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Monday, 24 May 1965

Senator ANDERSON (New South Wales) (Minister for Customs and Excise) . -I move -

That the Bill be now read a second time.

The main purpose of this Bill is to effect the changes in the defence forces retirement benefits scheme that were announced in the Senate on 27th April 1965. These changes are designed to alleviate the position of those pre-1959 Act entrants who have found some difficulty in meeting their contributions to the Fund, particularly when nearing the point of retirement. As the Act now stands, an increase in pension entitlement shortly before retirement, resulting from a promotion or increase in pay, may mean a high rate of fortnightly contribution for these servicemen because of the short period within which they must meet the additional cost of their share of the higher pension entitlement. The impact of such high fortnightly contributions upon pre-1959 entrants was alleviated by the provisions under which in certain circumstances, contributions may be deferred and paid in a lump sum on retirement. Nevertheless, some members have continued to experience difficulty in the latter stages of their service. Those who have joined the forces since the 1959 Act was passed do not face this difficulty because their contributions are expressed as a uniform percentage of pay throughout service.

The basis of the proposed changes is that, in future, pre-1959 Act contributors whose pension entitlements are increased will have the option of deciding not to pay additional contributions and of receiving the Commonwealth's share of the increase in pension entitlement without making a matching contribution. Such an election will be final and, once made, the Commonwealth's share of any further increases in pension entitlement will be granted on a non-contributory basis without, of course, the portion of the additional pension entitlement normally provided by the member's own contributions. The amount of the non-contributory element of pension provided by the Commonwealth will represent, on the average, 77½ per cent of the increase in pension that would be available if contributions were paid by the member, the actual percentages ranging from 80 per cent, at the earlier retiring ages to 71.4 per cent, for those retiring at 60 years of age.

A pre-1959 contributor who elects not to increase his contributions and who has previously rejected portion of his total pension entitlement will retain his existing right, upon a subsequent promotion, to elect to take up some or all of that previously rejected entitlement, subject to medical examination, but it follows that in these circumstances no additional contributions will be required and that the additional benefit will be confined to the Commonwealth's share of the previously rejected entitlement.

When deciding upon these changes, the Government recognised that for some servicemen the June 1964 pay increases had resulted in substantial increases in contributions. The Bill therefore provides that the option of electing to receive the Commonwealth's share of an increase in pension entitlement, without making a matching contribution, will initially be available, with effect from the date immediately prior to the increase in contributions resulting from the June 1964 pay increases, for a period of three months from the commencement of the amending legislation.

In addition to this major change in the scheme, the Bill includes the following minor amendments -

(a)   While there has never been a case in which an other rank invalid pensioner with 20 years' service has had his pension suspended by the Defence Forces Retirement Benefits Board, nevertheless, suspension is possible under the law, and the Bill provides for an amendment that will exempt the pension of such a member from the suspension provision.

(b)   The Bill provides for a member who is reduced to a lower rank or mustering which places him in a lower pension entitlement category to have the same option as contributors under the Superannuation Act of continuing the higher contribution for the higher benefit or of reducing contributions to the new lower level with a refund of excess contributions in the event of an election to reduce.

(c)   Upon re-engagement for a further six years' service after an initial engagement of six years, a member other than an officer may receive an amount of £300 which is an advance payment of benefit as incentive to re-engagement. The amount is recoverable from the benefits that later become payable, except where the benefit is an invalidity pension or a widow's pension. The Bill provides that recovery will also be waived upon the involuntary termination of service of a single member who dies in the Service or where a member is retired due to invalidity but with a degree of incapacity that is insufficient to attract a pension benefit.

(d)   In order to obviate the possibility of hardship being imposed on a pensioner who is required to repay such an advance payment, the Bill amends the period prescribed for repayment from 4 months to 12 months.

(e)   The Act provides for the suspension of an invalidity pension where the recipient is in employment and earning at a rate not less than two-thirds of his rate of pay at retirement. Because of changes in money values the Board has applied the provision on the basis of two-thirds of the current equivalent of pay at the date of retirement and the Bill includes a provision to validate this practice.

(f)   In the event of the re-entry to the Fund of a contributor who has received a refund of contributions, the Act presently provides that he shall not be entitled to claim any further benefit in respect of his previous service. The Bill provides that this restriction shall not apply where a member is retired for medical reasons, provided the period of absence from employment is less than 12 months, and he repays the amount of the refund of contributions and any gratuity received on the earlier termination of service.

Several other proposals of the Services and the Government Members Defence Forces Retirement Benefits Committee are being considered by the Government and a further amending Bill will be introduced in the Budget session.

The Government has also decided that the existing Defence Forces Retirement Benefits legislation should be simplified by replacing the present legislation with two separate acts. One will deal solely with the scheme as it applies to the post-1959 Act entrants. The other, which will apply to pre- 1959 Act entrants, will contain much of the existing complexities in the legislation. These arise primarily because of the need to apply to those contributors both the pre-1959 provisions, in respect of the pre-1959 Act element of their total entitlement, and separate provisions in respect of subsequent entitlements. Their subsequent entitlements are based on similar principles to those in the scheme as it applies to new entrants, with modifications to take account of the different contribution' bases. However, the necessary re-drafting will take a considerable time.

The Government is aware that the introduction of the Bill at this stage of the current sittings leaves little time for debate but it decided to proceed with the Bill after considering the effects of delaying the introduction of the amendments. The proposed changes are for the benefit of servicemen and it is clearly in their best interests that the Bill be introduced now rather than that it should be deferred until the Budget session.

As the information will be of interest to all honorable senators in connection with this Bill, I am having circulated a statement setting out the retirement benefit provisions that apply to members of the armed forces in Britain, the United States of America, Canada, New Zealand and Australia, together with examples of rates of pay in the various countries. I commend the Bill to honorable senators.

Debate (on motion by Senator Bishop) adjourned.

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