Uncertainty looms over uni's staff pensions
Last month, the Australian National University joined other university and public sector employers in announcing it would shed a large number of jobs. The ANU will seek 230 volunteers to accept an early retirement package, offering cash inducements of between six and eight months' salary depending on the staff's length of service. These incentives will be paid, subject to Taxation Office approval, not as a tax-free voluntary redundancy pay-out but as an eligible termination payment instead, subject to less generous concessional tax arrangements.
The information released to date does not clarify whether there will be forced redundancies if there are insufficient volunteers. As highlighted in many previous columns, deciding whether to seek a redundancy or early retirement benefit can be very difficult. For example, up to eight months' salary may be entirely inadequate compensation for giving up secure and steady employment. Yet, in other cases, where personal circumstances are different and/or there is the certain prospect of a new job or an intention to retire, the extra payment received on top of all the accrued leave entitlements can be the icing on the cake.
As in the Australian Public Service, accrued superannuation entitlements are an important consideration for any decision facing ANU employees. In this respect, there are two distinct categories of ANU staff.
The first is those now aged in their 50s or older who joined the ANU before 1983 or who transferred from the public service as members of the Commonwealth Superannuation Scheme. These employees are especially fortunate in being CSS members, knowing that they will receive all the benefits promised to them. These benefits take the form of an inflation-indexed lifetime pension with an attached 67 per cent surviving spouse (including same- sex partner) entitlement. As well, the member receives a full return of all their contributions plus interest, and a smaller lump -sum employer productivity benefit. After age 55, CSS members with 30 years' membership can be assured of a replacement pension income of at least 37.5 per cent of their previous income.
The second-largest category of employees is much less fortunate: they are members of UniSuper, which, since 1983, the ANU has forced all new staff to join. Unless they opted to join an accumulation fund within a short time of joining, these employees are members of UniSuper's defined-benefit fund. The pension and lump-sum pay-outs of this fund are less generous than those provided by the CSS, and for UniSuper defined-benefit members there is a serious issue.
The universities do not guarantee the payment of the benefits, including the lifetime pensions promised to them when they joined the fund. If there is inadequate money in the fund, the trustees are empowered, under clause 34 of the trust deed, to reduce both the pension and lump-sum benefits paid to members. This means the only way for members to be certain of receiving their full entitlement is to leave university employment, taking all their benefits as a lump sum. If they opt
to leave money in the defined- benefit fund and take a lifetime indexed pension, there are no guarantees that all the benefits will be paid.
Older ANU employees - aware of the fact that trustees have currently postponed a decision on whether they need to invoke clause 34 - could decide that now is a good time to take all the benefits promised to them. For these people, the ANU's early-retirement package would be a handy bonus and help compensate for leaving university employment sooner than they might otherwise have done. If they stay on in ANU employment, there will be continuing uncertainty about whether they will receive all the benefits promised to them by their defined-benefit fund.