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Wednesday, 30 May 1973
Page: 2888

Mr FAIRBAIRN (Farrer) - 1 am glad also to have the opportunity of saying a few words because while I was not directly responsible for retirement benefits for members of the Services when 1 was Minister for Defence - the Treasurer was the responsible Minister - it was my responsibility to put the views of the Services, and in particular 1 was closely associated with the Government's assessment of the Jess report and with its attempts to try to get a workable scheme and an agreed scheme that would be acceptable to the House, to the public and to the servicemen in particular. In particular I want to thank the officers of my former department who devoted so much time and energy to work on this scheme, which I think must be one of the most complex schemes on the statute book.

Most of the recommendations of the report of the Jess Committee have been implemented, but I feel that the Minister for Defence (Mr Barnard) might have been a bit more magnanimous in his second reading speech and might have paid a tribute to those who are responsible, and in particular to John Jess, the former honourable member for La Trobe. I am disappointed in the Minister. We got a lot of T. He used such phrases as 'I initiated', 1 moved for the appointment', 'the Government of the day agreed with my proposal', but everyone knows that in this place members of the Opposition can move amendments or motions until they are blue in the face and they do not achieve what they are seeking. The reason that the Jess Committee was established was that John Jess in particular and the honourable member for Isaacs (Mr Hamer) saw the then Prime Minister, Mr Gorton, and were able to persuade him to agree to this committee. I do not know what arguments they used to persuade the Prime Minister, but they certainly used them and they were effective.

Undoubtedly one of the major arguments would have been the tremendous complexity of the scheme as it now exists, especially the pre-1959 scheme. It is virtually impossible for any serviceman to know what his benefits are, and particularly in the pre-1959 scheme contributions varied enormously. The post- 1959 scheme was better but this led to considerable trouble and unrest in the Services. I recall that many years earlier when I was Minister for Air we had problems with people believing that the scheme was an ungenerous one; I do not think that this was so. The problem was partly or one could say almost mainly that the scheme was not understood. In fact we went to the extent, when I was Minister for Air, of sending a senior officer round to all the bases to explain the defence forces retirement benefits scheme and this had some effect. But in the old days virtually every case had to be looked at individually and obviously many anomalies existed. It was to try to get rid of these that the Jess Committee was formed.

Of course another problem was that in the earlier scheme promotion shortly before retirement led to vast increases in contributions. Admittedly the person who paid these received greater benefits eventually but he had to decide whether to live very cheaply while he paid for a benefit that he would receive later or not to make the additional contributions, in which case he lost the opportunity of an increased benefit. We were particularly fortunate in having available to us in the Government at that time people of the calibre of John Jess. He was brought up, as everyone knows, in a military background. His father, for instance, I believe was the youngest general in the First World War, and John Jess has maintained over a period of many years close links with the Army and he understands many of its problems and its thinking. We were also extremely lucky to have the services of 2 other men. One was the honourable member for Isaacs who spent a considerable time in the Navy and therefore understood the workings of this scheme. The other was the honourable member for Herbert (Mr Bonnett) who had very many years in the Army. They were of great help. I am not by any manner of means underrating the contributions made by other people, but I say that at the time when the then Treasurer, the then Prime Minister and I were doing our utmost to try to sort out some of the problems associated with this scheme those people were of considerable help to us.

Another argument that could possibly have told when it was decided to set up the scheme was the fact that the serviceman did not appear to be well treated vis-a-vis the public servant. I found in the time that I was associated with work on this scheme that there appeared to be a resistance amongst many people to realise that conditions of service in the Services are completely different from conditions of service in the Public Service. The serviceman, first of all, of course, is constantly on the move. It is not unusual for an officer in the Services over the period of his service to have 20 or more moves. A public servant can have perhaps only one. Sometimes he starts in Canberra and remains here all his life. On other occasions of course he may be moved to Canberra from Melbourne. But certainly it is very much easier for the public servant to set up a house. He does not have the problem of being constantly moved and having to establish a new home. Sometimes a serviceman gets a home where he thinks he will retire and will be settled and in no time he is sent off overseas or to another State. He has to face the problem of either selling his home or getting someone to occupy it, knowing that very often homes are not well looked after by tenants.

If a war breaks out a serviceman is pretty likely to find himself in it, being shot at and facing all the problems and conditions associated with war. The setup in the Services is completely different from that in the Commonwealth Public Service. The serviceman is separated from his family for long periods. This particularly applies to those in the Navy, not quite so much perhaps to members of the other 2 services. There is the problem of educating children. Even moves from one State to another can cause great problems and children may have to be left behind and often arrangements made under other legislation to help them. On occasions when a serviceman is sent overseas his children have to be sent back to Australia or perhaps sometimes to England to get the education that they need. The other thing - and this is extremely important - is that servicemen are forced to retire at an early age. Commonwealth Public Servants can opt to retire at 60 or 65, and they do not have to obtain a new job after retirement. Some do obtain a new job and some perhaps get a part time job. The serviceman, on the other hand, would be unlikely to retire after about 55 years. I suppose most of them would retire in their 40s. This is at a time when it is urgent for them to get some alternative employment. That is not easy because they are a little old to start off with new ways. On the other hand, of course, they do have service portability and this often helps them to find employment.

So, as I mentioned, it was extremely hard to get some of those who were looking at this problem to see the difference that existed between the DFRB and the Commonwealth Public Service arrangements for retirement. However, the report was tabled in May 1972, after 20 months. I know that the Committee had considerable problems. One of them was not being able to get reports on costs of the scheme as quickly as they would have wanted. In fact, I do not know whether these costs were finally obtained from the Actuary before the report was presented. But, as I have mentioned, this is one of the most complex pieces of legislation on the statute book. There was a great deal of work to be done and I and other members of the then Government did everything that we could to try to force this legislation along. 1 am afraid that the present Minister for Defence, while he called for implementation of the report last year, was not prepared to see that there were problems if the report were implemented. Of course, this became apparent the moment the report was produced because there were 2 ways in which a serviceman would have been disadvantaged if the report had been implemented in its entirety. I think something like 12,000 servicemen would have been worse off by its immediate implementation. This was realised very quickly and a letter was received by me from the chairman of the Committee saying that the Committee hoped that the Government would see that no serviceman was worse off as a result of the report. We looked at this matter very quickly, but there were 2 areas to be considered. There was the late entrant officer, owing to the change of the criterion for payment of pension to length of service at retirement rather than the rate of pay at retirement, as had been in the previous system. The other point was the pension reduction penalty of 5 per cent for each uncompleted year of service if the officer retired at his own request before the normal retiring age for rank. The then Government announced as quickly as it possibly could that no officers would be worse off as a result of the report and it set up a committee under Mr Rutherford, the Queensland State Actuary to advise the then Government how to transfer servicemen from the pre-1959 and the post 1959 scheme to any new scheme. I am extremely sorry that the present Government saw fit to abolish that inquiry. I believe that as a result of that action we will never have available the information we would have had the inquiry proceeded. We also said that any decision would be backdated to 1 October 1972. It was realised that drafting problems would have made it quite impossible to bring the scheme into the House before the end of the last Parliament. The then Government accepted 7 specific recommendations. I will give them quickly. They were:

Marriages of pensioners before age 60 will be recognised for widows' pension purposes;

A dependent spouse of a female member or pensioner will be entitled to pension on her death;

Subject to conditions yet to be determined, de facto spouses and illegitimate children will be recognised for pension purposes;

Children's benefits payable to students will be continued until age 25;

There will be payable to the estate of a contributor or pensioner, who dies without leaving dependants entitled to pension, an amount equal to one and one half times his contributions less, in the case of a pensioner, any pension or other benefits received;

The tapering of the entitlements of more senior officers will be eliminated;

A retiring member will not be penalised by reason of his refusing to sign on to a reserve force.

We also adopted another 6 recommendations in a modified form. Because of the time limit I shall not read them. But I was interested to hear the Minister's second reading speech on this Bill. A number of things which had been accepted by the previous Government about 6 months ago were referred to in the Minister's speech with an air of novelty as though they were being introduced for the first time. I hope that this was not the intention but certainly if one reads the Minister's speech one could be excused for believing that the Minister was introducing these things which we had agreed to do some 6 months previously.

We then set up a committee to advise use of the criteria by which the Defence Forces Retirement Benefits pensions should be adjusted annually after retirement to maintain relativity. Professor Pollard was asked to advise the Committee. I am only sorry that until now no final agreement or how these things should be done appears to have been made. But I hope that the Minister will continue to work hard on those areas of this Bill which have not yet been worked out. Apart from these aspects the Minister's speech does not appear to go much further. As I said, he mentioned some things which we accepted last October - 7 months ago. They are restated. The rest of the speech is really a number of platitudes like, for example:

The conversion of some 78,000 contributors to the new scheme . . . will involve individual calculations.

He goes on to say how many people this will apply to and how long it will take to do these individual calculations. He said:

I will be arranging for these cases - to be given priority treatment.

They are people who have retired since 10 October 1972- He then said:

.   . suitable methods of adjustment . . . are currently being eqamined.

He referred to development in updating in other Commonwealth pension schemes and said that these had to be carefully investigated.

None of this really takes us any further. I only hope that work will continue at a great speed with this scheme. I am glad to see the scheme introduced. I believe it is a monument to the work of John Jess and we should be magnanimous in paying a tribute to him. Without him in all probability we would not be debating this matter here tonight. I have only 2 minor matters in which I disagree with the proposals of the Jess Committee - and they are minor matters. They are to do with administration, and I suppose they are not very important in the overall scheme of things. The first is that the DFRB Fund, which now stands at $174m, will be frozen and wound up. I believe that an invested fund is likely in the long term to return earnings at a level that enables members' contributions to provide greater support for benefits than would otherwise be the case. We would have maintained this fund. We, in fact, made arrangements for it to be invested in a very much better way than previously so that it could earn a lot more. We had legal advice that the transfer of the existing fund could raise a possible question whether the transfer represented an acquisition of property by the Commonwealth in terms of section 51, (XXXI), which relates to just terms. I do not know whether this is so or not, but it is hard to know what is the true situation. The money does not belong to the Commonwealth; it beloings to the servicemen. I do not know how something can be acquired from the servicemen on just terms.

The other point is that the administration and the responsibility for the DFRB Fund is now to be transferred to the Department of Defence from the Treasury. We were satisfied that the present arrangement with the one organisation handling the Superannuation Board and the DFRB Board and servicing both the DFRB and the superannuation scheme is effective and results in significant economic improvement through the common use of highly specialised staff and facilities. I am sure, that the system of sharing was more satisfactory. I do not really quarrel on this point.

Mr Barnard - It was one of the recommendations.

Mr FAIRBAIRN - 1 know. But it was one of the recommendations which I, although I was Minister for Defence at the time, did not agree with. I felt that the actual administration, apart from policy making, was better left in the hands of the Board and the Treasurer and the Treasury, who handle such matters. Unfortunately we now have 3 schemes, not two. This was a problem to which the Treasury drew our attention. So I hope that the Government will work extremely hard over the parliamentary recess and at the earliest possible moment will arrange that the people concerned can be transferred into one easily undectored scheme as was recommended by the Jess Committee. Otherwise, I support the scheme.

Sitting suspended from 6.15 to 8 p.m.

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