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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.

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


1922. Scheme introduced into Parliament under the Defence Act for Army and Air Force personnel + civilian officers of the Commonwealth. Separate benefits for Navy.
1924. Compulsory contributory superannuation scheme designed to provide half of the member’s salary at retirement. Same as PS two years earlier.
1935-36. Compulsory retirement ages redefined – popular move.
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.
30 June 1959. Regular Defence Forces Welfare Association (RDFWA) formed to fight inequities in the DFRB scheme.
14 December 1959. New retirement pension schedules and a new method of financing the scheme became effective. 5% of salary adopted.
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.
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.
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.
1 October 1972. The DFRB Scheme closed to new members.
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.
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.
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..
2001. Australian Bureau of Statistics declares that CPI is a measure of inflation, not purchasing power.
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.
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.
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)..
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.
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


 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.


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.


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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