Superannuation is lifetime salary

All teachers need to be thinking about improving their superannuation lot.

In the run up to finalising the Federation's next salaries claim it is vital that the union once again looks at the increasing disparities between our members when it comes to their superannuation. This is especially so when one considers superannuation not only as lifetime salary, but also in the context of the ACTU's push for increased employer superannuation payments in the next salaries bargaining round.

Currently, under Federal legislation nine per cent employer contributions go to the post-1992 Superannuation Guarantee compliant funds.

This is simply not enough to retire on -- even at what is considered a modest level of retirement income -- even with 30 years of service. This is not simply a problem for our younger members but for many of our members who were excluded from earlier superannuation schemes. By November Council, when the union is scheduled to finalise its position in relation to the next salaries claim, we also must have a position in relation to superannuation.

The 2003 Annual Conference salaries resolution said that the next award would have to address the inequities in superannuation between our members. August Council, after a significant report, asked Associations to hold meetings to consider some of the superannuation options that the union should pursue on behalf of all members, but in particular those teachers who are in post 1992 schemes, that is those money accumulation schemes covered only by the superannuation guarantee.

Some of the options put forward:

• an additional employer contribution equivalent to two per cent of salary, to be paid into an approved fund identified under the 2004 or successor award
• an employer co-contribution equivalent of up to two per cent salary, based on a matching voluntary employee contribution of up to two per cent, into an approved fund identified under the 2004 or successor award.

In addition, and given the nature of teachers' work, Federation will investigate additional insurance provisions for teachers who are medically retired.

When many of us think about superannuation we tend to think of the old State Super Scheme (SSS). The old scheme provides a pension for life. In the event that the member becomes deceased there is a two thirds pension for a surviving spouse, benefits for dependant children, and in the event of a medical breakdown a pension with reversionary benefits at normal retirement age. It also provides for women members to retire on a full pension at age 55.

SSS was closed off in 1985 by the state government as being too generous and was replaced by a voluntary scheme called SASS (State Authorities Superannuation Scheme). The old scheme is worth about 60 per cent of final salary indexed for consumer price index movements, but it was only available to permanent employees.

Following are the number of accounts in each of the relative schemes in the Department of Education and Training:

• State Super Scheme (SSS): 15,000 members, (that is, active contributing members),
• State Authorities Superannuation Scheme (SASS):13,000 contributors, and
• First State Super (FSS) and other similar schemes: 114,000 contributors.

As you can see, for the majority of our members superannuation does not mean the older defined benefits schemes. Rather, it means the minimal level of superannuation for our members. At the moment the Superannuation Guarantee is limited to nine per cent employer contributions and, while it is possible for our members to contribute via employee contributions, only five per cent of members do make additional contributions.

For most of us, when we were younger we didn't think a great deal about superannuation -- either you had it because you were full time and permanent (and therefore you were automatically in the old State Superannuation Scheme whether you wanted to be or not), or you did not if you were casual, part time or not permanent.

At the time, women were allowed to opt out of the scheme, if they could show that they had a husband who had superannuation, as it was assumed that they would be dependant upon their husband in retirement. Typically many did. Many now find themselves divorced, with broken service, and in the newer schemes facing the prospect of not having enough superannuation to retire on. They will need to work in either a permanent, temporary or casual teaching capacity into their seventies, or rely on the government's old-age pension.

However, the majority of members, most of them women working on a casual part time basis, had no superannuation. With the introduction of universality in superannuation by the ACTU in 1992 we went from having a reasonably good superannuation arrangement for quite a significant number of teachers, and those who had nothing, to a minimum level of superannuation for almost everybody.

We now have an enormous disparity which this union and the union movement needs to address. Some of the decisions we will make in the next salary round could mean literally tens of thousands of dollars difference in our members' lifetime salaries.

It is generally regarded that a minimum of 15 per cent superannuation contribution is needed to provide for an adequate retirement income.

Some unions have been successful in arguing for additional superannuation as part of the bargaining around awards and agreements. For instance, the Construction Forestry Mining and Energy Union has been successful in negotiating, in over 600 of its industrial agreements, superannuation contributions of 12 per cent employer contributions together with three per cent employee contributions.

The National Tertiary Education Union has, through some of its university salaries agreements, achieved 17 per cent superannuation levels with seven per cent coming through employee contributions.

In considering the next salaries round this is not only an issue for younger teachers for the future. There may well be considerable taxation advantages for members in the older funds such as SSS and SASS in taking a portion of any potential salary increases in superannuation rather than having their incomes taxed at increased marginal income tax rates.

Recent polling by the ACTU has shown that 73 per cent of respondents indicated a willingness to make additional contributions if they were matched by employer or government contributions.

In addition there may be taxation advantages for many of our members in salary sacrifice arrangements that the DET allows through 'before-tax' income payments. However, many of our younger members, or members working part time with annual taxable incomes under $58,000, may be eligible for the Government's co-contribution payments. These co-contributions can mean up to 150 per cent of the member's own contributions depending on the individual taxable income.

Later this year First State Super will move from under the control of state legislation to the commonwealth legislative framework -- this will very shortly make First State Super no different to any other industry fund. We will have to make some decisions in relation to this because state legislation won't guarantee the provision of superannuation. Changes will need to be in the form of an award clause provision, even if as a union we do not pursue additional superannuation contributions.

We must begin to look at all the options rather than assume, as we have in the past, that from our first day of teaching to our last, superannuation is something largely looked after by the state government.

This article is based on a speech given by Assistant General Secretary (Communications and Administration) John Dixon to August Council. The general information contained in this article is not to be regarded as financial or personal advice. Members should seek their own independent, expert advice before making any decisions which affect their future.

Additional employer contributions needed

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August 2004 contents