Many teachers have raised concerns with their local Members about the effect of new Commonwealth superannuation preservation rules on invalidity benefits in the SSS and SASS. The following information is intended to assist Members provide accurate advice to their constituents in relation to this issue.

• Superannuation is regulated by the Commonwealth Government. While NSW public sector superannuation schemes have been exempted from strictly complying with every aspect of the superannuation legislation, the NSW Government is a signatory to a Heads of Government Agreement on superannuation, and has undertaken to ensure that the schemes conform with the principles of the Commonwealth's retirement incomes policy. Preservation of superannuation is specifically included in the Agreement.
• The new Commonwealth preservation rules, effective 1 July 1999, only allow the “preserved” portion of a benefit to be paid when a condition of release is satisfied, eg the member attains the “preservation” age (55-60, depending on year of birth), the member dies, or becomes permanently incapacitated.
• The “cashable” amount of a benefit is the amount that does not need to be preserved. Under the Commonwealth provisions, it is generally equal to the retrenchment benefit which would have been paid to members had they exited the scheme on 30 June 1999, less what had to be preserved under the pre-1 July 1999 rules. The “cashable” amount does not increase in the future.

State Superannuation Scheme

• Invalidity benefits in the SSS may not meet the definition of permanent incapacity in the Commonwealth legislation because they may be paid if members are unable to perform their current position rather than any reasonable position. If members do not meet the stricter Commonwealth definition of incapacity, some of the benefit must be preserved until a condition of release is satisfied. However, if the invalidity pension is paid on the basis that it may never be converted to a lump sum, there are no Commonwealth payment restrictions.
• SSS members who became medically incapacitated were significantly disadvantaged by the calculation for determining the “cashable” amount, because the value of an SSS invalidity benefit is greater than the value of an SSS retrenchment benefit. This meant that, where preservation was required, the amount of the invalidity benefit above the level of the (30 June 1999) retrenchment benefit had to be preserved.
• Following representations by the NSW Government and the scheme Trustee, the Commonwealth Government has agreed to allow the SSS invalidity benefit to be dealt with differently. The Trustee Board voted in favour of this course of action on 6 September 1999. The “cashable” amount of an SSS invalidity benefit will now be based on the value of the invalidity benefit as at 30 June 1999 rather than on the value of the retrenchment benefit. This means that the grandfathering principles that apply to other superannuation benefits will also apply to SSS invalidity benefits.

State Authorities Superannuation Scheme

• Members who are eligible for the total and permanent invalidity benefit in SASS meet the definition of permanent incapacity in the Commonwealth legislation. No part of any total and permanent invalidity benefit paid from SASS therefore needs to be preserved.
• The partial and permanent invalidity benefit in SASS is payable if members are unable to perform the duties of their position. This benefit does not, therefore, satisfy the Commonwealth definition of permanent incapacity, and restrictions may apply to the amount of any benefit which could be paid to members immediately.
• It is likely, however, that in the coming years only a small proportion of any partial and permanent invalidity benefit in SASS would need to be preserved. This is because the new rules generally allows members who do not satisfy one of the conditions of release to be paid an amount equal to the benefit they would have received had they terminated employment as at 30 June 1999.

SSS and SASS members may obtain specific information about the effects of the new preservation rules on their particular entitlements from the Superannuation Administration Corporation advisory service telephone number (02) 9238 5555 or toll free 1800 451112.

Any enquiries regarding this matter may be directed to Ms Robyn Parnell on (02) 9228 5247 or email address [email protected].

C. Gellatly
Director-General