Superannuation (Interest) Regulations (Amendment)

EXPLANATORY STATEMENT

STATUTORY RULES 1982 NO.318
ISSUED BY AUTHORITY OF THE MINISTER FOR FINANCE

SUPERANNUATION ACT 1976 - AMENDMENTS OF THE SUPERANNUATION (INTEREST) REGULATIONS

LEGISLATIVE BASES FOR THE REGULATIONS

The Superannuation Act 1976 (the Act) introduced, from 1 July 1976, a new contributory superannuation scheme for Commonwealth employees to replace the scheme provided under the Superannuation Act 1922. In accordance with section 45 of the Act, each member of the scheme is required to pay fortnightly basic contributions and, in accordance with section 48 of the Act, a member may elect to pay fortnightly supplementary contributions. In accordance with section 53 of the Act, contributions are paid into the Superannuation Fund (the Fund).

Section 168 of the Act provides that the Governor-General may make regulations, not inconsistent with the Act, prescribing matters which the Act requires or permits to be prescribed or which are necessary or convenient to be prescribed for carrying out or giving effect to the Act.

Sub-section 3(1) of the Act defines “accumulated basic contributions” and “accumulated supplementary contributions”, in relation to a person who has ceased to be a contributor, as -

(a) an amount equal to the sum of the relevant contributions paid by the person and the amount of any interest that, in accordance with the regulations, is payable in respect of those contributions; and

(b) in the case of a person who has previously ceased to be a contributor, any amount that, under section 7A of the Act, is to be added to the amount of the person’s accumulated relevant contributions.

Section 7A ensures that, where a contributor’s period of contributory service has not been continuous owing to his having been at some stage an invalidity pensioner or a person to whom deferred benefits were applicable, his accumulated contributions on again ceasing to be a contributor will include the contributions made by him prior to his break in service, together with interest calculated in accordance with the regulations.

Section 145 of the Act provides that, where a contributor was previously a member of a superannuation scheme based on life assurance policies, he may assign them to the Commissioner for Superannuation who will arrange for them to be maintained on behalf of the contributor. In certain circumstances, e.g. on the policies maturing while the person is still a contributor or on the contributor attaining his minimum retiring age, the policies cease to be available to the contributor. In these circumstances, the Commissioner is required, in accordance with sub-sections 145(8) and (9), to pay to the Fund, out of the proceeds of the policies, the amount of the contributor’s share of the surrender va1ue of the po1icies as at the date of cessation of his membership of the previous scheme together with the amount of any interest that, in accordance with the regulations, is payab1e in respect of that amount.

BACKGROUND

The Superannuation (Interest) Regulations (Statutory Rules 1978 No. 253 as amended by Statutory Rules 1980 No. 98, 1981 Nos 17 and 213 and 1982 No. 43) prescribe the rate of interest payable on accumulated basic contributions and accumulated supplementary contributions and interest payable into the Superannuation Fund out of the proceeds on maturity or surrender of life assurance policies for the financial years commencing 1 July 1976, 1 July 1977, 1 July 1978 and 1 July 1979. The Regulations also prescribe the rate of interest to apply from 1 July 1980 in respect of a person who has ceased to be an eligible employee on or after 1 July 1930.

The interest rate of 12.110% included in the new regulations for the financial year 1980/81 is the earning rate of the Fund for that year based on audited accounts of the Fund. The increase in the rate over the rate of 9.6378 prescribed for 1979/80 reflects, in part, the application of new accounting policies adopted by the Superannuation Fund Investment Trust from 1980/81.

Under the regulations, a person who ceases to be an eligible employee is entitled to interest on his basic and supplementary contributions for the period commencing on his first day of interest (in general, the day contributions were first deducted) and ending on the person’s termination day.

Therefore, it is also necessary to prescribe an interest rate to apply to contributors who leave the Fund on or after 1 July 1981 but before interest rates based on audited accounts for the financial year 1981/82 and subsequent years are known. Because the Fund’s actual earning rates since 1 July 1981 have not yet been determined, an interest rate of 11.500% is prescribed for the period from 1 July 1981 based on preliminary figures for financial year 1981/82 and budgetted figures for financial year 1982/83.

These rates replace rates prescribed in Statutory Rules 1981 No. 213 and 1982 No. 43.

CONTENT OF THE REGULATIONS

The regulations contained in the Statutory Rule amend the Superannuation (Interest) Regulations by prescribing the following interest rates for the periods shown:

The new rates apply to contributors under the Act who cease Commonwealth employment on or after the date of gazettal of the regulations. Also the new rates apply to those persons to whom deferred benefits become payable after the date of gazettal of the regulations.

Also the regulations amend the definition of “termination day” in the Superannuation (Interest) Regulations so that the date to which interest is payable is, in general, the later of the contributor’s last day of service or the end of a specified period, depending on the benefit payable, after the Commissioner for Superannuation has determined the contributor’s “accumulated contributions”.