Attached is the Report of the Working Party established out of the 2003 Collective Agreement settlement to consider matters related to Superannuation and the access or otherwise to Total Remuneration Packages.
You will see that, although there was extensive consensus over most issues, overall agreement could not be reached on the Union’s position that until access to TEPs was eliminated, all employees, on a restricted timeframe basis, be permitted access to a TEP.
This recognizes the Union’s position that any agreement must provide fairness and equity between members. The present unfairness and inequity initially arose out of the Fire Service’s decision in 1996 to prescribe an employment package for the then CSTs that included a TEP.
You will see however that apart from this matter, the Union remains strongly committed to an employer subsidized Superannuation Scheme and this position was strongly reinforced after the meetings with the various experts.
Many of the agreed positions are designed to encourage Superannuation Scheme membership:
- Increasing the subsidy back to $1.80 in lieu of the present PCA payment;
- Medical Boarding compensation only paid through the Superannuation Scheme;
- Reducing the vesting scale;
- Looking at reviewing the Medical Boarding compensation to recognize length of service.
The Working Party’s Report identifies the particular difficulties in phasing out the TEP for those groups who currently have access to them.
As well, this was the reason for the Union’s position on a timeframe restricted access to the TEP option for employees who presently do not have this access. There is an inevitable large number of persons who, if they choose, will remain in a system as grand-fathered to a TEP. The maintenance of the principle of the long term integrity of grand-fathering is vital.
Because full agreement could not be met because of the Fire Service’s refusal to agree to the one-off access to a TEP, there is no overall agreement. This was very much a “package deal”. However, it is possible that some of the recommendations can be pursued independently e.g. a reduction in the vesting scale.
Report of the Joint Management/Union
Working Party on Superannuation in the Fire Service
A working party on superannuation in the Fire Service was agreed as part of the Collective Employment Agreement in July 2003.
The Working Party agreed three principles upon which its work would be based, namely that:
- the prime consideration should be the method by which any particular strategy insures that Fire Service personnel make adequate provision for retirement;
- any strategy should lead to consistency and equity of treatment; and
- eligibility for membership of the Superannuation Scheme should be aligned with the government’s policy on retirement savings in the public sector.
The Working Party met with the Office of the Retirement Savings Commission, Treasury Officials, the State Services Commission, the Minister of State Services (Trevor Mallard) and Commission member, Angela Foulkes, who has had a long association with the superannuation industry in New Zealand.
From these meetings, the Working Party concluded that:
- participation in an employer subsidised superannuation scheme has a major positive impact on an individual’s net worth on retirement;
- options to trade-off the employer contribution in cash, as in total remuneration packages, actively discourage participation in superannuation; and
- as a high percentage of the Fire Service’s employees will retire (as opposed to resign) from the organisation, it is in the Fire Service’s best interests to ensure that its employees can do so with a level of financial security.
The Working Party has made the following recommendations on the basis that they will achieve a phasing out of the option to cash-up the employer contribution to superannuation in the medium term. The Chief Executive/National Commander has approved these recommendations in principle:
a) that the existing PCA allowance be replaced by an increase in the employer’s superannuation contribution from $1.52 to $1.80 net. The timing of this change should be determined around a future phasing out of superannuation allowances.
b) that medical boarding benefits be available only through membership of the superannuation scheme;
c) that the existing medical boarding benefit paid through the superannuation scheme be reviewed with the aim of providing a more equitable benefit from the perspective of length of service but within the same overall cost;
d) that the existing vesting scale be reduced to at least the level recommended by the Trustees to the Commission, namely full vesting at 7.5 years. Employees that have had access to a superannuation allowance and have therefore delayed joining the scheme should be able to have their actual employment service credited as superannuation service on joining the scheme. The cost of this change will be included as part of the overall settlement cost of the Collective Employment Agreement in 2006;
e) that the Fire Service Commission adopts a formal policy not to allow employer superannuation contributions to be exchanged for increased salary through superannuation allowances or total remuneration packaging. It is recognised that such a policy shift cannot be applied retrospectively immediately, and will require a gradual phasing in for those employees who already receive an allowance or increased salary;
f) that the Chief Executive proposes a variation to the NZPFU and Chief’s Society in respect of their Collective Employment Agreements that would cease to provide a cash alternative to superannuation for new employees joining the Collectives from a date agreed with the parties;
g) that the Chief Executive announce his intention to phase out the option for existing staff to take cash in lieu of the employer contribution. This intention would be presented as a Fire Service claim in negotiations of the Collective Employment Agreements in 2006. It is proposed that the phasing out of existing entitlements to the cash alternative would be spread over the duration of new Collective Employment Agreements;
h) that the Fire Service cease to offer new Individual Employment Agreements that contain a cash alternative to the employer superannuation contribution, and that any mirror agreements fully reflect any conditions agreed with the unions from 2006; and
i) that the Fire Service encourage the respective unions to join the organisation in actively promoting membership of the Fire Service Superannuation Scheme.
The NZPFU proposed that, until such time as the option to cash-up the employer contribution is eliminated, all employees should have the option of a total remuneration package. The Fire Service did not accept this proposal on the basis that it was not consistent with the agreed medium term objective and would, in the short term, only increase the extent of the problem.
There is, as a result, no agreed recommendation on this matter.
The Fire Service and the Union both accept that implementing some of these recommendations will not be a simple matter and that phasing out enhanced salary for those employees that presently have this condition will require ratification of a change in the Collective Employment Agreement provisions.