Peter Criss replies to Warren Truss

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The Hon W. Truss MP
Leader of the Nationals
Dear Mr Truss,
I am responding to your letter of 18 May 2012 and I apologise for the delay; I have been away until recently.

At the outset please let me assure you that I mean no disrespect in the comments that follow: I was raised on the land in Northern NSW, in Doug Anthonys old seat, and so support for the CP, CNP and the Nationals runs deep in my blood despite the passage time.

I am presuming your letter was generated by my forwarding, out of courtesy, the challenge issued by the three retired Service Chiefs, Gina Rinehart, Alexander Downer and 35 other signatories of 26 April 2012. I also acknowledge that you did not seek a response from me; I do so because I cannot ignore some of your comments.
I took no exception to the majority of your communication; however, your fourth paragraph causes me too much angst to simply ignore. (Paragraph Four says:


"As you are no doubt aware, all retirement schemes are different and there are many areas where retirement incomes and pension schemes are not equal other than in the way in which benefits are indexed. Many people receive retirement income from a number of sources and therefore share in the benefits and disadvantages of each scheme. For instance many service personnel receive a part age pension in addition to their DFRDB or other Military Superannuation and Benefits (MSBS) payments. The schemes also have different contribution rates. Active members of the services contribute about 5.5% of their after tax salary to their superannuation scheme. Some other schemes require a much higher contributions from their members. The standard employer contribution to superannuation today is 9%, although the Commonwealth contributes about 15.5% to the public sector superannuation scheme. The employer contribution to the DFRDB is about 33% and to MSBS is about 25%. The Defence Force schemes also offer earlier access and some Supplementary benefits not available to other retirees".)

If I did not know better, I would have assumed that the offending paragraph had been drafted by a Labor Party staffer – the manipulation of the data and the distortion of facts abound. Mr Truss, just like your Pre 2004 PCSS, which I am also intimately familiar with, ours is a Defined Benefit, legislated in the early seventies. The Jess Report responded to Liberal Coalition issued TOR and was tabled by that Government in 1972. The Whitlam Labor Government enacted ("accepted or improved on Jess") it 1973 and a Liberal Coalition Government legislated permanent indexation arrangements in 1976.

Please do not infer that the DFRDB scheme is generous or that one should be grateful – it was defined by the Parliament of Australia and it should be sustained by the Parliament of Australia. The Reinhart Challenge was simply stating the truth. Please, before you write to any other constituents in a similar vein simply compare your PCSS with DFRDB and CSS – your comparisons to modern superannuation arrangements can have no bearing on schemes defined forty or more years ago. You specifically noted that the DFRDB receives an employer contribution of about 33% and earlier access (after 20 years) than the society norm. In response I simply note the PCSS employer contribution rate of 67.6% and that it can be accessed after 8 years!
In 2001 Senators Sherry, Conroy, Hogg and others, through the Senate Select Committee on Superannuation and Financial Services, (Para 3.91) found that: "It was also a founding assumption (emphasis mine) that, as identified in the Pollard and Jess reports, annual indexation of benefits would preserve the purchasing power and value of benefits through adequately reflecting the rise in cost of living." Para 2.60 of the same report reinforced the intent. In 2002, the same committee (delete Senator Conroy and insert Senator Wong), Para 14.28, found: "The Committee recommends that the Government consider indexing Commonwealth funded superannuation benefits to Male Total Average Weekly Earnings (MTAWE) or the Consumer Price Index (CPI) whichever is higher, in order that recipients share in the increases in living standard enjoyed by the wider community."
Sir, please do not tell the serving and retired military community and / or their surviving dependants that they belong to a generous or fair superannuation scheme. I do freely acknowledge that up to 1986 DFRDB operated as Parliament and the legislation intended; however, from that point on it has progressively failed those most vulnerable. When their employer is also the legislator of entitlements and the arbitrator of complaints, and where no union is permitted, then that arrangement enshrines the potential for abuse of that power – since 1986 that is precisely what has happened and it is a national disgrace.

The 1986 two per cent reduction in CPI as applied to superannuation benefits for three successive years without restoration, followed by a 1989 redefining of CPI permitting quality offsetting and finally the new wage accord arrangements of the early nineties stripping CPI from its pivotal role in the wage arbitration process, guaranteed that the mid-seventies intent of Parliament to adequately protect veteran interests in retirement were deliberately abrogated.
Let me put the issue into stark reality for you:
– A retired Service Chief (three star officer) said to me recently: "We (he and his wife) exist in genteel poverty – a lifestyle demanding increased thrift." That distinguished officer retired in the eighties before the fiddles with CPI commenced.
– A Lieutenant Colonel, retiring in the same timeframe after 20 years service on 35% of the then salary now receives 19% of the current LTCOL salary.

In all of this spare a thought for the retired senior NCOs who also committed the vast majority, if not all, of their working life to the public service of this nation in the belief that the purchasing power of their superannuation was protected. Lamentably, we are now much wiser, realising the exploitation has been deliberate by successive governments of all political persuasions since 1986.

Having said all that, I took some solace from your first paragraph on Page 2;


"Nevertheless the Coalition believes that we should seek to improve superannuation benefits wherever we can. On the 27th July 2010 during the election campaign the Coalition committed to more beneficial indexation arrangements for DFRDB scheme members aged 55 years and older."

Regrettably though, whilst ever your pre-election policy continues to ignore the under 55 Invalidity and Reversionary pensioners, along with those on the newer (post 1991) MSBS who are also being severely impacted by the deliberately manipulated CPI process, then I am afraid the veteran voter remains highly sceptical of all promises made in Opposition.

Mr Truss we do not seek "fairer indexation to military superannuation pensions" – we seek restoration of fair indexation in accordance with the legislated intent.
Yours sincerely,
Peter Criss AM AFC
Air Vice-Marshal (retd)
Defence Force Welfare Association (DFWA) member and authorised Alliance of Defence Service Organisation (ADSO) spokesman

Who will benefit from a change to Indexation

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Some critics of the Fair Go Campaign say that the vast majority of military superannuation pension recipients will receive nothing  from  a change to indexation. The following answers that criticism.

The Campaign’s primary military superannuation objective is to restore military superannuation indexation to its original service condition being “to maintain the purchasing power of retirement pay“.  That condition of employment applied to most Commonwealth employees (excluding Federal Court Judges and Federal MPs) and also Commonwealth income support recipients.

With the Government’s 1997 change to the indexation method for Aged, Service  and other income support payments only, to include a wages component (CPI and 25% of MTAWE) to maintain its purchasing power, the military and APS superannuation schemes were the only Commonwealth pension payments left with CPI. Later in 2009, the Government further enhanced the Aged/Service pension indexation formula by increasing the MTAWE component to 27.7% and adding a new factor the Pensioner and Beneficiary Living Cost Index (PBLCI): military and APS superannuation schemes continued to remain pegged to CPI only.

That is unfair, unjust and is a breach of the military “employment contract”

The consequence has been and remains a financial loss to ALL military superannuates. You can calculate that loss here.

That wrong needs to be corrected regardless of the financial circumstances of any particular individual. To that extent, fair indexation as sought, is a benefit for all military super recipients.

Clearly, with such a broad range of military retirees receiving military superannuation, there are variations in financial status, living circumstances and ability to maintain a certain standard of living. Within that cohort there are:

 

  • some who may be eligible for a means tested service pension and other Commonwealth income,supportpayments including concessional benefits if they are Age 60 or over,
  • some who may be eligible for a means tested old age pension and other income support payments including concessional benefits if they are Age 65 or over,
  • some who receive NO Commonwealth income support because they EXCEED the income and assets means test limits.

Those who receive additional Commonwealth income support (pension) payments will receive a net benefit from an increase to their military superannuation payment because for every $1 increase, their other pension entitlements are reduced by fifty cents for a single pension and twenty five cents for each person in a couple. There is no reduction to their supplementary allowances.  Widows and widowers will also benefit from the 25 cent taper rate and will therefore be significantly better off with a net increase of 75 cents for every $1 increase in the military super pension.

Under the income test tables for Service and Social Security Age Pension Transition Ready Reckoner for couples their combined assessable income has to reach $2,958 per fortnight ($76,908 pa) before they lose their age/service pension entitlement. For singles, their assessable income has to reach $1,828 per fortnight ($47,528 pa) before they lose their age/service pension entitlement.

In relation to Pensioner Concession Card (PCC) from either Centrelink or DVA to service pensioners, age pensioners and war widows and widows receiving an income support supplement, to maintain their eligibility they must be receiving at least $1 (the minimum fortnightly payment). The DVA PCC has the same status as a PCC issued by Centrelink. Both cards provide access to the same concessions.

In relation to the Commonwealth Seniors Health Card (CSHC), if the retiree has a Pensioner Concession Card (PCC) from either DVA or Centrelink, they are not eligible for the CSHC. The PCC provides the same concessions as the CSHC.

A CHSC issued from DVA may be available to eligible persons not receiving an age pension, service pension or income support supplement from DVA or a pension or benefit from Centrelink if they meet the seniors’ health card income test of not greater than $50,000 per year for single persons and $80,000 per year (combined) for couples.

It is therefore misleading to baldly state that “THE VAST MAJORITY OF MILITARY PENSION RECIPIENTS WILL RECEIVE NOTHING FROM A CHANGE TO INDEXATION”.

There may be some people who receive a net loss depending on their individual financial position (assessable assets/other assessable income) and personal living circumstances, but if there are such cases, they will be in the higher income levels where safety net provisions cease. This should not affect the great majority of military super recipients, almost 90% of whom receive less than $30,000 pa in military super pensions. Most, if not all of these cases would gain a net benefit from fair indexation, regardless of their eligibility for age or service pension supplementation.

The Fair Go Campaign has always acknowledged the existence of the safety net for those who are eligible. But this should not be used by the Government as a cop-out to deny fair indexation of military super benefits. 

The purpose of the Fair Go Campaign is to restore the vested property of ADF members that was a promised condition of service on enlistment. If Governments had honoured their obligations over the past twenty years, the Fair Go Campaign for fair indexation would not exist.

 

Calculate your loss

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Graph

In this graph MTAWE is the base constant against which are shown the relative cumulative
percentage
increases or decreases, over time, of the several classes of Commonwealth pensions.

The graph shows the ravages of what CPI only indexation has done to Military Pensions overall.

To see (using your own data) how this erosion due to CPI only indexation has affected you personally then click HERE

The result is sure to make you appreciate how much you are likely to lose in the future if we dont restore pension indexation to its original "purchasing power" intent.

IF YOU ARE UNHAPPY WITH THE RESULT WHAT ARE YOU GOING TO DO ABOUT IT? 

  • DO NOTHING?
  • DO SOMETHING?
    • SUBSCRIBE TO BE KEPT INFORMED
    • VOLUNTEER TO JOIN YOUR ADSO LOCAL ACTION GROUP
    • CONTACT YOUR LOCAL FEDERAL MP

DFRDB Meeting Ipswich

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The Meeting was successfully organised by Peter Felton (President RSL Ipswich Sub-Branch) and Morry Hill at the Ipswich RSL Services Club on Saturday 8 October 2011.

About 150 men and women attended. The Local MP Shayne Neumann (ALP-Blair) was invited but did not attend.

The mood of the meeting was certainly anti the Governments handling of the matter. Speakers were Morry Hill who gave an excellent overview, Rod Shortridge and Ted Chitham. Phill Narramore gave a very impressive brief of his research and the results of his meetings with both the PM Julia Gillard and Opposition Leader Tony Abbott. He is very active and has volunteered to join our Action Group in his electorate.

Overall it was a successful and inspiring meeting. I was heartened by the enthusiasm and detailed understanding of the impact that the unfair indexation has on their standard of living. I am sure we have 150 advocates to spread the word.

The format and venue was excellent. It is a model to be used for such meetings in other electorates.

The meeting was reported by the Ipswich Advertiser here and it attracted letters to the Editor below

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Overview

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WHATS IT ALL ABOUT?

The "FAIR GO!" campaign is an issues based, apolitical campaign to correct existing wrongs and improve the well being of the defence family.

It began with the formal establishment of The Alliance of Defence Service Organisations (ADSO) comprising DFWA, NAA, RAAFA, RAR Corporation and ASASA prior to the 2010 Federal Election to influence all political parties to accept our objectives and in Government to implement them.

Objectives 

  1. Restoration of Fair indexation to DFR B/DFRDB under aged 55 and all MSBS members because of the inequity from excluding them from the Government's legislation (Fair Indexation Bill 2014) that restores its purchasing power to DFRB/DFRDB superannuates from 1 July 2014 .  

  2. Restoration of DVA Disability Pension indexation to parity as legislated by the Coalition Government in 2007  and removed by the Labor Government in 2009.

  3. Increased support for Veterans health care – because mental health and residential accommodation for younger veterans in particular are issues that are increasing in frequency and severity. We want increased funding and DVA support for appropriate community accommodation in order to meet the needs of veterans with mental health issues as well as younger veterans in need of care.

     4.Abolition of MSBS maximum benefit limits.

     5. Increased support for primary carers and their own health needs.

     6. Increased % to Spouses Reversionary Benefits.

     7. Abolition of tax on Superannuation.

     8. Access to Government Superannuation for the ADF Reserve members.

     9. Enhanced support for self management mental health programs.

 

Structure

The Campaign is governed by the National Coordination Council, consisting of the Presidents of each Alliance partner and the Campaign Director. It initiates and represents ADSO at meetings with the Government, Parliamentarians, political party organisations , government agencies and the national media. ADSO has a national support network of State/Territory and Local Area Action Groups in all federal electorates.

Strategy

The strategy promotes our objectives by direct and indirect means to the elected decision makers (Government, Parliamentarians and their political parties), the media and the electors (our defence community and the voting public).

Overview – Campaigns Progress

To date the Campaign has moved through two distinct phases and is currently in the third phase of direct action. You can track the details through our Updates and past events.

Phase 1 – Pre 2010 Election

We launched the Campaign publicly on the 11th July, just 40 days before the election amid the political circumstances our fair go for military superannuation indexation garnered no interest from the media, nevertheless we were successful in having the Coalition, the Greens and the Independents adopt our indexation objective as their election policy.

We failed to win the Governments acceptance of our fair indexation objective on the basis of the Matthews Review recommendation that CPI was the right formula and the changed formulas implementation costs were too large.

The Coalitions commitment was limited to DFRB and DFRDB recipients aged 55 years and older only and excluded the current Military Superannuation and Benefits Scheme (MSBS) contributors. We reluctantly accepted this on the basis that the Coalition in Government would remove these exclusions. Better to gain 80% of the objective than 100% of nothing.

The Campaign succeeded in having many voters support our cause at the ballot box and in some marginal seats, particularly in Queensland, did influence the result.

The election resulted in a minority Labor Government with an Agreement from the Greens and Independents to support its fiscal target of returning the Budget to surplus by 2012-2013.

Our challenge to the Government to reveal its costing assumptions and calculations on which the Government accepted the Matthews Reports recommendation was ignored.

See our Updates 1 – 6/2010

Phase 2 – Post Election to 16th June 2011

In line with the Coalitions pre election commitment to support fair indexation, the Shadow Minister for Veterans Affairs, Senator the Hon. Michael Ronaldson, on 18th November 2010 tabled the Defence Force Retirement Benefits and Defence Force Retirement and Death Benefits Amendment (Fair Indexation) Bill 2010 in the Senate to index military pensions at the higher rate of the Consumer Price Index (CPI), Male Total Average Weekly Earnings (MTAWE) or the Pensioner and Beneficiary Living Cost Index (PBLCI).

In early June 2011 the House of Representatives the Shadow Minister for Defence Personnel Mr. Stuart Robert MP, succeeded in having his Private Members Motion for "support to the concept of the unique nature of military service and Coalitions policy to index military pensions to members of the DFRDB and DFRB schemes who are aged 55 years and over, to the higher movements in CPI, Male Total Average Weekly Earnings or Pensioner Beneficiary Living Cost Index", passed.

On the 16th June 2011 the Government, with the complicity of Greens Senators Brown, Milne, Hanson-Young, Siewert, Ludlam, and Independent Senator Xenophon, who had all publicly supported fair indexation, voted down the Fair Indexation Bill. Read the Hansard report (pages 1-20)

The House of Representatives, just two weeks earlier unanimously agreed to support fair indexation of military superannuation pensions. (Read our media release Senate rejects Fair Indexation Bill.)

Our Defence Family was angered by this duplicitous action.

 See our Update 1/2011 and our Update 2/2011

 

Phase 3 – Since 16th June 2011 Direct Action

The Bills rejection united the defence community, especially serving ADF men and women and their families, to direct action.

See update 3 / 2011

It created the opening of the Campaigns Second Front "People Power" under the leadership of retired Brigadier Neil Weekes AM MC. See his Just a Fair Go website here.

The Government continues to deny our requests for a full exposure of its costing used to defeat the Fair Indexation Bill and to dispute our costing we have submitted to them.

We will continue to engage with the Government and Parliamentarians in Canberra and in all federal electorates.

See Update 4/2011

Activities in 2012 saw the Governments avoidance to engage ADSO despite numerous requests to the PM and relevant Ministers whereas the Coalition continued to reaffirm its pledge that in its first budget in Government it would introduce fair indexation as sought by ADSO for DFRB/DFRDB superannuants over age 55 years only. That pledge did not include MSBS. The Coalitions exclusions were based on their unwillingness to promise anything that they could not fund until in Government when they were able to assess the true state of the Governments finances. ADSO sought the Coalitions affirmation that this would be an aspirational objective. The Coalitions actions in both the House of Representatives and the Senate  to successfuly raise the matter in both a notice of motion and to debate a matter of public importance showed their determination to implement fair indexation. 

Phase 4 - January 2013 Advance to the Federal Election

The PM's early announcement of the election date of 14 September gave us ample preparation time. Follow our progress through Updates 27 to 33 here

 A major breakthrough came in early March when at our rally at Rooty Hill during the PM's visit to the Sydney's Western suburbs, she agreed to meet with ADSO executives in Canberra (she had previously refused three previous requests). That meeting eventually occurred in July with the new PM Rudd in July. Following that meeting the Government's policy on military superannuation was announced. Although severly inadequate it  showed that the Government had accepted that CPI indexation alone did not maintain the payments purchasing power. With the new announcement of an earlier election date we now had a comparison of policies for all to see. The appearance of two new political Parties, The Katter Australia Party (KAP) and the Palmer United Party (PUP) added further impetus to our Fair Go campaign with veterans' policies that in the case of the PUP was aspirationally superior to the major parties.

Phase 5 - After the 2013 Federal Election

The Coalition Government delivered its pledge for for fair indexation with the restoration of purchasing power for DFRB/DFRDB superannuates over aged 55.

Keep Informed

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SUPPORT THE "FAIR GO!" CAMPAIGN

ADSO relies entirely on public support to make the campaign successful. You can help in any of three ways:

KEEP INFORMED

Keep informed of the Campaigns progress by receiving our news. It will give you the knowledge to become a supporter and advocate for the cause. Spread the word to your family, warrior mates and friends and encourage them to get involved. You can subscribe by filling in the form on the left.

Register at This email address is being protected from spambots. You need JavaScript enabled to view it. with your name address and contact details and name your electorate and MPThank you for your support

 

Military Superannuation – Legislative History

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The Legislative History

Trace the Legislative history of military superannuation in this table and see the event, the dates and the Government in power at the decision time.

LEGISLATION / UNDERTAKING RESPONSIBLE PARTY
ALP Coalition
1909. Commonwealth (Central Staffs) Public Service Association proposed a superannuation scheme for PS, could apply to Naval and Military Forces.

PROT

1922. Scheme introduced into Parliament under the Defence Act for Army and Air Force personnel + civilian officers of the Commonwealth. Separate benefits for Navy.
NAT/CP
1924. Compulsory contributory superannuation scheme designed to provide half of the member’s salary at retirement. Same as PS two years earlier.
NAT/CP
1935-36. Compulsory retirement ages redefined – popular move.
UAP/CP
July 1947. Revised common pay scales and closer alignment of retirement ages for the three services.
1948. The DFRB Act – 15,300 contributors and 107 pensioners; pension geared to the conditions of service, surrender values equal to contributions without reduction, available for officers at retiring age or 20 years, OR on completion of engagement after 20years, generally higher pension than PS, 3 classes of invalidity benefits and commutation options for a lump sum in certain circumstance.
1959. Contributors total 39,330 with 3110 pensioners. Reduction in compulsory retiring age from 60 to 47 (officers) 55 (OR) creates tension. No compensation paid – virtual breach of contract. Death benefits questioned; widows left with pension. Pensioners not represented on DFRB Board. The fund made bigger profit than expected; surplus returned (eventually) to members.
LIB / CP
30 June 1959. Regular Defence Forces Welfare Association (RDFWA) formed to fight inequities in the DFRB scheme.
LIB / CP
14 December 1959. New retirement pension schedules and a new method of financing the scheme became effective. 5% of salary adopted.
LIB / CP
November 1960. RDFWA pension rights, Repatriation Services, War Service homes, the Canteens Trust Fund, Social Services, welfare for dependants of deceased personnel supported by responsible Minister and Treasury.
LIB / CP
1960-63. RDFWA active and successful in obtaining additional reforms. Salary increases addressed. Each remedy created new problems – the Act became very complex to interpret. By 1970 the gov’t had to act.
LIB / CP
Sep 70 – May 72 Jess Committee sat and reported. DFRB Act incomprehensible. Recommended compulsory contributions, 5.5% rate, retired pay or invalidity pay not pension, retired and invalidity pay to be expressed as a percentage of final pay, adjusted annually to ensure relativity with average weekly earnings, scheme not funded, payable to Commonwealth and Government guarantees the benefits, after 20 years service, commutation up to 4 years of retired pay. Bitterly opposed by the PS.
LIB / CP
1 October 1972. The DFRB Scheme closed to new members.
LIB / CP
2 December 1972. The new Government opted for CPI indexation. However, the CPI became a central plank in the centralised wage fixing system over this period and so effectively a condition of employment became a superannuation system with a cost of living index that maintained real purchasing power.
(Post Dec 1972)
1973. Defence Forces Retirement and Death Benefits Act (1973). The May 72 Jess report was fundamentally adopted except provision for relativity with average weekly earnings omitted. Some teething problems, especially relating to ‘No Detriment’ provisions. Jess recommendation for automatic annual adjustment of retired invalidity pay and widows pensions to maintain relativity with average weekly earnings rejected. Nov 73 Defence Minister promised amendment for ‘Notional’ years of service. Nothing happened until Nov 77.
Circa 1973. $126 million in accumulated DFRDB /DFRB superannuation funds reallocated into consolidated revenue. Funds declared untaxed. (The DFRB fund had approximately $160M as at 30 June 1972 but adjustments were required) The final balance of $126M was actually transferred into Consolidated Revenue in 1975 by the Whitlam Government.
1976. New Government in 1976 did not rescind the move into consolidated revenue. A new Commonwealth Superannuation Act for PS. Indexation to CPI changes introduced, along with contributions at 5% and widows to receive 67% of pension – better conditions/provisions than DFRDB.
LIB / NCP
February 1977. DFRDB act amended to reflect some PS entitlements including CPI provisions but with 5.5% contributions remaining, many complex provisions and still with detriment, especially to widows. Most of these inequalities still exist today.
LIB / NCP
1986. The Veterans’ Entitlement Act (VEA) under which all entitlements for veterans are administered enacted. The VEA Act excluded the principles of equity (fairness and natural justice) from the administration of all veterans’ entitlements, pensions and otherwise. (Federal Court of Australia ruling).
23 October 1986. Indexation unilaterally and arbitrarily cut by 2.0% from military pensions below the CPI percentage that then applied.
1989. Government accepted and adopted the new international standard for the compilation and calculation of the CPI, which introduced such things as “quality” into the calculation and which resulted in a major downward shift in inflation.
4 November 1989. CPI indexation restored but no compensation paid for the three year loss of retirement income from the cut in indexation.
30 September 1991. DFRDB ceased to be an option for new members joining the ADF. Military Superannuation Benefits Scheme only option for new recruits. Existing members given the option of staying with DFRDB or transitioning to MSBS.
Circa 1991-93. (i.e. Prices and Incomes Accords (Mark VII-VIII). With the end of centralised wage fixing, CPI began to delink from wages and become a measure of inflation rather than cost of living.
1997. CPI acknowledged as no longer protecting purchasing power of Age Pension, after a major campaign by pensioners because of falling standard of living. New measure adopted but military superannuation pensions excluded..
LIB / NPA
2001. Australian Bureau of Statistics declares that CPI is a measure of inflation, not purchasing power.
LIB / NPA
April 2001. The Government ignored various Senate select committee recommendations for fair indexation made in Apr 2001 and again in Dec 2002. Finance used the same arguments then as current ministers. The Government did nothing about fair indexation despite the Senate committee recommendations and despite its welfare pension indexation reforms in 1998.
LIB / NPA
From 2004 ‘salary’ used to calculate entitlements included all income (Service, Specialist and other allowances + basic salary). The effect is significant. DFRDB and MSBS superannuants discharged pre 2004 receive a pension as much as 50% less than their post 2004 counterparts.
LIB / NPA
May 2006. Superannuation “reforms” declared that military/APS super were ‘untaxed funds’ (see Circa 1973); beneficiaries are liable for income tax on their military super pension (unlike other Australians)..
LIB / NPA
Nov 2007. Parliament, with bi-partisan support, recognised loss of purchasing power for Veteran Disability Pensioners and provided a “one off” catch up increase and also brought their indexation arrangements into line with the other pensions. This “one off” increase did not fully recover the erosion suffered by Veteran Disability Pensioners particularly in the previous 10 years when revised indexation arrangements were introduced for Age and Service Pensions.
LIB / NPA
2007. ALP ‘promised’ to fix the indexation in lead up to the 2007 Federal election.
Result in power: Nothing (Matthews Review with constrained TOR recommended CPI be retained for Commonwealth & Military super – (Review widely condemned as superficial and inaccurate)
2007. ALP released the Podger Review into Military Superannuation, commissioned under the previous government. The Review Team determined there was an in-principle case for changing the indexation arrangements of DFRDB Pensions. It found the original scheme contained a wage-based indexation element that was removed in mid-1970s when CPI was adopted. It found no case to increase the benefits payable prior to age 55, but it found there was a case for older DFRDB pensioners – “Government should consider indexing DFRDB pensions on a similar basis to that applying to Age Pensions”. It also recommended fixing the MBL limits for MSBS members and other anomalies. “There should be no change to the MSBS pension indexation arrangements.” For over three years, both Labor Governments have sat on the report and done nothing.
2009. The Harmer Review of Pensions confirmed that at certain times, the rate of change in out of pocket living costs experienced by age pensioner households has moved faster than the rate of change in living costs of households as measured by the CPI. Age pensions indexation further adjusted by adding a pensioner and beneficiary living cost index (PBLCI) together with introducing a structural adjustment of pensions by increasing MTAWE benchmark to 27.5%. Military superannuation pensions ignored.
Budget 2009. The 2007 Veteran Disability Pension benchmark broken in the Federal budget of 2009. The legislation suspended the benchmark for one event only, that of the 2.7% of MTAWE increase of 20 Sep 2009 afforded to all other pension’s arising from the Harmer review in which DPs were promised they would be included – see 23 October 1986 entry – the 2.7% loss is a lifetime loss as was the Keeting loss of 2% for 3 consec years.
2009. Coalition pre-election statement: “if elected to government with a majority, they would on 01 July 2011 submit a Bill to provide for ‘Fair Indexation” of DFRB/DFRDB pensions to a higher level than just CPI indexation.”
2 June 2011. House of Representatives unanimously supported (on voices) a coalition member’s motion acknowledging the unique nature of military service and the need for fair indexation of pensions.
16 June 2011. the Government, The Greens and Senator Xenophon rejected Senator Ronaldson’s Fair Indexation Bill in the Senate.
+ The Greens and Sen Xenophon

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.

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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.

 

Current Developments from Nov 2010

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{rsfiles path="Letters/Peter-Criss_3-August-2011.pdf"}11 Aug 2011. Second Front Sitrep 6. Operation Letter Raid. Read it here

7 Aug 2011. Second Front Sitrep 5. Operation Letter Raid. Read it here

29 July 2011. ADSO Media Brief. Media Pack comprising Brief "Defence Retirees Ripped Off Again" , FAQ, Cost data and letter to PM sent to national media outlets. Read it here..

28 July 2011. ADSO Letter to the Prime Minister

22 July 2011. ABC TV – 7.30 pm Victoria: watch it here. (link to the ABC website). Read our press release challenging Defence Minister Smiths comments..

13 July 2011. Radio 2CC (Canberra) here: Listen to what Neil Weekes said in response to Mike Kellys interview of 7 July

23 July 2011.Second Front Sitrep 4. Read it here

12 July 2011. Second Front Sitrep 3. Read it here

12 July 2011. ADSO Update 3/2011. 

7 July 2011. Second Front Sitrep 2. Read it here

7 July 2011. Radio 2CC (Canberra) podcast : listen to Mike Kelly MP blame everyone else and say little about what the Government actually intends to do about fair indexation.

2 July 2011. Second Front Sitrep 1. Read it here

30 June 2011. ADSO Document: Can You Trust The Governments Quoted Costs? No ! Read why here

30 June 2011. ADSO Document: Indexation – Frequently Asked Questions. Read the FAQ here.

DEFENCE FORCE RETIREMENT AND DEATH BENEFITS AMENDMENT (FAIR INDEXATION) BILL 2010

30 Jun 2011. DFWA Summary. With the failure of the Fair Indexation Bill, all is not lost. Read it here.

25 June 2011. Retired Brigadier Neil Weekess letter to the PM and others together with a supporting letter from Ian McMannus (an ex NSW State Labor MP) is posted on Independent Australia a current affairs web site by Tess Lawrence, a journalist advocate. The response leads to the opening of the ADSOs FGC s Second Front – People Power, under Neils leadership.

16 June 2011. The Senate rejected the Bill – read here.

The Senate was asked (proposed by Senator Xenophon) to find a way of funding fair indexation "within 6 to 12 months." This will be a focus of our lobbying.

8 June 2011 Department Of Finance And Deregulation Figures Found Wanting!

Read what The Public Service Informant (The Canberra Times 8 June 2011) thinks about the Departments methods of accounting here. No wonder the politicians dont get good objective advice in order to make an informed decision about fair indexation!

07 Jun 2011 . ADSO Update. 2/ 2011. Read the second of our phase 2 Campaigns update here.

2 June 2011 the House passed the Motion on a show of hands – read ADSO press release (2 Jun 2011) here.

23 May 2011. House of Representatives – Private Members Motion from S Robert (Lib) was debated in the House of Representatives – read it here.

10 May 2011. The Senate Committee Report

The Committee, voting on party lines recommended the Senate not approve the Bill. The dissenting report recommends otherwise. Sadly, we can only surmise that some of our Parliamentarians are not concerned with the continuing unfair treatment of retired military superannuants, yet are happy for photo opportunities with veterans and serving military on Anzac Day, farewelling our soldiers when they depart for an overseas deployment, attending funerals, etc and then hypocritically deny them basic social justice (provided to other Australians) with fair indexation.

06 May 2011. ADSO Update. 2/2011. Read the first of our phase 2 Campaigns update here.

16 April 2011. Senator wong offers tacit support ? During an ABC TV "Big Ideas" segment, rerun on ABC News 24 on 16 April, there was a public debate titled "The Major Parties are Failing Us", held in Melbourne on the 5 April 2011. Watch and listen here. The Minister for Finance, Penny Wong, was the last debater and she mentioned the indexation issue in the context of other competing funding priorities being faced by the Government.

The Association is gratified that for the first time, a Government Minister has acknowledged in public arena that our cause has merit: Min Wong used fair indexation as an example of worthy social justice consideration "certainly a worthy ask". However the Minister again focussed on cost, and explained that the Government was at odds to funding fair indexation because of its supposed un-affordability and prioritisation of competing financial demands.

ADSO agrees that cost is the stumbling block on this issue: what we need is to reinforce with policy makers that current Government policy rests on a rocky foundation of imprecise data, ill-conceived ideas and false assumptions that underpins the policy advice they have been receiving so far. Our evidence is in the public arena and is well documented: as a start we invite readers to examine the public submissions from the Alliance of Defence Service Organisations and from Mr Peter Thornton to the Senate Inquiry into the Fair Indexation Bill.

The specific comments relating to us start at about 5:30mins into the attached clip ... but it is important to watch the whole thing to appreciate the context in which she made the comments.

14 Apr 2011.Submissions to the Finance and Public Administration Legislation Committee.

The DFWA, as part of the Alliance of Defence Service Organisations (ADSO), has made a submission read it here. A supplementary (late) submission, to counter the inaccurate claims made by the Department of Finance and Deregulation, is here.

24 Mar 2011. The Senate referred the Bill 2010 for inquiry and report. The Senate also referred the amendments circulated by Senator Ronaldson and proposed mechanisms for funding the Bill, to its for inquiry and report. The report is due on 10 May 2011.

02 Mar 2011. DFWAs Press Release (2 Mar 2011) is here The Bill was scheduled for debate in the Senate on 10 Feb but has been deferred to 24 Mar. Senator Wong has written to the Opposition indicating the Bill is "unconstitutional"!

Feb 2011. A DFWA summary of activities post the 2010 Election 2011 is here

19 Jan 2011,The DFWA commentary on the Bill released (19 Jan 2011). It expands on the Bills Digest to provide a more objective overview of the matter


22 Dec 2010. The Parliamentary Library Bills Digest No.55 provides a commentary on the Bill.

Nov 2010. The Bill was introduced to the Senate by Senator Ronaldson (Shadow Minister for Veterans Affairs). It seeks to amend the DFRDB Act to amend the indexation arrangements for DFRDB pensions. The Opposition has advised that it will be further amended to include DFRB superannuants.

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