News

Public Service Commission enquiry into APS agency workforce trends

The Sydney Sunday Telegraph and the Melbourne Sunday Herald-Sun both carried articles on 23 June under the headlines “Inquiry into PS Super Loophole” and “Exits for a super deal” which understandably have caused a great deal of concern among a number of members.

The articles refer to an inquiry being “ordered … into an apparent pension loophole for senior public servants.” The articles leave the reader with the impression that the inquiry is about the current provision in the CSS whereby CSS members may resign before reaching age 55 and defer their benefit and then take the benefit after age 55 (when their pension is calculated at a different rate to that which would have applied if they had worked until after age 55 and then retired.) This is not the case.

A Management Advisory Sub-Committee on Organisational Renewal, comprising ten agency heads, is examining the challenges facing public service agencies in building organizational capabilities by APS agencies against the background of changing workforce trends. As can be seen from the terms of reference for the Review, there is only indirect reference to the CSS deferred benefit provisions.

The CSS Board

Some members have asked whether the CSS Board will be making a submission to the inquiry. As can be seen from the Q&A No 8 below, there will not be an invitation to the public to make submissions. The Board views this inquiry as one which is about future organizational capability and not superannuation.

Information about the Review

The following information and Frequently Asked Questions (and answers) has been provided by the Department of Finance and Administration.

Steve Gibbs
Chief Executive Officer
PSS & CSS Boards
8 July 2002

Public Service Commission enquiry into APS agency workforce trends

Background

The Sunday Herald of 23 June included an article "Inquiry on PS super loophole". The three main issues from the article are:

• the benefits that can be received by members of the CSS if they resign before age 55, leave their member contributions in the CSS Fund and defer payment of a benefit until age 55 or later;
• CSS members resigning to take advantage of this benefit and then being virtually immediately re-employed in their same job as consultants; and
• examination of the issue by a sub-committee of the Public Service Management Advisory Committee.

Subsequently, there have been other press articles and a CPSU Bulletin issued on 27 June, with a similar focus.

The CSS provides a higher retirement pension for some members if they resign before age 55 and preserve their benefits rather than continue working until after age 55 and receive normal retirement benefits.

This arises because of the different methods of calculation of the alternative pension benefits

• the CSS pension provided when a member retires (a standard pension) is based on their years of service and their final salary; and
• the pension payable when a member resigns before they are at their retirement age and subsequently takes a pension when they do retire (a preserved pension) is based on a multiple of their basic member contributions, accumulated with interest.

Not all CSS members are advantaged by resigning before age 55.

Where a CSS member does have a preserved pension entitlement, payable at age 55, that is higher than the standard pension at that age, it is usually because they are longer-serving members and/or there has been a period of high interest earnings on their member contributions compared to their salary growth, especially in the later years of membership. This situation is becoming more common because of the older age profile of the CSS and the relatively high CSS Fund interest rates in recent times.

This form of CSS benefit has been an integral part of the CSS for over 20 years. Any removal or reduction of this benefit would require legislative change.

It is understood that there has been an increasing trend for CSS members to resign before age 55 years to avail themselves of the CSS deferred benefit and then seek re-employment within the public service. To avoid reactivating their CSS membership these persons often seek re-employment as a consultant or contractor.

A Management Advisory Committee chaired by Mr Max Moore-Wilton advises the Government on the management of the APS. A Management Advisory Sub-Committee (consisting of 10 Agency Heads) on Organisational Renewal was established in 2001 to consider the challenges facing public service agencies in building organisational capabilities. Phase 2 of the project commenced in February 2002 and is focusing on workforce trends, including the ageing workforce. The impact of superannuation such as the CSS deferred benefit is one of the issues being examined in Phase 2.

Frequently Asked Questions

CSS BENEFITS FOR MEMBERS RESIGNING JUST BEFORE 55

A Management Advisory Sub-Committee on Organisational Renewal, comprising ten Agency Heads, is examining the challenges facing public service agencies in building organisational capabilities of APS agencies against the background of changing workforce trends.

Research being undertaken by the Sub-Committee includes the likely employment and retirement patterns of mature age workers in the APS. One aspect of this is the possible imminent departure of increasing numbers of CSS members who are approaching age 55, to better understand the demographics and to consider appropriate strategies by agencies to reduce the loss of skills and knowledge. The project is also looking at the career intentions and patterns of graduate recruits and strategies for their development and retention.

The Sub-Committee report is expected to be completed early in 2003.

Q1 Is it true that CSS members can resign before age 55 and receive a greater pension after age 55 than if they retired after 55?

Some, but not all, CSS members would be eligible for a higher retirement income by resigning and subsequently taking a pension that is based on a multiple of their member contributions, rather than retiring and taking one based on their length of service and final salary.

Q2 Is an enquiry into the benefit being conducted?

There is no enquiry that is solely examining CSS benefits. A Management Advisory Sub-Committee on Organisational Renewal, comprising ten Agency Heads, is examining the challenges facing public service agencies in building organisational capabilities of APS agencies against the background of changing workforce trends.

Q3 Who initiated the review?

The review was initiated by the Management Advisory Committee, which advises the Government on the management of the APS and is chaired by Mr Max Moore-Wilton. The review is being conducted by the Management Advisory Sub-Committee on Organisational Renewal, which was established in 2001.

Q4 Who is conducting the review?

A Management Advisory Sub-Committee on Organisational Renewal, comprising ten Agency Heads, is examining the challenges facing public service agencies in building organisational capabilities by APS agencies against the background of changing workforce trends.

Q5 What is the review about and what superannuation issues is it considering?

The Sub-Committee is reviewing the challenges facing public service agencies in building organisational capabilities by APS agencies against the background of changing workforce trends. This will cover research into the likely employment /retirement patterns of mature age workers in the APS, including the possible imminent departure of increasing numbers of CSS members who are approaching age 55.

Q6 What are the terms of reference for the review?

The Sub-Committee’s terms of reference are:

Focus. To understand and meet the challenge of building organisational capability. The hypotheses to be tested are that the APS is facing:

• the imminent departure of increasing numbers of staff with an incentive to retire prior to the age of 55, which may affect corporate knowledge; and
• a move from a predominantly career Service to a labour market increasingly interested in APS employment of five to ten years within a broader career.

(1) Undertake quantitative and qualitative research to determine:

• the rate of overall ageing of the APS workforce and whether its impact is significant at particular levels or in particular career streams;
• career expectations of the “baby boomer generation” identifying intentions to retire at or near 55 and post-retirement options;
• career expectations of newer members of the APS and how this might differ from the past;
• agency views of skills gaps in their current workforce, particularly having regard to expected future requirements.

(2) Addressing the implications of the analysis, above, for strategic workforce
planning, including the identification of:

• retention and retirement strategies for those approaching age 55;
• recruitment strategies including graduate recruitment strategies;
• strategies to identify and develop potential replacement staff;
• knowledge management/transfer programs;
• skills retention and transfer programs

Q7 What is the time frame for completing the review?

The project report is expected to be completed early in 2003.

Q8 How can individuals make submissions to the review?

There will not be an invitation to the public to make submissions to the project because the Sub-Committee is charged with the task of providing a report largely focussed on statistical and analytical material covering the challenges of building organisational capabilities in the APS.

Q9 What conclusions has the review reached so far?

The project is still “work in progress”. It is too early to advise of any results from the work of the Sub-Committee.

Q10 When will any amending legislation come before Parliament?

The Government has not given any consideration to this matter and no legislation on this matter is scheduled for consideration.

Q11 Can the Government change the CSS to remove the higher benefit?

No changes can be made to the CSS to remove the higher benefit without changes to legislation being passed by the Parliament.