The option to commute a lump sum was an early manifestation of a reward for the unique nature of military service.
Military personnel were compulsorily retired at relatively early ages having been frequently re-located and not had the opportunity to establish a permanent home. The need for a lump sum payment being a pre payment of future entitlements was justified against this background.
It was not expected that retiring members would be able to invest the lump sum to provide an income stream and there was never any mention of a conversion factor.
In other Commonwealth funded superannuation schemes the lump sum is provided without any repayment or conversion factor.
It is believed that it was an oversight that the DFRDB Act did not provide for the periodic updating of the life factors.
Currently, a DFRDB member retiring at age 60 with a notional life expectancy of just 15.6 years must earn 6.4% on the lump sum to offset the amount by which his pension has been reduced.
The continued use of out of date life tables means that the amount of money deducted from each fortnightly pension payment to repay the lump sum far exceeds the amount that would apply if the latest life tables had been used.
We want the Government to adopt immediately current up to date life tables in calculating commutation and fortnightly payments for all new DFRDB superannuants.