ACT PUBLIC SECTOR

SUPERANNUATION: TRANSITION TO RETIREMENT ARRANGEMENTS

  • HR Directors

PURPOSE

To advise agencies regarding transition to retirement arrangements.

BACKGROUND

In 2005, the Commonwealth introduced legislative changes to superannuation arrangements (called transition to retirement arrangements) that allow certain members of certain superannuation schemes who have reached their preservation age to start receiving their superannuation benefit whilst remaining employed by the same employer. The initiative was introduced as a mature age employment strategy, aimed at keeping older experienced employees in the workforce.

Under transition to retirement arrangements, eligible employees can only be paid in the form of an income stream such as a pension. Any lump sum must be rolled over.

ISSUES

Recent advice from Comsuper has confirmed that in certain limited circumstances current CSS members who work in the ACTPS can cease their contributory membership of the CSS and join another employer sponsored scheme, which activates the transition to retirement arrangements for the CSS scheme.

The full Comsuper advice is attached (Attachment A). Agencies should note that there are only two ways that CSS members can access transition to retirement arrangements without ceasing their employment:

  • The member’s terms and conditions of employment allow them to join another employer sponsored scheme, provided the employer benefits in that scheme exceed the minimum 9% Superannuation Guarantee requirement;

OR

  • The member’s employment conditions change so that they are no longer eligible to contribute to the CSS i.e. members who move to temporary part time or casual employment. These employment types are not covered by the CSS so these members cease CSS membership.

In relation to the first dot point, agencies will be aware that through recent changes to ACTPS superannuation arrangements, employees now have access to superannuation choice of fund and if they contribute personally a minimum of 3% into an approved fund the Territory will provide a further 1% employer contribution, bringing the employer contribution rate to 10%.

Comsuper has confirmed that provision of the further 1% employer contribution means that the employer benefits would exceed the 9% Superannuation Guarantee. This means that the CSS transition to retirement provisions are open to ACTPS members who cease their CSS contributions, join another approved scheme and personally contribute a minimum of 3% of their earnings into a new fund.

The employing agency must advise Comsuper that it has approved an employee participating in a transition to retirement arrangement. A standard form letter has been prepared for this purpose and is attached for agency use (see Attachment B).

Members of other funds may also participate in transition to retirement arrangements, including AGEST members. However, members would need to personally contribute the minimum 3% of their earnings into that scheme to be eligible for the extra 1% employer contribution, which in turn would meet the Superannuation Guarantee employer benefit requirement.

Comsuper has advised that transition to retirement arrangements are currently not available for PSS members.

The Australian Taxation Office has advised that no definitive list exists of the superannuation funds that offer transition to retirement arrangements.

Agencies should advise all staff that transition to retirement arrangements maybe available to officers and employees once they reach preservation age. Staff (other than CSS members) should be advised that they should check with their own fund regarding availability and eligibility.

If transition to retirement is provided by a particularfund, it is recommended that the staff member also seeks appropriate financial advice.

More facts about transition to retirement arrangements can be found at the ATO site:

Should you wish to discuss this advice please contact Peter Gillin on 620 50307.

APPROVAL AUTHORITY

Andrew Kefford

Deputy Director General, Workforce Capability Governance Division

November 2006

Document Name: Superannuation: Transition to Retirement Arrangements

Prepared by: Senior Manager, Workplace Relations, Office of Industrial Relations

Version: Number 1

Feedback to:

Issue Date: November 2006

ATTACHMENT A

TRANSITION TO RETIREMENT - CSS

What is the Australian Government’s transition to retirement initiative?

As part of the Australian Governments initiative to encourage older workers to remain in the workforce, the transition to retirement arrangements allow superannuation scheme members to start receiving their superannuation benefit whilst remaining employed by the same employer, provided they have reached their preservation age and the benefit is paid as a non-commutable pension.

These benefits are, however, only payable if scheme rules allow.

How does transition to retirement apply in the CSS and PSS?

The transition to retirement initiatives cannot be utilised by PSS members and most CSS members because the PSS and CSS scheme rules generally require that a member must cease their employment before a benefit can be paid.

For most members, therefore, the scheme rules prevent them from receiving their benefit whilst remaining in the same employment.

Are there any exceptions?

Yes, there are certain CSS members who can cease their scheme membership without ceasing their employment;

  • Members whose terms and conditions of employment allow them to join another employer sponsored scheme, provided the employer benefits in that scheme exceed the minimum 9% Superannuation Guarantee requirement;

OR

  • Members who change their employment conditions so that they are no longer eligible to contribute to the CSS; ie members who revert to temporary part time or casual employment. These employment types are not covered by the CSS so these members cease CSS membership.

What benefit options are available?

If a member is under 55 at the date they cease their CSS membership, the member can preserve (defer) their benefit and then claim their deferred age

pension benefit from age 55, even though they remain employed by the same employer.

If the member is over 55 at the date membership ceases, the member can immediately claim their normal age retirement pension benefits, even though they remain employed by the same employer.

What’s changed?

Nothing has changed in relation to members ceasing scheme membership without ceasing employment; these provisions have always existed and were mostly used by members to “lock in” the more attractive CSS deferred benefit before age 55 without ceasing employment.

What has changed is when members who cease CSS membership without ceasing employment can claim their CSS benefit.

Before transition to retirement, a person who preserved their benefit when they ceased scheme membership without ceasing employment before age 55 could not claim their preserved (deferred) benefit after age 55 unless they ceased the employment to which their CSS membership related. Their benefit had to remain preserved until the employment ceased.

Now the deferred benefit can be claimed from age 55 regardless.

Before transition to retirement, a person who ceased scheme membership without ceasing employment after age 55 could not claim their age retirement benefit until they ceased the employment to which their CSS membership related. Their benefit had to be postponed until their employment ceased.

Now the age retirement benefit can be claimed as soon as the CSS membership ceases.

In either scenario, however, any lump sum benefit cannot be taken as cash in hand; it must be rolled over.

ATTACHMENT B

ComSuper

PO Box 22

BELCONNEN ACT 2616

Attention: Benefit Payment Section

RE: Mr A Citizen AGS: 12345678

CESSATION OF CSS MEMBERSHIP

TRANSFER TO ANOTHER SCHEME

Please find attached the completed SR2 – CSS form, Cessation of Membership for Mr A Citizen who has elected to cease membership of the CSS and join the <INSERT NAME OF SCHEME>.

The ACT Government has agreed to pay employer contributions that will exceed the minimum Superannuation Guarantee (SG) requirements of 9%.

Yours sincerely

Manager

Human Resources

Directorate