This paper discusses the issues which are relevant to the financing of superannuation benefits provided by the Commonwealth of Australia to its employees. There are four main schemes for Commonwealth employees which are referred to in this report:
- Commonwealth Superannuation Scheme (CSS)
- Public Sector Superannuation Scheme (PSS)
- Defence Force Retirement and Death Benefits Scheme (DFRDB)
- Military Superannuation and Benefits Scheme (MSBS)
The CSS and PSS are the schemes for civilian employees; the CSS was closed to new members on 1 July 1990 when the PSS was established and existing CSS contributors were given the choice of transferring to the new scheme or remaining as members of the closed CSS. The DFRDB and MSBS are the schemes for Defence Force personnel; the DFRDB was closed to new members on 1 October 1991 when the MSBS was established and existing DFRDB contributors were given the choice of transferring to the new scheme or remaining as members of the closed DFRDB.
While there are a number of other schemes for Commonwealth employees, they are of little financial significance relative to the four main schemes. In addition a number of Government Business Enterprises (GBEs) have established superannuation schemes for their employees.
The Commonwealth superannuation schemes are financed in a different way from private sector schemes in Australia. From time to time concerns have been expressed as to the soundness of the financing of the Commonwealth schemes and it has been suggested that it would be preferable if the Commonwealth superannuation schemes were funded in a similar way to private sector schemes. This paper analyses these arguments and concludes that the current financing arrangements are sound, provided there is appropriate reporting and monitoring of the costs of the schemes in the long term. It recommends an appropriate reporting structure necessary to ensure that the schemes are soundly based.
The paper concentrates on defined benefit schemes, because this is the general structure of the Commonwealth schemes. However, some of the issues relating to accumulation funds are discussed also.