Bulletin No: 044 Volume: 21 Thursday 12 March 2015
To ALL UFU MEMBERS
Over the last several months, the UFU has been working with technical experts and other emergency services unions to undertake research into members superannuation arrangements, their potential shortcomings and strategies to rectify such.
In particular, in October 2013 the UFU commissioned an independent review of operational staff superannuation. We provide here an update for members as to developments in relation to these matters.
For historical context, newer members may not be aware that your current superannuation scheme was established on 1 January 1987. The Treasurer’s second reading speech in relation to the scheme referred to the following points:
i. Meaningful employee representation
ii. Benefits tailored for employment conditions and practices
iii. Special feature of emergency services employment = arduous duties
iv. Need realistic options for early retirement (up to five years earlier than other public sector employees)
v. Fundamental principle of benefits = member may elect to pay extra contributions to be able to retire between 50 and 60 with maximum retirement benefit
Whilst the scheme as initially established addressed the above requirements, over time the adequacy of the scheme has been brought into question by member enquiry and the independent review commissioned by the UFU.
The scheme initially accorded a high benchmark of superannuation for emergency services employees, however, contemporary developments across relating to the superannuation sector have resulted in a number of enquiries regarding the methodology used to maintain parity with developments in performance and legislation.
Research commissioned by the UFU demonstrates that in some cases accumulation funds outperform defined benefit funds over the course of an employees working life. Members who enjoy long careers appear to be particularly disadvantaged. However, accumulation funds are subject to market forces whereas defined benefit schemes guarantee a fixed figure amount.
One of the changes that warrant investigation is the legislative requirement across all industries where super contributions by the employer move from 9 to 12 percent via superannuation guarantee changes. Our consultants report raised the issue of whether defined benefit funds comply with obligations under the Superannuation Guarantee Act.
Resulting from the deliberations of technical experts, the UFU has formed a preliminary view, based on analysis which may form the basis to advocate for change. Some of the areas identified for further investigation and discussion are as follows:
- Preservation trap – The cap of 30 years of service on the Defined Benefit be reviewed with consideration being given to fire-fighters having their actual years of service applied in the calculation of their Defined Benefit.
- Early age resignation – The penalty applied to resignations prior to reaching the age of 50 be considered for removal as it disadvantages members with the same service periods and who are doing the same work purely on account on their respective ages.
- Default fund and choice of fund – The Defined Benefit be the default fund. Members be given the right to opt out of the Defined Benefit to the Accumulation Fund. This should be available from when members reach their maximum benefit multiple.
- Transition to retirement pension
- Income protection– recent studies regarding occupational illness have highlighted the need for Fire-fighters to have access to adequate income protection.
- Death and disability insurance – The death and insurance benefits be reviewed to see whether they are capital adequate and if not this needs to be addressed.
The UFU has commissioned this research as part of increasing our services to our member in particular given the ever increasing hazardous nature of our occupation, however to achieve change consideration needs to be given to the following-
‘Given members’ superannuation fund operates independently from the employers and contains members from other unions, achieving change in these areas involves a number of different parties, including Government, other unions, the employers and the ESSS Board.’
The UFU has commenced dialogue with the other emergency service unions via the Emergency Services Federation (ESF). The way forward will be for the ESF is to resolve a joint position and claim to increase the benefits to members’ superannuation. Any improvements as a result of the review and discussions will have to be negotiated with Government and other key stakeholders.
The UFU has also put in place a second strategy where as part of enterprise bargaining we have issued a claim to both the CFA and MFB. The claim, in part, is as follows:
- Consideration be given to increase the defined benefit from 8.4% on death or retirement. Please note, the 8.4 multiplier has not changed since the scheme was established in 1987.
- Consideration be given to re-allocating the employer contribution from ESSS defined benefit to the employees accumulation scheme as soon as the employee has reached the maximum defined benefit and continues his/her employment.
- Consideration be given to a increase of benefits for spouses or dependent children.
- Consideration be given to reduction of Taxation implications.
- Consideration be given to repealing the 1994 two year Final Average Salary provision.
- Consideration be given to the implications of changed community standards and the increase in the Superannuation Contribution Guarantee from 9% on July 2013 to 12% on 1 July 2019.
- Consideration be given to a technical fix to an issue concerning members who have reached their maximum benefit multiple and have attained age 65.
- Review of temporary disability pensions rules.
- Consideration be given to the introduction of a transition to retirement pension.
- Review of the implications to members of the scheme who are on parental leave.
- Review of death and disability benefits.
As reported previously, the enterprise bargaining environment is currently changing and the UFU is hopeful that further discussions with the MFB and CFA will resume shortly in relation to these matters. To date, discussions with the employer have been stymied by the previous environment under the regressive Napthine Government.
As can be seen above, considerable research and groundwork has been undertaken and a range of considered initiatives developed. Multiple parties are involved to facilitate the review and any potential changes with respect to ESSS.
The UFU will keep members appraised of development on this important issue.
Strength in Unity
READ OUT AT MUSTER AND PIN ON NOTICE BOARD
Authorised by Peter Marshall, Branch Secretary