Unions NSW SANCS Briefing Note
A preliminary analysis shows that most if not all employees who exit the scheme during this decade will receive a reduction in their benefits. This is because the defined benefit schemes (SSS, SASS and SANCS) are all based on an individuals’ final average salary and any reduction in salary i.e. 2.25% rather than 2.5% will reduce the defined benefit.
If the Bill’s new accumulation account’s earning rate returned at or higher than historical averages (last year the fund earning rate was 17.1%, but in 2009 it was -10.3%) then the accumulation side would out-perform the defined benefit SANCS component, but only over the longer term.
The attached tables demonstrate that a reduction in salaries will result in inferior outcomes for SSS and SASS members who retire or defer prior to 2022.
There were 53,064 contributing members of SASS as at 30 June 2012. This was projected to have fallen to approximately 48,000 by June 2013 and to only 15,000 by 2022. It follows that while 15,000 SASS members may be unaffected or perhaps even benefit from the Bill’s changes over the long term, there will nonetheless be 33,000 SASS members (almost 70%) who will be disadvantaged.
The Bill’s impact is even greater for the roughly 12,000 still-contributing SSS members, almost all of whom are expected to retire over the next decade. Modelling has shown that any long-term benefit from the Bill’s new accumulation account will be more than offset by their reduced in wages, and therefore pensions. It is expected that the Bill will leave almost every SSS member worse off.
The attached tables illustrate how the government’s approach in the SANCS amendment bill will impact on SSS and SASS members.
Table A models the current arrangements, leaving the wages of SASS members and the SANCS legislation both undisturbed.
Table B models the impact of the State Authorities Non-contributory Superannuation Amendment Bill 2013. reducing the 2013 wage increase to 2.27% and placing an additional 0.25% into a separate accumulation account (here called “SANCS II”).
Table C models both the current and proposed arrangements, showing a before and after comparison of a SSS member who retires in 2013 and the impact of the State Authorities Non-contributory Superannuation Amendment Bill 2013 on their benefits.
All three tables assume:
- An employee with an annual wage in 2012 of $75,000 with 30 years’ service and full benefit points (for either SSS or SASS, whichever applies);
- annual wage increases of 2.5% except for Table 2’s 2013 increase, which is set at 2.27%; and
- an additional 0.25% in SANCS be placed into a separate accumulation account (here called “SANCS II”);
- an assumed annual earning rate for the SANCS II account of 7.5% (which is the SASS “Growth” fund’s average return over the 10 years to 30 June 2013).
