
   • Documentation in relation to the joint ownership of real estate.

   In addition RBF will require certified copies of the following:

   • Birth certificate or extract of birth for the deceased and the identified person;
   • Death certificate or extract of death for the deceased.

Once the requested documentation has-been received RBF will decide on the person's eligibility to receive a benefit. If the person is confirmed as the surviving partner RBF will provide details of the benefit options available to them.

What if more information is required?

Sometimes the information provided does not satisfy RBF that the person making the application is the member's surviving partner.

Should this occur, the applicant has 21 days in which they can request that the decision be reviewed. If a review is requested the file will be transferred to RBF's Review Officer who will manage the process. The applicant may also provide additional evidence in support of the review.

Once any additional information has been considered, RBF will make a revised decision. The identified person will be advised of the outcome in writing.

Another 21 day period is then provided for the applicant to advise RBF whether the revised decision is acceptable. If the revised decision is not acceptable they will be offered the opportunity to attend a hearing before the RBF Board.

Payment of any death benefit will not be made until the review process has been completed and the surviving partner application has been finalised.

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5. Death Benefit of the Surviving Partner of a RBF Superannuant

This information has been provided by RBF following a request from TASS

Notification of death normally comes from the surviving spouse or relative but RBF has other means to ascertain this. The Board will initially verify the identity of the surviving partner. This procedure is set out in article 5 above.

The Board will then contact the surviving spouse and ask if the widow/widower wishes to take a lump sum or a pension. It will give an estimate of the lump sum, and forms will be supplied to specify the options chosen. If the superannuant was a member of RBF on or before 1 July 1994, and had elected to receive any part of his/her lump sum on retirement as a Life Pension, then the surviving spouse will automatically receive two thirds of the pension the superannuant was receiving at the time of his/her death. However this will not occur if living apart at time of death, or if superannuant was not providing significant financial support. The surviving spouse will have the option of receiving this pension for life, or converting all or part of it to a lump sum within 3 months of superannuant's death.

The RBF will continue to pay the pension until the documentation is returned and is quite happy to discuss all matters with the surviving spouse.

As continuation of the original pension may result in overpayment, this will be corrected once the final documentation has been processed.

The widow/widower will be required to provide RBF with

• An extract or copy of marriage certificate.
• An extract or copy of death certificate.
• An Annuity and Superannuation Pension Declaration form (pink form)

If this form is not signed, taxation deductions from pension payments will be made at the maximum
applicable rate.

If there is no surviving spouse the RBF will write to the Executor of the estate on the above matters.

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6. Superannuation for separated couples

This information has been provided by RBF following a request from TASS

In relation to a person who is divorced, no spouse benefit would be payable. The regulations specifically relate to “widow” or “widower” when talking about a spouse pension. Since divorce legally annuls a marriage, the divorced person is not the ‘widow/widower’ of the deceased person and no benefit is payable.

In a de facto relationship the matter becomes more complicated. The details are based on Regulation 80 of the Retirement Benefits Regulations 1994 which is recommended viewing.

In brief, if a person was ‘living as man and wife with the contributor or pensioner’ (REG 80) at the time of death that person has the same rights as if he or she had been married. This begs the question of ‘how do you prove’ a person has been living as man and wife?? The final decision is a Board decision, the general guidelines are that a person has to prove emotional and financial dependence on the deceased person.

There can be complications if the member or pensioner has a surviving spouse (separated) and a de facto partner, and the separated partner, receiving financial support, makes a claim on the pension.

For those of our members in this situation it could be worthwhile contacting RBF on an individual basis to see if a statutory declaration could be made by the superannuant stating their situation before the superannuant dies. Clearly RBF must be certain that the intention of the Act is carried out correctly.

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