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.

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).