Military Superannuation – Legislative History

20 Sep 2011

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