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Wednesday, 1 November 1967

Mr McMAHON (Lowe) (Treasurer) - by leave - On 15th August 1967, in the Budget Speech, I informed the House that the Government proposed to seek an amendment of the Defence Forces Retirement Benefits Act to give common entitlements to all members of the Services on full time continuous duty for periods of 12 months or more by admitting to the benefits of the scheme those now excluded because they are enlisted for periods of less than 6 years. Because of the projected early finish of the present parliamentary session and the complexity of the task I regret that it has not been possible to complete the drafting of the necessary legislation in the time that has been available. However, there has been a great deal of interest in the Government's proposals and it is therefore appropriate that I should inform the House in some detail of the contents of the legislation that the Government expects to submit to the House early next year.

The defence forces retirement benefits scheme was inaugurated in 1948 to provide a common superannuation scheme for the three permanent arms of the Services. In essence, the scheme was limited to regular officers of the three Services and to other ranks engaged for 6 years or more. However, with the implementation of the national service scheme and the successful integration of national service and regular army elements there are now over 21,000 servicemen and women who, although serving for 12 months or more on the same basis and alongside longer serving members of the forces, do not enjoy comparable benefits.

The Government's proposals will remedy this. These members henceforth will enjoy the retirement benefits now available to permanent members of the forces under a scheme which is akin to an insurance scheme providing benefits of an annuity type. However, the combination of benefits which will be available to members will cover a wider range of possible events than would have been possible under the life assurance scheme which the Govern' ment considered earlier this year. Thus, for example, a married private soldier totally and permanently incapacitated as a result of war service will receive a pension of $31.50 per week under the defence forces retirement benefits legislation, together with a basic tax free pension of $34.55 per week under the repatriation legislation. In addition, of course, further repatriation benefits are provided in respect of children and by way of medical and hospital treatment.

The proposed Bill will make provision for admission to the fund of those members of the forces enlisted or appointed for fulltime continuous service for 12 months or more. Members who already have entitlement to pension from the fund, having reached the appropriate age for retirement for their rank, will be exempted from contributing again. However, provision will be made for additional benefits to these persons in the event of death or substantial incapacity, during their further period of service. The age pension previously payable will be replaced by the. generally higher rate of pension that would have been payable had death or invalidity discharge occurred at the time of age retirement. Included in the new members will be 15,800 national servicemen, 3,400 members of the Regular Army Supplement, 700 members of the Citizen Military and Air Forces and Naval Reserves and 1,300 female members of the various Services.

The new members will contribute to the fund from the first pay following the date of commencement of the Act. However, the Government will propose that eligibility for pension benefits be extended retrospectively in respect of former members of the forces whose service was terminated by death or substantial incapacity on or after the date of the first national service intake, 30th June 1965. While eligibility for pensions benefits under the Bill will accrue to members of the forces, or their widows and children, where death or invalidity occurred subsequent to 30th June 1965, provision will be made for payment of pension to those eligible to commence on and from 3rd November 1967.

It had been intended that pension payments should commence from the date of commencement of the amending legislation with one fortnight's contribution at the rate appropriate to the former member's rank being deducted from the initial pension payment to give contributor status in accordance with the provisions of the principal Act. Because the early end to the session will delay the introduction of this measure, 1 emphasise again that it is the intention of the Government to include in the Bill provision for pension payments to commence on and from 3rd November 1967. Members who would otherwise have been admitted to the fund and who might die or be discharged in circumstances which would establish pension entitlement under the proposed Act, between 3rd November 1967 and the commencement of the Act will thus be adequately protected. The effect of the Government's proposal will be to regard these former members of the forces as becoming members of the fund on the day immediately preceding the date of commencement of the provision and to deem that death or discharge occurred on that day. The cost of these pensions will be met by the Commonwealth and not the fund.

There are presently in the forces a considerable number of Commonwealth officers on leave from their employment who are contributing to the Commonwealth Superannuation Fund. The Government considers it appropriate that these members, like their Service colleagues, should contribute to the DFRB Fund. The Government will propose that the superannuation contributions of these members should be deferred while they remain on leave from their civil employment to serve in the forces. On returning to Commonwealth employment on the completion of defence service the officer will be expected to pay his deferred superannuation contributions. The refund of contributions and gratuity which the officer will receive from the Defence Forces Retirement Benefits Fund should be more than sufficient to permit this.

Although these members will not be contributing under both funds at the same time it is the Government's intention that, should a situation arise in which the benefit under the Superannuation Fund would be greater than the benefit payable from the Defence Forces Retirement Benefits Fund, benefits at the higher level should be paid. Speaking in general terms, the Defence

Forces Retirement Benefits Act now provides for gratuities for members of the fund, and the financial regulations of the various Services provide gratuities for nonmembers. It is proposed to continue this arrangement. The gratuity provisions will, however,beextendedtocoverthenew types of members to be admitted to the fund.

The Government's review of the scheme consequent upon the decision to extend its benefits to short service members drew attention to two aspects of the present scheme that require amendment in order to fully protect existing and future members of the fund. The first concerns active service risks. Although the Superannuation Act protects the Superannuation Fund against abnormal liabilities arising from death and incapacity due to active service the Defence Forces Retirement Benefits Fund is not similarly protected. The Government considers that the fund should not continue to carry this risk for which specific provision cannot reasonably be made in the contribution rates of members. Accordingly, the Government proposes to amend the Act to provide for the Commonwealth to meet, in respect of all contributors to the fund, the cost of active service risks in excess of the normal risks provided for in the rates of contributions paid. The second matter concerns the protection of the fund and the Commonwealth against the payment of benefits in respect of a medical condition which clearly existed before a member entered the defence force. The Government will propose that persons discharged within 3 months of entry because of a medical condition which existed prior to enlistment or appointment and which has not been materially aggravated by service should not be entitled to benefits under the Act.

There are three other matters about whichI should comment. Because many of the new members will serve for comparatively short periods and then leave the service, receiving a refund of their contributions to the fund on discharge, the question arose as to whether the earnings on these contributions while held by the fund would be adequate to meet the cost of death and invalidity risk cover provided to the member during his service. These arrangements now apply to existing mem bers of the fund. However, the statistical information presently available has not been sufficient to determine whether the experience of new members will be similar to that of existing members. Accordingly, it is the Government's intention to have the Commonwealth Actuary reviewthe position as at 30th June 1969 by which time reasonable statistical information should be available. Should the Actuary's review show that the death and invalidity risk amongst these new categories of members is significantly higher than that of the longer term members of the fund, and this is by no means certain, the Government will propose that the fund be reimbursed for the added risk.

A similar approach will be adopted in respect of those persons who the Government proposes should now be admitted to the fund although of a somewhat lower medical standard than present fund members. Here again, there is insufficient statistical information available to assess whether the invalidity and death risk in respect of these persons is higher than for other members of the fund. In view of the relatively small numbers involved, the Government decided that these members should be subject to the same conditions as other members of the fund. However, it would be the Government's intention to review the position as at 30th June 1969 and to propose that the fund be reimbursed should a significantly higher risk be disclosed.

The third matter concerns juvenile members of the forces. The Government Members' Defence Forces Retirement Benefits Committee, ably led by the honourable member for Maribyrnong (Mr Stokes), has expressed concern about the existing provisions of the Act referring to members of the Services under the age of 20. Members aged 18 and 19 years at present contribute at the normal rate of 5% of pay but are covered only for death and invalidity benefits until age 20 years when service commences to count towards an age pension. Accordingly, these members may pay up to 2 years' more contributions for the same age pension as a person entering the forces at the age of 20. As well, there are now over 3,000 juvenile members of the forces under the age of 18 years who are not permitted to join the Fund although many are in receipt of adult rates of pay. For such non-contributory members a small invalidity pension only is payable, even though the disability might be such as to impair the member's earning capacity for life. There are a number of possible solutions which are being considered and the Government hopes to be in a position to determine the most appropriate solutions, and to incorporate these in legislation early in the autumn session.

I again emphasise that the Government's proposals will extend the benefits of the Defence Forces Retirement Benefits Act to over 21,000 additional servicemen and women, who have hitherto been prevented by the terms of their service from becoming members of the Fund. The proposals will ensure that all members of forces on fulltime continuous duty for periods of 12 months or more will enjoy similar benefits for comparable service. I present the following paper:

Defence Forces Retirement Benefits Fund - Ministerial Statement, 1 November 1967 - and move:

That the House take note of the paper.

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