All ADF personnel and veterans on MSBS, like I am, are probably well aware that our retirement income is indexed at CPI only, whereas since mid-2014 those on DFRB or DFRDB have had theirs indexed differently.
That strikes me as both unfair and discriminatory. Those of us who have been retired for a while will know the effect this has on their purchasing power; and it is up to us to do something about it, before those who follow us face the same situation when they retire. I have written to our Parliamentary leaders in the terms below, and encourage all of you to take similar action, with your local Member and Senators, and if you are up to it, relevant Ministers and the Media.
Without us being heard, we run the risk of no action being taken to protect our modest retirement. DFWA and ADSO are also campaigning for a “Fair Go”
Letter to Parliamentary Leaders
Military Covenant: Finally a ‘Fair Go’?
I am addressing this message to all sides of the political divide, as it is high time for the Parliament to take a multi-partisan approach to resolve a serious inequity in the treatment of military superannuation for veterans. The politicking over military super needs to cease. No more delay in fixing this inequity can be justified.
This affects those in one of the two categories of now-closed schemes (1), namely the Military Superannuation Benefits Scheme (MSBS). Like DFRDB, MSBS was designed so that its retirement income streams would be indexed appropriately to maintain a recipient’s purchasing power (2).
The factor by which this occurred was through a biannual adjustment by the CPI, with the legislative intent that the super income would generally keep up with retired military families’ cost of living. This was a ‘condition of service’ to which Service people themselves compulsorily contributed.
It is well known that changes to how CPI is calculated have since resulted in a steady erosion of the value of military super. In recognition of this, in 2014, the Parliament amended the Defence Force Retirement and Death Benefits Scheme (DFRDB) [and DFRB] Act, thereby rightly changing the indexation factor so that superannuation retirement incomes under these schemes would be adjusted appropriately, in a similar way to those of age and services pensions (3).
What was known as the “Fair Indexation” Act applying to DFRDB was explicitly promised to be a ‘first step’ (4). However, MSBS superannuation remains subject to a substandard CPI factor that no longer reflects real cost of living movements. The Australian Human Rights Commission (5) has agreed that this differential treatment between members of the schemes may be discriminatory. It also places MSBS superannuants and their families at the serious disadvantage of having the purchasing power of their retirement incomes spiral ever downwards. Is this really a “Fair Go”?
I understand that in this year of the Commemoration of the Centenary of the Armistice, the Parliament may be considering instituting a “Military Covenant”. This occasion is surely the ideal time to put this discrimination and unjust disadvantage behind us – by way of a non-partisan agreement that the Parliament shall resolve immediately to index MSBS superannuation payments in exactly the same way that DFRB/DFRDB retirement income streams are appropriately adjusted now.
The Centenary of Armistice commemoration presents an opportunity for the Parliament to take this ‘second step’. It could be achieved easily by drawing upon the Future Fund (6), and would treat this cohort of deserving veterans with the same respect and dignity that the Parliament showed to DFRDB recipients in 2014.
A positive reply and an undertaking from you all to take action, will go a long way towards building trust and respect with military veterans.
Better still, a joint Media Statement by the Prime Minister and the Leader of the Opposition, giving a cast iron guarantee that this second step will now be taken, would admirably reflect the motives behind the “Military Covenant”. I look forward to that!
1. DFRB/DFRDB: Defence Force Retirement Benefits / Defence Force Retirement and Death Benefits. MSBS: Military Superannuation Benefits Scheme. A new scheme, ADF Superannuation, came into effect on 1 July 2016.
2 This was a condition of employment (Pollard Report March 1973, 1.2 (2)). 2.6. Ch IV, and R.4), most recently expressed as follows: “… … ensuring that $1 in 2011 will be equivalent to $1 in 2028” (MilSuper Book 2011, 5, subpara 4). Until about 1990 the CPI was a valid index by which to achieve this – since then it has no longer been that.
3. The greater of the CPI and the Pensioner and Beneficiary Living Cost Index (LCI) measured against a floor percentage of Male Total Average Weekly Earnings (MTAWE).
4. In response to queries about the DFRB/DFRDB Fair Indexation Bill, on
27 March 2014, Senator Ronaldson stated:
“The Government has long recognised the unique nature of all military service. As we have also previously acknowledged, the fair indexation of DFRB and DFRDB pensions is an important first step [my emphasis] in addressing a long standing grievance of the veteran an ex-service community and the Government remains committed to considering contiguous matters within the context of the current fiscal environment.”
5. In response to concerns about discrimination in the way DFRDB and MSBS superannuation pensions have been differently indexed since mid-2014, on 24 February 2016, the President of the HRC has agreed that this discrimination raises questions about Australia’s adherence to human rights to equity and non-discrimination obligations in many fields, including provision of pension entitlements, to which Australia subscribes.
6. Future Fund Act (2006). A valid step that clearly reflects the Fund’s legislative intent to meet unfunded [and non-discretionary] superannuation liabilities