1 – INDEXATION – AUSTRALIAS DEFENCE FORCE PERSONNEL SHORT CHANGED
Members of military superannuation schemes are unfairly treated when compared with all other Australians:
- They paid a higher compulsory percentage of their pay than public servants. They receive a lower average super pension than public servants.
- Their super pensions are taxed until death. The vast majority of Australians pay no tax on their super pensions after age 60.
- On the members death, surviving spouses receive 62.5% of their loved ones DFRDB pension. Surviving spouses of pre-2004 Federal MPs receive 83%.
- Military super pensions do not keep pace with the cost of living. They are indexed using an outdated formula that erodes pension purchasing power. This formula is based solely on the Consumer Price Index (CPI). The Australian Bureau of Statistics (ABS) states “CPI is not a purchasing power or cost of living measure.”
- In 1997 the Government abandoned the solely CPI indexation formula for Age and Service pensions by adding a wages indexation factor. In 2009 the Government continued to protect the purchasing power of those pensions by upgrading the indexation mechanism to be based on the greatest of CPI, the Pensioner & Beneficiary Living Cost Index (PBLCI) and the wages based measure (Male Total Average Weekly Earnings (MTAWE).
- After 20 years using CPI to index a $20,000 commencing pension, the military superannuant receives far less than they would have received had their pension been indexed in the same way as the Age & Service pensions.
- Military retirement and disability pensions now stand out as being more harshly treated than almost every other long-term Commonwealth payment that is subject to regular indexing to maintain its value.
We want the Federal Government to adopt the same percentage increase and the same frequency as used for Age and Service pensions for all components of Military retirement pensions (DFRB/DFRDB/MSBS) including the total reversionary pension for partners of deceased military superannuation pensioners.