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Tuesday, 7 May 1968

Mr McMAHON (Lowe) (Treasurer) I move:

That the Bill be now read a second time. 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 members of the armed forces on continuous full-time duty for a period of 12 months or more by admitting to the scheme those now excluded by reason of the terms and conditions under which they serve. The defence forces retirement benefits scheme was inaugurated in 1948 to provide a common superannuation scheme for the three permanent arms of the defence force. In essence, the scheme was limited to regular officers of the three services and to other-rank members engaged for 6 years or more. Following the introduction of the national service scheme and the increase in the numbers of citizen, reserve and supplementary force members on fulltime service, there are now over 21,000 servicemen and women who, although serving for extended periods on the same basis and alongside members of the permanent forces, have not access to the scheme.

This Bill, which extends the membership of the fund to include members of the defence force aged 18 years or more who are engaged or appointed for a period of continuous full-time service of not less than 1 year, will bring the large majority of these persons into the fund. Though the new members will not contribute to the fund until after the Act is proclaimed, the Government has decided that eligibility for pension benefits will be extended retrospectively to or 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, 28th June 1965, and before the commencing date, who would have been eligible to contribute to the fund had the membership provisions of this Bill then applied. Amounts of pension to be paid in respect of periods prior to the commencement of the Act will be determined by the Defence Forces Retirement Benefits Board.

In determining these retrospective payments, the Board will have regard to amounts of gratuity received at discharge and to payments that have been received by the member or his beneficiaries by way of Commonwealth social service benefits, weekly payments under the Commonwealth Employees' Compensation Act or pension under the Superannuation Act. The amounts recovered from any of these sources will not in any case exceed the amount of the retrospective pension payment. One fortnight's contribution at the rate appropriate to the former member's rank will be deducted from the initial pension payment to establish contributor status in accordance with an existing principle of the principal Act.

By reason of fund membership the new members will become entitled to the generally more beneficialgratuity provisions of the Defence Forces Retirement Benefits Act. As appropriate, suitable transitional provisions will cover those serving members who are now entering the fund in respect of gratuity entitlements accrued under Service regulations in respect of their earlier non-contributory service. No member will suffer any loss of gratuity benefit simply as a result of Fund membership. However, certain medical and dental officers who are entitled to special benefits by way of bounty and gratuity will continue to receive these benefits under the Service regulations.

Since 1959 the Act has provided for payment of $600 to a male other rank "member who re-engages for a further period of not less than six years after completion of an initial period of service of six years. The Government has decided to extend this provision to provide from now on for payment of $200 after three years' service if the member has agreed to serve for not less than a total of six years, and for payment of $800 after six years' service, less any payment previously received, if the member has agreed to serve for not less than a total of 12 years. However, payment will not in any case exceed the amount that would be payable to the member by way of gratuity and refund of contributions if he were to be discharged at the point he becomes entitled to the advance. The existing arrangement that payment will be made as entitlement arises unless the member specifically elects not to receive it will continue. As hitherto, advance payments will not be recovered from the retirement benefits of the member should he die or be retired on invalidity grounds.

Amongst the members who will now be elibible to contribute to the Defence Forces Retirement Benefits Fund are considerable numbers of Commonwealth officers on leave from their employment who are contributing to the Commonwealth Superannuation Fund. The Government has decided that these members, like their Service colleagues, should contribute to the Defence Forces Retirement Benefits Fund while members of the forces and their contributions to the Superannuation Fund will be deferred until they cease to be liable to contribute to the Defence Forces Retirement Benefits Fund. On completion of defence service the deferred contributions to the Superannuation Fund will be met from the refund of contributions and gratuity, if any, payable from the Defence Forces Retirement Benefits Fund.

In the event of a superannuation contributor being discharged on invalidity grounds from the defence force he will not be entitled to pension benefit from the Defence Forces Retirement Benefits Fund. Instead he will receive a refund of contributions and an invalidity gratuity if so entitled and will look to the Superannuation Fund for his pension which will be supplemented where the pension entitlement from the Defence Forces Retirement Benefits Fund would have been greater. Similarly, should a superannuation contributor die while still a member of the forces, his widow and any children will receive a superannuation fund pension supplemented as appropriate. The member's contributions to the Defence Forces Retirement Benefits Fund will be refunded. Later this day, when I introduce a Bill to amend the Superannuation Act I will explain these proposals in more detail.

Provision has been made in the Bill to meet the situation of a national serviceman who is granted extended leave without pay on grounds of exceptional hardship. Under the existing provisions of the Defence Forces Retirement Benefits Act a member of the Fund is required to contribute during any period of leave without pay and continues to be entitled to benefits, including pension benefits, under the Act during the leave irrespective of its length. While this is appropriate for members of the regular forces the Government has decided that, in the case of a national serviceman, his contributions to the Fund will cease when the leave without pay extends beyond a period of 30 days and he will not be entitled to death or invalidity benefit while he continues to remain on leave. On eventual discharge the period during which he contributed to the Fund will be the period of his service for gratuity purposes.

The Defence Forces Retirement Benefits Act at present does not make any provision against early payment of benefit from the Fund because of disabilities in existence before entry but not detected in a pre-entry medical examination. This is remedied in the Bill which provides that persons discharged within 3 months of entry into the forces because of a medical condition which existed prior to enlistment or appointment and which has not been materially aggravated by service will not be entitled to invalidity benefit under the Act. This provision will apply to all classes of members in the Fund and not only to the new categories of members being provided for in the legislation. The disqualification from benefit will not apply in the case of death during service.

Unlike the Superannuation Fund, the Defence Forces Retirement Benefits Fund is not protected against abnormal liabilities arising from death and incapacity due to active service. The Government has decided that, with effect from 14th December 1959, the date from which the Defence Forces Retirement Benefits Fund was placed on an actuarial basis, the Commonwealth will meet any excess charge against the Fund arising from the expected greater risk of death and retirement on invalidity grounds amongst members on active service, active service meaning service that is active service for the purposes of the Defence Act. -The Bill provides for the excess cost to be determined annually by the Treasurer after receiving a report from the Defence Forces Retirement Benefits Board which will consult with the Commonwealth Actuary. It is intended that at each quinquennium the Actuary should review the adequacy of the amounts paid into the Fund.

One of the effects of extending the scope of membership of the fund is that members of the permanent forces who reach the retiring age for their rank and transfer to a reserve or supplementary force with a higher retiring age will be able to continue their contributions to the Fund and qualify for higher pension. Similarly, members who retire on pension and later return to serve again on a full time basis will be eligible to contribute towards better pensions Because some complex issues are involved it has not been possible to incorporate in this Bill the provisions establishing the basis on which these persons will continue their contributions to the Fund. The Government proposes to introduce a second Bill to deal with these and related matters later in this session.

There are three other matters not dealt with in this Bill about which I want to 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 arises whether the earnings on these contributions while held by the Fund will be adequate to meet the cost of death and invalidity risk cover provided to these members during their service. 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 and accordingly, it is the Government's intention to have the Commonwealth Actuary review the 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 present 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, insufficient statistical information is 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 the younger members of the forces. 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 contributions more for the same age pension as a person entering the forces at the age of 20 years. As well, over 3,000 members of the forces under the age of 18 years 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.

The Government Members' Defence Forces Retirement Benefits Committee, ably led by the honourable member for Maribyrnong (Mr Stokes), some time ago expressed its concern to the Government about the position of these younger members and submitted a number of proposals. Last November I informed the House that the Government was examining various alternatives and hoped to be in a position to determine the most appropriate solutions and to incorporate these in legislation during this session. The Government has now decided that the age limit of 18 years before which a member is not permitted to contribute to the fund should be removed. Provision will be made for members entering the Fund before age 20 to pay lower rates of contributions throughout their service. These lower rates also will apply to present members who have entered the Fund since 1959, when the contribution basis of the Fund was changed, and whose age on entry to the Fund was 18 or 19 years.

Because the invalidity pension entitlement of some younger members would be unduly low in the initial years of service if it were determined by the member's rate of pay and level of contributions to the Fund, the Government proposes to establish a basic invalidity pension rate which will relate the invalidity pension of members on less than adult rates of pay to the pension category appropriate to a private group 1, the minimum adult pay grouping applying to age 17 entrants. The existing provision for small non-contributory pensions payable to members under the age of 18 years retired on invalidity grounds will be repealed. I hope to introduce the legislation to implement these proposals in the Budget session.

This Bill and the legislation I have foreshadowed represent a new and, I think, enlightened approach to the matter of retirement benefits for the armed forces. Some 24,000 or more servicemen and women, including the 3,000 under the age of 18 years previously excluded, will become eligible to enter the Fund. This will provide death, invalidity and retirement cover for the great majority of the members of the armed forces. The scheme if amended will give to members new opportunities to contribute over wider spans of service for better pensions as they move from force to force. The changes being made are both worth while and timely. 1 have had prepared for honourable members a statement which gives examples of DFRB benefits payable to, or in respect of, members who are killed or discharged from the forces as a result of active service in Vietnam. Examples of the appropriate repatriation benefits payable in addition to the DFRB pensions also are shown. With the concurrence of honourable members, I incorporate the statement in Hansard.


DFRB benefits are payable, in accordance with the examples in the table below, irrespective of whether the death or injury is suffered in Australia or on active service:


In certain circumstances, benefits are also payable under the Commonwealth Employees' Compensation Act.


The following examples show the combined benefits payable, based on the above table of DFRB entitlements, when servicemen of the ranks shown suffer death or total and permanent incapacity in circumstances which also attract Repatriation benefits:


I commend the Bill to honourable members.

Debate (on motion by Mr Clyde Cameron) adjourned.

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