Overview

Overview

Table 4: Overview of the schemes
CSS PSS PSSap
Established The CSS was established on 1 July 1976 by the Superannuation Act 1976 The PSS was established on 1 July 1990 by the Superannuation Act 1990 The PSSap was established on 1 July 2005 by the Superannuation Act 2005
Type Combination of accumulation and defined benefit plans Defined benefit plan Accumulation plan
Funds under management as at 30 June 2009 $4 715 million+ $9 971 million+ $1 240 million+
Members* as at 30 June 2009 146 277 253 394 85 202
Employer agencies as at 30 June 2009 236 236 169

*Includes: contributing, preserved, deferred and pension members.

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Description of the schemes

CSS

The CSS is a hybrid superannuation scheme, with benefits generally being made up of two components:
  1. A member-financed component This benefit is based on the contributions paid by the member into the fund plus fund earnings.
  2. An employer-financed component, which includes two parts: The first part, which in most circumstances is paid as a non-commutable indexed pension out of consolidated revenue, is a defined amount. The amount payable depends on the reason for exit and has regard to several factors including final salary, age and length of contributory membership. The second part of the employer component is the employer productivity superannuation contribution, which comprises employer contributions and fund earnings.

The CSS closed to new members on 30 June 1990.

PSS

The PSS is a defined benefit superannuation scheme. For contributing members, final benefits are calculated as a multiple of final average salary and an accrued benefit multiple (ABM). A member’s ABM depends on the rate at which contributions are made to the PSS and the length of membership. Members may contribute between 0% and 10% of salary. The employer contribution rate varies with the member contribution rate, subject to a cap in any ten years of total membership.

For preserved benefit members, investment performance has a more direct impact on their final benefit. Any member and productivity components will grow with the performance of the fund, while the employer component moves in line with CPI.

Retirement benefits can be paid as lump sums with the option to exchange the lump sum (or part of it) for an indexed pension. The benefits are generally made up of two components:

  1. A member-financed component This part comprises the contributions paid by the member into the fund plus fund earnings.
  2. An employer-financed component, which includes two parts: The first part comprises the employer productivity superannuation contribution paid by the employer into the fund plus fund earnings. The second part of the employer component is the ‘benefit balance’, which is determined at the time the member exits from the PSS. The amount is the balance after the member and productivity components are deducted from the (defined) total lump sum benefit.

The PSS closed to new members on 30 June 2005.

PSSap

The PSSap is an accumulation plan. This means members and their employers pay money into the fund and ARIA credits investment earnings (positive or negative) to the account after deducting fees, taxes and charges.

Employers are required to make a 15.4% p.a. contribution to the PSSap on behalf of each contributing member.

Additionally, members can make before-tax (salary sacrifice) and after-tax (personal) contributions to the PSSap. The retirement benefit is a lump sum amount and generally consists of the following components:

Table 5: PSSap retirement benefit components
Employer contributions
+ Any member contributions (before or after tax)
+ Any super co-contributions and transfers from other funds
+ Investment earnings
- Fees and charges
- Insurance premiums if applicable
- Taxes
= Retirement benefit

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SIS compliance

The CSS, PSS and PSSap are complying funds under the Superannuation Industry (Supervision) Act 1993 and accordingly continue to be eligible to have tax payable on their net income assessed at the concessional rate of 15%.

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Actuarial review

The most recent actuarial review of the CSS and PSS was completed by Mercer (Australia) Pty Ltd during 2008/09. The results were included in the PSS and CSS Long Term Cost Report 2008 tabled in Parliament on 25 May 2009.

The PSSap is an accumulation plan and as such the cost to the government is limited to the contributions made by Australian Government employers and no actuarial review is required.

The results of the 2008 actuarial review and the previous two reviews are summarised below.

Table 6: Results of actuarial reviews
30 June 2008 30 June 2005 30 June 2002
CSS
PSS
CSS
PSS
CSS
PSS
Net assets
$6.1b
$11.3b
$6.0b
$7.6b
$5.3b
$4.5b
Unfunded liability
$59.2b
$20.9b
$50.6b
$13.8b
$49.3b
$9.1b
Notional Commonwealth employer contribution rate (including 3% productivity contribution) as a percentage of salaries
21.4%
16.3%
28.2%
15.6%
28.3%
15.4%

The notional employer contribution rates are the employer contribution rates necessary to ensure that employer financed benefits payable from the CSS and PSS would remain fully funded in three years time, if they were fully funded at the time of the actuarial review.

The Australian Government’s outlay on the CSS and PSS in any year is equal to the total benefit paid to exiting members in that year, less the accumulated balance of member and productivity contributions of those members plus actual productivity superannuation contributions made by the Australian Government to the funds.

The 2008 review provides an actuarial projection of the Australian Government’s estimated costs for the CSS and PSS over 40 years to 30 June 2048 (adjusted to 2008 dollars using a discount rate of 6%). Table 7 shows the projections for the first three years, to 30 June 2011.

Table 7: Actuarial projections
Year ending 30 June Estimated Australian Government costs
PSS
CSS
2009
$506m
$3 059m
2010
$521m
$2 969m
2011
$528m
$2 909m

Further projections of estimated costs are included in the PSS and CSS Long Term Cost Report 2008.

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