Gai Brodtmann (Canberra, Australian Labor Party, Shadow Parliamentary Secretary for Defence) Share this | Link to this | Hansard source

I rise tonight to support these bills, which establish the Australian Defence Force Superannuation Scheme, as well as introduce a new death and disability scheme and make the changes necessary for workplace flexibility within the ADF. They are in keeping with Labor's vision to modernise the Australian Defence Force. This modernisation was the key focus of Project Suakin, initiated by Labor when we were in government. In fact, I remember when it was launched by the member for Batman. Project Suakin aims to deliver a contemporary workforce with a range of full-time and part-time service categories and options. These form a service spectrum that allows ADF members to continue to serve as their circumstances change across their working lives. This flexible model benefits those seeking part-time work and aims to increase the participation of women in the ADF.

Absolutely fundamental to this is the portability and modernisation of the Australian Defence Force superannuation scheme. That is why this legislation has bipartisan support to move away from the current scheme, the Military Superannuation and Benefits Scheme, or MSBS, to an accumulation scheme, ADF Super. By moving away from the restrictions imposed by the current defined benefits scheme, flexibility is enhanced. Crucially, these bills will provide encouragement and support for women's participation in the ADF as well as accommodate those members who might wish to engage in other work but then return to the ADF. Australia needs to be constantly on the lookout to ensure that the employment conditions of the ADF are in line with changing requirements and life paths of its members. We must continuously work to ensure that those who serve this nation, those who put their lives on the line in defence of this nation, have access to best-practice systems—and that includes superannuation.

That brings me to this legislation, the Australian Defence Force Superannuation Bill 2015. This legislation establishes a new, modern and more flexible superannuation system, to be known as ADF Super. The new scheme applies to any Australian Defence Force members joining after 1 July 2016. Personnel who are currently members of the MSBS can choose to opt in to the new ADF Super, but it will not be compulsory.

ADF Super has an employer contribution rate of 16.4 per cent. This rate is higher than that applied to the Public Service in general and we believe it clearly recognises the unique nature of military service which arises from a number of factors. These include: liability for combat operations; a military discipline code; a regimented way of life; long and irregular working hours; statutory retiring ages well below the community norms; high standards of physical fitness; frequent relocation; and separation from family.

We believe this higher contribution rate also recognises the generally shorter periods of service in the ADF compared to the Public Service. According to 2007 census data, the average service period for ADF members is 6.8 years. This is down from 10 years in 1997. I am proud to say that Labor worked tirelessly with the government on this scheme to secure the 16.4 per cent contribution rate. In fact, I have been working since February this year to negotiate a single-tier system after the government originally proposed a two-tiered superannuation system. The initial proposal would have seen ADF personnel receive a government contribution rate of 15.4 per cent which would then increase to 18 per cent for those engaged in warlike operations. However, Labor had significant concerns with this type of two-tiered system, especially the fact that it would undermine the team ethos of the ADF.

But it was not just Labor who had concerns about a two-tiered system. The Chief of the Defence Force, Air Chief Marshal Mark Binskin, raised concerns with the government's approach at Senate estimates. He said:

My preference would be to try and do a flat rate which is a mid-point that actually doesn't have the clunkiness between the war-like operations and the peacetime.

The President of the Defence Force Welfare Association, David Jamison, also criticised the government over its lack of consultation on the new scheme. He said:

… the consultation has more been information sessions on what the administration is coming up with rather than listening …

Aside from the clunkiness of the two-tiered system, as described by the Chief of the Defence Force, Labor felt it would have been administratively cumbersome and confusing—for example, the difficulty of determining at which point an ADF member entered a 'warlike' operation. Also, imagine the administrative nightmare if a particular operation was retrospectively declared 'warlike'. Given these concerns, Labor was pleased the government backed down from its two-tiered proposal a few months ago.

ADF Super deals with some of the concerns with the current MSBS system—namely, the lack of flexibility and the lack of portability of a member's superannuation benefit when they leave the ADF. I will go first to the issue of flexibility. The new ADF Super scheme recognises that members of the ADF may want to move in and out of the ADF. It will help facilitate movement across the different job streams in the ADF. It will also allow for permanent part-time work to reflect different needs at different stages of life. These are all elements of a modern, flexible superannuation system, elements that the MSBS system lacks. Under the MSBS arrangement, members of the permanent force who wish to work other than full time are required to take part-time leave without pay. The period of part-time leave without pay cannot exceed 21 days for any particular period without having adverse superannuation consequences by creating a break in service.

I will go secondly to the issue of portability. ADF Super recognises that military service is no longer for life, as members are serving shorter periods before moving on to outside employment. The new scheme enables personnel to take their superannuation with them upon leaving the ADF, giving them the option to roll it into another super fund, an option not available under the existing MSBS. Under the MSBS arrangement, it is impossible for members of the ADF to move in and out of service without incurring costs and rigidities in their superannuation.

Under the new ADF Super, there will also be no requirement for members to make employee contributions to their super. This differs from the current scheme, which requires a minimum employee contribution of five per cent of salary. The removal of compulsory employee contributions not only brings the ADF in line with other modern super arrangements; it gives ADF personnel greater choice when it comes to their income management. For example, members of MSBS who opt in to the new ADF Super will immediately receive a five per cent increase to their take home pay as there is no longer a need to make compulsory employee contributions.

To give a better understanding of how the new ADF Super will enhance flexibility and portability, I would like to introduce Sally, whose case illustrates the change being made. Sally is in MSBS having joined the ADF in 2010. She is on part-time leave without pay and, although she is being paid on a pro rata basis, she has to contribute to MSBS at the full-time rate in accordance with the conditions of MSBS. Sally will move to a permanent part-time arrangement in August 2016, after the new military superannuation arrangements have been introduced. Moving to ADF Super will enable Sally to stop making mandatory contributions of five per cent of her pay, which will offset some of the financial loss of not earning a full-time wage. She will also be able to move her super benefit accrued in ADF Super when she leaves the ADF in the future.

Although this is one specific case, there are many like Sally in the ADF who will benefit from the enhanced flexibility of the new scheme. Under ADF Super, members will for the first time be able to choose which superannuation fund they belong to. I also note that the introduction of the new scheme is also in line with the move in the public sector away from defined benefit schemes to accumulation schemes.

This legislation also provides for stand-alone statutory death and invalidity cover for members of ADF Super, to be known as ADF Cover. That is because it is difficult for ADF members to obtain death and invalidity cover at a reasonable cost under group insurance arrangements. ADF Cover ensures a replacement for the existing scheme. ADF Cover is designed to be consistent with the death and invalidity benefits provided under the current MSBS. It will ensure that ADF members are properly looked after for the rest of their life, if required, in the event that they are injured during their ADF service.

Both sides of politics can be proud of the work that has been done in government in recent years to increase flexibility, inclusivity and diversity within the ADF. The introduction of this legislation enhances this flexibility, inclusivity and diversity. These three bills introduce important and necessary reforms for the modernisation of the ADF workforce and bring about important changes. ADF Super brings the ADF into line with the rest of the government sector in not having a defined benefit scheme with its long-term unfunded liabilities. It means for the first time that ADF members will be able to transfer their super scheme to new employment when they leave the ADF. This means that employer contributions can be carried across to new employment, which would not be possible under the old defined benefit scheme.

ADF Super also enables members to move in and out of service without incurring costs and rigidities in their superannuation. This in particular will provide encouragement and support for women's participation in the ADF as well as accommodate those members who might wish to engage in other work but then return to the ADF. Flexibility, inclusivity and diversity are each crucial to Defence's ability to operate at peak performance and demonstrate maximum capability.

At the handover ceremony in the middle of last year the current Chief of the Defence Force, Air Marshal Mark Binskin, said that we should not be shy in talking about the very real advances we are making across Defence as we seek a culture of inclusion and not of exclusion. Just as the former Chief of Navy and now VCDF, Vice Admiral Ray Griggs, said at the Navy change of command ceremony:

We can only fight and win as a team and to do that we must respect all elements of the team; if we don't have an inclusive culture we can never reach our full potential.

These bills go some way in achieving this inclusivity and I commend them to the House.

Ann Sudmalis (Gilmore, Liberal Party) Share this | Link to 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.

Michael McCormack (Riverina, National Party, Parliamentary Secretary to the Minister for Finance) Share this | Link to this | Hansard source

The Australian government is resolutely committed to supporting Australian Defence Force members throughout their service and in their retirement. All three branches of the ADF have bases in my electorate of Riverina. Indeed, Wagga Wagga is the only inland city in Australia with all three arms of Defence. The Kapooka Army Recruit Training Centre is quite justifiably the home of the soldier. We have the Royal Australian Air Force base at Forest Hill, which recently celebrated a magnificent milestone of service dating back to World War II. Even though Wagga Wagga is many hundreds of kilometres inland, we have an important training base of the Royal Australian Navy, with strong connections to HMAS Albatross at Nowra. I am proud to represent these soldiers, sailors, airmen and airwomen in the parliament and to put forward the case for improvements to their service conditions. As part of the government's commitment to the ADF, these bills establish a new military superannuation scheme for ADF members to be known as ADF Super and a new insurance scheme to be known as ADF Cover, and introduce for the first time flexible service to allow ADF members to serve part time.

The Australian Defence Force Superannuation Bill 2015 was introduced on 25 June 2015. The bill introduces new, modern and flexible superannuation arrangements for people joining the ADF on and after 1 July 2016. The new military superannuation scheme will be a fully funded accumulation scheme.