Submission - Vietnam Veterans' Federation - Department of Finance ...

Mr Trevor Matthews, MA, FIA, FIAA, ASA
Pension Indexation Review Secretariat
Department of Finance and Deregulation
John Gorton Building
King Edward Terrace
PARKES ACT 2600
15 July 2008
Dear Mr Mathews,
VIETNAM VETERANS’ FEDERATION
8 Mary Street Granville PO Box 170 GRANVILLE NSW 2142,
Phone (02) 9682 1788 Fax (02) 9682 6134
Incorporating
Vietnam Veterans Peacekeepers and Peacemakers Association NSW Branch
Vietnam Veterans Federation Queensland Branch
Vietnam Veterans Federation ACT Branch
Vietnam Veterans Federation Victorian Branch
Vietnam Peacekeepers Peacemakers Federation of Tasmania
Vietnam Veterans, Peacekeepers and Peacemakers Federation of Australia WA
Branch
Attached is our submission to the Review of Pension Indexation Arrangements in Australian
Government Civilian and Military Superannuation Schemes.
Yours sincerely,
Tim McCombe
President

Vietnam Veterans Federation of Australia Submission to the
Review of Pension Indexation Arrangements in Australian Government Civilian and Military
Superannuation Schemes
CUMULATIVE % INCREASE
140.0
130.0
120.0
110.0
100.0
90.0
80.0
70.0
60.0
50.0
40.0
30.0
20.0
10.0
0.0
31-Dec-89.
Dec-90
CUMULATIVE % INCREASE IN: CPI, AGE PENSION, MTAWE, AWOTE & MP's SALARY & PENSION
AWOTE (PS): Average Weekly Ordinary Time Earnings, Public Sector, All full time adult persons. (124.9%), [4.54%]
M P's SALARY & PENSION: Linked to The Remuneration Tribunal's Principal Executive Officer
Classification Band A. (131.0%), [4.69%]
AGE PENSION: The Single Person Age Pension, linked to the greater of CPI or 25% of MTAWE. (104.6%), [4.32%]
MTAWE: Male Total Average Weekly Earnings, All Male employees total earnings. (98.4%), [3.82%]
CPI: Consumer Price Index. ( Used to Index ComSuper & Aust. Defence Force Pensions.) (63.54%), [2.73%]
NB Cumulatiive indexation values over 18.25 years are indicated in brackets (--.-% )
Average compound indexation values % per annum are indicated in brackets [-.--%]
Dec-91
Dec-92
Dec-93
Dec-94
MP's SALARY & PENSION
Dec-95
Dec-96
AWOTE (PS) MTAWE AGE PENSION CPI MP'S SALARY & PENSION
Dec-97
Dec-98
Dec-99
Dec-00
Dec-01
Dec-02
Dec-03
AWOTE(PS)
Dec-04
Dec-05
Dec-06
AGE
PENSION
MTAWE
CPI,
ComSuper & Australian Defence
Force Pensions
VER 15 31-03-08
Dec-07
140.0
130.0
120.0
110.0
100.0
90.0
80.0
70.0
60.0
50.0
40.0
30.0
20.0
10.0
0.0

14 July 2008
VIETNAM VETERANS’ FEDERATION
8 Mary Street Granville PO Box 170 GRANVILLE NSW 2142,
Phone (02) 9682 1788 Fax (02) 9682 6134
Incorporating
Vietnam Veterans Peacekeepers and Peacemakers Association NSW Branch
Vietnam Veterans Federation Queensland Branch
Vietnam Veterans Federation ACT Branch
Vietnam Veterans Federation Victorian Branch
Vietnam Peacekeepers Peacemakers Federation of Tasmania
Vietnam Veterans, Peacekeepers and Peacemakers Federation of Australia WA
Branch
Vietnam Veterans Federation of Australia
Submission to
Review of Pension Indexation Arrangements in Australian
Government Civilian and Military Superannuation
Schemes
Paper No 1 – Indexation
The graph on the front cover of this submission shows how poorly the indexation of
DFRB, DFRDB and MSBS military superannuation pensions has served retiring
Australian Defence Force members compared with how the more generous indexation
of other government pensions such as the Age, Disability and War Widows pensions has
served their recipients and especially how the even more generous indexation of
parliamentary pensions has served members of parliament.
Indeed, since 1989, the pensions of members of parliament have increased some 60%
more than DFRB, DFRDB and MSBS pensions and other government pensions such as
Age, Invalid, War Widow etc pensions have increased some 35% more.
Far from there being an acceptable rational for this disparity, there is every reason that
DFRB, DFRDB and MSBS pensions should be the most favourably indexed. Members
of the Australian Defence Force have suffered conditions of service far less favourable
than civilians including:
liability for compulsory high risk combat operations (in the life of the DFRB,
DFRDB and MSBS pension schemes, Australia has been involved in many
conflicts including the Malayan Emergency, Indonesian Confrontation, the
Vietnam War, Timor, Iraq and Afghanistan);
a restriction of liberty in a regimented way of life;
compulsory long and irregular working hours;
compulsory statutory retiring ages well below the community norms;

Page 2 July 18, 2008
compulsory high standards of physical fitness;
frequent compulsory relocation causing schooling and network dislocation; and
long periods of compulsory separation from family.
DFRDB, DFRB and MSBS military superannuation pensions were calculated as a certain
percentage of the wage of the rank at which the member left the service. Justice demands
that each member’s DFRDB, DFRB and MSBS pension be restored to that percentage
of the current wage of that rank, then indexed either to increases in the wage of that rank
or to increases in the other government pensions such as the Age, Disability and War
Widows pensions.
Before 1997, other government pensions such as Age, Disability and War Widows
pensions, were indexed to increases in the cost of living (CPI) only. But because these
pensions were falling further and further behind community incomes, the government, in
that year, re-indexed them so that they increased with increases in the cost of living
(CPI) but established a minimum pension of 25% of the average wage (MTAWE).
Military superannuation pensions, however, were left to languish, indexed only to
changes in the cost of living (CPI) and so have continued to fall farther and farther
behind community incomes. It is a sad fact that long standing military superannuants
have lost many thousands of dollars each by military superannuation pensions being
excluded from the 1997 changes.
Tim McCombe
President

15 July 2008
VIETNAM VETERANS’ FEDERATION
8 Mary Street Granville PO Box 170 GRANVILLE NSW 2142,
Phone (02) 9682 1788 Fax (02) 9682 6134
Incorporating
Vietnam Veterans Peacekeepers and Peacemakers Association NSW Branch
Vietnam Veterans Federation Queensland Branch
Vietnam Veterans Federation ACT Branch
Vietnam Veterans Federation Victorian Branch
Vietnam Peacekeepers Peacemakers Federation of Tasmania
Vietnam Veterans, Peacekeepers and Peacemakers Federation of Australia WA
Branch
Vietnam Veterans Federation of Australia
Submission to
Review of Pension Indexation Arrangements in Australian
Government Civilian and Military Superannuation
Schemes
Paper No 2 – Other Influences on the Value of
DFRB/DFRDB/MSBS pensions
SOME DFRB/DFRBF/MSBS MILITARY SUPERANNUANTS have opted to receive
a ‘commuted’ lump sum payment with a compensating reduction of their fortnightly
pensions.
The amount of this reduction was calculated by dividing the lump sum payment
by how many years the recipient had to live according to government life expectancy
tables. Other things being equal, the more years the recipient had to live, the less each
pension payment had to be reduced to compensate for receiving the lump sum.
But life expectancy has increased markedly in the last thirty years. This means
that the amount of money deducted from fortnightly pensions to compensate for
receiving the lump sum should be reducing.
No such reduction has occurred, because the old, out of date, life expectancy
tables are still being used.
It is easy to see that current life expectancy tables should be applied to those who
opted for lump sum payments; a change which would result in modestly increased
fortnightly pension payments.
We are at a loss to understand why out of date life expectancy tables should
continue to be used.

Page 2 July 18, 2008
WE NOTE THAT PENSIONS FROM ‘taxed’ superannuation funds are no longer
subject to taxation but pensions from ‘untaxed’ superannuation funds, including
DFRB/DFRDB/MSBS, receive only a minor tax concession.
Contributions to DFRB/DFRDB/MSBS were compulsory. Contributors could
not choose to pay or not pay tax on their contributions. There having been no choice it
seems unfair to deny veterans tax-free pensions.
This discrimination has imposed a double disadvantage on military
superannuants. Firstly, as we have pointed out, they do not receive tax-free pensions.
Secondly, unlike those whose pensions are not taxed, military superannuants pension
income is added to any other income, the new total perhaps raising their marginal tax
rate.
DFRB/DFRDB/MSBS military superannuation pensions should cease being
taxed. If this is not possible, then, at least, pension income should not be added to other
income but taxed separately so as not to push the pensioner into a higher tax bracket.
FINALLY, WE NOTE that, whilst the spouse of a deceased parliamentarian receives
83% of the decease’s superannuation pension, the spouses of deceased
DFRB/DFRDB/MSBS superannuants receive only 62.5%.
Are the spouses of parliamentarians worth more that the spouses of war
veterans?
Tim McCombe
President