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Briefing Book for the 42nd Parliament

                                                      

Military Superannuation

In February 2007, the Howard Government announced a wide-ranging review of military superannuation. Under the terms of reference, the review was to evaluate whether the design of the Defence Force Retirement and Death Benefit Scheme (DFRDB) and Military Superannuation and Benefits Scheme (MSBS) suited current Australian Defence Force members and reflected contemporary superannuation policy.

Background

The DFRDB was closed to new members in 1990. The MSBS is the current military superannuation scheme. Both are defined benefit schemes paying both pension and lump sum benefits. Most of Australia’s superannuation schemes are of the ‘accumulation’ type, including the currently open Commonwealth public sector superannuation scheme—the Public Sector Superannuation Scheme Accumulation Plan (PSSAP). An ‘accumulation’-type scheme is one that only pays a lump-sum benefit.

Currently, the provision of military superannuation benefits is the largest component of the Commonwealth’s project superannuation liabilities, as the following graph shows.

Projected defined benefit superannuation liabilities

Projected defined benefit superannuation liabilities

     Source: Australian Government, Intergenerational Report 2007

The accumulation of assets in the Commonwealth’s Future Fund is designed to cover these liabilities.

Progress of the review

The review’s report was submitted to the Howard Government on 31 July 2007, and it was still being considered when the election was called and caretaker conventions came into effect. The report has not yet been released to the public.

Major issues for the review

The submission of the Regular Defence Force Welfare Association (RDFWA) contained most of the issues raised in the majority of submissions to the review. These included:

  • the importance of military superannuation schemes taking into account the unique aspects of military service (a point recognised in the review’s terms of reference)
  • the correction of the specific deficiencies in the MSBS, DFRDB and the older Defence Force Retirement Benefits scheme
  • the indexation of military superannuation pensions to the greater of rises in the Consumer Price Index or male weekly ordinary time earnings
  • the tax-free status of invalid benefits paid by the current (and any future) military superannuation schemes, and
  • the interaction of the recently implemented simplified superannuation rules and the current (and any new) military superannuation schemes.

The RDFWA was also concerned that the benefits of any new military superannuation scheme should not be less than those provided by the MSBS.

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Last reviewed 7 January, 2008 by the Parliamentary Library Web Manager
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