David Johnston (WA, Liberal Party, Shadow Minister for Defence) Share this | Link to this | Hansard source

From the outset I want to say that the opposition supports both of these important measures. I deal firstly with the Veterans’ Affairs Legislation Amendment (Budget Measures) Bill 2009, which I will refer to as ‘the budget measures bill’, and will then move on to the Veterans’ Affairs and Other Legislation Amendment (Pension Reform) Bill 2009. This latter bill I will refer to as the ‘pension reform bill’.

The budget measures bill is a relatively simple piece of legislation. It enables veterans and their dependents living overseas to have payments made directly to allow them to avoid transfer and bank fees, which accumulate over time and cost the recipient a sizeable proportion of their entitlement. It should be noted in passing that, of the five biggest companies in Australia, four are banks. We do not need to be helping them any more than we do.

The second provision deals with the Defence Service Homes Insurance Scheme: 7,500 defence personnel will benefit from these arrangements and changes, with a net saving to government over four years of approximately $1 million.

The last principal measure contained in the bill is the removal of what is now an anomalous dependents pension, a scheme which saw its last new recipient in 1985. The last increase for the dependent children was in 1952. Partners received an increase in 1964 and there was a small increase in 2000 to accommodate the GST. This pension has become redundant. It is going to be resolved with a one-off payment to the beneficiaries equivalent to three years, or 78 fortnights, worth of pension. I see that as an equitable resolution and a tidying up of what was a pension which was, in some circumstances, paying around $8.42 per fortnight—$2 to partners and widows, $2.86 per fortnight for children—and with minimum payments as little as 84c per fortnight and 29c for children. Resolving those nickels and dimes, if I can be so presumptuous, is, I think, an important aspect of this bill and is good governance.

I now move on to the pension reform bill. This is a very complex bill. It contains a number of very deep formulas and pension index changes and adaptations. I think time will tell about their success. We see the single maximum service pension basic rate increased by $1,560 per year—approximately $30 per week. These measures would commence on 20 September 2009 were the legislation to be passed and I anticipate that it will be.

The specific increases are $32.50 per week for single service pensioners and a combined $10.15 per week, rounded up, for couples on the maximum rate. War widows and widowers will benefit from an increase of $30 per week. Income support supplement recipients will also receive an increase in the supplement and the ceiling rate will be increased.

There is a new index being applied to the service pension. It is indexed twice a year and the bill has a new index which it is proposed be known as the pensioner and beneficiary living cost index—the PBLCI. The maximum basic rate of service pension will be increased in line with the pensioner and beneficiary living cost index. The PBLCI will be used to adjust the maximum basic pension rate when movement of the PBLCI is greater than the movement of the CPI for the relevant indexation period.

I understand that the rationale for the new PBLCI is the desire to have an index that more closely resembles the cost of living expenses experienced by pensioners. That is, I think, a very important, equitable and useful ambition. I just hope the reality of it—the basket of goods and the influences on the index—bears out what we would all want to see and that is that pensioners are insulated from spikes in the cost of living which impact particularly upon them.

There are further changes to the benchmark for couples. From 20 March 2010, a new combined couple benchmark for pension rates will be 41.76 per cent of the annualised male total average weekly earnings—the MTAWE figure. The maximum basic rate of service pension that can be paid to a person who is a member of a couple will be half the maximum combined couple rate of pension. The single pension will be benchmarked at 66.33 per cent of the combined couple benchmark, effectively 27.7 per cent of MTAWE. People with vast and considerable experience have told us, in our consultations, that that is a meaningful change and an acceptable one.

One of the things that I want to pause to acknowledge is a very interesting matter that has been included, quite rightly, in this bill at proposed sections 198R and 198S. There is an increase of one per cent, commencing on 1 July 2011, and an increase of 1.8 per cent, on 1 July 2012, as compensation to these pensioners for the CPRS. A note as to each of those proposed sections sets out an anticipated inflation rate of 0.4 per cent in the first year and 0.8 per cent in the second year, so over two years that is a total of 1.2 per cent. This is an interesting figure and a seriously important indicator of a CPRS cost to pensioners. That should not be forgotten and should be very distinctly noted, and I seek to do that in drawing attention to those provisions within the second bill and, as I have said, it is a complex bill.

There are a number of other measures. The taper rate is a very important measure. As set out in the bill, the legislation is being amended to increase the income test taper rate from 40c to 50c per dollar of income over the ordinary income-free area and to remove the additional income-test-free area for dependent children from the calculation of the amount of a person’s ordinary income-free area. Transitional arrangements will apply for existing pensioners affected by the new income test changes to ensure current payment rates are maintained in real terms and those pensioners also benefit from a pension increase.

There are very substantial costs to the budget from these provisions: $2.7 billion in 2009-10, $3.6 billion in 2010-11, $3.8 billion in 2011-2012 and $4 billion in 2012-2013. Notwithstanding that, these pensioners are amongst our most deserving. If you can have a variation between pensioners being deserving, those who are veterans have committed a substantial part of their lives in the service of their country being prepared to commit those lives in the ultimate sacrifice were they called upon to do so. I am very pleased to be able to say the opposition supports both these bills.

Ursula Stephens (NSW, Australian Labor Party, Parliamentary Secretary for Social Inclusion and the Voluntary Sector) Share this | Link to this | Hansard source

I thank Senator Johnston for his comments and support for these bills, the Veterans’ Affairs and Other Legislation Amendment (Pension Reform) Bill 2009 and the Veterans’ Affairs Legislation Amendment (Budget Measures) Bill 2009. As he has said, both bills taken together are very important measures. I will turn firstly to the Veterans’ Affairs and Other Legislation Amendment (Pension Reform) Bill 2009, which is the more straightforward of the two bills that we are considering today. This bill gives effect to the key elements of the government’s secure and sustainable pension reform package, particularly in relation to veterans and their dependants, because the government is committed to delivering a simpler, more responsive, more adequate and certainly a more sustainable pension system for both veterans and their dependants and for social security recipients overall. These reforms prepare Australia to meet future challenges, including an ageing population, through changes to social security, family assistance, veterans affairs and aged-care legislation. More than 320,000 Veterans’ Affairs pensioners will benefit from these reforms and from 20 September this month, so only a week or so away, the pension reform package will increase pensions for all Veterans’ Affairs income support recipients, war widows and widowers. Couples will benefit from an increase of $10.15 per week and single service pensioners on the maximum rate will benefit from a much-needed $32.50 per week increase. War widows and widowers will benefit from an increase of at least $30 per week and up to $35 a week if they receive full-rate income support supplement. As Senator Johnston said, a new pensioner and beneficiary living cost index will be introduced that actually measures the cost of living for pensioners. From 20 September 2009 the maximum basic rate of income support pensions will be adjusted in line with either the consumer price index or the new Pensioner and Beneficiary Living Cost Index, whichever is the higher. The bill increases the relativity of the single-rate pension to 66.33 per cent of the maximum rate payable to a couple, up from the current 60 per cent.

The current complex system of allowances and supplementary payments will be simplified by the introduction of a new pension supplement. A new senior supplement—for holders of the Commonwealth seniors health card or certain gold card holders over qualifying age—will replace the existing seniors concession allowance and the telephone allowance. The bill establishes two new supplements to replace pharmaceutical and telephone allowances for those veterans, members and dependants who do not receive a Veterans’ Affairs or a social security income support payment. The veterans supplement will replace the pharmaceutical and telephone allowances under the Veterans’ Entitlements Act and the MRCA supplement will replace the pharmaceutical and telephone allowances under the Military Rehabilitation and Compensation Act. These new supplements will also commence on 20 September this year. A work bonus will be established to provide an incentive for those who want to take up or continue to undertake paid work after they reach pension age. With this bonus only 50 per cent of the first $500 a fortnight of employment income will be counted in the income test. The reforms in the bill introduce greater flexibility to the pension advance arrangements from 1 July 2010 and, to secure a pension system that is sustainable into the future, the government will tighten the pension income test to ensure that the pension system is targeted at those most in need. So from 20 September 2009 the pension income test taper rate will increase from 40c to 50c for each dollar of income over the income-test-free area. In addition, to bring the veterans’ entitlements income test in line with other means tested payments, the additional income-test-free area for dependent children will be removed.

As part of the reforms, new transitional payment arrangements are being introduced so that existing part-rate pensioners who would otherwise face a reduction in their payments as a consequence of the reforms will have their current payments retained. The transitional rules will continue to apply until changes under the pension reforms result in a higher payment. It is important to recognise that the pension reforms will have no impact on veteran pension age and qualifying age under the Veterans’ Entitlements Act. There will be no increases in these ages. This is a significant reform package which will make for a more secure repatriation pension system, provide greater certainty to veterans and their dependants and ensure that the system remains both adequate and sustainable.

And in relation to the budget measures, the more convenient payment arrangements will be made for Veterans’ Affairs pension recipients who are living permanently overseas. So the first measure in this bill will enable Veterans’ Affairs payments to be made directly to bank accounts in countries which have reliable banking systems. The second measure will extend eligibility for the Defence Services Homes Insurance Scheme to persons eligible under the Defence Home Ownership Assistance Scheme Act 2008. This extension will provide eligible persons with access to cost-effective insurance designed specifically for the service and ex-service community. This final measure will cease payment of an outdated dependents pension and will pay existing pension recipients a lump-sum payment. This lump-sum payment will be the equivalent of three years of pension. The existing payment ranges from 29c to $8.42 a fortnight. Other government programs, such as the partner service pension and social security, now provide more effective financial support. Without adequate means of support, dependents pensions are not part of this measure and will continue to be paid at existing rates. It should also be made quite clear that existing war widow and war widow and orphan pensions are not affected by this measure.

This bill continues this government’s commitment to an effective and equitable repatriation system that responsibly supports Australia’s ex-service and defence communities, and I commend the bill to the Senate.

Question agreed to.

Bills read a second time.