EXPLANATORY STATEMENT
FAMILY LAW (SUPERANNUATION) (METHODS AND FACTORS FOR VALUING PARTICULAR SUPERANNUATION INTERESTS) AMENDMENT APPROVAL 2010 (No. 1)
ISSUED BY THE AUTHORITY OF THE ATTORNEY-GENERAL
In this instrument, the Attorney-General, under regulations 38 and 43A of the Family Law (Superannuation) Regulations 2001 (the Regulations) approves in writing, for the purposes of the provisions of the Family Law Act 1975 (the Commonwealth Act) allowing superannuation to be split on relationship breakdown, methods for determining the gross value of superannuation interests in the New South Wales Parliamentary Contributory Superannuation Scheme (the NSW PCS Scheme) established by the Parliamentary Contributory Superannuation Act 1971.
The Attorney-General’s approval of the methods is contained in new Part 10 of Schedule 2 to the Family Law (Superannuation) (Methods and Factors for Valuing Particular Superannuation Interests) Approval 2003 (the Valuation Approval).
In this instrument the Attorney-General also makes an amendment to the method approved on 10 April 2006, for determining the gross value of certain interests held by members of the New South Wales State Authorities Superannuation Scheme and, on 13 September 2007, for interests held by certain members in the New South Wales State Superannuation Scheme.
The gross value is one element in the determination of an amount which is taken to be the value of superannuation in property settlement proceedings under the Commonwealth Act.
Methods are approved for three categories of interests in the NSW PCS Scheme.
First, a method is approved for interests held in the NSW PCS Scheme by members of the Legislative Assembly of New South Wales or the Legislative Council of New South Wales.
The method provides for interpolation between two actuarial valuations of accrued benefits payable to a member of the Legislative Assembly or the Legislative Council in respect of his or her interest in the Scheme at the beginning and end of the financial year in which the valuation date of the interest falls. The gross value of an interest using the method will be provided to separating couples, on behalf of the trustee of the NSW PCS Scheme, in response to a request for valuation information concerning the interest under section 90MZB of the Commonwealth Act.
Second, two methods are approved for interests held in the NSW PCS Scheme by former members of the Legislative Assembly of New South Wales or the Legislative Council of New South Wales who are receiving a pension under the Scheme after earlier having elected to commute part of their pension entitlement to lump sum or where the member has an entitlement to elect to so commute pension entitlement to lump sum. Former members who have so commuted pension entitlement to lump sum, where they were a member of either the Legislative Assembly or the Legislative Council immediately before 1 February 1990 or their pension under the Scheme commenced to be paid before that date, have their pension indexed in accordance with a special indexation rate. The special indexation rate is calculated by reference to the total amount of pension which would have been payable had the former member not elected to commute any of their pension entitlement to lump sum.
The first of the two methods provides a method for valuing interests held by these former members of the Legislative Assembly or the Legislative Council who have elected to commute part of their pension entitlement to lump sum, reflecting the special indexation rate that applies to the pension payable to the former member.
The second of the two methods provides a method for valuing interests held by these former members of the Legislative Assembly or the Legislative Council where they are entitled to commute pension entitlements to lump sum, but have not yet elected to do so. Where a former member has been a member of the Commonwealth Parliament or another State Parliament since being a member of the Legislative Assembly or the Legislative Council, the former member retains a right to commute pension entitlement to lump sum, if they have not previously done so, within the period of three months of the recommencement of their pension, which is suspended while they are a member of the other Parliament. The method assumes that one in two former members will, following the recommencement of their pension, elect to commute the maximum amount that they can commute while still retaining some entitlement to pension.
Third, a further three methods are approved for interests held in the NSW PCS Scheme by former members of the Legislative Assembly of New South Wales or the Legislative Council of New South Wales whose pension entitlements under the Scheme are suspended for the period for which they are a member of the Commonwealth Parliament or another State Parliament.
Each of the three methods values the interest held by such a former member on the assumption that they will remain a member of the Commonwealth Parliament or the other State Parliament for a further 3 years, or if they turn 70 years of age within that further period, until they turn 70 years of age.
The three methods differ depending on:
- whether or not the former member was a member of the Legislative Assembly or the Legislative Council immediately before 1 February 1990 or pension under the Scheme commenced to be paid to them before that date, and
- if they were such a member or pension under the Scheme commenced to be paid before that date, whether or not they are entitled to elect to commute pension entitlements to lump sum.
As mentioned above, pension entitlements of former members who were members of the Legislative Assembly or the Legislative Council before 1 February 1990, or whose pensions under the Scheme commenced to be paid before that date, who have commuted pension entitlements to lump sum, are indexed in accordance with a special indexation rate, calculated by reference to the total amount of pension which would have been payable had the former member not elected to commute any of their pension entitlement to lump sum.
The first of the three methods values interests held by former members of the Legislative Assembly or the Legislative Council, who were not members immediately before 1 February 1990 or to whom pension under the Scheme did not commence to be paid before that date, whose pension entitlements under the Scheme have been suspended while a member of another Parliament, in accordance with how their pension, when it recommences to be paid, will be indexed. On recommencement, pensions payable to these former members are indexed in line with the increase in salary payable to members of the Legislative Assembly or the Legislative Council.
The second of the three methods values interests held by former members of the Legislative Assembly or the Legislative Council who were members immediately before 1 February 1990, or to whom pension under the Scheme commenced to be paid before that date, whose pension entitlements under the Scheme have been suspended while a member of another Parliament, where they have elected to commute pension entitlement to lump sum, in accordance with the special indexation rate by which the former member’s pension, once it recommences to be paid, will be indexed.
The third of the three methods values interests held by former members of the Legislative Assembly or the Legislative Council who were members immediately before 1 February 1990, or to whom pension under the Scheme commenced to be paid before that date, whose pension entitlements under the Scheme have been suspended while a member of another Parliament, where they have an entitlement to elect to commute pension entitlements to lump sum, on the assumption that one in two former members will, following the recommencement of their pension, elect to commute the maximum amount that they can commute while still retaining some entitlement to pension.
The amendment to Part 7 of Schedule 2 to the Valuation Approval corrects an error in the method approved in 2006 for valuing interests held by members with deferred benefits in the New South Wales State Authorities Superannuation Scheme.
The error would affect any member with benefits of that kind seeking to value their interest when it had been split in an earlier Family Law Act property settlement with a former spouse or de facto partner, where that former spouse or partner’s entitlement under the earlier Family Law Act property settlement split had been paid, under amendments to governing rules of the Scheme commencing in December 2008, to the former spouse or partner or rolled over to a superannuation fund for their benefit.
The error has not disadvantaged the rights of members or their former spouses or de facto partners. Pillar Administration, which provides administrative services to the trustee of the New South Wales State Authorities Superannuation Scheme, advise that no requests for family law valuation information have been received from deferred benefit members in the Scheme where the member’s interest has been split in an earlier Family Law Act property settlement and amounts have been paid or rolled over under the December 2008 governing rules amendments.
The amendments to provisions in Part 8 of Schedule 2 to the Valuation Approval relate to methods approved in 2007 for valuing interests in the New South Wales State Superannuation Scheme.
The amendments:
- correct errors in methods approved in 2007 for valuing interests held by members with deferred benefits in the New South Wales State Superannuation Scheme, and
- clarify the application of the method approved in 2007 for valuing interests held by contributing members of the Scheme.
The errors in the methods approved for valuing interest held by deferred benefit members in the New South Wales State Superannuation Scheme would affect any member seeking to value their interest when it had been split in an earlier Family Law Act property settlement with a former spouse or de facto partner, where that former spouse or partner’s entitlement under the earlier Family Law Act property settlement split had, under amendments to governing rules of the Scheme commencing in December 2008, been paid to the former spouse or partner or rolled over to a superannuation fund for their benefit.
The errors have not disadvantaged the rights of members or their former spouses or de facto partners. Pillar Administration, which provides administrative services to the trustee of the New South Wales State Superannuation Scheme, advise that no requests for family law valuation information have been received from deferred benefit members in the Scheme where the member’s interest has been split in an earlier Family Law Act property settlement and amounts have been paid or rolled over under the December 2008 governing rules amendments.
The remaining amendments in relation to the New South Wales State Superannuation Scheme clarify the method for valuing interests held by contributing members of that Scheme when an interest is valued as at 1 July in any particular year, or as at 29 February in any year that is a leap year.
The instrument incorporates by reference:
- the Parliamentary Contributory Superannuation Act 1971 (NSW), which establishes the contributory superannuation scheme for members of the Legislative Assembly of New South Wales and the Legislative Council of New South Wales.
- the Constitution Act 1902 (NSW), which makes provision, amongst other things, in relation to the Legislative Assembly of New South Wales and the Legislative Council of New South Wales, and
- the Parliamentary Electorates and Elections Act 1912 (NSW) which makes provision, amongst other things, in relation to elections for members of the Legislative Assembly of New South Wales and the Legislative Council of New South Wales.
The NSW Parliamentary Contributory Superannuation Act may be viewed at the following website:
http://www.legislation.nsw.gov.au/maintop/view/inforce/act+53+1971+cd+0+N
The NSW Constitution Act may be viewed at the following website:
http://www.legislation.nsw.gov.au/maintop/view/inforce/act+32+1902+cd+0+N
The NSW Parliamentary Electorates and Elections Act may be viewed at the following website:
http://www.legislation.nsw.gov.au/maintop/view/inforce/act+41+1912+cd+0+N
Copies of the Act can also be purchased from Salmat, a print-on-demand and mail order service, located at 2 Military Road, Matraville, NSW 2036. Contact details for Salmat are: Telephone: 1300 656 986, facsimile: 02 9311 1076 and e-mail: bookshop@salmat.com.au.
Consultation on the content of the instrument was undertaken under section 17 of
the Legislative Instruments Act 2003 with the Australian Government Actuary,
the New South Wales Department of Premier and Cabinet and Cumpston Sarjeant, Consulting Actuaries, who were engaged by the New South Wales Department of Premier and Cabinet to advise in relation to the methods that have been approved and Pillar Administration, which provides administrative services to the trustee of the New South Wales Parliamentary Contributory Superannuation Scheme, the New South Wales State Superannuation Scheme and the New South Wales State Authorities Superannuation Scheme.
The consultation occurred by way of exchange of correspondence and discussions between Commonwealth and New South Wales officials.