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Thursday, 4 April 2019
Page: 14943

Defence: Superannuation

Dear Mrs Wicks

Thank you for your letter of 18 February 2019 regarding petition number EN0842. The petition seeks changes to the Defence Force Retirement and Death Benefits Act 1973 to restore the perceived loss of benefits payable under the Defence Force Retirement and Death Benefits (DFRDB) scheme.

Like all Commonwealth defined benefit schemes, DFRDB was developed as a structured benefits scheme. DFRDB has a number of key features that include:

payment of pension benefits on leaving the permanent forces after 20 years' service (irrespective of age);

a higher percentage of final salary as a pension compared to other schemes;

the ability to commute or exchange part of the pension for a lump sum;

the ability to receive lifetime indexed pensions with reversionary benefits to spouses and/or children or orphans.

These are benefits that are not normally available without significant additional costs to the member. The DFRDB scheme compared favourably with other limited superannuation schemes of the day, and continues to recognise the unique nature of military service.

For many years, retired military members and ex-service organisations, have sought to improve various elements of DFRDB and its replacement scheme, the Military Superannuation and Benefits Scheme (MSBS). These campaigns focus on single or discrete elements of the scheme without consideration of the overall benefit available to members upon retirement.

The lifetime reduction of the DFRDB pension is consistent with arrangements in the other civilian and military superannuation schemes where a member elects to take all or part of their benefit as a lump sum instead of a lifetime pension. All the civilian and military superannuation schemes apply factors that take into account life expectancy. The way that they do this varies according to the design of the particular scheme. None of the schemes include a recalculation of the pension if a member reaches or outlives the life expectancy incorporated in the factor used to calculate the entitlement.

Whilst I acknowledge that the issues raised in the petition cause considerable concern amongst a group of the ex-service community, the Government does not support the proposed legislative changes to the scheme.

Defence can confirm the existence of various application forms and fact sheets from the 1970s onwards that make clear the resulting permanent reduction of pensions following a member's election to commute. However, it is acknowledged that there are different views among some in the veteran community about the appropriateness of information provided to members at the time.

Recognising the importance of open and transparent discussion around veteran concerns, the Government will commission an independent inquiry to examine the information provided by scheme administrators and relevant departments to members of the DFRDB scheme.

The Government will consult with the ex-service community about the terms of reference for the inquiry, as well as panel membership. Ex-Service Organisations and scheme members will have the opportunity to make submissions to the inquiry and raise any other concerns relevant to the scheme. The inquiry is on the agenda for the next Ex-Service Organisation Round Table, to be held on 2 April 2019.

I trust this information will be of assistance to you and the Committee.

Yours sincerely

from the Minister for Veterans' Affairs, Mr Chester(Petition No. EN0842)