If you're new here, chances are you've heard about, or become aware of, issues with your super and want to understand what those issues actually are and what can be done to fix them.
Before we look at the individual problems, it's important to acknowledge one fundamental point: the ESSS scheme we have today was designed for a very different time.
Many of the problems we face today are the result of changing community standards, changes to the superannuation system and, importantly, the changing demographics of emergency service workers.
A little bit of history
ESSS was introduced in 1986, with bipartisan support from both major political parties, to recognise and reward emergency service workers for the sacrifices they make in serving the Victorian community.
It was intentionally designed to be generous and to provide members with the ability to retire early.
The scheme was built around an emergency services career being a 30-year career for life. The concept was relatively simple: someone would start their career at 20 years old, work for 30 years and retire at 50.
At the time, there was also no compulsory superannuation system in Australia. The Superannuation Guarantee wouldn't be introduced until 1992, initially at just 3%.
The world has changed considerably since then.
There have been attempts to modernise ESSS, most notably in 2005 and 2019, but the changes haven't kept pace with the scale of the changes occurring outside the scheme. The compulsory employer superannuation contribution rate, for example, has increased from 3% to 12%.
At the same time, the demographics of emergency service workers have changed significantly. The fund's own actuarial report from PwC indicates that 30% of emergency service workers are over 50. Around 30% of members exiting the fund are resigning before age 50.
This creates a kind of dumbbell effect. A significant proportion of members are leaving before completing the expected 30-year career, while another significant proportion are continuing to work beyond 50, an age at which some of the scheme's critical insurance benefits begin to reduce or cease.
Very few members now fit the original "Goldilocks" scenario the scheme was designed around: 30 years of service, reaching 50 and immediately retiring.
So what are the problems?
The fundamental structure of the defined benefit scheme has remained remarkably similar to what was designed in the 1980s.
The changes made in 2005 and 2019 were worthwhile and introduced some genuine improvements, but they were relatively modest compared with the broader issues affecting the scheme today. To put it simply, the world around the scheme has changed dramatically, while the scheme itself hasn't kept pace.
Over the coming weeks, we're going to take a deep dive into what we believe are the eight core issues affecting ESSS and, importantly, what we believe could be done to address them.
1. The frozen multiple
Our defined benefit multiple has effectively remained frozen since the scheme was established. Meanwhile, compulsory superannuation contributions for Australian workers have increased substantially, from 3% to 12%.
The result is that other Australian workers have benefited from those increases, while the value of our DB multiple hasn't increased in the same way.
2. The age-55 insurance cliff
The scheme's death and disability insurance benefits reduce as members get older and ultimately cease when members reach 55.
This creates a significant gap for members who continue working beyond 50, particularly given that many emergency service workers are now working well beyond the age the scheme was originally designed around.
3. The under-50 resignation penalty
Members who leave the scheme before age 50 can lose a significant portion of the benefits they would have received had they remained in the scheme.
Depending on their circumstances, this can effectively mean losing up to five years of full superannuation entitlements.
4. The safety-net trap
The safety-net calculation is intended to protect members where their defined benefit multiple hasn't delivered the expected outcome.
However, we believe there are significant shortcomings in the way this safety net operates, which can leave members worse off than they might reasonably expect.
5. Hidden fees
The ESSS defined benefit scheme has been promoted as having "no fees".
However, members are charged a 0.6% fee on their annual salary through the scheme's safety-net formula. On a $120,000 salary, that's $720 per year.
6. Under-reported salary
There is evidence that some employers have, at various times, under-reported salary information to ESSS.
Where this occurs, it can potentially have a significant impact on a member's superannuation entitlement.
7. The secret formula
The underlying formula used to determine aspects of the safety-net calculation has been altered multiple times since the 1990s.
Yet members aren't provided with the formula or sufficient information to independently reproduce the calculation used to determine their entitlement. If we're being asked to trust the calculation, members should be able to understand and verify how it was reached.
8. The transparency blackout
Perhaps most importantly, members are being denied meaningful access to the data and calculations used to determine their own superannuation entitlement.
We've collected evidence that suggests there may be systemic issues with the underlying data.
If members can't access the information used to calculate their retirement benefits, they can't independently verify whether their balance is correct. And that's a fundamental problem.
Where this series is going
Over the coming weeks, we'll unpack each of these issues in detail: what the problem is, how it affects members, the evidence behind it, and what we believe can be done to fix it.
The purpose isn't to attack ESSS or individuals.
The purpose is to understand what we've got, identify where it isn't working, and demand a scheme that properly recognises and rewards the sacrifice emergency service workers make throughout their careers.
