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Military Superannuation and Benefits Act - Military Superannuation and Benefits Board of Trustees No. 1 - Report - 1993-94


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T h e m i l i t a r y

S U P E R A N N U A T I O N

A N D B E N E F I T S

B O A R D O F T R U S T E E S

N O . 1

A N N U A L R E P O R T 1993-94

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The Military Superannuation and Benefits Board of Trustees No. 1

Annual Report 1993-94

Australian Government Publishing Service Canberra

© Commonwealth of A ustralia 1994

ISSN 1037-7956 ISBN 0644 34870 4

This work is copyright. It may not be reproduced for commercial use or sale. It may, however, be reproduced in whole or part for study or training purposes subject to the inclusion o f an

acknowledgment of the source. Requests and inquiries concerning reproduction for other purposes should be directed to the M anager, Commonwealth Information Services, Australian Government Publishing Service, GPO Box 84, Canberra ACT 2601.

Note: Statistics are based on the records of ComSuper at the time of reporting.

Military Superannuation and Benefits Board of Trustees No. 1

Street address: Unit 1 Cameron Offices

Chandler Street Belconnen ACT 2617

Postal address: PO Box 22

Belconnen ACT 2616

Telephone: (06) 252 7965

Facsimile: (06)253 1116

Annual report inquiries: Anne Reed

Client Communications Branch ComSuper Telephone: (06) 252 6865

Produced by the Australian Government Publishing Service

The Honourable Gary Punch Minister for Defence Science and Personnel Parliament House Canberra ACT 2600

Dear Minister

In accordance with section 26 of the Military Superannuation and Benefits Act 1991, the Trustees of the Military Superannuation and Benefits Board are pleased to present to you our annual report on the performance of our functions for the year ended 30 June 1994, together with financial statements in respect of the management of the Military Superannuation and Benefits Fund No. 1 from 1 July 1993 to 30 June 1994, and the report of the Auditor-General in respect of those financial statements.

Subsection 26(3) of the Military Superannuation and Benefits Act 1991 requires the Minister to cause a copy of the report to be laid before each House of the Parliament within 15 sitting days after the Minister receives the document.

Yours sincerely

Sir William Cole Chairperson

Mr Kenneth Searson Nominated by the Minister

Mr Patrick Gourley Nominated by the Minister Nominated by the Chief o f the Defence Force

5 October 1994

iii

Organisation chart

The relationship between the different parties involved in the MSBS

Contributors

Investment Consultant

Beneficiaries

MSB Fund

MSB Board of Trustees

Minister for Defence Science Personnel

Fund Managers

Dept of Defence Policy Adviser

RBO Scheme Administrator

vi

Introduction

Origin of the MSBS

The Military Superannuation and Benefits Scheme (MSBS) replaced the Defence Force Retirement and Death Benefits (DFRDB) Scheme for new contributors on 1 October 1991, following government initiatives to improve the standard of superannuation arrangements for Australian Defence Force personnel. Existing DFRDB contributors were given the option of transferring to the MSBS.

The DFRDB Scheme had been reviewed with the following aims:

• to introduce superannuation arrangements which are as simple as possible to understand, given the complex nature of the superannuation environment;

• to assist the Australian Defence Force (ADF) with what was at that time a substantial loss of trained personnel;

• to cater for the needs of a wide range of individual members;

• to comply with the requirements of the Occupational Superannuation Standards Act 1987 (OSSA); and

• to ensure that new arrangements would cost no more than the DFRDB Scheme.

It was not possible to amend the DFRDB Scheme to accommodate all of these aims. The MSBS was therefore proposed and implemented.

Other sources of information about the MSBS

In accordance with Parliament’s request that annual reports be concise documents that account for performance in the preceding financial year, this report has been streamlined to contain only essential information. More detailed information about the MSBS can be obtained by contacting the ComSuper officer specified on page 55.

More information about the MSBS can also be found in the following publications, which can be obtained from ComSuper:

• the two booklets, Your Superannuation Scheme and Investment Policy,

• The MSBS Book (to be published November 1994), and

• a new edition of leaflets on the following topics:

Dependants’ Benefits Taxation o f Benefits The Productivity Benefit Maximum Benefit Limit

Invalidity Benefits Preservation o f Benefits Rejoining the ADF Resignation and Retirement Benefits

1

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Chairperson’s report

During 1993-94, the Australian superannuation industry continued to undergo rapid and complex change in response to the range of government initiatives in the area of retirement income policy. Changes had to be made to reflect increased levels of prudential supervision over the administration of superannuation schemes, and also to provide increased levels of service.

In the second full year of the Military Superannuation and Benefits Scheme (MSBS), membership fell by five percent, exits having exceeded entrants by 1852. The majority of exits (69 percent) were transferees from the DFRDB Scheme. The predominant reason for exit was resignation (73.1 percent), followed by redundancy (14.9 percent), then invalidity (6.3 percent). Overall, the trend is towards a stabilisation in membership following the end of the large influx of DFRDB transferees.

On 1 March 1994, the scheme administrator changed its name from the Retirement Benefits Office (RBO) to Commonwealth Superannuation Administration (ComSuper) to reflect its reorganisation and revitalised commitment to outstanding service in the administration of public sector superannuation schemes. In the midst of this restructuring, ComSuper has continued to provide a level of service well within the limits of its agreement with the Board. In fact, the turnaround time for processing benefits was further reduced, in 1993-94, from 9.9 to 6.1 days.

The Board worked closely with the Fund managers during the year and maintained MSB assets between asset classes to ensure the long-term viability of the Fund. The Board’s investment advisers recommend using two or more Fund managers with different investment styles. Accordingly, in addition to Commonwealth Funds Management Limited (CFM) and Bankers Trust Asset Management Limited (BT), the Board appointed a third Fund manager, J P Morgan, on 1 July 1993. The target of equal allocation of fortnightly contributions to each of the three Fund managers was attained this year.

In 1993-94, the MSB Fund size grew from $m l04.0 to $ml95.7. Fund managers achieved an annualised after-tax and fees return on investment activities of 7.2 percent. Unfortunately, this annualised figure was greatly reduced because market developments during the June quarter were dominated by rises in long-term interest rates, resulting in negative returns being recorded in most major markets. While the result for the June 1994 quarter was disappointing in nominal terms, the results over longer periods remain favourable both in absolute terms and relative to the notional return on the MSBS benchmark portfolio.

Superannuation is a long-term investment. Accordingly, our Fund managers have been given guidelines that aim for solid growth over the long term — that of spreading investments within and between asset classes inside specified ranges. In 1993-94, the distribution between classes did not change markedly from that of 1992-93.

2

By the end of the century, the MSB Fund will be one of the larger occupational

superannuation funds in Australia, with assets expected to have grown to approximately one billion dollars. With the assistance of its advisers, the Board is constantly monitoring its strategy in line with the maturation of the MSBS and the MSB Fund.

Sir William Cole Chairperson

3

The Board of Trustees

Membership

The Board consists of five Trustees appointed by the Minister under section 21 of the Act. Two of the Trustees, nominated by the Minister, are required to be persons with experience in, and knowledge of, the formulation of government policy and public administration. Two are to be members of the Defence Force, nominated by the Chief of

the Defence Force, one an Officer and the other a member other than an Officer. The fifth Trustee, who is also the Chairperson of the Board, is appointed by the Minister after consultation with the Minister for Finance. The Chairperson and the Trustees nominated by

the Chief of the Defence Force are appointed for a period not exceeding three years (but are eligible for reappointment), whereas the remaining two Trustees hold office at the Minister’s pleasure. Members holding office at 30 June 1994 were:

• Sir William Cole (Chairperson) - appointed 18 September 1991 Formerly: Australian Statistician; Secretary, Department of Finance; Chairman, Public Service Board; Secretary, Department of

Defence. Sir William chaired the Defence Force Retirement and Death Benefits Scheme Review Committee. He is currently Hon. Treasurer, Churchill Trust; Hon. Treasurer,

Burgmann College, Australian National University.

• Major General Stephen Gower AM1 -

appointed 27 April 1993 Assistant Chief of the Defence Force

(Personnel)

1 Alternate for MAJGEN Gower was AIRCDRE Frank Burtt OBE until his resignation on 26 November 1993. He was replaced by CORE Geoffrey Earley on 15 January 1994.

4

• Mr Kenneth Searson2 — appointed 27 April 1992

Commissioner for Superannuation and Chief Executive Officer of ComSuper; Chairman, Defence Force Retirement and Death Benefits Authority; a member of the Commonwealth Superannuation Boards of Trustees Nos 1 and 2; a member of the NSW Executive and a

Federal Councillor of the Association of Superannuation Funds of Australia

• Warrant Officer David Sutherland3 —

appointed 18 September 1991 Officer In Charge, Fleet Air Arm and

Submarine Arm, Career Management Cell, Harman Navy Office

• Mr Patrick Gourley4 — appointed 9 August 1993 First Assistant Secretary, Human Resources and Management Division, Department of

Defence

2 Alternate for M r Searson is Mr Peter Skinner, Deputy Commissioner, ComSuper.

3 WO Newton was appointed alternate for WO Sutherland following WO Rothe’s resignation on 1 February 1994.

4 Mr Gourley replaced Mr Alan Thompson, who resigned on 9 August 1993. Alternate for Mr Gourley is Mr Claude Neumann.

Board meetings

During 1993-94, the Trustees attended meetings each month except January and July. In addition, three out-of-session meetings were convened to discuss the following topics:

28 January 1994 Superannuation Industry (Supervision) Act 1991 — implications for the Military Superannuation and Benefits Act 1991

18 February 1994 MSBS taxation and ISC (Insurance and Superannuation

Commission) compliance

8 June 1994 Tabling of the Australian Government Actuary’s review of the

MSBS

The attendance of Trustees or alternates at Board meetings is shown in Table 1.

Table 1 Hoard meetings and attendees

Scheduled meetings. 1W 1-94

20 17 15 19 17 18 18 15 20 17

Attendee Aui’. Sep. Oct. Nov. Dec. Feb. Mur. Apr. May Jim.

Sir William Cole * * * * * * * * * *

Mr P. Gourley * * * * * *

M AJGEN S. Gower * * * * * * *

Mr K. Scarson * * * * * '* * * * *

WO D. Sutherland * * * * * * * * *

AIRCDRE F. B unt1 * *

M r C. Neumann2 * * * *

WO R. Newton1 *

1 AIRCDRE Burtt was the alternate member to Major General Gower until 26 November 1993. 2. Mr Neumann is the alternate member to Mr Gourley. 3. WO Newton has been the alternate member to WO Sutherland since 1 February 1994.

Charter

The Board has defined its charter as follows:

• to establish appropriate banking and related arrangements to facilitate the receipt of moneys directed to the MSB Fund and the payment of benefits, and to facilitate the investment activities of the Fund managers; and

• to establish appropriate arrangements, including delegation of Board powers and functions under the Act and Trust Deed, in order to facilitate the proper administration of the scheme.

6

Objectives

The Board aims to:

• manage the Fund so as to limit the risk of short-term negative returns while maximising the opportunity to achieve maximum long-term investment returns;

• determine, authorise and approve programs for the effective and efficient

administration of the Act; and

• establish and maintain, at reasonable cost, effective communication with scheme members, the Minister and Parliament on the operations of the scheme.

Performance indicators

The following are indicators of performance against the Board’s objectives:

• success in achievement of benchmark returns on investment;

• the time taken to process benefit applications;

• the appropriateness of decisions taken under the Board’s delegated authority;

• the level of client satisfaction with administrative procedures; and

• the level of client awareness of scheme provisions and Board activities.

The Board’s performance in relation to its objectives is outlined in the following chapters.

Secretariat

The Secretary to the Board is

responsible for the maintenance of the formal transcript of Board

proceedings and the dissemination of Board decisions, is custodian of the Common Seal and otherwise acts as the link between the Board, its policy

advisers (the D epartm ent of

Defence), the scheme administrator (ComSuper) and the Fund managers (Commonwealth Funds Management Limited, BT Asset Management

Limited and J P Morgan).

The Secretariat is staffed by

ComSuper.

Staff of the Secretariat

7

I

Acknowledgments

The Board records its appreciation for the contribution made by Mr Alan Thompson, who resigned on 9 August 1993 after two years’ membership of the Board. The Board also records its appreciation for the contributions made by the alternate members, Warrant Officer Keith Rothe and Air Commodore Frank Burtt OBE, who resigned during the year.

The Board also records its appreciation for the cooperation and assistance of the Department of Defence.

In fulfilling its responsibilities, the Board has relied on the support of the staff of ComSuper. The Board thanks those officers for their efforts, their loyalty and the concern they show for the rights and needs of our clients.

8

Investment and crediting rates

The Fund managers

On 1 July 1993, the Board appointed J P Morgan Investment Management Australia Limited as the third investment manager for the Fund, joining Commonwealth Funds Management Limited (CFM) and BT Asset Management Limited (BT). The addresses of the Fund managers are:

Commonwealth Funds Management Limited 12 Moore Street Civic ACT 2600

BT Fund Management Limited Australia Square Tower Sydney NSW 2000

J P Morgan 333 Collins Street Melbourne Vic. 3000

Strategy

The Fund managers have been given benchmarks as shown in Table 6, with discretion to operate within the prudential limits. Performance is closely monitored by the Board which matches results achieved against recognised indexes for the various classes of assets — for example, performance in Australian shares is matched against movements in the All

Ordinaries Accumulation Index.

Other features of the investment strategy include:

• The exposure to overseas currencies is managed in the range of 5 percent to 30 percent of the total assets. At 30 June 1994, exposure to overseas currencies was 27 percent of the total assets.

• The Fund managers are permitted to use futures and options for risk-reduction strategies but are prohibited from using these instruments for gearing portfolios and speculation.

• Not more than 70 percent of investments may be held in shares plus property. Not more than 15 percent of investments are held in property. Unless otherwise decided by the Trustees, all purchases of property investments other than property trusts listed on the Australian Stock Exchange must be specifically approved by the Board.

• The Fund managers may not invest more than 5 percent of the Fund’s assets in the shares of any one company or any one property, other than BHP shares. Not more than 10 percent of the Fund’s assets may be invested in BHP.

9

Table 6 Asset allocation at 30 June 1994

Investment sector Assets

$m

Allocation % Benchmark range %

Benchmark portfolio %

Australian shares 57.9 29 20-40 30

Overseas shares 39.9 20 10-30 20

Listed property 20.0 10 5-15 10

Australian fixed interest 55.9 28 10-35 30

Overseas fixed interest 5.9 3 0-15 5

Cash 20.0 10 0-30 5

T otal 199.6 100 - 100

The Financial Statements of the Fund appear on pages 38-51 of this report.

Determination of interest rates

One of the functions of the Board is to determine the interest to be credited to member accumulation accounts. This rate of interest is called the allocation rate.

After consultation with its investment advisers, the Board decided to apply a new interest crediting method in 1993-94. From 1 July 1993, interest rates were determined annually rather than six-monthly. Interest calculated on daily balances in member accounts were credited by the Board at the rate of 5.4 percent in the 1993— 94 financial year.

In establishing its investment strategy, the Board determined that there would be no reserves. It was considered that a Reserve Account would not be in the best long-term interests of members for the following reasons:

• an investment strategy with a reserving policy involves the transfer of funds between short-term and long-term members; and

• in a new scheme like the MSBS, the build-up of reserves cannot match the flow of funds into the scheme in its early years, with the result that until the Fund matures the Reserve would be inadequate and members would lose part of their earnings to the Reserve.

Difference between investment performance and crediting rates

Investment performance

This rate reflects the return (expressed as a percentage) earned on funds invested by the Fund manager or managers over a discrete period of time — normally one year.

The investment management industry, generally, utilises the time-weighted method ot computing investment returns. This methodology reflects the investment performance of a unit of assets held continuously for the entire time period measured. As such, this methodology reduces the impact of money flows into or out of a fund and provides an

effective standard for comparing the performance of the managers ot different iunds, in

11

which cash flows can vary considerably. As a growing fund, the MSB Fund has very high inwards cash flows which, in fact, resulted in the Fund almost doubling in size during 1993-94.

Although investment performance rates are net of tax and fees incurred directly through the investment process, they do not reflect (nor are they intended to reflect) the full lax and other liabilities of the scheme.

Crediting rate

In allocating investment returns to contributors’ accounts, a money-weighted methodology is employed. This methodology is affected by the amount and timing of cash flows during a given time period and, as such, represents an effective measure of the Fund’s rate of growth, giving full weight to the impact of cash flows on Fund assets.

The crediting rate reflects the end of year financial outcome of the scheme as shown in the financial statements. As such, this rate represents the amount of income available for distribution after allowance for the full tax obligations of the scheme (including productivity contribution tax); fees, charges and expenses necessarily incurred in the administration of the scheme; and provision for outstanding liabilities of the scheme —

normally represented as ‘benefits due but not paid as at 30 June’.

For 1993-94, although the Fund managers reported for the Fund a (time-weighted) return of 7.2 percent on investment activity, the crediting rate of 5.4 percent represents, on the other hand, the rate of interest which, when applied to all member accumulations, would enable the available net earnings of the Fund to be equitably allocated to all scheme members.

The fact that the crediting rate was well below the performance rate in 1993-94 does not imply that this will normally be the case. In 1993-94, financial markets were very strong in the first seven months of the year, thereafter deteriorating markedly. However, because

the MSB Fund grew strongly during the year, more funds were in the market during its period of weakness than during its period of strength, dragging down the average return on funds invested across the year. In a growing fund, much depends on the pattern of market movements within the year — and 1993— 94 was a year in which the movements operated to separate the performance rate and the crediting rate by a significant margin in one direction. A different pattern would produce a different result and, in some circumstances (that is, a weak market in the first half of the year and a strong market in the second half), the crediting rate could exceed the performance rate.

Determination of exit rates

Exit rates arc the rates of interest credited to the accumulations of members leaving the MSBS to cover the period between the last allocation rate and their date of exit. The initial exit rate (set immediately after the allocation rate for the previous financial year has been computed) is the market yield on 10-ycar Commonwealth bonds applying at the end of the

previous financial year, less an adjustment to allow for tax.

12

The exit rate is reviewed after the results for each quarter become available and, if necessary, adjusted to reflect the investment results for the financial year to date.

The Board determined five rates during the period. Table 7 shows the exit rates applying during 1993— 94.

Table 7 Exit rates

Committees

In pursuit of its objectives, the Board has established three committees. The Audit Committee was established to oversee the Board’s internal audit requirements. As required by MSB Rule No. 17, the Board established the Incapacity Classification Committee (ICC) for the purpose of classification of members. In accordance with Part 9 of the MSB Rules, the Board established the Reconsideration Advisory Committee (RAC) for the reconsideration of reviewable decisions made by the Board and its delegates.

The Audit Committee

Objective: to assist the Board by overseeing the audit practices and plans o f the internal auditors and any private sector advisers in relation to MSBS matters

The function of the Audit Committee is to act as an agent of, and an advisory body to, the full Board in relation to accountability and audit matters. This includes responsibility for the review of the Fund’s financial statements and other matters as detailed in the

Committee’s Charter and the Terms of Reference. Since ComSuper, the Department of Defence, the Department of Finance and the Fund managers all conduct activities impacting on the MSBS, the Audit Committee is required to satisfy itself as to the relevant audit procedures for those bodies.

The Audit Committee considers the following issues when fulfilling its objectives:

• the adequacy of procedures for protection of moneys and assets;

• the adequacy of arrangements and plans for the prevention and control of fraud;

• the design, development, implementation and operation of systems, procedures, processes and controls;

• the assessment of risk and the adoption of measures to reduce the incidence and impact of risk;

• the reliability and adequacy of information available for decision-making and accountability purposes;

• the economy and effectiveness with which resources are used; and

• the initiation of any additional reviews or investigations considered necessary.

Membership

In 1993-94, Sir William Cole, Air Commodore Frank Burtt, Commodore Geoffrey Earley, Mr Claude Neumann and Warrant Officer David Sutherland served on the Audit Committee. The attendance of committee members at meetings is shown in Table 8.

14

Table 8 Audit Committee meetings and attendees

Scheduled meetings. 1993-94

Attendee 14 October 1993 8 March 1994

Sir William Cole * *

WO D . Sutherland *

Mr C. Neumann * *

AIRCDRE F. Burtt *

CORE G. Earley *

Audit reviews

At the two meetings held during the 1993— 94 financial year, the Audit Committee considered the following internal audit reports:

• 1992-93 Financial Statements

• Information dissemination — compliance with OSSA

• Delta software usage review

• Proposed MSBS post implementation review

• Independent review report — J P Morgan Investment Management Australia

• Review of ComSuper’s pensioner benefit processing

15

The Incapacity Classification Committee (ICC)

Objective: to determine the classification o f members retired on invalidity grounds and to review the existing classification o f invalidity pension recipients

The individual Services have the right to retire on the grounds of invalidity — that is, a physical or mental incapacity to perform their duties — members who do not meet the ADF’s high standard of fitness, even though they may be capable of employment of a similar nature in the civilian workforce.

Members of the MSBS retired on invalidity grounds receive an A, B or C classification, designed to reflect the member’s loss of capacity to obtain civilian employment. If there is a discrepancy between the classification nominated by the Service Office and the assessment of the medical specialist, the case is passed from the ComSuper delegate to the

the Incapacity Classification Committee (ICC), which makes the decision. The ICC made 152 classification decisions during the year.

The rate of benefit payable to a recipient member may be altered if the pensioner’s level of incapacity to undertake civilian employment deteriorates or improves. If specialist evidence indicates that a member’s classification is no longer appropriate, the review of that case is

passed from the ComSuper delegate to the ICC. The ICC made seven reclassification decisions during the year.

Membership

The Board determined that the

Committee would be composed as follows:

• an officer of ComSuper at Senior Officer Grade B level to act as

Chairperson, nominated by the Commissioner for Superannuation;

• an officer of the Department of

Defence at Senior Officer Grade B level, nominated by the Secretary of that Department; and

• two Officers of the Australian

Defence Force, preferably of

Colonel or equivalent rank, who are nominated by the Chief of the

D efence F o rce , and whose

appointment is to be rotated through the three Service Offices.

Statistical data on invalidity retirement can be found in this report on pages 30-33 of the chapter entitled ‘Scheme administration’.

The Incapacity Classification Committee: standing from left to right — Brian W oolley (Secretary), Wing Commander Bob Robertson, Lyn Slattery and Commander Tom Steward; seated — Michele Dawson

(Chairperson)

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The Reconsideration Advisory Committee (RAC)

Objective: to reconsider decisions taken by the Board, its delegates or the ICC, on application, and to make subsequent recommendations to the Board

Part 9 of the MSB Rules requires that the Board establish at least one Reconsideration Advisory Committee (RAC) and that one member of the RAC must be a retirement pensioner. The Board has established such a Committee.

A person who is the subject of a decision made by a ComSuper delegate, the ICC or the Board may apply for reconsideration of that decision. In the case of a decision that had been made by the Board, additional evidence must be provided with the application. All such applications must be referred to the RAC. The Board may also refer any decision to

RAC of its own accord, without there being a request from the person concerned.

Membership

The RAC comprises:

a representative of ComSuper, who is the Deputy Commissioner for Superannuation and who is

Chairperson;

a Senior Executive Service

representative of the Department of Defence, who is also an

alternate MSB Board Trustee;

a one-star representative from a Service Office, rotated across the Services; and

an MSBS pensioner representative.

The Reconsideration Advisory Committee: standing from left to right — A ir Commodore Richard Gurevitch AO, Brigadier Peter Bray and Claude Neumann; seated - Peter Skinner (Chairperson)

Reconsideration o f decisions

More information and statistical data on reconsideration of decisions can be found in this report on page 34 of the chapter entitled ‘Scheme administration’.

17

Scheme members

Contributors

At 30 June 1994, there were 35 297 contributors to the MSBS. Table 9 shows the number oi new entrants and exits and the total contributor membership at 30 June 1994. Chart 1 shows the proportion of contributors by gender for each Service. Of the 35 297 contributors, 29 178 (82.7 percent) were male and 6119 (17.3 percent) were female.

Table 9 Contributor composition

Number o f contributors

DFRDB Scheme transferees N ew entrants Total

M embership at 30.6.93 32 109 5 040 37 149

Plus new contributors, 1993-94 51 4 280 4 331

Less exits, 1993-94 4 280 1 903 (6183)

M em bership at 30.6.94 27 882 7 415 35 297

Note: Some figures vary slightly from those reported in previous annual reports due to the timelag in processing variation returns. .

Chart 1 Contributors by age, gender and Service

L egend

[ | Air force | Army S I Novy

40-44 150 and oveA-ess than 20 25-29 I 45-49 20-24 :

I 20-24 ! :

Less than 20 25-29

35-39> 45-49

40-44 50 and over

30-34

30-34 35-39

Male A 9° |y~"1 Female

18

The age group containing most contributors (38.8 percent) was 20 to 24 years. Table 10 shows the age, gender and length-of-service profile of contributors to the MSBS at 30 June 1994.

Table 10 Contributors classified by age group, gender and length of service

Length o f eligible service (years)

A ge erouD (vears) Total < 20 20-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64

Males 0 -9 2 659 11 045 6 372 1 799 645 208 100 32 12 0 22 872

10-14 0 0 1 088 1 458 457 226 118 49 4 0 3 400

15-19 0 0 0 517 843 393 277 112 6 0 2 148

20 + 0 0 0 0 105 119 244 276 14 0 758

Subtotal 2 659 11 045 7 460 3 774 2 050 946 739 469 36 0 29 178

Females 0 -9 369 2 658 1 920 453 134 31 15 0 0 0 5 580

10-14 0 0 92 269 69 21 6 2 0 0 459

15-19 0 0 0 24 32 9 9 1 0 0 75

20 + 0 0 0 0 1 1 2 1 0 0 5

Subtotal 369 2 658 2 012 746 236 62 32 4 0 0 6 119

A ll 0 -9 3 028 13 703 8 292 2 252 779 239 115 32 12 0 28 452

10-14 0 0 1 180 1 727 526 247 124 51 4 0 3 859

15-19 0 0 0 541 875 402 286 113 6 0 2 223

20 + 0 0 0 0 106 120 246 277 14 0 763

Total 3 028 13 703 9 472 4 520 2 286 1 0 0 8 771 473 36 0 35 297

Percentage 8.6 38.8 26.8 12.8 6.5 2.9 2.2 1.3 0.1 0.0 100

Contributor exits

There were 6183 exits from the MSBS during the year. The contributors’ reasons for exit and length of eligible service are shown in Table 11

Table 11 Contributor exits

Eligible service (vears1

Reason fo r exit 0 -9 10-14 15-19 20 + Total % o f total

Age retirement 6 8 18 83 115 1.9

Resignation 3 818 567 88 49 4 522 73.1

Redundancy 643 208 29 43 923 14.9

Invalidity retirement 232 2 4 152 390 6.3

Death 0 0 1 24 25 0.4

Other(a) 199 5 3 1 208 3.4

Total 4 898 790 143 352 6 183 100.0

% o f total 79.2 12.8 2.3 5.7 100.0

(a) Includes members who had exited but whose applications had not been submitted or were awaiting processing.

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Beneficiaries

In 1993-94, 1105 members became beneficiaries and 31 ceased to be beneficiaries under MSB legislation. At 30 June, the total pension population was 2150s. The number of male and female pensioners for each class of benefit is detailed in Table 12 for the end of each financial year since the beginning of the scheme on 1 October 1991. 5

Table 12 Number o f male and female pensioners by class of pension benefit

No. o f pensioners

Class o f pension benefit 3 0 June 1992 30 June 1993 30 June 1994

Retirement Male members 47 129 201

Female members 1 2 2

Subtotal 48 131 203

Redundancy Male members 2 634 1 264

Female members 0 114 346

Subtotal 2 748 1 610

Preserved > age 55 Male members 0 2 8

Female members 0 0 0

Subtotal 0 2 8

Invalidity Male members 34 113 268

Female members 3 15 44

Subtotal 37 128 312

Reversionary benefits ^ Spouses 6 15 17

Orphans 0 1 0

Subtotal 6 16 17

Total 93 1 025 2 150

(a) Paid on the death of a member, former member or pensioner.

5 These figures, which have been extracted from a computer record system, reflect the position at the time of compilation. Statistical movements not recorded at the time will influence opening and closing balances.

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Scheme administration

Administrator

The MSBS is administered, on behalf of the Board, by Commonwealth Superannuation Administration (ComSuper). ComSuper became the new name for the Retirement Benefits Office (RBO) on 1 March 1994. The new name and a new logo were chosen to reflect the revitalised organisation, which is committed to becoming a leading administrator of

superannuation schemes.

ComSuper’s receptionist assisting a client

In administering the MSBS and other Commonwealth superannuation schemes, the stall oi ComSuper strive to:

• maintain accurate contribution records;

• pay member benefits promptly;

• determine and review benefits payable to members who retire from the ADF as medically unfit for further service; and

• communicate clearly with clients about their superannuation interests.

A comprehensive account of the operations of ComSuper is provided in the annual report of the Commissioner for Superannuation.

21

Collection of contributions

In 1993-94, the 35 297 contributors of the MSBS paid $73 544 686 into the Fund, as shown in Table 13. Although the number of contributors decreased by 1852 in 1993-94, contributions are greater than in 1992-93 because most exits from the scheme took place towards the end of the financial year.

Table 13 Number o f contributors at 30 June and contributions paid

Year Contributors Member contributions

$

1 .1 0 .9 1 -3 0 .6 .9 2 14 690 10 299 182

1992-93 37 092 63 087 503

1993-94 35 297 73 544 686

Contribution rates

At three-monthly intervals, MSBS members can elect to vary their contributions to the scheme from between 5 and 10 percent of salary, including Higher Duties Allowance and service allowances. Members, who do not elect otherwise, contribute to the scheme at the rate of 5 percent of salary. The average rate of contribution by members in 1993-94 was

6.4 percent. Details are shown in Table 14.

22

Table 14 Contributors at each of the contribution rates

Contribution rates % Average rate

Contributors 0 5 6 7 8 9 10 o f contribution

NAVY:

Officers Males 18 484 209 112 67 8 173 6.3

Females 0 134 51 38 14 0 48 6.4

Subtotal 18 618 260 150 81 8 221 6.4

Other ranks Males 2 2 868 846 718 420 44 1 330 6.7

Females 0 564 231 152 98 10 286 6.7

Subtotal 2 3 432 1 077 870 518 54 1 616 6.7

Total 20 4 050 1 337 1 020 599 62 1 837 6.6

ARMY: Officers Males 29 852 338 224 117 4 296 6.3

Females 0 201 66 28 17 2 52 6.2

Subtotal 29 1 053 404 252 134 6 348 6.3

Other ranks Males 21 5 258 1 727 1 178 570 57 1 712 6.4

Females 0 812 333 188 82 5 248 6.3

Subtotal 21 6 070 2 060 1 366 652 62 1 960 6.4

Total 50 7 123 2 464 1 618 786 68 2 308 6.4

AIR FORCE: Officers Males 30 921 457 205 117 7 194 6.1

Females 0 213 76 35 16 2 37 6.0

Subtotal 30 1 134 533 240 133 9 231 6.1

Other ranks Males 11 3 569 1 932 923 420 36 674 6.1

Females 0 1 046 445 252 91 11 235 6.2

Subtotal 11 4 615 2 377 1 175 511 47 909 6.1

Total 41 5 749 2 910 1 415 644 56 1 140 6.1

ALL SERVICES: Officers Males 77 2 257 1 004 541 301 19 663 6.2

Females 0 548 193 101 47 4 137 6.2

Subtotal 77 2 805 1 197 642 348 23 800 6.3

Other ranks Males 34 11 695 4 505 2 819 1 410 137 3 716 6.4

Females 0 2 422 1 009 592 271 26 769 6.4

Subtotal 34 14 117 5 514 3 411 1 681 163 4 485 6.4

Grand total 111 16 922 6 711 4 053 2 029 186 5 285 6.4

Note: Members shown contributing at 0 percent are those who have ceased contributing to the scheme upon reaching their MBL.

23

Payment of benefits

The Board and ComSuper have an Chart 2 Average time taken to process a benefit

agreement on the level of service to be provided by ComSuper.6 Under this agreement, ComSuper is to pay benefits in 90 percent of cases within eight working days of the receipt of correctly completed applications, and in 95 percent of cases within 13 working days. Virtually all

payments for members exiting the scheme were automated by 30 June 1994. The systems in place, together with the

dedication of staff to maintaining a high level of service to members of the scheme, resulted in the service level being attained. In fact, in 1993-94, the average time taken

to process a benefit was reduced from 9.9 to 6.1 days.

During the year, further redundancy programs were conducted by the ADF. Since these programs resulted in abnormal peaks of exits, special arrangements were put in place between ComSuper and the Department of Defence. Under those arrangements, the payments to the 923 members who were made redundant were for the most part processed within the agreed service levels. '

Efforts to improve the service to clients have continued. In particular, ComSuper revised its arrangements for the issuing of documentation to members exiting the scheme. Changes have resulted in members receiving the ‘Statement of Termination Payment’ approximately two weeks earlier than previously, thus eliminating delays for those members transferring

lump-sum payments to rollover institutions.

Member benefit

The member benefit is a lump sum of the member’s contributions, including amounts notionally brought over from the DFRDB Scheme, plus the interest earned on those contributions in the MSB Fund. The member benefit cannot be converted to a pension. Part or all of the lump-sum benefit may be taken immediately on exit, rolled over to a private

fund or preserved within the MSBS for any period until age 65.

The 6183 members who left the MSBS during the year received entitlement to member benefits totalling $82 549 544, most of which represented DFRDB money notionally held in the MSBS in respect of those members who had transferred from the DFRDB Scheme.

1991-92 1992-93 1993-94

6 The Department of Defence and ComSuper are currently developing a similar agreement.

24

Preserved member benefits

Of these exiting members, 225 elected to preserve benefits totalling $6 232 686, as shown in Table 15.

Table 15 M em ber benefits paid or preserved

No. o f

persons

Lum p sum s $

Average lump sums S

Benefits p a id on exit Officers 393 16 711 262 42 522

Other ranks 5 328 64 084 431 12 028

T otal 5 721 80 795 693 14 123

Benefits preserved on exit Officers 73 3 424 841 46 915

Other ranks 152 2 807 844 18 472

T otal 225 6 232 685 27 700

Withdrawal o f benefits preserved Officers 15 779 195 51 946

Other ranks 54 974 656 18 049

T otal 69 1 753 851 25 418

Note: Members who received a partial withdrawal of their member benefit are counted under both benefits paid and benefits preserved.

Employer benefit

The employer benefit consists of an unfunded component paid for by the Commonwealth when the benefit becomes payable, and the three percent productivity component which is funded, that is, paid by the Department of Defence into the Fund. The unfunded component of the employer benefit is subject to a phase-in period over the first seven years

of service. The phasing-in of entitlement to the unfunded employer benefit is designed to assist with retention of Defence Force personnel in the early years of service, as benefits increase substantially with each additional year served.

However, the reduced employer benefit payable to those retiring before two years’ service was less than the amount required by the Superannuation Guarantee (Administration) Act 1992, which came into force on 1 July 1992. That Act requires a prescribed minimum level of superannuation support to be provided by the employer, gradually increasing during the period 1992 to 2003. The MSB Rules were therefore amended to increase the

percentage of employer benefit in accordance with the superannuation guarantee legislation as it applies up to the year ending on 1 July 1994. Increases in respect of later years will be made by a later instrument when the results of actuarial calculations are available. Table 16

compares the percentage of employer benefit available to those members retiring in the first seven years of eligible service before and after the superannuation guarantee arrangements became effective on 1 July 1992.

25

Table 16 Percentage o f em ployer benefit available to retiring members

Percentage

Completed Period Period Period Period

years o f ending ending commencing ending

eligible service 30.6.92 31.12.92 1.1.93 30.6.94

0 0 15 25 25

1 10 15 25 25

2 20 20 25 25

3 30 30 30 30

4 40 40 40 40

5 50 50 50 50

6 75 75 75 75

7 100 100 o 100

Entitlements

All exiting members who have paid contributions are entitled to a member financed benefit regardless of their reason for leaving the ADF. Members are also entitled to an employer financed benefit, which varies according to the reason for exit, as described below.

Resignation

The employer financed benefit must be preserved in the MSB Fund, generally until members reach age 55 and retire from the workforce. .

From 1 July 1993 to 30 June 1994, 4522 members resigned from the scheme before reaching their statutory retiring age or age 55.

Retirement

Members who retire on reaching a statutory retiring age which is less than age 55 have the option of receiving the whole employer financed benefit, but only as a full CPI indexed pension. Alternatively, members may preserve the employer benefit until they reach age 55 and retire from the workforce, at which time they may access the benefit as a lump sum, half or more of which can be converted to a CPI indexed pension.

Members retiring from the ADF and the workforce at or after reaching age 55 are entitled to an employer financed benefit payable as a lump sum, half or more of which may be converted to a CPI indexed pension. Members who retire from the ADF after reaching age 55, but do not leave the workforce permanently, may choose to take the whole employer financed benefit as a CPI indexed pension or to preserve the benefit in the Fund until permanent retirement or age 65.

From 1 July 1993 to 30 June 1994, 115 members retired at statutory retiring age for rank or after the age of 55.

26

Redundancy

Members who are made redundant by the ADF are entitled to an employer financed benefit, which may be preserved to permanent retirement after age 55 or converted to 100 percent pension.

Between 1 July 1993 and 30 June 1994, 923 members of the MSBS were made redundant. Of these, 847 members elected to receive an employer financed benefit as full pension.

Death

If a member dies in service, the employer financed benefit payable is a lump sum and/or a CPI indexed pension. If the member is survived by a spouse, the benefit is equal to the lump-sum value of the member’s potential Class A invalidity benefit, at least 50 percent of which can be converted to a CPI indexed pension. If the spouse elects to convert the whole lump sum to pension, the rate of pension will be 67 percent of the Class A invalidity pension and will increase by 11 percent for each eligible child to a maximum of 100 percent of a Class A pension benefit.

If a member dies after retirement, the spouse’s benefit is 67 percent of the member’s actual pension. If the member is also survived by eligible children, the percentage of pension benefit is increased by 11 percent (for one), 22 percent (for two) or 33 percent (for three or

more eligible children). If the member is survived by eligible children, but not by an eligible spouse, pension benefits are payable to, or for the benefit of, the member’s children at the rate of 45 percent (for one), 80 percent (for two), 90 percent (for three) or 100 percent (for four or more eligible children) of either the member’s potential Class A or

actual pension benefit.

If the member dies without leaving dependants, the employer financed benefit will be paid as a lump sum to the member’s estate. However, the MSB Board does have discretion to pay a lump-sum benefit to a dependent person who is not an eligible spouse or child if that person is a beneficiary in the member’s Will and the member has nominated that person as

a dependant in writing to the MSB Board.

If a member dies after retirement but before claiming a preserved employer financed benefit, that benefit will be paid as a lump sum to an eligible spouse or to the member’s estate, as appropriate. An eligible spouse may elect to convert the benefit to a pension equal to 67 percent of the pension the member would have received, increasing by 11

percent for each of up to three eligible children. If the member is survived by eligible children only, a pension benefit would be paid at 45, 80, 90 or 100 percent for one, two, three or four or more children respectively.

Between 1 July 1993 and 30 June 1994, 15 spouses of deceased contributors and no spouses of deceased pensioners became eligible for benefits. Of these, nine spouses elected to receive a full lump-sum benefit and six spouses elected to receive all or part of the benefit as a pension. No orphan benefits became payable during 1993-94.

27

Employer benefit payments by lump sum

At 30 June 1994, 337 members had received lump-sum employer benefit payments under MSB legislation, as detailed in Table 17. Payments of these lump-sum benefits from the commencement of the scheme to 30 June 1994 amounted to $27 465 850.

Table 17 Partial and full lump-sum employer benefit payments

Reason fo r exit

No. o f

persons

Total lump-sum paym ents $

Average lump-sum payments $

Retirement Male members 68 11 589 783 170 437

Female members 0 0 0

Subtotal 68 11 589 783 170 437

Redundancy M ale members 0 0 0

Fem ale members 0 0 0

Subtotal 0 0 0

Preserved > age 55 M ale members 8 2 789 907 348 738

Female members 0 0 0

Subtotal 8 2 789 907 348 738

Reversionary benefits'^ Spouses 13 2 502 882 192 529

Orphans 0 0 0

Estate 10 2 484 528 248 452

Subtotal 23 4 987410 216 844

Early paym ent ISC approved 130 2 294 926 17 653

Board approved 108 5 803 821 53 739

Subtotal 238 8 098 747 34 028

Total 337 27 465 850 81 501

(a) Payable on the death of a member, former member or pensioner.

Employer benefit payments by pension

At 30 June 1994, 2150 members were receiving pension payments under MSB legislation. Pension entitlements amounted to $15 652 000.

The number of members who became eligible for full or partial pension benefits during this financial year are shown in Table 18.

28

Table 18 Pensions granted and annual liability, 1993-94

Class o f benefit No. o f

persons

Annual liability $

A nnual average pension $

Retirement Male members 76 1 694 715 22 299

Female members 0 0 0

Subtotal 76 1 694 715 22 299

Redundancy Male members 625 2 551 654 4 083

Female members 231 584 842 2 532

Subtotal 856 3 136 496 3 664

Invalidity Male members 136 1 922 117 14 133

Female members 25 331 988 13 280

Subtotal 161 2 254 105 14 001

Preserved > age 55 Male members 6 195 864 32 644

Female members 0 0 0

Subtotal 6 195 864 32 644

Reversionary benefits^ Spouses 6 88 934 14 822

Orphans 0 0 0

Subtotal 6 88 934 14 822

Total 1 105 7 370 114 6 670

(a) Payable on the death of a member, former member or pensioner.

Preserved employer benefits

In most exit categories, the employer benefit must be preserved until age 55. At 30 June 1994, there were 10 704 preserved employer benefits, as shown in Table 19.

Table 19 Preserved employer benefits

Reason fo r exit

Officers Other ranks All members

M ale Female M ale Female

Retirement 5 0 1 0 6

Resignation 575 157 7 728 1 533 9 993

Redundancy 7 2 235 82 326

Invalidity Class C 2 2 334 41 379

Total 589 161 8 298 1 656 10 704

29

At age 55, members have the option of claiming the employer financed benefit in the form of a full lump sum or converting from 50 to 100 percent of the benefit to a CPI indexed pension. The amount of employer-financed benefit payable is based on length of service and salary. It is expressed as a multiple of final average salary (FAS), which is the average of the member’s salary over the last three years of service in the ADF. The employer

financed benefit grows at the rates shown in Table 20.

Table 20 Multiple accrual rates

P eriod o f service Accrual rale

(% o f FAS)

0 to 7 years 18

8 to 20 years 23

M ore than 20 years 28

Early release of employer financed benefits

The MSB Rules provide that a preserved employer financed benefit may be paid before a person reaches the age of 55 only if:

• the Board determines that the person has a permanent physical or mental incapacity, or intends to depart Australia permanently; or

• the Insurance and Superannuation Commissioner approves payment of the benefit.

During the period 1 July 1993 to 30 June 1994, two persons received approval for the payment of employer financed benefits totalling $210 877 on the grounds of permanent physical or mental incapacity; 106 persons received approval for the payment of employer financed benefits totalling $5 592 944 on the grounds of permanent departure overseas; and

130 persons received entitlements to employer financed benefits totalling $2 294 926 following the approval of the Insurance and Superannuation Commissioner.

Invalidity retirement

The invalidity retirement provisions of the MSBS reflect the ADF’s need to maintain high standards of fitness. It is the responsibility of the MSB Board to determine the level of benefit payable to invalidity retirees.

Members granted an A or B invalidity classification are eligible for a pension, as well as their lump-sum member financed benefit. Those granted a C classification are entitled to a member financed benefit which is a lump sum of contributions plus interest, and an employer financed benefit, which is not payable until retirement from the workforce at or after age 55.

30

ComSuper delegates

In dealing with the classification of members who have been retired on the grounds of invalidity, ComSuper administrative staff endeavour to assist clients in the preparation of their cases. The member is invited to present material in support of his or her case and each case is examined to ensure that steps have been taken to assemble all information that may be relevant under the requirements of the legislation. In determining invalidity classifications, considerable effort is devoted to minimising delays while at the same time taking care to make properly informed decisions.

If the evidence is contradictory, the case is referred to the Incapacity Classification Committee (ICC), which makes the decision. More information about the ICC is provided on page 16.

After a classification decision has been made, the member is advised in writing and informed of the right to request reconsideration of the decision, if he or she is dissatisfied. Members receiving advice of decisions of the Board and the ICC receive a copy of the minute recording the decision, while members receiving advice of decisions made by other delegates receive a copy of the decision itself.

Number o f invalidity retirees classified

From 1 July 1993 to 30 June 1994, 338 former MSBS contributors have received initial invalidity classifications, as shown in Table 21. Of these, 190 (Class A and Class B) became entitled to invalidity pension. The proportion of invalidity classifications for each Service is shown in Chart 3.

Chart 3 Invalidity determinations for each Service

31

Table 21 Invalidity classifications

Year Class A Class B Class C Total

1 .1 0 .9 1 -3 0 .6 .9 2 17 10 43 70

1992-93 30 71 102 203

1993-94 84 106 148 338

Total 131 187 293 611

Pre-existing incapacity

In the 1993-94 financial year, there were 193 invalidity retirees considered under MSB Rule No. 32, which provides for the payment of benefits to contributors who had a pre­ existing incapacity and who were discharged On invalidity grounds within two years of entry to the Defence Force. In the case of transferees from the DFRDB Scheme, that period is within one year of transfer. Table 22 shows the number of cases where Rule No. 32 was considered and benefits granted from 1 October 1991 to 30 June 1994.

Table 22 Number o f cases for which Rule No. 32 has been considered and applied

Transferees: considered applied

N ew entrants: considered applied

1.10.91-30.6.92 4 2 54 30

1992-93 2 2 97 50

1993-94 0 0 . 193 70

Retrospective entitlement

In the 1993-94 financial year, five retirees were considered under MSB Rule No. 30, which provides for retrospective invalidity retirement where the Board is satisfied that, at the time the member was retired, grounds existed for invalidity retirement. The Board was satisfied that grounds existed in four cases.

Review o f invalidity pensioners

Decisions by the Board to classify members Class A or B are reviewable at intervals determined by the Board. Also a member who believes that his or her classification has altered since it was last considered may request that the ICC review the classification. Cases of reclassification from Class A or B to Class C are also reviewable should the member write and request a review on the grounds that the impairment has deteriorated to the extent that he or she should be reclassified to Class B or A. To date, 40 such cases have been examined. As a result of these reviews seven classifications have been changed

and these changes are shown in Table 23.

32

Table 23 Invalidity entitlements reviewed

Review 1.10.91-30.6.92 1992-93 1993-94

Invalidity entitlem ents at commencement of year 0 27 117

Invalidity entitlements examined 0 3 40

Number where full review with medical exam ination conducted 0 1 14

Classification raised: • Class B to Class Λ 0 1 5

• Class C to Class A 0 0 0

• Class C to a ass B 0 0 0

Total raised 0 1 5

Classification reduced: • Class A to Class B 0 0 1

• Class A to Class C 0 0 0

• Class B to Class C 0 0 1

Total reduced 0 0 2

1 Total classification changes 0 1 7

Causes o f invalidity retirement

During 1993-94, the most common causes of invalidity retirement were disorders of the spine and joints, 166 retirees out of a total of 338 being in this category. The major causes of invalidity retirement are shown in Chart 4.

Chart 4 M ain causes o f invalidity retirement

Joints Spine Total invalidity

Muscular-skeletal

33

Reconsideration of decisions

The reconsideration process has a number of stages:

• The Secretariat of the Board receives an expression of dissatisfaction with a decision from a member and refers it to officers of the Review and Legal Services Branch of ComSuper. They examine this correspondence to ensure that it constitutes a proper request for reconsideration and that, in the case of a Board decision, the person concerned has provided both the grounds for the request and evidence not previously taken into account, as required by the Rules.

• The applicant is then informed of the requirements of each stage of the reconsideration process. Where necessary, the applicant is asked to provide evidence and submissions in support of his or her request and is further advised of the information and action that ComSuper (on behalf of the Board) requires - for example, medical examinations or signing of authorities to enable the release of relevant records.

• When all available relevant evidence has been acquired, the case must be submitted to the Reconsideration Advisory Committee (RAC) for review and subsequent recommendation to the Board. (The role of the RAC is outlined on page 17.)

• If recommendations of the RAC are adverse to the applicant, ComSuper invites a further submission from the applicant. If provided, this is then submitted with the RAC’s recommendation to the Board.

• The Board makes its decision, having regard to the RAC’s recommendation and any other relevant matters. The applicant is notified of the decision, and is provided with the Board’s minute recording the decision and reasons for the decision. If appropriate, the applicant is advised of any further appeal rights.

• Significantly, the Board may also, on its own motion, reconsider a decision made by the Board or a delegate.

During 1993-94, 17 requests for reconsideration of decisions made by delegates of the Board were received. Of these, 16 concerned invalidity and one concerned entitlement to spouse’s benefit.

No requests for reconsideration of Board decisions were received. The Board did not reconsider any decision on its own motion.

Table 24 shows the number of cases received and resolved for each year since the scheme’s inception.

I ahle 24 Reconsideration applications received

34

Communication with members

The Trustees are required to make available to members information regarding relevant ISC .returns, notices and certificates, auditor reports, actuarial reports and rules for the administration of the Fund.

As superannuation is an important component of the employment

conditions of ADF personnel, one of the Board’s primary objectives is to establish and maintain, at reasonable cost, effective communication with scheme members. In 1993-94, client

access to information has been

enhanced, and dissemination of information to clients has been more timely than in previous years.

Modernisation o f communication systems

Some major improvements to ComSuper’s communication systems were made during 1993-94. On 2 March, a new telephone service was introduced for the convenience of members seeking specific types of information. The ComSuper Interactive Voice Response (IVR) system allows members to have 24-hour access to ComSuper. On 1 July 1994, this service will change from a 008 free service to a c u s t o m n e t o n e t h r e e service.

The message system operates in two parts:

• Contributors within 12 months of retirement may request estimates of prospective benefits; and check progress with payment of benefits.

• Beneficiaries may advise change of address, bank account and taxation deductions.

Publications

Contributors were sent six-monthly newsletters outlining the Fund managers’ investment activities and matters of current interest, such as exit rates and legislative changes.

The annual information statements, which provide each member with the current details of his or her equity in the scheme, were distributed in September 1993, 10 weeks earlier than the previous year. Ready reckoners, which enable members to calculate easily their prospective benefit entitlements, were sent to Pay Offices for members to use with their information statements.

Client Communications officers

35

From November 1993, a monthly newsletter, ‘Military Super News’, was sent to Defence Force Pay Offices to inform personnel officers about any new issues, such as changes in legislation or practices which will affect the members. A booklet for members, ‘Investment Policy’ was also sent to Pay Offices.

A comprehensive information booklet for new entrants, ‘Your Superannuation Scheme’, was produced by the Department of Defence and issued to Pay Offices in December 1993. An information booklet for all members, ‘The MSBS Book’ has been prepared by ComSuper and will be distributed to Pay Offices in November 1994. A new edition of

leaflets describing the various aspects of the scheme will be available in October 1994.

Counselling

ComSuper counselling officers provide members of the military superannuation schemes with information about retirement benefits. During the year, staff issued 3772 retirement advice letters, responded to 6800 telephone inquiries, and personally counselled 27

members. Presentations were also given at 24 resettlement seminars and six presentations were given to Service personnel and recruitment officers. A total of 4916 people attended the seminars.

In 1994-95, the resettlement seminars will be expanded. Costs, however, will be cut by better coordination of seminars according to region.

ComSuper counselling officers

36

Freedom of Information

Matters associated with the administration of the Freedom of Information Act 1982 and the Privacy Act 1988 are dealt with by ComSuper and are reported on in detail in the Defence Force Retirement and Death Benefits Authority Annual Report 1993—94.

There were 24 requests for access to documents processed for MSBS members.

Inquiries relating to the documentary disclosure of information about the personal affairs of clients of the agency under the provisions of either the Freedom o f Information Act 1982 or the Privacy Act 1988 should be directed to:

The Freedom of Information Coordinator ComSuper PO Box 22 Bclconnen ACT 2616

Facsimile: (06) 253 1116

Telephone: (06) 252 7446

Financial statements

A

AUSTRALIAN NATIONAL AUDIT OFFICE

Centenary House 19 National Crt Barton ACT 2600

our ref;

INDEPENDENT AUDIT REPORT MILITARY SUPERANNUATION AND BENEFITS BOARD OF TRUSTEES NO.l

To the Minister for Defence Science and Personnel

I have audited the financial statements of the Military Superannuation and Benefits Scheme (MSBS) which includes the Military Superannuation and Benefits Fund No. 1 for the year ended 30 June 1994. The statements comprise:

. Statement by the Trustees

. Statement o f Changes in Net Assets

. Statement o f Net Assets, and

. Notes to and forming part of the Financial Statements.

The Military Superannuation and Benefits Board of Trustees No. 1 is responsible for the preparation and presentation of the financial statements and the information contained therein. I have conducted an independent audit of the financial statements in order to express an opinion on them to the Minister for Defence Science and Personnel.

The audit has been conducted in accordance with Australian National Audit Office Auditing Standards, which incorporate the Australian Auditing Standards, to provide reasonable assurance as to whether the financial statements are free of material misstatement. Audit procedures included examination, on a test basis, of evidence

supporting the amounts and other disclosures in the financial statements, and the evaluation of accounting policies and significant accounting estimates. These procedures have been undertaken to form an opinion whether, in all material respects, the financial

statements are presented fairly in accordance with Australian accounting concepts and standards and statutory requirements so as to present a view which is consistent with my understanding of the net assets and changes in net assets of the Fund and the Scheme.

The audit opinion expressed in this report has been formed on the above basis.

Scope

GPO Box 707 Canberra Australian Capital Territory 2601 Telephone (06) 203 7300 Facsimile (06) 203 7777

Audit Opinion

In accordance with sub-section 26(2) of the Military Superannuation and Benefits Act 1991, I now report that the statements are in agreement with the accounts and records of the Board, and in my opinion:

i) the statements are based on proper accounts and records

ii) the statements show fairly the changes in net assets of the MSBS for the year

ended 30 June 1994 and the net assets of the MSBS as at that date

iii) the receipt of moneys into the Fund, and the payment of moneys out of the Fund and the investment o f moneys standing to the credit of the Fund, during the year have been in accordance with the Military Superannuation and Benefits Act 1991 and the Trust Deed, and

iv) the statements are in a form approved by the Minister for Defence Science and Personnel in accordance with sub-section 26(1) of the Military Superannuation and Benefits Act 1991 and comply with statements of Accounting Concepts and applicable Accounting Standards.

Acting Executive Director Australian National Audit Office

Canberra

19 September 1994

40

Statement by the Trustees of the Military Superannuation and Benefits Fund No. 1

Military Superannuation and Benefits Scheme

The Trustees hereby state that in their opinion:

(a) the attached financial statements of the Military Superannuation and Benefits Scheme show a true and fair view of the net assets of the Scheme as at 30 June 1994 and the changes in net assets of the Scheme for the year ended 30 June 1994;

(b) at the date of this statement there are reasonable grounds to believe that the Scheme will be able to pay its debts as and when they fall due;

(c) the financial statements are in a form approved by the Minister for Defence Science and Personnel in accordance with sub-section 26(1) of the Military Superannuation and Benefits Act 1991 and have been prepared in accordance with applicable Australian Statements of Accounting Concepts

and applicable Statements of Accounting Standards; and

(d) the operations of the Fund have been conducted in accordance with the Trust Deed and the Military Superannuation and Benefits Act 1991.

Signed at Canberra this / b f h , day of v C p f o n t 6)6. Γ f 1 9 9 4 in accordance

with a resolution of members of the Military Superannuation and Benefits Board of Trustees No. 1.

R.W. Cole Chairman

?'<. -x-_' r

K.A. Searson Member

Military Superannuation and Benefits Board of Trustees No. 1

41

Military Superannuation and Benefits Scheme

Statement of Net Assets as at 30 June 1994

MSB FUND

Note 1994

$ ’000

1993 $’000

Investments Short Term Money Market 20,336 15,736

Australian Fixed Interest 50,444 29,076

Overseas Fixed Interest 10,738 8,228

Australian Equities 60,638 33,965

Overseas Equities 35,049 21,170

Listed Property Trusts 20,084 7,965

Other Overseas Investments 1.489 150

Total Investments 198,778 116,290

Other Assets

Cash at Bank and on Hand 4,505 406

Sundry Debtors 8 597 2,602

Future Income Tax Benefit 6 777 -

Prepayments 9 24 89

Accrued Income 1 . 0 1 0 471

Total Other Assets 6.913 3.568

Total MSB Fund Assets 205.691 119.858

Less: Liabilities

Sundry Creditors 10 872 9,414

Accrued Expenses 238 121

Benefits Payable 1,914 721

Provision for Income Tax 6 6,511 5,006

Provision for Deferred Income Tax 6 411 644

Total MSB Fund Liabilities

CONSOLIDATED REVENUE FUND

9.946 15.906

Other Assets

Sundry Debtors 4.703 9.222

Total Consolidated Revenue Fund Assets 4.703 9.222

Less: Liabilities

Benefits Payable 4.703 9.222

Total Consolidated Revenue Fund Liabilities 4.703 9.222

Net Assets Available to Pay Benefits at 30 June 195.745 103.952

The attached notes form part of these financial statements.

43

Notes to and Forming Part of the Financial Statements 30 June 1994

Military Superannuation and Benefits Scheme

1. Summary of Principal Accounting Policies

(a) Basis of Preparation

These financial statements have been prepared in accordance with Australian Statements of Accounting Concepts, applicable Accounting Standards and the Defined Benefit Plan provisions of Australian Accounting Standard (AAS) 25 "Financial Reporting by Superannuation Plans". A Defined Benefit Plan refers to a superannuation plan where the amounts to be paid to members on retirement are determined at least in part by a formula based on their years of membership and salary levels.

The Scheme has adopted the provisions of paragraph 22(a) of AAS 25 whereby the financial statements include a Statement of Net Assets, a Statement of Changes in Net Assets and notes thereto.

The form of these financial statements has been approved by the Minister for Defence Science and Personnel in accordance with subsection 26(1) of the M i l i t a r y S u p e r a n n u a t i o n a n d B e n e f i t s A c t 1 9 9 1 , The form of these statements

differs from the Guidelines for Financial Statements of Commonwealth Public Authorities and Commercial Activities issued by the Minister for Finance.

Unless otherwise stated, these accounting policies were also adopted in the corresponding preceding reporting period.

(b) Taxation

Income tax has been brought to account using the liability method of tax effect accounting. A provision for deferred income tax has been brought to account in order to recognise the timing effect of income earned during the period that is not assessable for taxation purposes in the current period but is expected to

reverse in future periods.

(c) Foreign Currency Translation

Foreign currency transactions are converted to Australian currency using the currency exchange rate in effect at the point of recognition of each

transaction. Foreign currency balances are converted to Australian currency using the exchange rate as at balance date.

(d) Valuation of Investments

Assets of the MSBS are recorded at net market value as at the reporting date and changes in the net market value of assets are recognised in the Statement of Changes in Net Assets in the periods in which they occur. Net market values of investments are reduced by an amount for selling costs which would be expected to be incurred if the investments were sold. The bases of market valuations are summarised below.

(i) Short Term Money Market - these securities are valued by marking to market using yields supplied by independent valuers.

(ii) Fixed Interest - these securities are valued by marking to market using yields supplied by independent valuers.

(iii) Futures Contracts - open futures contracts are revalued to closing price quoted at close of business on 30 June by the Sydney Futures Exchange.

44

Notes to and Forming Part of the Financial Statements 30 June 1994

Military Superannuation and Benefits Scheme

.

1

i

(vi) Equities - listed securities, including listed property trusts, are valued based on the last sale price quoted at close of business on

30 June by the Australian Stock Exchange, or last bid where a sale price is unavailable.

(v) Exchange Traded Options - options are valued as the premium payable or receivable to close out the contracts at the last buy price quoted at close of business on 30 June by the Australian Stock Exchange.

(vi) Overseas Investments - overseas securities are valued on the basis of last sale price quoted at close of business on 30 June by the relevant securities exchange. In the case of UK securities, the basis of

valuation is the average of the bid and offer prices.

(vii) Currency hedges - these securities are valued at the relevant exchange rate at close of business on 30 June.

(e) Set Up Expenses

:

During the first nine months of the operation of the MSBS, the Trustees

incurred expenses relating to the establishment of the Fund and the development of the Fund investment strategy. As those expenses will benefit all MSBS members over a number of years, those expenses were capitalised and are being written off against the income of the Fund over a period of four years

commencing from 1 October 1991.

(f) Benefits Paid

The amounts shown for benefits paid under the MSB Fund and Consolidated Revenue Fund (CRF) for 1993/94 include benefits payable in respect of those members who had retired or resigned prior to 30 June 1994 and whose benefits had not been paid as at 30 June 1994.

(g) Crediting Rate

To facilitate the timely issue of information statements to members, the Trustees decided that the 1993/94 crediting rate would be calculated during July 1994 and any variation between the crediting rate calculated during July 1994 and the crediting rate calculated once the audited financial statements

for 1993/94 were available would be applied in the calculation of the 1994/95 crediting rate. The crediting rate determined during July 1994 was 5.4l per annum and the crediting rate calculated from the information contained in the 1993/94 financial statements is 4.4 Z per annum. The difference of 1.0Z per annum will be applied in the calculation of the 1994/95 crediting rate.

2. Changes in Net Market Values

1994 1993

$ ’ 0 0 0 $ ’ 0 0 0

Changes in Net Market Value of Investments:

(i) Investments Held at 30 June

Short Term Money Market Australian Fixed Interest Overseas Fixed Interest Australian Equities

Overseas Equities Listed Property Trusts Other Overseas Investments

- 61

(4,676) 720

(664) 405

1,258 1,056

193 2,073

(178) 530

(741) 153

(4.808) 4.998

45

Notes to and Forming Part of the Financial Statements 30 June 1994

Military Superannuation and Benefits Scheme

1994 1993

Investments Realised During the Period $ ’ 000 $ ’ 000

Short Term Money Market 2 192

Australian Fixed Interest (828) 127

Overseas Fixed Interest (749) 423

Australian Equities 4,115 966

Overseas Equities 1,326 460

Listed Property Trusts 227 24

Other Overseas Investments - (125)

4.093 2.067

(715) 7.065

3. Fund Management Expenses

Costs of the Military Superannuation and Benefits Board of Trustees No. 1 which are related to its responsibilities for the management of the MSB Fund and the investment of its moneys are a charge against the Fund. All other costs incurred by the Board of Trustees are paid from moneys appropriated by Parliament.

4. Funding Arrangements

Members contribute to the MSB Fund at optional rates ranging from a minimum of 5 per cent to a maximum of 10 per cent of salary paid to the member and the

Department of Defence contributes employer superannuation contributions to the MSB Fund at the rate of 3 per cent of salary paid to the member.

The net assets available to pay benefits, as shown in the Statement of Net Assets at 30 June 1994, is the accumulated employee and employer contributions held in the MSB Fund as at 30 June 1994.

Where a benefit that becomes payable under the Scheme can be fully met from moneys held in the MSB Fund the benefit is paid to the beneficiary from the MSB Fund.

Where a benefit that becomes payable under the Scheme cannot be fully met from moneys held in the MSB Fund, all moneys held in the MSB Fund in respect of the member are paid to the Commonwealth and the Commonwealth is responsible for the payment of the benefit to the beneficiary from the Consolidated Revenue Fund.

Under the provisions of the M i l i t a r y S u p e r a n n u a t i o n a n d B e n e f i t s A c t 1991 the

Commonwealth is required to fund its share of all benefits as they become due and payable.

Benefits payable by the Commonwealth as at 30 June 1994 total $4,703,000 (1993 $9,222,000), The Commonwealth is the corresponding debtor for this amount in accordance with the funding arrangements described above.

46

Military Superannuation and Benefits Scheme

Notes to and Forming Part of the Financial Statements 30 June 1994

5. Benefits Paid

The benefits paid from the Scheme during 1993-94 were: 1994 $ ’ 0 00 1993

$ ’ 0 00

MSB FUND

Payments to Commonwealth Lump Sum Benefits

15,818 5,2-58

1.623 1.101

17.441 6.359

CONSOLIDATED REVENUE FUND

Lump Sum Benefits Pensions

111,477 105,531 15.652 5.991

127,129 111.522

An explanation of the funding arrangements for the payment of benefits is provided at Note 4.

6. Taxation

The taxation liability at 30 June 1994 has been calculated on the basis that the Scheme complies with the standards contained in the O c c u p a t i o n a l

S u p e r a n n u a t i o n S t a n d a r d s R e g u l a t i o n s and that tax will be payable on the income

received by the MSB Fund at a rate of 15 per cent.

The aggregate amount of income tax attributable to the period is less than 15 per cent of the "Net Revenue and Net Contributions Before Tax" as shown in the Statement of Changes in Net Asset. The difference is reconciled as

follows:

Prima facie income tax expense on Net Revenue and Net Contributions Before Tax

Add/(Less) Permanent Differences Employee contributions Benefits paid Imputation credits from

franked dividends received Foreign tax credits Unrealised gains (indexation) Tax free distributions Other items (net) Over provision in previous year

Income Tax Expense Comprises: Provision for Income Tax Overprovision in prior year Provision for Deferred Income Tax Future Income Tax Benefit

1994 1993

$ ’ 0 00 $ ’ 0 0 0

14,593 14,348

(11,032) (9,463) 2,616 954

(566) (196)

(49) ( 2 )

(49) -

( 1 0) (3)

( 2 ) 12

( 8 )

5.493 5.650

6,511 5,006

( 8 )

(233) 644

( 777) 5.493 5.650

Income tax paid during the period amounted to $4,944,000 (1992/93 $737,000).

47

Notes to and Forming Part of the Financial Statements 30 June 1994

Military Superannuation and Benefits Scheme

7. Transactions of the Consolidated Revenue Fund

The M i l i t a r y S u p e r a n n u a t i o n a n d B e n e f i t s A c t 1991 requires the Commissioner for

Superannuation to provide administrative services to the Military

Superannuation and Benefits Board of Trustees No. 1 to enable the Board to perform its functions under the Act. Under the provisions of the Act, only those expenses of the Board in respect of its responsibilities for the management of the MSB Fund and investment of its moneys are paid from the MSB

Fund. Accordingly, all other expenses of the Board, the Commissioner for Superannuation and the staff of Comsuper who assist the Commissioner for Superannuation in the administration of the M i l i t a r y S u p e r a n n u a t i o n a n d

B e n e f i t s A c t 1 99 1 and Rules, are met from moneys appropriated by the Parliament to Comsuper for its running costs.

In addition to this, the Act requires the Commonwealth to make certain benefit payments (refer Note 4).

8. Sundry Debtors

1994 1993

$ ’ 0 0 0 $ ’ 000

Outstanding Settlements 641 2,602

Other (44) -

597 2.602

9. Prepayments

1994 1993

$ ’ 0 0 0 $ ’ 0 0 0

Withholding Tax 4 53

Investment Strategy 20 36

24 89

An amount of $65,000 was incurred by the Trustees during 1991/92

establishing the Fund and developing the Fund investment strategy. The Trustees consider that these expenses will benefit all MSBS members over a number of years and therefore determined that these expenses should be amortised over a period of four years, commencing from 1 October 1991. An

amount of $16,000 was charged against the income earned by the Fund during the year ended 30 June 1994.

10. Sundry Creditors

1994 1993

$ ’ 0 0 0 $ ’ 0 00

Outstanding Settlements 853 9,297

Other 19 117

872 9.414

48

Notes to and Forming Part of the Financial Statements 30 June 1994

Military Superannuation and Benefits Scheme

11. Vested Benefits

Vested benefits are benefits which are not conditional upon continued membership of the Scheme (or any other factor other than resignation from the Scheme) and include benefits which members were entitled to receive had they terminated their plan membership as at the reporting date.

The value of vested benefits represents the liability that would have fallen on the Scheme if all members had ceased on 30 June 1994 and elected the option which is most costly to the Scheme. The value quoted does not in any way

represent the Scheme’s liability under circumstances which have any reasonable possibility of arising.

The Australian Government Actuary has advised that the estimated amount of vested benefits has been determined as at 30 June 1994.

1994 1993

$ m $ m

Vested Benefits 2,642 2,172

12. Liability for Accrued Benefits

The amount of accrued benefits has been determined on the basis of the present value of expected future payments which arise from membership of the scheme up to the measurement date. The accrued benefits are comprised of a funded component, which will be met from the Fund, (ie. accumulated member

contributions and, where applicable, productivity contributions plus interest) and an unfunded component to be financed from the Consolidated Revenue Fund at the time the superannuation benefits become. payable. The valuation of the accrued benefits was undertaken by the Australian Government Actuary as part of a comprehensive actuarial review during 1993/94. (A copy of the Australian

Government Actuary’s report is attached.)

Accrued Benefits as at 30 June 1993

$ m

. funded component 104

. unfunded component 2.470

2.574

13. Auditor’s Remuneration

The amount paid and payable in respect of external audit services is $34,000 (1992/93: $34,000).

14. Foreign Currency Gains

The foreign currency loss on overseas investments for the year was $740,733 (1992/93: gain of $280,000) . This amount is included in the Changes in Net Market Values of Investments disclosed in Note 2.

49

Notes to and Forming Part of the Financial Statements 30 June 1994

Military Superannuation and Benefits Scheme

15. Related Parties

The Trustees of the MSBS, the Military Superannuation and Benefits Board of Trustees No. 1, had the following members during the year:

Sir William Cole (Chairman) Mr K.A. Searson Warrant Officer D.J. Sutherland, RAN Mr A.G. Thompson1 Major General S. Gower, AM Mr P.D. Gourley Mr P.G. Skinner2 Mr C . Neumann3 Air Commodore F.E. Burtt, OBE4 Warrant Officer K.L. Rothe3 Warrant Officer R. Newton6

Commodore G.J. Earley7

1. Resigned during the year. 2. Alternate for Mr K.A. Searson. 3. Alternate for Mr P.D. Gourley.

4. Alternate for Major General S. Gower. Resigned during the year. 5. Alternate for Warrant Officer D.J. Sutherland. Resigned during the year. 6 . Alternate for Warrant Officer D.J. Sutherland. 7. Alternate for Major General Ξ. Gower. .

Fees and associated superannuation contributions paid to or in respect of the Trustees, both from the MSB Fund and the Consolidated Revenue Fund, during the year totalled $67,000 (1992/93: fees $52,000).

16. Segment Reporting

(a) Industry Segments

The MSBS operates in the superannuation fund investment industry with exposure to several sectors. These sectors comprise the short term and fixed interest money markets, the Australian and international equities markets and commercial property markets, through listed property trusts.

(b) Geographic Segments

The MSBS operates predominantly within Australia. However, significant investments are held overseas. At 30 June 1994 the market value of the

Scheme’s overseas investments in relevant investment categories in Australian dollars, was as follows:

1994 1993

$ ’000 $*000

United States Dollar 15,943 13,325

United Kingdom Pound 3,755 6,646

Japanese Yen 10,979 6,330

German Mark 2,337 3,152

French Franc 977 2,435

Other Currencies 11.054 6.284

45.045 38.172

All overseas investments are sufficiently liquid as to be realisable within a period of one year.

50

Notes to and Forming Part of the Financial Statements 30 June 1994

17. Contingent Liabilities

As at 30 June 1994, the Scheme had no contingent liabilities.

Military Superannuation and Benefits Scheme

18. OSSA Compliance

During the year the Scheme did not comply with certain requirements of the O c c u p a t i o n a l S u p e r a n n u a t i o n S t a n d a r d s A c t 1 9 8 7 . The areas of non-compliance

related to the adequacy of reporting to members, specifically regulations 18E(4), 18F and 18H(3). These matters have been considered by the Insurance and Superannuation Commissioner and advice has been received that an exercise of discretion to treat the Fund as if it had satisfied the superannuation fund conditions in relation to the year ended 30 June 1994 can be anticipated in respect of the identified breaches. The financial statements for the year ended 30 June 1994 have been prepared on the basis that the Fund was a complying fund for the financial year.

51

Key statistics

A comprehensive compendium of statistical tables may be obtained by contacting the officer named at the front of this report.

1992-93 1993-94

Contributors at 30 June Males 30 511 29 178

Females 6 581 6 119

Total 37 092 35 297

DFRDB Scheme Transferees 24 333 27 882

Contributor exits Age retirement 140 115

Resignation 4 172 4 522

Redundancy 1 036 923

Invalidity retirement 266 390

Death 43 25

Other 183 208

Total • 5 840 6 183

Pensions commenced Age retirement 83 76

Redundancy 749 856

Invalidity retirement 92 161

Preserved > age 55 266 6

Spouses and orphans 10 6

Total 936 1 105

Partial and full lump-sum employer benefits 210 337

Invalidity retirement rate (per 1000 contributors) 10 11

$m $m

Member and productivity contributions (after tax) 87.8 102.7

Annual pension liability 10.9 18.7

Average annual pension liability .011 .009

Fund size 103.9 195.7

% %

After-tax investment return (annualised) 12.5 7.2

Interest crediting rate (after fees and charges) 12.1 5.4

52

Legislative matters

Changes to the Act

On 30 November 1993, subsection 52 of the Act was amended by replacing reference to the Occupational Superannuation Standards Act 1987 with reference to the Superannuation Industry (Supervision) Act 1993.

On 22 December 1993, section 51a , which provides for Instrument No. 3 of 1993 to have retrospective effect to 1 October 1991, was inserted in the MSB Act by the Defence Legislation Amendment Act 1993. Instrument No. 3 prevents re-entered recipient members from being credited with the contributions from previous periods of service in addition to

receiving a DFRDB pension for that service.

Compliance index

Although this is not a departmental annual report, we have endeavoured to comply with the ‘Requirements for Departmental Annual Reports’, where applicable. For a comprehensive account of ComSuper’s activities and performance, see the Commissioner for Superannuation Annual Report 1993-94. Where the annual reporting requirement is met in

the Commissioner for Superannuation’s report, the cross-reference is indicated below by an asterisk.

Requirement Page

Letter of transmission iii

Aids to access

Table of contents iv

Alphabetical index 57

Compliance index 54

Glossary7

Corporate overview *

Organisation chart vi

Social justice and equity *

Internal and external scrutiny

*

Industrial democracy *

Occupational health and safety *

Freedom of information 37

Advertising and market research n/a

Program performance reporting

Staffing overview

*

Financial statements 38

7 A list of abbreviations is provided on page 50. A glossary o f technical terms is being prepared for next year’s annual report.

54

Contact officer

Information available to Members of Parliament, Senators and members of the public on request

In the interests of timeliness and conciseness, this report has been designed to provide fundamental information. Requests for more detailed information should be directed to:

Officer. Mary Miller

Postal address: Client Communications Branch ComSuper PO Box 22 Belconnen

ACT 2616

Street address: Unit 1, Cameron Offices

Chandler Street Belconnen ACT

Telephone: (06) 252 5893

Facsimile: (06) 253 1116

ADF Australian Defence Force

AIRCDRE Air Commodore AO Order of Australia

BHP Broken Hill Proprietary Limited

BT Bankers Trust

CORE Commodore

CFM Commonwealth Funds Management Limited ComSuper Commonwealth Superannuation Administration CPI consumer price index

DFRDB Defence Force Retirement and Death Benefits FAS final average salary

ICC Incapacity Classification Committee

ISC Insurance and Superannuation Commission

IVR Interactive Voice Response telephone system

LWOP leave without pay

MAJGEN Major General ·

MBL maximum benefit limit

MSB Military Superannuation and Benefits

MSBS Military Superannuation and Benefits Scheme OBE Order of the British Empire

OSSA Occupational Superannuation Standards Act RAC Reconsideration Advisory Committee

RBO Retirement Benefits Office

WO Warrant Officer

56

abbreviations, 57 administration of the Scheme, 21-36 assets allocation & holdings, 10-11 Audit Committee, 14-15

audit reviews, 15 Australian Defence Force (ADF) loss of trained personnel, 1

Bankers Trust Asset M anagement Limited (BT), 2, 7, 9

beneficiaries of the Scheme, 20 benefits employer benefit, 2 5 -2 6 , 28-30, 52 entitlements, 26-27

incapacitated officers, 16 lump-sum benefits, 24-25 number of pensioners by class of benefit, 20 orphans, 27

payment, 24 processing time, 2, 24 spouses, 27 Board of Trustees

mem bership, 4 meetings, 6 charter, 6 objectives, 7

performance indicators, 7 Secretariat, 7

Chairperson’s report, 2 client service, 24 access to inform ation, 35 committees, 14-15

see also individual committees Commonwealth Funds Management Lim ited (CFM ) links with the B oard, 2, 7, 9 Commonwealth Superannuation Adm inistration

(Com Super) Interactive Voice Response System (IVR), 35 invalidity retirem ent, 31 links with Board, 2, 7, 21

Review & Legal Services Branch, 34 review of pensioner benefit processing, 15 communication with m em bers, 35-36 see also inform ation compliance index, 54 computers

review of software usage, 15

contact for further information, ii, 37, 56 contributors, 18-19, 52

collection & amount paid, 22, 52 contribution rates, 22-23 counselling, 36 crediting rates

see investment & crediting rates

death of a m em ber, 27 decisions reconsideration, 17, 31, 34 Defence Force Retirement & Death Benefits

(DFRDB) relationship with MSBS, 1, 2 Dept of Defence employer benefit, 25

inform ation for new entrants, 36 links with the Board, 7 redundancy arrangements, 24

efficiency client service, 24 payment of benefits, 2, 24 employer benefit, 25-26, 28-30, 52 entitlem ents, 26-27

exits from the Scheme. 2,19, 52 determination of exit rates, 12-13 documentation, 24

financial statements, 38-51 audit review, 15 Freedom o f Inform ation, 37 fund managers, 2, 9

strategy, 9-10 fund size, 10, 52 performance rates on investm ents, 10

growth of MSBS, 2 guidelines for fund managers, 2

Incapacity Classification Committee (ICC), 14, 16, 31 objective, 16 information, 1

annual statements, 35 review of dissem ination, 15

57

‘The MSBS Book’, 36 interest rates determination, 11 interest crediting rate, 52 internal audit, 15 invalidity retirement, 2, 16, 30-33, 52

see «/so ICC statistics on retirem ent, 30-33 investm ent & crediting rates, 9-13 interest crediting rate, 52 investment return, 52

J P M organ links with the Board, 7, 9 review, 15

legislative matters, 53 letter of transmittal, iii

m em bership, 18-20 drop in numbers, 2

objectives see also individual sections Audit Committee, 14 ICC, 16 Board of Trustees, 7

RAC, 17 organisational chart, vi origin o f the MSBS, 1

pensioners numbers by class of benefit, 20 pensions commenced, 52 pension liability, 52 perform ance indicators

Board of Trustees, 7 investment performance, 11-12 perform ance m onitoring, 9 pre-existing incapacity, 32 publications, 1, 35-36 publicity & public relations, 36

Reconsideration Advisory Committee (RAC), 14, 17, 34 objectives, 17 reconsideration of decisions, 17, 31, 34 redundancy, 2, 27

special arrangements, 24 reserves investment strategy, 11 resignation, 2, 26 Retirement Benefits Office (RBO) name change, 2 retirem ent, 26 reviews

audit, 15 DFRDB Scheme, 1 invalidity pensioners, 32-33

Scheme members, 18-20 spouses death of a member, 27 Statement of Termination Payment, 24 statistics

asset allocation & holdings, 10-11 Audit Committee meetings & attendees, 15 benefits paid or preserved, 25 board meetings & attendees, 6 contribution rates, 22, 23 contributors, 18-19, 22 employer benefit available, 26-30 exit rates, 13 fund size, 10 invalidity

classifications, 32 i

entitlements reviewed, 33 retirement, 30-33 key statistics, 52 pensioners by class of benefit, 20 performance rates on investments, 10 pre-existing incapacity, 32 reconsideration applications received, 34 strategy fund managers, 9-1 0 , 11 Superannuation Guarantee (Administration) Act

1992, 25

superannuation industry changes, 2

)

I

i

'

58