Bills Digest no. 85 1976-77
Defence Force (Retirement and Death Benefits Amendments) Bill 1977
WARNING:
This Digest was prepared for debate. It reflects the legislation as introduced
and does not canvass subsequent amendments. This Digest does not have
any official legal status. Other sources should be consulted to determine
the subsequent official status of the Bill.
CONTENTS
Passage History
Purpose
Background
Provisions
Contact Officer & Copyright Details
Passage History
Defence
Force (Retirement and Death Benefits Amendments) Bill 1977
Date introduced: 17 February 1977
House: House of Representatives
Purpose of Bill
This Bill provides for the automatic annual
adjustment of pensions payable under the Defence Force Retirement Benefits
Act and the Defence Force Retirement and Death Benefits Act in accordance
with increases in the Consumer Price Index.
Background
As a result of the recommendations of the
Joint Select Committee on Defence Forces Retirement Benefits Legislation
(The Jess Committee), which reported to Parliament in May 1972, a fundamental
change was made in the method of providing retirement benefits for the
Defence Force.
There are now two schemes:
(a) The Defence Force Retirement and Death Benefits (D.F.R.D.B.)
Scheme which came into force on 1 October 1972
. This covers new contributors, and serving members who had been contributing
to the Defence Forces Retirement Benefit (D.F.R.B.) Fund. The latter
were transferred to the new scheme.
(b) The Defence Force Retirement Benefits Fund. This was closed to
contributors from
1 October 1972, but continues to provide for the benefit
entitlements of ex-servicemen who retired before that date, or their widows
and children.
Under the D.F.R.D.B. there is a flat rate
of contribution of 5.5% of pay.
The basis of contribution under the D.F.R.B.
scheme had become very complicated. Contributions were also on two different
bases depending upon whether the serviceman entered before or after
1959.
After closure of the D.F.R.B. scheme in
1972 all benefit payments for both Schemes are being met by special
appropriations from consolidated revenue.
One of the important recommendations of
the Jess Committee was that pensions be adjusted annually.
Adjustments in the Past
Prior to 1972 two methods of calculating
pension increases had been used. One was based on changes in the value
of the pension unit and was applied in 1951 and 1954. The other was
the notional salary method in which the increase was related to the
salary which the pensioner would be receiving if he had retired at a
later date. Adjustments on this basis were made in 1961, 1963, 1967
and 1971.
Although increases were generous there were
long gaps. There was no certainty about them because new legislation
was required in every case.
Since 1972 the principle of annual adjustments
has been followed. Increases have been based upon either the percentage
increase in average weekly earnings or the C.P.I. increase.
Main Provisions
of the Bill
Automatic annual increases of pensions under
both schemes are provided for by adding Part VID – Pension Increases
to the D.F.R.B. Act and Part XA – Pension Increases to the D.F.R.D.B.
Act.
The formula for adjustment is the same for
each scheme. The percentage increase to apply from 1 July in any financial
year is the difference, expressed as a percentage, between the C.P.I.
for the March quarter in the financial year preceding adjustment and
the highest C.P.I. for the March quarter since 1 July 1974. Adjustments are made only
if the C.P.I. exceeds a previous highest C.P.I. for the March quarter.
Increases for 1976/77 are to be paid retrospectively from 1 July 1976.
There is a difference in the application
of this formula to the two schemes. Under D.F.R.B. it applies to the
whole of the pension currently being paid. Under D.F.R.D.B. it applies
to the amount which the pensioner would receive if he had commuted to
the maximum extent allowable.
Other amendments provided for in Part VID
of the D.F.R.B. Act and Part XA of the D.F.R.D.B. Act take care of various
circumstances and special cases and define how the basic formula for
increases is to apply. Included in these provisions are:
(a) Application to widows’ pensions. These benefit in the
same way.(b) Effect on children’s pensions.(c) Proportion of increase to apply to a new pension depending
upon the number of months it has been in force.(d) The effect of commutation.(e) Non-availability of increases for the purpose of commutation.
Defence, Science and Technology
23 February 1977
Bills Digest Service
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ISSN 1328-8091
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