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Wednesday, 30 May 1973
Page: 2882

Mr HAMER (Isaacs) - It gives me also great pleasure to see this Bill introduced, a Bill which effectively codifies the report put forward by the Jess Committee. But what we are considering today are 3 Bills of great complexity. The main one contains 79 pages. These Bills affect about 70,000 present servicemen and many thousands of retired ones. It was introduced into this House last Friday and 5 days later we are debating it. For a Bill of such complexity, in my opinion, that is a grossly inadequate time for proper consideration. The honourable member for Herbert (Mr Bonnett) has pointed out what seems to him and to me an anomaly in the Bill. I am sure many other anomalies will be found when people with close interest in and concern about these Bills study them in detail.

It is a matter for great regret therefore that we have not had more time to go into the Bills in detail and consult those most concerned. What the main Bill does is effectively to introduce the provision and the recommendations of the Jess Committee, of which I was a member, as was the honourable member for Herbert and, of course, the present Minister for Defence (Mr Barnard). I congratulate the Minister for Defence on thus honouring an election promise he made on behalf of his Party. It was, we must recognise, an all-party committee and the findings were unanimous, with one minor dissent by Senator Byrne. The setting up of the Committee had support from both sides of the House. Although I said that this Bill does implement the recommendations of the Jess Committee, 1 should add that it has had to vary them in a number of ways, some of them necessary. I have quite serious doubts about others, although I accept the principle and the purpose of what is going on. I would like to run through a few of my doubts. One of the overriding purposes of the Jess Committee was to achieve simplicity. The earlier Defence Forces Retirement Benefits Fund legislation had many admirable features, but it failed in its purpose because it was not understood by the average serviceman. For that reason the

Jess Committee very strongly felt that there should be a single Defence Forces Retirement Benefits Fund Act, simple in form and comprehensible to servicemen. Only in this way would we achieve the purpose which the Government had in mind.

For reasons I do not agree with, the Government has chosen to retain the old Defence Forces Retirement Benefits Fund Act in existence as a means of continuing to pay benefits to pensioners who left the Services before 1 October last year. I can see why that has been done, but I do not agree with it. The Jess Committee had in mind that people who left the Services before 1 October 1972 should have their updated pensions assessed as a percentage of the rank they held at the time of retirement. For instance, a major would have a pension equal to 40 per cent of the current active pay of a major. These people should be transferred to the new scheme on that basis. Thereafter their pensions should be updated by maintaining a steady ratio with the active pay for their rank.

The reason why that has not been done is quite clear. So far the Government has been unable to reach any conclusions about the best method of updating pensions. The suggestion I put forward implicitly accepted that the system was to operate on the basis of average weekly earnings. Apparently the Government is not yet prepared to accept that suggestion, although it is worth noting that a different arm of the same Government, operating as it tends to do in different directions, has accepted that principle in the Commonwealth Employees Compensation Act which has been passed by this House. If the Government can adopt that suggestion in the Commonwealth employees compensation legislation I cannot see why it will not give equivalent benefits to its servicemen.

I am glad to see that in respect of pensioners who left the Services before 1 October 1972 the Government has accepted the full benefits which the Jess Committee recommended for children. There is no doubt at all that the benefits for children have become grossly outdated. The honourable member for Herbert (Mr Bonnett) mentioned one anomaly. I think it is a clear error in drafting the Bill. It concerns late entrant officers. In that respect the initial report of the Jess Committee was incomplete. When representations were made after the Jess Committee report was published it became obvious that some late entrant officers - officers who enter the Services probably in their 30s and are unable to complete 20 years service before they reach the mandatory retiringage for rank - would receive less under the Jess scheme than they would under the post- 1959 scheme. This was an obvious unfairness. It was not totally compensated for by the fact that those people were contributing at very high rates - over 10 per cent of their pay in many cases - and would receive a substantial refund of their contributions. The recommendation of the Jess Committee in its supplementary report, in a letter to the then Minister for Defence, which the Government has not adopted, was that any late entrant officer who found that his future entitlement was being reduced should be entitled to buy back notional service to bring his entitlement under the new scheme as high as it was under the post- 1959 scheme. That has not been accepted by the Government. I think that is a mistake, because from that refusal stems the error of drafting pointed out by the honourable member for Herbert.

The contribution rate is now to be a constant 5.5 per cent of pay. This was done in the interests of simplicity and because it was the rate paid currently by most post- 1959 contributors. There is no magic in the figure of 5.5 per cent. It was merely a figure picked out to represent a fair contribution by servicemen. I know that in the study of the Commonwealth Superannuation Act the proposal has been put forward that the contribution by Commonwealth public servants should be 5 per cent. That has not yet been accepted by the Government. If it is accepted, I think the Government should consider very seriously bringing the DFRB rate down from 5.5 per cent to 5 per cent because, in my view, it would be quite unfair for servicemen to pay a higher rate than public servants.

I turn now to the key area in which I part company with the Government. The Government has not been prepared to make a decision on what is in many ways the most important aspect of the report: that is the method of updating. The Jess Committee after considering various alternatives recommended that updating be done on the basis of average weekly earnings. We managed to prove, at least to my satisfaction, that Service pay followed very closely average weekly earnings. Therefore the requirements of both simplicity and fairness would be met if after retirement a pensioner's annuity was maintained as a constant percentage of the active pay for the rank he held. It is simple and fair. A pension would thus be updated on the basis of average weekly earnings. Although the Government has accepted this principle in respect of the Commonwealth Employees Compensation Act, apparently it is not prepared to accept it in this legislation. I cannot understand why.

One of the reasons why the Government is delaying a decision on this aspect is the report by Professor Pollard. He was appointed by the previous Liberal-Country Party Government to investigate methods of updating pensions, particularly for the Commonwealth superannuation scheme. The right honourable member for Lowe (Mr McMahon) as Prime Minister had promised to expand the scope of the investigation of Professor Pollard to cover the defence forces retirement benefits scheme. The present Government did not follow through on this matter so that Professor Pollard's report covers only the Commonwealth superannuation scheme. It does not cover the DFRB scheme and his findings are probably not relevant to what we are now considering.

Professor Pollard recommended that the superannuation payable to public servants after retirement should be updated in accordance with changes in the consumer price index. This has caused a lot of confusion. Many people thought that he recommended that adjustments should be made at the rate of 1.4 times changes in the consumer price index. That is not so. Under the Commonwealth superannuation scheme the Commonwealth pays five-sevenths of the superannuation and the fund pays two-sevenths. The only part that is updated by payments after retirement is the Commonwealth portion. In order to keep the total pension moving with changes in the consumer price index it was necessary to adjust the Commonwealth fivesevenths portion at 1.4 times changes in the consumer prices index. Professor Pollard is thus recommending that changes in Commonwealth superannuation should follow consumer price index changes. What the Jess Committee recommended - and what the Government has done in respect of the Commonwealth Employees Compensation Act - was that pensions should be changed in accordance with average weekly earnings. In the scheme we are considering today the demands of both simplicity and fairness make that highly desirable and I strongly recommend that the Government take action on those lines.

I can speak personally about what I consider to be an extraordinary anomaly in this measure. The Jess Committee recommended that rather than starting service for DFRB purposes at the age of 20 years - there is no magic or purpose about that age - service should start for that purpose at the age of entry. It was never envisaged that this would apply to officer cadets who entered the Services as young as at 13 years, but as this measure is worded that result will follow. I entered the Navy at the age of 13 years. When I joined my pay was ls. a week, rising after 6 months of very good conduct - they took a rather generous view of what comprises very good conduct - to ls.3d. a week. During my 4 years' service as a naval cadet I earned a total of £16 4s. Taking from that 5.5 per cent, which is the requirement of this Act, the sum that such an officer now serving would have to contribute would be $1.80. For that contribution of $1.80 he would be entitled, after retirement, to a pension increase for the rest of his life of at least $1,000 a year. This seems to be a very generous donation. It even makes me wish sometimes that I was back in the Navy so that I could receive it. The Minister might look at this aspect. I accept that the purpose of the Bill should be generous, but this seems to me over-generous. As far as I know it was never envisaged by the Jess Committee that the date of commencement of service would go back to the age of 13 years.

A serious area of difficulty in this Bill concerns invalidity and death benefits. Two things have happened since the Jess Committee investigated this subject. The first is that repatriation benefits have been extended to servicemen for injuries or illness not related to operational service. All servicemen are now entitled to repatriation benefits for injuries or illness associated with their service careers. This takes out one of the principal purposes of the invalidity provisions of the Defence Forces Retirement Benefits Act. In fact the only purpose that it retains is to cover the case where a serviceman either becomes ill or is injured when not on duty. I accept that tha; provision should continue, but I think that the meshing in of the Repatriation Act and the Defence Forces Retirement Benefits Act with respect to the invalidity pension should be looked at. Most of all, the Government should look at what it is doing with respect to the Commonwealth Employees Compensation Act.

I do not know whether all honourable members remember this, but at the moment the widow of a person killed in Commonwealth employment gets his full pay, including overtime - his recent average weekly earnings - for life. These earnings are updated by a factor very close to that of the average weekly earnings. This is twice as generous as the provisions of the Defence Forces Retirement Benefits scheme. I do not know why a civilian employee should be so much more generously treated than servicemen. I think it is wrong and I can imagine it being an oversight by the Government - another example of its right hand not knowing what its left hand is doing. The whole area of death and invalidity benefits should be looked at to see whether we really need a repatriation system, a defence forces retirement benefits system, a Commonwealth employees compensation system and ordinary invalid pensions. I hope that the Government will wait with the Commonwealth employees compensation scheme until we see the result of the report by Mr Justice Woodward who is looking at this area. It would be rash of the Government to take too radical action before his report is received.

Another aspect that caused the Jess Committee some concern was the question of retention of officers. It is agreed on all sides that what we want in the professional Army, Navy and Air Force are long service career officers. The experience of the Canadians and Americans whose officers had a right to retirement after 20 years' service - though in their case service commences at the age of 20 - was that they had a high attrition rate among officers at that point. The Jess Committee therefore recommended that there should be some penalty for the voluntary retirement of officers before they reached the retiring age for rank which in the case of, say, a lieutenant-commander in the Navy is 45 years. The Jess Committee recommended that the pension entitlement should be reduced by 5 per cent for every year at which an officer voluntarily retired before the laid down retiring age. I must admit that this caused some concern in the Services largely because the men misunderstood what the 5 per cent was to apply to. They thought it was an absolute 5 per cent reduction when, in fact, it was only 5 per cent of entitlement. What the Government has done is to introduce a notional retiring age of 5 years less than the ordinary laid down retiring age and to reduce the penalty to 3 per cent. I do not know what will be the effect of this generous action. I fear it may well be a very severe attrition of officers in their late 30s and early 40s, who will take their defence forces retirement benefit entitlement and establish themselves in new careers. Surely it is not the purpose of a defence forces retirement benefits scheme to encourage early retirement. We should be trying to encourage people to remain in the Services. I confess that I am concerned about this aspect.

My final point concerns the Defence Force Retirement and Death Benefits Authority. Perhaps the last part of the title is the best. The Jess Committee recommended that this Authority should be disbanded. I can accept that it will have a temporary rate while contributors are being transferred from existing schemes to the new one. This will be a difficult job and there are bound to be considerable disputes and difficulties about entitlements and rights but I do not think the Authority should have a permanent existence. I should like to see a system under which Service personnel - whose pay is computerised - are paid by their branch of the Services throughout their lives. While they are active they are paid through the Services computer system. When they retire they should continue to be paid through the Services pay system although, of course, at a proportionately lower rate depending on their length of service. Administratively this would be much simpler and clearer and, I believe, better than retaining the Authority.

I accept the purposes of this Bill as, of course, I must. I was a signatory to and totally agreed with everything in the Jess Committee report. I believe this Bill is an honest attempt to implement the findings of the Jess Committee and the election promises of the Minister for Defence. I am not happy with the way in which it has been done. It has been cone in a muddled and confusing way and I think many amendments will be necessary as difficulties arise in its practical application. I urge the Government not to regard the defence forces retirement benefits question as settled and put it at the bottom of the priorities of the Parliamentary Counsel but to keep the Parliamentary Counsel ready at short notice to draft the many amendments that I am sure will be necessary to make this Bill work in the manner in which it is intended to work.

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