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STANDING COMMITTEE ON FINANCE AND PUBLIC ADMINISTRATION
05/07/2007
Superannuation Legislation Amendment Bill 2007

CHAIR —Good afternoon. Would you like to make any amendments to your written submission?

Mr Jamison —No.

CHAIR —Would you like to make an opening statement?

Mr Jamison —Firstly, we would like to thank you for the opportunity to appear before you and reinforce our submission to you. Our submission is in the name of the Regular Defence Force Welfare Association but we are now dropping the word ‘regular’ from the title because we cover both the reserves and the regular parts of the ADF. Our detailed submission is about two aspects of the bill: schedule 4, the restoration of a pension that was previously cancelled on remarriage; and schedule 6, the reversionary spouse benefits under the DFRDB Act. We are very pleased that the restoration of the pension in schedule 4 is being proceeded with. We feel that this is a long overdue action.

We are concerned, however, about the unfairness of the delays in implementing the 2006 budget announcement regarding the reversionary spouse benefits under the DFRDB Act. The reason is given in our submission, and we seek your assistance to correct that. We believe there is no legislative or financial reason that this measure cannot be made retrospective to at least the date of the 2006 budget announcement, or preferably back to 1 July 2003 when a similar provision was made for the Public Service schemes. That concludes my opening remarks.

CHAIR —At the outset I might refer to the item on page 2 of your submission where the association indicates that it received correspondence from Minister Billson which suggested:

... that there is the possibility of Act of Grace payments for cases arising between the 2006 Budget announcement and the commencement of Schedule 6.

Firstly, in what context was that letter issued from Mr Billson and, secondly, might it be possible for that to be tabled?

Mr Griffiths —This was the result of a third letter to Minister Billson about when the legislation was going to appear and continually asking whether it was going to be retrospective. Eventually we received two responses in which the question of retrospectivity was not addressed and in which the minister said it was hoped the legislation would be introduced ‘before the end of’ and giving a series of deadlines—none of which were met until this latest one. I am not entirely sure whether we should table the letter because it is a letter from the minister to us. Perhaps Minister Billson should really be the one who decides whether the letter can be made public.

Mr Jamison —I have no objection to it being made public.

Mr Griffiths —We have no objection, but Minister Billson is at the other end of the correspondence. I am not sure what the protocol is.

CHAIR —I think as it is a letter in your possession the decision is yours. Is it something you would prefer to take on notice?

Mr Jamison —We would be happy to table it now.

CHAIR —Thank you. Also on the same page you mention a particular case of an individual who you think could be adversely affected. Could you take us through that? 

Mr Griffiths —Senator, we were approached towards the end of 2006 by our Victorian branch regarding a widow who had approached them because she had seen that we had been explaining that the legislation was going to be introduced to allow this pension eligibility period to be reduced to three years. Her husband had died in August 2006 after just over 37 months of marriage. If the provision had been in force, she would obviously have been entitled to full pension. We then contacted the minister. That was when we first started writing to the minister asking, ‘What is happening?’ and ‘Is this going to be retrospective?’ The minister started responding about act of grace payments even if the legislation had not been passed. The widow had gone to the delegate of the Defence Force Retirement and Death Benefits Act in Victoria, who had rejected her claim because he legislation had not been amended. That is as far as that has gone.

Senator SHERRY —On this issue, it does seem to me a reasonable expectation that if something is announced but not yet legislated it would be reasonable for an individual in those circumstances to receive the benefit. Do you have any idea of the number of people this would concern?  Say we were to recommend that this change be retrospective to the date of announcement. I ask for the number because it has a cost implication. I frankly would not have thought it would be significant—other than for those who would receive the benefit, obviously.

Mr Griffiths —Budget Paper No. 2 of 2006, at page 146, identifies this particular measure. There were in fact no numbers given by the department, because they said that the cost of this measure would be met fully from within the existing resourcing of the department. They estimated that the total cost over four years would be about $600,000—$0.06 million over four years—which suggests $150,000 a year. By our estimates, the average sort of widows pension of this kind is somewhere between $10,000 and $20,000. So that suggests no more than 10 widows a year. I keep using the term ‘widows’ in general. This measure mainly applies to widows. So it is not very many people and it is not very much money.

Senator SHERRY —I accept that. We will see what your correspondence says, but if the minister is indicating that X number of these people can apply for an act of grace payment, why shouldn’t they have the certainty of the act?  Why should they have to apply for an act of grace payment? 

Mr Griffiths —That is exactly our question.

Senator SHERRY —And there is clearly not a significant cost issue in terms of the legislation. Obviously I will explore that with the department. On your estimate, we are probably looking at about 10 people at a cost of $150,000.

Mr Griffiths —Senator, it depends on the kind of payment that the minister is proposing to make. I was under the impression that an act of grace payment is a lump sum.

Senator SHERRY —It is.

Mr Griffiths —If we are talking about a lump sum, then presumably the lump sum that is going to be paid out is going to have a much more significant budgetary effect because it is going to be a lump sum equivalent to the lifetime pension received by the widow.

Senator SHERRY —I think that is worth exploring. I have some sympathy for the situation. It is a very small number of people. It is not a big cost in any sense. Although you are right—if it is paid out as a lump sum, if it is lump sum equivalent, ironically it would be a much more significant cash cost for that year if those payments were made. It is a pretty tortuous process. You are aware of the act of grace payments provisions. It takes some time to resolve. Do you think a widow in those circumstances—it could be a widower, I suppose—should have to go through that sort of process: an act of grace payment application?  It is lengthy, it is complex, it is not an easy process.

Mr Jamison —We think it sends the wrong message to the ex-service community that such a process has to be gone through on something that is seen to be an act of fairness and equity on behalf of the government and its treatment of the ex-service community.

Senator SHERRY —Okay. You have obviously referred to backdating to May 2006 the date of announcement. Do you have any explanation as to why, given this was acted on in the general public sector from July 2003, the issue was not dealt with until almost three years later in respect of military defence personnel?

Mr Jamison —No, we do not, and it is one of a number of issues that puzzles us, because we thought that members and former members of the ADF would have been worthy of at least the level of equity in the treatment that is given to public servants. It is something that we have no explanation for or an understanding of.

Senator SHERRY —If your costings are accurate—and you have referred to the $600,000 over four years, which the department has provided—if we recommended backdating to July 2003, which is four years, presumably we would not be looking at a cost any greater than what the department has provided for the four out years: $600,000.

Mr Griffiths —That seems logical, but obviously ComSuper would be in a better position to estimate that. I presume they worked this figure of $600,000 over four years from the number of pensions that were terminated in the previous four years.

Senator SHERRY —Yes. ComSuper are not appearing before us, but the department may be able to give us some detailed information. It just seems to me not unreasonable, given the announcement of May 2006, but also the previous change for the general public sector from July 2003, that it is not exactly going to break the budget to make it retrospective to either of those dates.

Senator FIERRAVANTI-WELLS —With regard to communication with and the contacting of beneficiaries about the restoration of pensions that were previously cancelled on remarriage, do you have some recommendations in relation to that? How you would see that most effectively being done? The ex-defence community is quite tight-knit, so how do you envisage that happening?

Mr Griffiths —It is tight-knit and it is not tight-knit, if you see the issue. It is easy to lose contact with, particularly, widows in these sorts of circumstances. They meld into the general community. Some of the suggestions we would have on how to rectify that is that there ought to be public announcements and advertising, and ComSuper should actively go out and seek them out.

Senator FIERRAVANTI-WELLS —Given that some have not had contact with the Commonwealth for many years, you feel that that is the way of doing it?

Mr Griffiths —I cannot think of another effective way of doing it.

Senator FIERRAVANTI-WELLS —Through the networks of—

Mr Griffiths —We certainly would be publicising it through our networks, but we suspect that we would not reach the total number.

Senator FIERRAVANTI-WELLS —Given that ex male members tend to fraternise, whereas once women are widows they do not tend to be as interactive. Thank you.

CHAIR —Mr Griffiths and Mr Jamison, thank you very much. Although brief, your appearance has been very helpful for our understanding, particularly in relation to the issue of the potential act of grace payments.

Proceedings suspended from 1.29 pm to 1.46 pm