Ann Sudmalis (Gilmore, Liberal Party) Share this | Hansard source

Today is a particularly important day to be speaking on this Defence Force legislation. Today, as we know, is Vietnam Veterans' Day. It is appropriate to be describing the beneficial changes to the legislation surrounding superannuation and other death and disability considerations. There are three parts to this current legislative change relating to our Defence personnel. The first is the Australian Defence Force Superannuation Bill 2015, which will apply from 1 July 2016, establishing the ADF super scheme and the ADF super fund that the Commonwealth Superannuation Corporation will be looking after. It sets out the functions and the powers of this corporation and makes the rules for the administration of ADF Super by the Commonwealth Superannuation Corporation.

It sets out those who will be eligible to be members of this ADF Super. It will be new members of the permanent forces, new members of the reserves on continuous full-time service, members of the permanent forces who are Military Superannuation and Benefits Scheme members and elect to transfer to ADF Super, members of the reserves who are on continuous full-time service who are MSBS members and elect to transfer to ADF Super, and former DFRDB or MSBS members who wish to transfer lump-sum amounts received from either of those schemes for the purpose of buying into an account based pension.

Over time our Defence Force personnel have saved our nation. They have protected us from nations at war with us and worked and fought alongside our allies, showing true grit and courage. They are famous for their efforts. Very often their service rewards can be seen to be compromised. This legislation has been developed after considerable negotiation and conversation. The process has been done in such a way that it is fair and so that a bipartisan agreement could be reached. It gives appropriate recognition to our Defence Force personnel. The Australian government is resolutely committed to supporting our ADF members throughout their service and in their retirement. As part of this commitment, landmark legislation was introduced in June this year.

We recognise that military service is unique so accompanying legislation was also introduced to establish ADF Cover, a new scheme that will continue to provide members of the ADF with death and invalidity cover. Ground-breaking legislation enabling ADF members to seek part-time work, subject to Defence capability requirements, was also introduced. ADF Super fixes one of the longest-running grievances of the veteran and ex-service community—namely, the lack of flexibility and portability of a member's superannuation benefit. The government has worked with stakeholders, such as the RSL, the Defence Force Welfare Association and the Australian Defence Association, in developing these policies. All major stakeholders support these important reforms and so does the other side of the House.

The legislation introduces new, modern and flexible superannuation arrangements for those joining the ADF after 1 July next year. The current Military Superannuation and Benefits Scheme, unfortunately, will be closed to new members from that date, but this new policy will perfectly suit the new serving ADF members. For the first time they will be able to join the superannuation fund of their choice. Although there will be this default military superannuation scheme, they will still be able to choose should they so wish.

The second part of the legislative change is the Defence Legislation Amendment (Superannuation and ADF Cover) Bill. It amends a number of other acts to facilitate the new arrangements. As far as is relevant to external bodies, the bill amends the Defence Act 1903 and sets out the rate of contributions that Defence must make to ADF Super or a member's chosen fund as 16.4 per cent. This amount is based on their ordinary time earnings, which is the salary and various allowances that are paid in recognition of the unique nature of their service. As an aside, this base is generally higher than the base that applies to accumulation scheme members in the Australian Public Service, mainly because they have such a unique duty in our space.

Members of the ADF will get this generous contribution rate irrespective of the fund they choose. The rate is higher than that offered to the APS, at 15.4 per cent, but significantly higher than the 9.5 per cent available to the majority of Australians through the Superannuation Guarantee. There will be no requirement for ADF Super members to make employee contributions. As a result, serving MSBS members who currently contribute a minimum of five per cent of their salary who choose to become ADF Super members will immediately receive a five per cent increase to their take-home pay.

It is likely there will be a number of questions that may come to mind when the bill is first mentioned. The most common is centred around just who can join ADF Super. It will apply to those joining the ADF after 1 July. It could be for those who choose to transfer their dollars across and it will be available to others in the way they investigate it. Importantly, currently serving MSBS members will not be compelled to move to ADF Super. Those DFRDB members receiving retirement pay who re-enter the ADF full-time as a reservist or on continuous full-time service must make an election to become either an MSBS member or not or must try to again become a DFRDB contributing member before commencing further service.

Superannuation is often a complex set of choices, but the following reflects some of the simplified applications of change introduced by this bill. If a person elected to become a member of the MSBS, their retirement pay was suspended until such time as they completed their period. If they elected to become part of DFRDB contributors, their retirement pay was cancelled. Many of these aspects have been changed in the new ADF Super. ADF Super has a number of benefits specifically for ADF personnel who serve for fewer than 15 years. Approximately 80 per cent of ADF personnel leave the Defence Force having served fewer than 15 years and will gain a financial benefit from the new scheme. In addition, the government's commitment to redress the issues of the DFRB and the DFRDB will not be affected and the new indexation, as committed by the government, will continue. Additionally, both the ADF Financial Services Consumer Centre and the Commonwealth Superannuation Corporation will be able to provide a list of recommended financial advisers for ADF members, and they should be encouraged to seek their own independent advice. The recommended advisers are named because of their understanding of military financial matters and ability to give a better source of relevant information to the ADF member. This is particularly relevant when you talk to exchange personnel who are in parliament at this time. They think that only military advisers who have military experience can do a proper job.

The third part of this legislative change is related to the Australian Defence Force Cover Bill and establishes a statutory death and invalidity benefits scheme that applies to ADF Super members and to people who would have been ADF Super members but for choosing another scheme to which Defence is going to contribute. It does not require contributions from those covered. All benefits are met from consolidated revenue. The government recognises that, as a result of the unique nature of military service, it is difficult for ADF members to obtain death and invalidity cover at a reasonable cost. ADF cover addresses this issue by ensuring all ADF personnel who are members of ADF Super have full death and invalidity cover. The cover provides the same level of death and invalidity cover as is provided to members of the current MSBS.

There are special capacity measures that will be reflected as different classifications and resulting pension payments. If an ADF member's capacity is reduced by 60 per cent or more, they will be classified as class A and will receive a commensurate pension. If their capacity is reduced by 30 per cent or more but less than 60 per cent, they will be classified as class B and will receive an appropriate pension. If an ADF member's capacity is reduced by less than 30 per cent, they will be classified as class C and their superannuation will be preserved in the fund of their choice. If an ADF member dies in service or if an invalid dies while receiving an invalidity pension, the benefits will be paid to the dependents of that member or invalid or to their estate. During informal discussions with some members currently serving in our Defence Force, this change is being greatly welcomed. There is a sense of financial security in this matter.

Coupled with the well deserved pay increases, the benefits and flexibility of ADF Super and ADF Cover, these members feel respected again as being a significant sector in Australia. Reinvesting not only in our Defence Force personnel but also equipment, our long vision, capital investment and planning reassures all of our Defence Force that this government values their contribution for Australia's national and international security. We have introduced groundbreaking reforms that for the first time will enable our ADF members to seek part-time work subject to defence capability requirements. It is all part of the respect that we bear for our Defence personnel, the security of our nation and, altogether, the security of every Australian citizen.

See this speech in context