“THE PENSION REFORM PACKAGE INTRODUCED A NEW PENSIONER AND BENEFICIARY LIVING COST INDEX WHICH PROVIDES A MORE REALISTIC INDICATOR OF CHANGES TO THE COST OF LIVING FOR PENSIONERS. THIS NEW MEASURE OF PRICE CHANGES WAS APPLIED ON 20 SEPTEMBER TO INDEX BASE PENSION RATES AS IT WAS HIGHER THAN THE CONSUMER PRICE INDEX AND THE MALE TOTAL AVERAGE WEEKLY EARNING BENCHMARK.”

The key words are: A more realistic indicator of changes to the cost of living……Surely this also applies to our DFRDB pensions.

It’s pity the Rudd Government aren’t “More Realistic”.

The Defence Community are a tough bunch and we won’t let up on you Kevin.

FACTS AND FIGURES

COMMONWEALTH DFRB AND DFRDB SUPERANNUATION SCHEMES

The three currently operating military superannuation schemes were intended to reflect the ‘Unique Nature of Military Service’ as acknowledged in their core legislative and foundation documents.

The Government’s most recent expression of the characteristics applying to this Unique Nature of Military Service was included in the Terms of Reference for the 2007 Review into Military Superannuation (Annex A). In short the main characteristics of military service as described in those Terms of Reference
are:
• liability for combat operations;
• a military discipline with a regimented way of life;
• long and irregular working hours;
• statutory retiring ages well below the community norms;
• high standards of physical fitness;
• frequent relocation; and
• separation from family.
Not included in those Terms for those of the DFRB/DFRDB era:
. the primitive and environmentally dangerous levels of accommodation, and
. the disparity in diversity and levels of allowances as now received by modern day service personnel.

All personnel joining the Australian Defence Services do so under contract to the Federal Government of Australia. Those personnel are then compelled to comply/accept all decisions made on their behalf by the Government of the day. This includes the compulsory requirement to be a contributor to one of the Military Superannuation schemes. As such, the Federal Government has a responsibility to those personnel to act in an honest and fair way.

Note also, ADF personnel are subject to both the civil legal code and a separate Defence Force disciplinary code. The disciplinary code supports the command structures necessary for effective conduct of combat operations and training. The Defence Force disciplinary code imposes restrictions on personal conduct; it demands different standards from those generally acceptable within the community; and it impinges on the individual’s family life and leisure time.

Each decision of an incumbent Federal Govt affecting the DFRB/DFRDB Scheme post 1973 has been based on matters of policy, not in terms of the criteria on which those schemes are based. That is, “The Unique Nature of Military Service” The Federal Government has been neither fair, nor honest in some circumstances, in its treatment of those veterans in receipt of DFRB/DFRDB superannuation payments.

Notably:-

The Jess Review of 1972 proposed a superannuation scheme where the “. adjustment should be related to average weekly earnings and the relativity of retired pay with that index maintained ….(to)… ensure that the man in retirement will be able to maintain his position in relation to rising community standards and he will obtain those increases when needed”; This recommendation was accepted and implemented and all Defence Force personnel had reason to believe the scheme would meet their needs when they finally retired.

This has been a view shared by subsequent Senate Committee Reviews but each time dismissed by members of the incumbent government. Those Senate Committee Reviews include:-

• April 2001.Senate Select Committee on Superannuation and Financial Services. “A Reasonable and Secure Retirement” recommended that DFRDB and Public Service pensions be adjusted on “other than CPI”

• December 2002. Senate Select Committee on Superannuation. “Superannuation and Standards of Living in Retirement” recommended that DFRDB and Public Service pensions be adjusted on “CPI or MTAWE, whichever is the greater”.

• July 2007. Report of the Review into Military Superannuation Arrangements recommended a partial indexing of some military retirement pensions to “a similar basis to that applying to age pensions”. The outcomes of this Review are yet to be announced by Government.

• March 2008. Standing Committee on Community Affairs. The March 2008 Committee Chairman’s key outcomes (Annex B refers) are summarised below:
“The report on the cost of living pressures for older Australians has recommended the Government
immediately move to index Commonwealth superannuation pensions to both CPI and Male Total
Average Weekly Earnings (MTAWE).

There are two recommendations which are absolutely key;

First, we have recommended that the Government urgently review current pension levels to determine
whether these are sufficient to provide a decent standard of living.

Second, we have recommended that while the Government is conducting such a review, Commonwealth and Defence superannuation pensions should immediately be brought in line with other government pensions by indexing these to both CPI and MTAWE.”

Other Background

1. Between 1973 and 1975 the Whitlam Government transferred DFRB contributions from the DFRB to Consolidated Revenue. All contributions had been made from taxed dollars. To then say future payments from Consolidated Revenue were from an untaxed source and subject to aggregation with income from civilian employment, for taxation purposes, was totally unfair. This meant Ex-service personnel were paying tax on previously taxed dollars and at a higher rate because of the aggregation of the two income sources. Those who moved into higher salary brackets were in fact nullifying the already reduced benefit of their superannuation payments and even more so when the Superannuation Surcharge Tax was applied.

2 The replacement of the wage based indexation with the CPI in 1974 was purely a cost constraint for, and a benefit to, the Government but subsequently a large cost to veterans. This particular arrangement was inserted into the DFRDB Act by the Defence Forces (Retirement and Death Benefits) Amendments Act 1977 as set out in the second reading speech, as follows; “In essence therefore, the pension updating arrangements encompassed by this Bill achieve the earlier stated aim of consistency with those currently applying to the comparable classes of pensioners under the Commonwealth Public Service Superannuation schemes.” This position completely nullifies the criteria for setting up of the DFRB/DFRDB schemes. It can only be assumed that the reference to “…comparable classes of pensioners under the Commonwealth Public Service Superannuation Schemes” was in fact a reference to Defence Force personnel.

3 Also in 1974 The Hon. Frank Crean instigated another review. This review recommended that “under the proposed provisions of the CSS it would be appropriate to index the government financed pension to be increased automatically and annually by the percentage increase in the Consumer Price Index” (Note: not the DFRDB) Again, this statement belittles the criteria for setting up the DFRB/DFRDB schemes and made these schemes mere shadows of the CSS.

4 The Superannuation and Other Benefits Legislation Amendment Act 1986 amended the legislation governing the operation of both the DFRB and DFRDB from the payday of 23 October 1986 to discount the 1986 pension increase by 2% from 9.2 % to 7.2%. This policy continued till 20 October 1989. Again, purely a cost constraint for the Government. (that is, the discounted CPI portions were never passed back to DFRDB pensioners.) There has never been any attempt to make up for this period of discounting nor, loss of the compounding effect of the full amount due to DFRB/DFRDB superannuation recipients.

5 There were also times when negative CPI results impacted veterans superannuation payments by the fact that no increases were given in those particular years. This was despite the fact that Male Average Weekly Earnings and the Old Age Pension were increasing significantly. And again, no attempt has ever been made to correct this difference and compensate veterans for further decreases in their standard of living.

NOTE: On the basis of items 4 and 5 veterans have seen their payments increase at a level lower than that indicated by CPI increases in Chart 2.

6 Some DFRB/DFRDB recipients took up the option, on their retirement, to commute part of their superannuation on the understanding their would be a compensating reduction of their fortnightly payment. The actual mount to be determined by dividing the lump sum payment by the number of years the retiree was expected to live. This latter figure was extracted straight from the Government Life Expectancy Tables in effect at the time.

7 Life expectancy has increased markedly in the last thirty five years and retirees are exceeding the age limits by which their payments were set. This means that the amount of money deducted from fortnightly pensions to compensate for receiving the lump sum should be reducing. No such reduction has occurred, nor have the outdated Life Expectancy Tables been updated. This is a fact recognized in the 2009 Budget where the Pension Age is to be increased to 67 years.This has been another cost constraint action by the government to the detriment of DFRB/DFRDB retirees.

*Based on full time average weekly ordinary time earnings (seasonally adjusted)

Chart 1

Chart 2

CONCLUSIONS

The criteria on which military superannuation schemes was based have been rendered utterly meaningless by political decisions. Those schemes are now only somewhat of a reflection of the CSS.

The Jess Review in its recommendations stated that indexation should be such that it would “… ensure that the man in retirement will be able to maintain his position in relation to rising community standards and he will obtain those increases when needed”. On reflection it can now be stated that in seeking to meet that objective the DFRB/DFRDB schemes are abject failures.

After 35 years of operation it is obvious that there has been one political policy of “containment of payments” in respect to these schemes and one of self interest for “maximum payment” for MP’s. Service personnel have absolutely no reason to believe the Government will treat them, in financial terms, with the respect they deserve.

Coupled with the fact that the DFRDB scheme is still indexed by the CPI, this has made Australian Defence Force veterans the lowest compensated sector of the Australian community when in fact they should be at the higher end.

THE FUTURE

Will the Federal Government ever correct the wrongs of the past.? Should the Government accept the recommendations of the Standing Committee on Community Affairs Report, March 2008, it will not make good the financial losses of those long retired. It would only help current Defence Force personnel and those engaged in the future. It is hardly expected that it will ever happen in the current financial situation. More likely the Federal Government will just accept that more veterans will have to apply for the Service Pension, Old Age Pension or, hopefully, just die. This is a very demeaning possibility given that many went on to be successful in civilian life and contributed heavily (taxed), beyond that expected of everyday civilians, to the success of this country.

In the current financial crisis it is very likely that inflation will again increase significantly. Will the Federal Government again discount veterans Superannuation payments? If they do, it will be yet another dishonest action against veterans. If they elect to pay all increases veterans will still be well behind all other superannuates unless the wrongs of the past are corrected.

The RSL agreed to stay non political in retutn for the Veterans Entitlements Act many years ago. The Governments treatment of veterans who served in war zones and ex servicemen who served for 20 years or more has shown an increasing belt tightening from the current government when it comes to preservation of veterans rights and superannuation treatment. Apart from keeping us aligned with CPI, we continue to pay tax on our super payments, albeit because we were unfunded? We did not have the opportunity to choose our super fund and we were informend there was a Government co-contribtion. Where did this money go?
I would ask all veterans who belong to the RSL to start lobbying for the RSL to get behind the Coalition running up to the next election. Likewise for Commonwealth superannuants who are members of their Associations. With 350.000 votes plus votes of all serving Defence force personnel that could help influence the result of the next election. The Labour Government has shown it does not care, In return,wewould expect the coalition to start opposing the current Government and promise to look after military and commonwealth superannuants if they are elected to Government.
You should also write to yout local Federal member exoressong your concerns over the decision to maintain your super payments with CPI adjustments only. If they got 100,000 plus representations, imagine the impact.

It is indeed criminal what the Rudd and Howard Governments, and several Federal Governments before, have done to CommSuper recipients and Australian War Veterans!
Justice will eventually prevail and there is an election soon in 2010!

All Commonwealth superannuants require indexation via CPI, 27.7% of MTAWE or PBLCI, WHICHEVER IS THE HIGHER!

Just like Centrelink customers, nothing more nor nothing less!

Persevere
Bernie McGurgan (A Vietnam Veteran & DFRDB superannuant)
Brisbane 4157

From the outset (or 1985 at least) the Department of Social Securities in each State acted as a paying agent for the DFRDB Authority up to the pay notification dated July 1988.
There is no indication of where the payments came from (or if there had been a change). We need to be careful before jumping to conclusions if our arguments are to stick
The ‘Paying Agent” Identity number no longer appeared from the July 1989 notification.

Quote (in part) from increased Rate of Pension notice July 1988:

“CHANGE IN PAYMENT AND ENQUIRIES ARRANGEMENTS
Near the end of this calendar year, our present pension paying agents, the Department of Social Securities in the States and the Department of Finance in the Territories, will cease to have any role in the payment of DFRB/DFRDB pensions. Pension payments will be then made directly from the Office of the DFRDB Authority in Canberra…”

Quote from an (undated) letter signed by Chairman DFRDB Authority in 1988:

“CHANGE IN PAYMENT RESPONSIBILITIES
The payment of DFRB/DFRDB pensions will shortly become the sole responsibility of the DFRDB Authority. As from pension payday 3 November 1988 pensions being paid by the Department of Social ecurity in NSW, VIC, QLD, SA, WA and TAS will be paid directly by the Authority.”

From July 1990 payment notifications were letter-headed Retirement Benefits Office (RBO) which became ComSuper before July 1994 (Ref 801/28473854). The letter-head remained as ComSuper until July 2002, when it again became “dfrdb” and annual pension figures where replaced with only fortnightly amounts (to date, 2009), except for July 2005 and July 2006.

I have some enquiries of the DFRDB as to how annual amounts were arrived at from 2002 as it appears they were calculated backwards from the fortnightly figures and not continued by direct application of CPI adjustments annually and bi-annually!