Thousands of State Government employees are set to get a financial boost under the new State Superannuation Act 2000 planned to be proclaimed early next month.
Minister Assisting the Treasurer Graham Kierath said more than 180,000 State Government employees would benefit under the changes to the West State Super Scheme.
Mr Kierath said the legislation - to take effect with the start of the new financial year - would give members greater returns than under current arrangements.
“Under the current system, members receive the Consumer Price Index plus two per cent,” he said.
“That worked out last year to be less than a four per cent return, which is poor when compared to returns in private schemes of 13 and 14 per cent.”
Mr Kierath said the new legislation provided a funding mechanism for the unfunded liability in the West State Super scheme that would help provide members with market rates of return.
He said the move to offering returns that were competitive with the market was vital when introducing changes to the scheme to allow members investment choice.
“If we are going to allow members the choice of staying with West State Super or going to another fund, then we had better make sure that we offer a competitive rate or they will take their money elsewhere,” the Minister said.
“Providing market rate returns to scheme members has been one of the central concerns of employee groups and rightly so.
“If people are to be expected to provide for their future through superannuation, then the State Government should give them every opportunity to realise the highest returns and that is what we have done.”
Mr Kierath said the impediment to the scheme realising market rate returns had been unfunded liability of $536 million - accumulated since its inception in 1992 until 1998, when Government committed to funding all contributions.
He said the liability resulted because previously only about 30 per cent of employer contributions were actually paid to the GESB to invest. Members were paid their full benefits on retirement from Consolidated Revenue.
“The commitment in 1998 to fully fund contributions effectively capped the unfunded liability,” Mr Kierath said.
“Now the new legislation will expand the Government Employees’ Superannuation Board’s borrowing powers to meet the unfunded liability.”
Media contact: Zac Donovan (08) 9213 6400