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Monday, 24 May 1965

Senator BISHOP (South Australia) . - This Bill is designed to alleviate the position of persons who entered the Services before the operation of the Defence Forces Retirement Benefits Act in 1959 and seeks to restore the proportion of pension to pay. This is understandable because of rising incomes and rising prices. No doubt this has application particularly to the increases in pay granted to members of the Defence Services in 1964. As this Bill aims to correct the position which has arisen in relation to the proportion of pension to pay, the Opposition, in this respect, does not oppose it. We see it, as the Minister for Defence (Senator Paltridge) indicated in his second reading speech and as the Minister for the Army (Dr. Forbes) explained in his ministerial statement in another place, as an improvement of the present position. The Minister also indicated that further legislation will be considered and that there are some recommendations in hand at the present time.

A matter which seems to me to be of importance and which will improve the present position is that the whole of the existing Act, which is very difficult to follow, will be replaced with two separate Acts. This simplification, in itself, will be very important. As I have said, Opposition members see this Bill as an improvement on the existing legislation. We see it against the background of criticism by members of the Services themselves and representations by honorable senators which have highlighted a number of anomalies in the present legislation. It has been argued in the past that this superannuation scheme cannot operate in the same way as other superannuation schemes because it provides for earlier retiring ages for its contributors than do other superannuation schemes, and because of this fact there are more complicated provisions to be set out. There is a limit to the increases and improvements in relation to entitlement to benefits which may obtain in ordinary superannuation schemes.

I come to the first consideration which I think is important. I believe that in the circumstances of the Services we should not be guided by the decision that this Act has to follow the pattern of superannuation Acts; that it should be worked on an actuarial basis; and that the scheme should in fact attempt to pay for itself. It seems to me that we should recognise that there is a special pattern of organisation of promotion and retirement in the Services and also a certain period when members might resign by reason of the nature of the Services. Because of these facts, the Defence Forces Retirement Benefits Fund ought to be redesigned and reshaped to avoid the sort of burdens that apply to contributors to ordinary superannuation schemes. We know, too, that in all States this situation has been imposed upon subscribers. It is the policy in the various States for the governments to assume responsibility for the payment of increasing amounts of subsidy to provide superannuation benefits. This has applied in my own State of South Australia, and in other States too.

While we do admit that this matter has its political side, we think there is need to take stock of the basis of the scheme and to have it examined. It might be worthwhile pointing out to the Government that a comprehensive inquiry into this scheme has not been held at any time although Sir John Allison did conduct an inquiry into it some years ago. His report was finally completed, I think, in 1959, but no member of this Parliament has been able to obtain a copy of it. I tried to get a copy, but I could not. Because there has not been a comprehensive inquiry, members of both Houses of this Parliament have not been able to analyse and decide the requirements of a bill which might be introduced to deal with this scheme. The Opposition says that this has an important side effect. Some examination or canvass ought to be made of the scope of a superannuation scheme to be applied to members of the Services.

As I said when I began my speech, this is a preliminary move towards easing burdens on those people who joined the Services before 1959 and who, in their later years in the Services, would have higher and continually increasing contributions to make to this superannuation fund. Because of this fact, the Government has provided some alleviation of the position. This action is understandable. It is a characteristic of all superannuation schemes in Australia that when wages rise the burden that is placed on the superannuation contributor becomes even greater.

One of the amendments which is proposed in this Bill is a good one. This provides that a pre-1959 entrant to the Services will have a final election or option of deciding not to pay additional contributions and of receiving the Commonwealth share of the increase in pension entitlement without making a matching contribution. This means that, if these entrants so desire, they themselves will be able to avoid making contributions towards their pension but they would not receive the additional pension which otherwise would be added upon the contribution by them of their share. As I have said, these people can elect not to pay additional contributions and they will receive an increased pension which would be equivalent to the Commonwealth's share of the increase in contribution, but they would not have to pay a matching contribution. This would be a final election and, after they had so elected, they would have no further opportunities to decide to assume the whole of the unit value. They would have to be content to receive only the Commonwealth's share of the increased contribution.

The Minister made the point in his second reading speech that the amount of the noncontributory element of pension provided by the Commonwealth will represent, on the average, 774 per cent, of the increase in pension that would be available if the member paid the contribution. The Minister also said that the actual percentages ranged from 80 per cent, at the earlier retiring ages to 71.4 per cent, for those retiring at 60 years of age. I make the same point about this factor as I made when I commenced my speech. I think that, in the very nature of this scheme, consideration might be given to an advance upon this amount for the purpose of improving the scheme overall. Reference has been made to the existing position of the pre-1959 subscriber who elected not to increase his contributions. The situation could arise that he receives a promotion or a rise in pay. In those circumstances, he can still take up the value of the existing units if he so desires. This was done in 1963.

Some of the minor amendments are worth mentioning. The first of these amendments provides for the case where, under the existing legislation, an other rank invalid pensioner might have his pension suspended. This has been prevented by a proposed amendment in this Bill. A serviceman who is demoted in rank or reduced to a lower mustering as a result of which he earns a lower income will be able to nominate to continue to pay the higher contribution or to reduce his contributions to his new and lower level. In other words, he can continue to pay the contributions he made before his demotion, or he can elect to contribute upon his lower income.

One of the matters which has always been a bone of contention in this legislation is the amount of gratuity which is paid after an ordinary ranker in the Services has served his six year term. This amount is recoverable from the benefits that become available later. Previous legislation provided that this amount might be recovered over a period of four months. An amendment in this Bill provides that the period prescribed for repayment of this amount will be increased to 12 months. The amount will be recoverable except in the case of invalid or widows' pensions. The Bill also provides that recovery will 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 or with a degree of incapacity that is insufficient to attract an invalid pension. Another amendment to the original Act which is important is that provision is made for the suspension of an invalidity pension where the earnings of the recipient, who is in employment, are not less than two-thirds of his rate of pay at the time of retirement. This has been a matter for complaint to this Parliament by ex-servicemen. This seems to me to impose a burden upon the person who is forced to retire and who finds that it is necessary to go and find employment so as to earn a living to supplement his pension. If he enters the Commonwealth service, he may have his pension suspended. Whilst this amendment is an advance, it still seems to me that the legislation should be further improved in this respect. At any rate, the situation has been affected by a change of money values, and the earning rate of twothirds will now be based on an amount equivalent to his pay at the time of retirement.

Another provision referred to by the Minister in his second reading speech relates to the re-entry to the Fund of a contributor who has retired on medical grounds and who receives a refund of contributions. 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. This really is not a new provision; it is common to most other Acts of a similar kind.

We realise that it is intended to bring down improved legislation in the Budget session. That will give us an opportunity to examine the anomalies that have been mentioned and also to consider the comparison of benefits and pay in various other countries. That may enable us to persuade the Government to improve even the legislation that it will then introduce. Members of the Parliament have complained about not being able to understand the scheme in its present form. The same, of course, is true of ordinary superannuation legislation. One must be familiar with the principal legislation before one can follow the improvements that are being effected in amending legislation. But the difficulty is even greater in this particular case because of the segregation of particular items.

It is very difficult, even though we have before us the table of comparison that has been circulated, to make a sensible comparison of the Australian scheme with schemes that are operating in other countries. In each country there are certain provisions that are advantageous and others which are disadvantageous. 1 draw attention to the schemes in operation in Great Britain and the United States which offer fairly good benefits, and they are non-contributory. Canada has a non.actuarial scheme which offers very good benefits. One would expect schemes so based to be better than our scheme. Our scheme was introduced in 1948 as an urgent measure following the end of the last war. Improvements have been effected since then, but unfortunately they have been introduced at fairly short notice. Whilst it might be argued that, because we had notification of this legislation, it should be possible for us to understand fully all its provisions and allow for proper debate, I suggest that the time available prevents this being done. We have before us a bill which extends over 13 pages and which must be considered beside an Act which embraces the five sections I have mentioned. Many of those sections are related to one another; some of them are similar to provisions in the Commonwealth superannuation legislation and to some extent in State legislation. Nonetheless, that does not afford the Senate an opportunity to examine to what extent the scheme might well be revised. In any case, the table of comparison that has been circulated probably will enable -us to examine the Bills that are to be introduced later in the year and to see whether they will effect the improvements that we believe should be effected.

The anomalies that exist will not be removed merely by our following the trend that has been followed in the past, with amending legislation being introduced as wage scales change in order to relieve the burden that rests on the older contributor who is faced with the need to elect whether he will take out additional units and pay additional contributions. When such contingencies arise the Government makes further attempts to alleviate the position of such contributors. So we find ourselves in the position where we are forced to accept legislation which the Government introduces as a matter of urgency merely because it effects some improvement of the existing state of affairs.

On previous occasions when amending legislation has been introduced very little time has been available to consider the amendments. Amendments to the 1948 legislation were introduced on 5th December 1950. They were debated on 7th December, and the Parliament rose on 8th December, the next day. In 1957 an amending bill was introduced on 4th December, it was debated on the same day, and the Parliament rose on 5th December. In 1962 amending legislation was debated on 6th November, but the Parliament did not rise until 6th December. That case was an exception. Legislation which was introduced in 1963 to relieve the burden on contributors was introduced on 28th October and debated on 29th October, and the House rose on 30th October. I suggest that we should put an end to this routine method of examining the benefits that are paid to members of the Services.

We must have regard to the fact that the defence Services are unique, that they are separate from other Commonwealth or State organisations. If the requirements of the Services are different from those of the ordinary Commonwealth and State activities and if servicemen are exposed to a complexity of disabilities to which the ordinary public servant is not exposed, the basis of the defence forces retirement benefits scheme ought to be different. The scheme ought to be more advantageous and should impose a lighter burden on the contributor. The basis of our scheme should be more like those of the United States and the United Kingdom.

I have outlined our attitude to the legislation. I do not propose to develop an argument about anomalies; probably they will be the subject of discussion when we are considering further legislation a little later in the year. May I mention, however, that there is an urgent need to amend and improve section 42, which provides for gratuity payments to servicemen who are retired on the ground of incapacity, and also sections 51 to 53 and section 73. 1 refer to other ranks who do not receive a pension but who receive a gratuity which is based upon their length of service. A young man may have been in one of the Services for not more than three or four years, and he may get not more than £200. That is not right. There seems to be a defect in the legislation in this respect. I know that this is related to the early retiring age and the general form of the scheme. I refer to the method of assessing a percentage of incapacity. A man's incapacity is rated as A, B, or C, according to a percentage. In all other superannuation Acts contributors who are incapacitated and cannot perform their ordinary duties receive the standard pension.

As I have indicated already, the Opposition does not oppose the measure. It is important legislation which has become necessary because of increased pay standards in the services and the effects on persons who cannot afford to take up the burden of increased contributions to the Fund. The legislation provides that persons so affected can contribute under certain conditions.

The provisions on the question of recovery also need further improvement. To the Opposition it does not seem to be a solution to the problem to say " If you are discharged after six years service, re-engaged for service and accept payment of £300, you can repay that amount out of the lump sum to be paid in lieu of long service leave, if you wish ". I believe that the scheme should be considered in a new light and that an inquiry should be conducted within this Parliament to determine whether the scheme might operate more effectively on an actuarial basis or on similar lines to the schemes in operation in the United States of America and the United Kingdom.

Bill read a second time, and passed through its remaining stages without amendment or debate.

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