Military Superannuation

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Military Superannuation issues cover DFRB/DFRDB and MSBS and involves six subjects:

  1. Indexation
  2. DFRB/DFRDB Commutation
  3. MSBS MBL Limits
  4. Spouses Reversionary Benefits
  5. Taxation under Better Superannuation
  6. Extension to ADF Reserve Members

Background

 There are three military superannuation schemes:

The Defence Forces Retirement Benefits Act (DFRB) 1948 and applied until 1973 when superceded;

The Defence Force Retirement and Death Benefits Act (DFRDB) 1973 until 1993 when superceded,

Annual Report 2010-2011

The Military Superannuation Benefits Scheme (MSBS)

Annual Report 2010-2011

Defence Force members were/are required compulsorily as a condition of service to contribute 5.5% of their gross (pre-tax) salary to the relevant Fund/Scheme.

After the Whitlam Governments decision in 1974 to unfund the military superannuation Funds, all member contributions previously deposited into a defined funded Management Fund, were transferred into Consolidate Revenue with the Government guaranteeing the defined benefits payments on retirement. These Funds, by the Governments decison, were now defined as unfunded with later unintended tax consequences to the superannuates. The Funds and continuing contributions were not invested by the Government to increase the value of the members superannuation contributions but were used for Government purposes, without any financial benefits accruing to the individual members. In simple terms the Government was using Defence members contributions as another funding source, to invest or to use how the Government decided.

In 1972, a Joint Parliamentary Committee, commonly known as the "Jess Committee" after its Chairman, Mr John Jess, MHR, recommended, in Recommendation No 6 of its Report, "... that retired and invalid pay be expressed as a percentage of final pay and be adjusted annually so that relativity with average weekly earnings is maintained. A means to achieve this would be to maintain relativity of benefits to current pay for the rank held on retirement." Furthermore the Jess Committee recommended that "... The Committee has concluded that the most appropriate method of maintaining the real value of retired pay is to ensure that it maintains relativity with average weekly earnings." The Whitlam Government, and subsequent Governments of all political persuasions, chose not to accept the Jess recommendations. Consequently the DFRDB was indexed against the Consumer Price Index (CPI).

There have been further reviews since of the DFRDB schemes, all of which have recommended that the DFRDB pension should be indexed against the Male Total Average Weekly Earnings (MTAWE) or the CPI, whichever is the greater, to ensure that relativity with current salaries is maintained. Despite these confirmatory recommendations, the Government of the day, still continued to argue that the CPI is the fairest means of indexing these payments.

However, the Australian Bureau of Statistics (ABS) has stated that the CPI is a measure of inflation, NOT a measure of the increase in the cost of living. DFRB and DFRDB superannuants were advised that, as there had been no increase in the CPI during the third quarter of 2007, there would be no increase to their payments. However, the ABS announced, in late July 2007, that petrol prices had risen by 9%, the cost of vegetables had increased by 6%, and rent had increased by 16% in the three months to June 2007, just to mention a few increases in the cost of living.

When a pension is indexed in line with movements in the CPI, it continually causes standards of living to fall behind other community groups – relativity is not maintained. The former Prime Minister, the Honourable John Howard, MP, is reported to have said that this "... would not occur." This "falling behind" is accumulative.

It is interesting to note that, during this same period Government salaries were increased by 6.7% in 2007 and by 7% in 2006. If there had been no increase in the CPI one has to wonder why Parliamentarian salaries were increased by such a large margin. It must be noted that, as represented in the following graph, since December 1989 to December 2009, Parliamentary salaries have increased by 139%, the Old Age Pension has increased by 131% and the poor old Military superannuation has risen by only 70% – equal to the CPI increases.

Super Chart

Over the last ten years, Parliamentary superannuation pensions (pre 2004 Scheme)have risen by 91%, the Age Pension has increased by 95% BUT the CPI (noting that ADF and ex-Commonwealth superannuants have their pension indexed against the CPI) has increased by a meagre 33%.

Since 2009 the Age Pension has been indexed further in line with a wage-based index (27.7% of MTAWE) , the CPI or the Pensioner and Beneficiary Living Cost Index, whichever is the greater. The Age Pension continues to increase at a faster rate than the military superannuation pension, even though the DFRB/DFRDB superannuants were required to contribute 5.5% of their gross (pre-tax) salary to these funds.

Follow the Legislation history here

According to the latest June 2011 figures, the average weekly Military Retirement superannuation pension was LESS than the Henderson Poverty Line:

Average ADF DFRB/DFRDB superannuation pension (weekly for a couple) was $448.25 ($23,309 pa)

Henderson Poverty Line June 2011 (weekly for a couple) was $512.80 ($26,665 pa)

Age Pension September 2011 (weekly for a couple) $519.40  ($27,008 pa - excludes pension supplement if eligible of + $1,555 pa)


Not only that, but Aged Pensioners are eligible to split their superannuation payments for taxation purposes, providing them with a more favourable taxation outcome. This is not available to the Defence superannuants.

Australias ex-servicemen and women and their families coping with rising costs of living are seeking a "Fair Go" in having the current inequitable indexation formula for their superannuation pensions amended to bring them in line with age/service pensions. and receive the same percentage increase.

 


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Mervyn H Harris 26.03.2014 (21:31:22)  
indexation of Superanuation Yes No  

A column appeared in the Townsville Bulletin on 24/03 by Daniel Bateman. A paragraph in this column stated, " Meanwhile, veterans will receive a pension rise of up to $24.20 p/f from March 20, as part of the bi-annual pension increase. Dawson MP George Christensen said the rise would help with increasing costs of living. " This increase will help put money back in the pockets of veterans and their families, and will also have flow-on effects for the local economy" ,he said
The next pension paid after the increase, on payday April 3 will be paid partly at the old rate and partly at the new rate. The new rates of pension will begin from payday April 17". Do we have a problem here? Are they speaking of our Super or the Age Pension ?
Where did $ 24.20 come from ? I have e-mailed both parties attempting to find an answer Mervh

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They are talking about the Service pension a not our superannuation payment. With the FIB approved today the superannuation increase for DFRB/DFRDB will become effective from 1 Jul 2014 with the first payment on the 12 July

 
   
       
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Jack Pettigrew 25.01.2014 (03:19:45)  
still left out Yes No  

as always, MSBS members are being left out.
Do we have to start a discrimination claim if DFRDB and DFRB members win fair indexation while MSBS over 55s are ignored?

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The over 55 exclusion applies to the Government's DFRB/DFRDB pledge. The MSBS is excluded from any pledge for cost reasons: our claim is based on a legal and ethical injustice.

ADSO will not relent in having the DFRB/DFRDB under 55 exclusions removed and MSBS included in our Fair Indexation claims to the Parliament.

 
   
       
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Mervyn H Harris 24.01.2014 (23:11:45)  
Fair indexation Yes No  

I emailed my MP regarding progress on this subject. received the following.

On DFRDB, the course is set. We promised fair indexation would happen and it will. Joe Hockey will deliver his first budget in May and Indexation of DFRDB and DFRB recipients over the age of 55 will change to include MTAWE and PBCLI will commence July 1, 2014. This was our commitment, and we will follow through.

Kind regards

Ewen
Ewen Jones
M e m b e r f o r H e r b e r t

 
   
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Ken Belgrove 05.11.2013 (12:09:19)  
Dfrdb Indexation Yes No  

Just prior to t Federal election I attended a meeting at Beenleigh RSL which was chaired by the Shadow Vet Affairs'Minister, the Hon. Michael Ronaldson. At the meeting he pledged to all attendee's that the first thing he would do if elected to office was to index the DFRDB. Not only did he verbally issue the promise, but he signed a Tony Abbott advertisement brochure proclaiming the pledge. Does anyone have any info if he or his party are acting in a positive fashion to table a motion in the House of Reps.

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The PM has re-affirmed the Coalition's pledge to introduce legislation to provide for the changed DFRB/DFRDB indexation effective from 1 July 2014.

 
   
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Jack Pettigrew 29.08.2013 (23:05:42)  
MSBS too Yes No  

Robert Newton said :

It is interesting to note that successive governments have for 10 years or so claimed that to index the old pensions properly would be unaffordable. Every time the military super goes up or down (due to CPI) we receive a letter advising us of such. Lo and behold we then receive two letters (one to wife) stating that because super has gone up, the DVA service pension(s) will be reduced. The overall net result financially to the government of the day is just about negligible. The same can also be said of the financial result to ourselves. This does not take into account the loss of pension and purchasing power over the ensuing years since the implementation of the DFRB & DFRDB schemes. Unless some form of back-compensation for this loss is proffered. "Oh but we cant afford it as we have just given all politicians another huge pay increase " We will still remain well and truly shafted even if & when indexed properly. It is a national disgrace the way politicians of all persuasions have failed to address this inequity properly.


Dont forget, MSBS is in the same boat as DFRB and DFRDB. This is the only scheme available since late 1991 so the vast majority of serving members (when retiring), as well as many present retirees and disability pensioners, will be affected if it is not fairly indexed.

 
   
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Robert Newton 29.08.2013 (12:54:11)  
DFRB,DFRDB & DVA Service Pension Yes No  

It is interesting to note that successive governments have for 10 years or so claimed that to index the old pensions properly would be unaffordable. Every time the military super goes up or down (due to CPI) we receive a letter advising us of such. Lo and behold we then receive two letters (one to wife) stating that because super has gone up, the DVA service pension(s) will be reduced. The overall net result financially to the government of the day is just about negligible. The same can also be said of the financial result to ourselves. This does not take into account the loss of pension and purchasing power over the ensuing years since the implementation of the DFRB & DFRDB schemes. Unless some form of back-compensation for this loss is proffered. "Oh but we cant afford it as we have just given all politicians another huge pay increase " We will still remain well and truly shafted even if & when indexed properly. It is a national disgrace the way politicians of all persuasions have failed to address this inequity properly.

 
   
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Paul 27.08.2013 (05:47:05)  
wifes pensions Yes No  

Rudd in his first budget did not even know that he had taken benefit entitlements off the servicemens wives, by making them go on the dole instead of the pension he was suppose to save $24 million a year, all labor had to do was wait for a couple of years and all Vietnam Vets would have retired, and phase it in. Apparently the scuttlebut was a labor leftie who had visited and supported Nth Vietnam during the war, was behind this, he couldnt get at the serviceman and maybe the wives were an easier target. It would have cost more than it saved.

 
   
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Brian Morris 08.08.2013 (03:56:47)  
Waste of Taxpayers Money Yes No  

This makes me very cross, wasting our money and hiding it by not using 34 Squadron VIP aircraft; and WTF him taking his wife to a war zone. I think he is only in the top job for nothing more than the photo opportunities!

Received this via email yesterday;

"I made an enquiry via my ex RAAF connections, apparently KRUDD & the first shiela’s trip to Afghanistan via a RAAF KC30-A A330
Tanker was specifically tasked for just him, wife & media visit to Afghanistan.
The trip went via Perth and was a very quick over & back task.
What a complete waste of taxpayer funds for a photo op with the troops, when we have a massive cutback in defence spending.

This trip will not have come out of No 34 VIP Squadrons funding for Prime Ministerial travel. The KC30-A Tanker belongs & funding
expenditure is allocated by No 33 Squadron at Amberley.

In effect he is stealing funding from defence operations for his own political purposes.
Is there no end to this prick’s selfishness, self aggrandisement, waste and contempt
to the Armed Services and the Australian Tax Payer?

And this while most of my retired military friends are living impoverished lives on their Labor Party deliberately reduced (Defence
Forces Retirement Benefit Fund) superannuation indexation. In my case it is minus $550 a fortnight since I retired and I was a Wing Commander
most of the retired guys were Warrant Officers or lesser ranks and really struggling after serving their country all their working lives.
It’s a bloody disgrace! About $560 million would repay it all back which is about 2 weeks worth of illegal immigrants under Rudd!"

 
   
       
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Jack Pettigrew 12.07.2013 (06:07:00)  
Yes No  

Quote :

It doesnt matter which party is in government, we will always be shafted.
When the Coalition spoke of fixing the unfair indexation, our current Minister for Veterans Affairs, Warren Snowdon, labelled it as a stunt. So dont expect any help from him.
As for the Coalition, they have pledged to fix indexation, but only for DFRB and DFRDB members. When I asked the Shadow Veterans Affairs Minister, Senator Ronaldson, he claimed financial constraints and thanked me for my interest.
When further questioned, he blamed it on Labors mismanagement. Not a good sign that anything will change for us with a change of govenment.
I have also written to some journalists, hoping that they would write a piece on our unfair indexation. None of them have written anything so far.
So, were on our own. Its time our serving personnel and ex-service organisations turned their backs on all politicians who attend services, military funerals, Anzac Day etc.

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I have attended five of Ronaldsons Forums and my recollection of his criticism of the Labor Government was the its 2007 policy failure to fix the matter and their allegedly financial mismanagement. Equally, the Coalition was criticised for its 11 years of inaction in Government .
Yes all our efforts to gain media attention have been unsuccessful. We need to present actual cases of severe financial hardship to arouse their interest .

I do not believe we are on our own. ADSO has given a unity of purpose through its Fair Go Campaign to the defence family and the Australian people. We all have a chance through the ballot box to make our presence felt.
Turning our backs on pollies and memorial and commemorative events in my opinion is not the answer. All that does is politicise a memorial event that is sacred to us.


I certainly dont want to politicise our memorial events but, at the same time, I wouldnt kiss politicians arses when they are so disgustingly contemptuous of us - except when they are giving a nice little speech at a diggers funeral.

 
   
       
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Jack Pettigrew 10.07.2013 (06:51:38)  
unfair indexation and government contempt for the military Yes No  

It doesnt matter which party is in government, we will always be shafted.
When the Coalition spoke of fixing the unfair indexation, our current Minister for Veterans Affairs, Warren Snowdon, labelled it as a stunt. So dont expect any help from him.
As for the Coalition, they have pledged to fix indexation, but only for DFRB and DFRDB members. When I asked the Shadow Veterans Affairs Minister, Senator Ronaldson, he claimed financial constraints and thanked me for my interest.
When further questioned, he blamed it on Labors mismanagement. Not a good sign that anything will change for us with a change of govenment.
I have also written to some journalists, hoping that they would write a piece on our unfair indexation. None of them have written anything so far.
So, were on our own. Its time our serving personnel and ex-service organisations turned their backs on all politicians who attend services, military funerals, Anzac Day etc.

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I have attended five of Ronaldsons Forums and my recollection of his criticism of the Labor Government was the its 2007 policy failure to fix the matter and their allegedly financial mismanagement. Equally, the Coalition was criticised for its 11 years of inaction in Government .
Yes all our efforts to gain media attention have been unsuccessful. We need to present actual cases of severe financial hardship to arouse their interest .

I do not believe we are on our own. ADSO has given a unity of purpose through its Fair Go Campaign to the defence family and the Australian people. We all have a chance through the ballot box to make our presence felt.
Turning our backs on pollies and memorial and commemorative events in my opinion is not the answer. All that does is politicise a memorial event that is sacred to us.

 
   
       
 
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