MILITARY SUPERANNUATION INDEXATION – REBUTTAL OF COMMENTS BY THE HON. WARREN SNOWDON MP
ADSO rebuts the Ministers comments made in the House during a debate on 15 May 2013.
In the Veterans Affairs Legislation Amendment (military compensation..) Bill debate in the House on 15 May 2013 the DVA Minister responded to comments about the indexation of military superannuation pensions . ADSO rebuts his comments here.
Minister: “Briefly, I will refer to the comments which have been consistently made about indexation of military pensions.
The first observation is that people are linking a superannuation payment—an entitlement as part of their employment—to income supplements or income support payments as a pension, which they are not. They are in no way equivalent to a pension; they are a superannuation benefit. I think people are either deliberately obfuscating or confusing the two issues.”
ADSO: Minister, you confuse the purpose of a taxpayer-funded pension with the reason for indexation. The only reason to index any taxpayer-funded pension, whether it is a welfare payment or a defined benefits superannuation payment, is to preserve the purchasing power of the payment.
Neither a welfare pension recipient nor defined benefit super pension recipient should see his/her standard of living rise or fall if the pension payment is indexed fairly. This is an important principle, and is why welfare (age etc.) pensions are now indexed fairly. But military super pensions are not. Our case is that simple.
Military superannuation pensions need to rise by the same percentage and frequency as the age pension and for exactly the same reason – to maintain pension purchasing power.
Retention of purchasing power was the foundation principle of the Jess Report as agreed by the Senate in 2001 and 2002 with senators Hogg, Sherry, Conroy and Wong present on at least one committee. The deliberate decision both the Whitlam Labor Government 1975 and the Fraser Liberal Government 1976 to treat welfare and pension indexation processes identically reinforces the ADSO position for equal indexation mechanism treatment now.
Super and welfare are two different things with two different purposes but the reason to index one is the same as for the other – simply to maintain its purchasing power.
Minister. “I am not going to go to the merits of the arguments because I do not agree with them, but I do want to make one observation.”
ADSO. Minister as a member of the Government whose credo is evidence based decisions you seem to have a closed mind to the facts
Minister. “I think the member for Riverina gave the impression that this proposal for indexation was about the impact on the lives of people who are currently serving. In fact, nothing could be further from the truth. This will not impact at all on at least 150,000 serving men and women who are under the current MSBS superannuation scheme. They will not be impacted at all.”
ADSO. Wrong Minister, your ignorance of the facts is amazing.
Superannuation is compulsory for all military schemes of which MSBS is the current one for serving men and women – Agree?
CPI is its superannuation indexation – Agree?
The employers contribution is indexed at CPI – Agree?
From when an employee leaves the ADF until he or she reaches their Preservation Age the employer component is withheld by the Government and only indexed to CPI – Agree?
An employee leaving the ADF before Preservation Age is not permitted to roll the Employer Component into a fund of their choosing – such funds are retained by the Commonwealth – Agree?
At Preservation Age if the retiree opts for an indexed pension then CPI is the method – Agree?
Minister. “I had a meeting quite recently with a senior, very venerable returned serviceman who was in discussion with a very venerable serving man who has recently come from Afghanistan. The retired veteran said to me, What are you doing about our pensions? I said, Were not doing anything about your pensions. He said, Well, you need to. I said, Why? He said, Its all about these young blokes. This young serving veteran said, No, its not. It has no impact upon us at all. Let us understand what is happening here.”
ADSO. Minister is your view based on the word of one veteran? Where is the remainder of your evidence? It seems obvious that your young Afghanistan veteran does not fully understand his MSBS scheme. I can produce evidence from MSBS superannuants that will prove otherwise. This reinforces one of ADSOs major concerns, youth believe they are bullet proof and never going to grow old – superannuation is irrelevant to them. When they eventually retire they sadly find out the facts and then appreciate how their employer has disadvantaged them.
Minister. “This is about dealing with a retirement benefit which people could take after 20 years of service. Many took it in their early 40s, got a lump sum and an annuity for the rest of their lives,…”
ADSO. All defined benefits that recognise the uniqueness of the military profession. Are you suggesting these benefits are generous?
Minister. “…and they are now asking the Commonwealth to index that lump sum to the equivalent of a pension, which it is not.”
ADSO. NO Minister they are seeking restoration of their agreed contract that was based on the same indexation principle that did apply to all Commonwealth pension and welfare payments before 1997.
Lets agree on some basic facts.
1. The military superannuation CPI indexation was set by the parliament in 1970s on the same basis as other Commonwealth employees and welfare recipients that was as the basis for maintaining purchasing power – Agreed?
2. Quality Offsetting and Product Substitution applied to the CPI from 1989 impacted on subsequent annual increases – Agreed?
3. The wages agreement in the early ninetees broke the nexus of CPI with wages – Agreed?
4. The combined impact of that was CPI no longer maintained the purchasing power of wages – Agreed?
The Coalition Government recognised this impact and in 1997 after extensive lobbying by age pensioners and social welfare groups changed the indexation method for Age and Service pensions and some income support recipients from CPI to include a wages component 25% of Male Total Average Weekly Earnings (MTAWE). This de jure indexation method became the standard for measuring purchasing power – Agreed?
But military and commonwealth employees superannuation indexation remained pegged to CPI – Agreed?
In 2009 the Labor Government updated the indexation method to maintain purchasing power for Age and Service pensions and income support recipients by adding to CPI a new factor PBLCI and increasing the reference wages component to 27.7%. – Agreed?
But again military and commonwealth employees remained pegged to CPI – Agreed?
The Government has broken its contracted condition of employment – superannuation payments indexed to maintain their purchasing power
Minister. “Let there be no confusion here. I am surprised at the dishonest way in which this debate has been repeated around the country by some elements of the returned services community and promoted by the opposition as if in some way it is going to impact upon current serving veterans. It is just really dishonest. I would say to them: I have no problem with you having the argument but let us be clear about the intent, who it is meant to address and who it is going to exclude.”
ADSO. Why should a defined benefit exclude anyone? Does your PCSS pre-2004 defined benefit exclude anyone? All service personnel, serving and retired, are entitled to have their superannuation fully indexed to retain the purchasing power across subsequent years. That is what the current Military Superannuation hand books currently say – Agreed?
Minister. “We do not agree with you. You have got every right to promote your view, but let us do it in a way which actually demonstrates very clearly who you are talking about rather than confusing the discussion about this indexation as if it is going to impact upon people who are MSBS members because it will not. That is all I have to say… “
ADSO. No Minister there is no dishonesty in our presentation of the facts. We have lived the experience and we know the truth. You appear to have been poorly briefed.
We eagerly await your reply.