Monthly Archives: February 2010

Newsreel of Japanese Surrender

Some have seen the still photo’s of the surrender but haven’t seen the newsreel of it.

Veterans’ pensions under fire

Mark Dodd From: The Australian February 25, 2010 12:00AM 

THE Rudd government has cast more than 63,000 veterans and their families on to the welfare scrap heap by failing to index military pensions, the Defence Force Welfare Association claimed yesterday. Unlike with the age pension, which is indexed, the government had chosen to ignore the collapse in purchasing power of military superannuation beneficiaries, DFWA national president David Jamison told The Australian. The hub of the association’s concerns are a government-ordered military superannuation inquiry in late 2008 headed by superannuation specialist Trevor Mathews, which recommended the super scheme be left untouched. 

Describing the report as “flawed” and “biased”, the DFWA said it wanted answers from the government about why it had failed to safeguard military super pensions. “For the very first time, we’ve had an inquiry which has not recommended adjustments to the military pension,” Mr Jamison said. “This has caused us to look at the method of how the review was conducted.”

DFWA executive director Les Bienkiewicz said veterans deserved better treatment from the government.”We’re owed a debt of gratitude. But it seems the government’s attitude is – once they’re out – let them go on to the welfare scrap heap,” he said. In a statement yesterday, Mr Jamison questioned the relationship between Assistant Treasurer Nick Sherry and Mr Mathews. 

Mr Mathews was commissioned by Senator Sherry to undertake the review on June 26, 2008, with hearings in Canberra in July and the report released in December 2008. “But on 30 July, 2008, some five days after holding hearings, Mr Mathews commenced employment as the chief executive officer of Friends Provident UK, one of the biggest pension and insurance companies in the UK,” Mr Jamison said. “The degree to which the CEO of such a major company could find time to research, deliberate on and then write a report on such a complex issue could prima facie be questionable,” he said. 

Last night, Assistant Treasurer Nick Sherry strongly denied that the inquiry was flawed but admitted former servicemen were upset by its findings. “I understand that former defence force and public sector retirees may be disappointed with the outcomes of the Matthews review but to focus their substantive concerns into a personal attack on my integrity and that of Mr Matthews is very unfortunate,” Mr Sherry said. “Mr Matthews was entirely appropriate to head the review. He is a world leader in this field and a proud Australian who even accepted no pay for this work.”


The Minister for Finance Lindsay Tanner did not cover himself with glory with inadequate response to Peter Thornton’s question to him on ABC’s Program Q&A on 15 February. Responding to concerns about the deterioration in military superannuant’s reducing standard of living dueto unfair indexation arrangements compared to age pensioners (and particularly pre 2004 Federal Parliamentarians) Mr Tanner again referred to the flawed Matthews Report as an “expert review”. Matthews said military superannuation was a “condition of employment” so Mr Tanner at least got that right – but neglected to say that the condition of military superannuation was that it would maintain living standards and purchasing power. The CPI index may have done that 30 years ago – but it has changed and doesn’t anymore. That’s exactly why the Government changed the index for aged pensioners so why not for military superannuants? 

Another issue Mr Tanner raised was that to change the indexation mechanism would be unfair on members who had earlier chosen to take a lump sum. What he ignored was DFRB and DFRDB members were never able to take their superannuation as a full lump sum. That right is a feature of the latest scheme started in the 1990s. In any case had they done so they would have enjoyed – by the Government’s own admission – returns well above inflation, so how would they be disadvantaged? Mr Tanner then suggested that a change would cost “billions and billions”.. the Association asks where is the evidence for this ? – we have asked in the past, but heard nothing. Mr Tanner’s emotive statement is meant to shock and simply does not add up – the reality is that the cost is affordable with Department of Finance revealing a full budget cost of $16m in 2010-2011 and the Future Fund well on the way to covering the full superannuation liability. 

The ability of the Government to suddenly find funds for free to air television stations ($250m), the Taliban ($25m) let alone the $40billion for “economic stimulus” surely ,makes a mockery of his assertions. We applaud Mr Tanner’s honesty in declaring he is a member of the older defined benefit scheme for MPs with its incredibly generous indexing method. We may have been more impressed if the Government had committed to changing the old MP scheme to the same CPI based mechanism that is used for military superannuants.

Objections by DFWA

Comment on the Bill When the Government announced its intention to amalgamate the Commonwealth military and civilian superannuation boards DFWA wrote to the Minister expressing its strong opposition. DFWA had and still has three key objections: Key Objection 1 The merger proposal ignores the unique nature of military service. All major political parties acknowledge that no other avenue of service to the Australian people places its participants at the same, or even distantly similar, levels of personal and collective risk nor requires the complete surrender of basic human rights to the State. Unique service requires unique solutions, not ones which further blur the distinction between the uniqueness of military service and civilian norms. That is why Australia has a separate Department of Veterans’ Affairs and is a key reason why Australia needs to retain a separate board to administer the military superannuation schemes (one an unfunded defined benefit scheme and the other comprising an employee contributory fund and an unfunded employer defined benefit component). These differ markedly from other Commonwealth Government administered schemes particularly in respect to the specific to ADF disability and death provisions. On the 19th December 2008 The Federal Court of Australia pointed out that “the Minister is required by s 4 of the Military Superannuation and Benefits Act 1991 (Cth) to establish an occupational superannuation scheme for, in substance, members of the armed forces with a deed in the form set out in a schedule to the Act (the Deed). ….The Act also establishes the Military Superannuation and Benefits Board of Trustees No 1. The Board has such functions and powers as are set out in the Deed. Rule 3 of the Deed provides: 3 Functions and powers of the Board (1) The functions of the Board are to administer the Superannuation Scheme and to manage and invest the Fund in accordance with the provisions of the Act and this Deed including, without limiting the generality of the foregoing, the following functions: a. to pay benefits to or in respect of members, and to make payments to and receive payments from the Commonwealth, as provided for in the Act; b. to provide advice to the Minister on proposed changes to the Act and the Deed; and c. to determine interest rates for the purposes of the Superannuation Scheme; (2) The Board has power in Australia and elsewhere to do all things necessary or convenient to be done for, or in connection with, the performance of its functions and, in particular, may: g. establish an Incapacity Classification Committee to determine members’ incapacityclassifications under the Rules; h. establish 1, or more than 1, Reconsideration Committee: i. to examine and report on decisions of the Board and its delegates under the Rules relating to members’ entitlements to benefits; and ii. to reconsider decisions of the Board and its delegates under the Rules relating to members’ entitlements and benefits;” As indicated in this judgement, the military superannuation schemes are specific to the requirements of members of the ADF. Notably the schemes disability and death benefits are unique to the responsibilities of the trustees of the current military schemes and require a different and additional skill set to that needed for the public service schemes. Key Objection 2 The decision was made before the Four reviews1 (two of which are still to be finalised) affecting military superannuation being conducted had reported and introducing such an unexpected change to the governance arrangements for disparate schemes serving distinctly different classes of members was at best premature and at worst unnecessarily provocative. Key Objection 3 The proposed amalgamation was initiated without prior consultation and without regard for the views of key ex-service organisations, including DFWA. subsequent correspondence from the Minister and the DFRDB Authority has not allayed our concerns. In addition, DFWA concerns that the amalgamation proposal would achieve its own momentum despite being contrary to the interests of past, present and future servicemen and women – and therefore to the wider Australian community have now been born out. Other Comments Governing Board (Board of CSC) Clause 8 requires there to be a governing board of directors (Board) of CSC. The function, membership and operation of the Board are set out in Clause 10 – Membership. This board needs a blend of experience and knowledge, including a comprehensive understanding of the unique nature of military service, in order to best serve the military and the wider Australian community. The way it is intended to be constituted gives us no confidence that it will have this and to the extent it may have, that this expertise will have sufficient influence in board considerations to ensure the uniqueness of ADF service is given appropriate weight. The combined effect of subclauses 10(1) and 10(2) is that, in line with the equal representation requirements in the SIS legislation, the Board of CSC consists of an equal number of employer and employee directors (sometimes referred to as “employer representatives” and “member representatives”, respectively). There is also an independent director, being the Chair. Under subclause 10(2), the employee directors are nominated, in writing, by: • the President of the ACTU who represents the interests of members of the civilian schemes and nominates 3 directors; and the Chief of the Defence Force who represents the interest of members of the military schemes and nominates 2 directors. 1 The Review into Military Superannuation Arrangements The Senate Inquiry into the cost of living pressures on older Australians The Matthews Inquiry into Indexation, and The Henry review into Australia’s future taxation arrangements The effective result of these provisions is that although the public service members will be well represented (but not necessarily those retired), the serving and retired men and women of the ADF are left without direct representation on this governing board. To suggest that the CDF provide for that representation is a bridge too far. His nominees will undoubtedly perform their roles with diligence but with the best will in the world they will inevitably represent the ADF as an entity rather than ADF individuals and it is highly unlikely based on experience up until now that they could effectively represent retired members of the military schemes. In any event the total of 2 members in the number of 10 constituting the board inevitably means that the specific nature of the service aspects in board considerations will be subordinated by the weight of numbers even taking into consideration the voting provisions in clauses 22 and 23. This bill proposes the Finance Minister choose the remaining 5 employer directors and represent the employer-sponsor of the relevant civilian and military superannuation schemes, being the Commonwealth. In selecting suitable candidates to act as employer directors, it is intended that the Finance Minister would consult with Ministers in the Defence portfolio but DFWA believes this arrangement would have little practical impact in ensuring a balanced “employer understanding” of the uniqueness of ADF service aspects in these appointments. For the present Minister for Defence Personnel, Materiel and Science. Review into Military Superannuation Arrangements has acknowledged the military schemes disability and death benefits are unique to the responsibilities of the trustees of the current military schemes and require a different and additional skill set to that needed for the public service schemes in its recommendation to establish a single board to manage all military superannuation schemes. DFWA has already advised its agreement with this and has recommended a possible board composition designed to met the governance requirements as well as protect the interests of both the members of these schemes and the Commonwealth. We have suggested a 7-member board constituted as follows: • Independent Chairman • Independent member with superannuation industry expertise • Independent member with investment/financial services industry expertise • 2 employer members (with at least 1 from Department of Defence) • Employee member nominated from within the ADF. • Ex-employee member nominated by the military superannuants’ community. Clauses 31 & 32 – Exemption from taxation Both of these clauses have sub clauses enabling regulations to be made which reduce the scope of the tax exemption. It is not clear how it would be intended to use these but they provide an avenue to siphon off funds to Government revenue that would otherwise benefit fund members with a minimum level of scrutiny. Clause 33 – Source of funds for paying remuneration and allowances Clause 33 sets out the source from which the Chair and other directors of CSC are paid remuneration and allowances. The bill proposes that the Chair and other directors of CSC are paid out of the superannuation fund in respect of which they are performing functions. However, when performing functions in relation to the 1922 scheme, DFRB, DFRDB or PNG scheme, they are paid from the Consolidated Revenue Fund because these schemes do not have a superannuation fund. DFWA presumes that Commonwealth employees nominated to be members will not receive remuneration or allowances under clause 13 in addition to their existing remuneration but would simply be reimbursed expenses in line with existing Commonwealth Government provisions. Financial Impact of Change The assumption that these revised arrangements will result in cost savings and an increase in efficiency is unlikely to be realised. The disparate nature of the military schemes and the governance expertise required inevitably means there would need to specialist “policy committees” formed to provide advice to the governing board and would limit the opportunity for staff rationalisation. It is not hard to envisage the headline savings being quickly absorbed in higher administration costs to the funds. In addition there is a direct cost of $1.1 million to ARIA, the MSB Board and the DFRDB Authority associated with implementing the merger of these boards. The cost relates to tasks such as undertaking due diligence and conducting a communication campaign for scheme members. It would be inappropriate for these costs to be a charge against the funds as this is a government not superannuation fund project.

Briefing Notes on Governance of Australian Government Superannuation Schemes Bill 2010

Purpose of the Bill The Governance of Australian Government Superannuation Schemes Bill 2010 seeks to give effect to the Government’s announcement in October 2008 to merge the Australian Reward Investment Alliance (ARIA), the Military Superannuation and Benefits Board (MSB Board) and the Defence Force Retirement and Death Benefits Authority (DFRDB Authority) to form a single trustee body from 1 July 2010. The Bill is part of a package of three purporting to modernise Australian Government superannuation and establish governance arrangements for the Commonwealth superannuation schemes that are effective and more consistent with the broader superannuation industry. The other two Bills in the package are: • the ComSuper Bill 2010 , which makes changes to the governance framework for superannuation administration arrangements for the main civilian and military superannuation schemes; and • the Superannuation Legislation (Consequential Amendments and Transitional Provisions) Bill 2010 , which contains the consequential and transitional provisions necessary to facilitate the merger, the changes to superannuation administration and the modernisation of specific aspects of Australian Government superannuation to better align with the broader superannuation industry. Following the merger of ARIA, the MSB Board and the DFRDB Authority, the single trustee will be responsible for managing the main Commonwealth civilian and military superannuation schemes. These schemes are: • the Commonwealth Superannuation Scheme; • the Public Sector Superannuation Scheme; • the Public Sector Superannuation Accumulation Plan; • the Military Superannuation and Benefits Scheme; • the Defence Force Retirement and Death Benefits Scheme; and • the Defence Forces Retirement Benefits Scheme . The single trustee will also be responsible for the superannuation scheme established by the 1922 scheme and the Papua New Guinea scheme. These schemes were previously the responsibility of the Commissioner for Superannuation. The position of Commissioner for Superannuation is being replaced with a Chief Executive Officer position, and ComSuper will be established as a Commonwealth agency, from 1 July 2010 by virtue of the ComSuper Bill 2010. Consolidation of the trustee arrangements will bring more than 650,000 members and pensioners under a single trustee board with funds under management of nearly $19 billion (based on figures as at 30 June 2009).