Appendix D. Contemporary ADF attitudes to superannuation

Defence Attitude Surveys

Defence conducts a census of all ADF personnel every four years and attitude surveys of a 30% sample of ADF personnel each year. The 2003 Your Say Survey by McKinnon & Gorny (2003), was themed ‘What Motivates You’ and provided definitive data on the importance of various features of military service and the level of satisfaction with each feature. Table D-1 sets out the top 15 influences on retention (out of 97 listed elements) for various age groups in the ADF. Superannuation scheme, together with retirement benefits and employer contributions, were influential factors for members over 30 years of age. The survey was repeated in 2006 but the results have not yet been released. Nevertheless, initial indications are that the influence of superannuation scheme and the employer contribution level have increased.

ORIMA Research results

ORIMA Research was commissioned in late 2006 to conduct a survey with current full-time members of the Australian Defence Force (ADF) about their superannuation scheme. In light of the Review of Military Superannuation announced on 27 February 2007, the original survey methodology / questionnaire were reviewed before commencing fieldwork.

The purpose of the survey was to target current serving full-time members of the ADF in peak discharge years to find out:

• to what extent military superannuation influences members’ decision to join, remain in or discharge from the ADF;
• members’ level of knowledge of their scheme;
• scheme features members consider to be most important;
• perceptions of military schemes compared to civilian schemes; and
• members’ preferences on retirement.

A selection of results that address each of the survey areas are presented on the following pages. In general, results show both overall ADF attitudes and the influence of years of ADF service on outcomes.

Key results

• Just over one quarter of respondents were aware of military super and its benefits before they enlisted in the ADF.
• Around one third of respondents were confident that they have a ‘very good’ or ‘good’ understanding of the benefits provided by their military scheme, however an almost equivalent proportion felt their understanding was ‘poor’ or very poor.
• Superannuation had little influence for most respondents on their decision to join the ADF, however membership of military super has a greater influence on respondents’ decision to remain in the ADF.
• MSBS respondents felt that the most important features of their scheme were the employer benefit, that no administration fees or charges were payable, and the insurance cover.
• The two main features which encouraged MSBS respondents to remain in the ADF were pension benefits on retirement, and the ability to choose how to invest the member benefit.
• Around two thirds of respondents indicated they would prefer a pension at retirement over a lump sum payment.
• Respondents generally felt their scheme provided higher benefits than civilian schemes for death, invalidity, and retirement, however views were mixed about benefits for resignation.

Table D-1: 15 most influential aspects of ADF employment

Rank	24 years and below	25-29 years	30-34 years	35-39 years	40-44 years	45-49 years	50 years and over
1	Medical Benefits	Job enjoyment	Job enjoyment	Job enjoyment	Job enjoyment	Job enjoyment	Job enjoyment
2	Dental Benefits	Job security	Job security	Job security	Job security	Job security	Challenging Work
3	Opportunity to travel	Ability to balance work and personal time.	Base Pay	Ability to balance work and personal time.	Superannuation scheme	Superannuation scheme	Team environment
4	Job security	Dental Benefits	Medical Benefits	Base Pay	Support from partner spouse	High level of responsibility	Job security
5	Job enjoyment	Medical Benefits	Support from partner spouse	Superannuation scheme	Challenging Work	Base Pay	Ability to balance work and personal time.
6	Access to leave entitlements	Base Pay	Dental Benefits	Support from partner spouse	Ability to balance work and personal time.	Support from partner spouse	Serving your country in uniform
7	Involvement in peacekeeping/ humanitarian operational deployments	Access to leave entitlements	Future job opportunities	Future job opportunities	Team environment	Challenging Work	Job diversity
8	Base Pay	Future job opportunities	Superannuation scheme	Medical Benefits	Base Pay	Superannuation employer contributions	High level of responsibility
9	Deployment allowances	Service Allowance	Access to leave entitlements	Dental Benefits	High level of responsibility	Job diversity	Support from partner spouse
10	Mateship	Challenging Work	Ability to balance work and personal time.	Access to leave entitlements	Retirement benefits	Opportunity to lead	Mateship
11	Quality of co-workers	Nationally recognised qualifications	Opportunity to travel	Quality of co-workers	Opportunity to lead	Ability to balance work and personal time.	A different work experience
12	Involvement in combat operational deployments	Professional training-development	Superannuation employer contributions	Retirement benefits	Superannuation employer contributions	Team environment	Opportunity to lead
13	Future job opportunities	Quality of co-workers	Mateship	Superannuation employer contributions	Mateship	Retirement benefits	Superannuation scheme
14	Nationally recognised qualifications	Opportunity to travel	Service Allowance	Challenging Work	Job diversity	A different work experience	Trust in CO
15	Provision of rental allowance	Access to long service leave	Challenging Work	Team environment	Trust in CO	Mateship	Base Pay

Note       The table shows the 15 most influential aspects of ADF employment (out of 97 elements), by age group, in a survey conducted in 2003.

Source   Adapted from The Defence Personnel Environment Scan 2025, July 2006.

Awareness of military superannuation scheme benefits

Figure D.1. Were you aware of military superannuation and its benefits before you enlisted in the ADF? Base: All respondents (n=739)

Figure D.2. Overall, how would you rate your understanding of the benefits provided by your military superannuation scheme? Base: All respondents (n=739)

Figure D.3. Overall, how would you rate your understanding of the benefits provided by your military superannuation scheme? [By years of service] Base: All respondents

Influence of superannuation scheme benefits on job

Figure D.4. To what extent did your knowledge of military superannuation and its benefits influence your decision to join the ADF?
Base: All respondents (n=739)

Figure D.5. To what extent does your membership of your military superannuation influence your decision to remain in the ADF?
Base: All respondents (n=739)

Figure D.6. To what extent does your membership of your military superannuation influence your decision to remain in the ADF? [By years of service]
Base: All respondents

Preferred features of their Scheme

Figure D.7. Most important features of MSBS
Base: All MSBS respondents

Figure D.8. MSBS features which influence remaining in ADF
Base: All MSBS respondents

Figure D.9. MSBS features which influence remaining in ADF [By years of service]
Base: All MSBS respondents

Preferences on retirement and perceptions of scheme

Figure D.10. From your current viewpoint, which benefit would you prefer at retirement?

Figure D.11. From your current viewpoint, which benefit would you prefer at retirement?

[By age]

Figure D.12. Do you believe that your military scheme provides higher, the same or lower benefits than contemporary civilian schemes?

Focus Group results

The Review Team tested attitudes towards current and potential superannuation features with small groups of ADF personnel in Sydney, Can berra and Wagga Wagga late in the Review process. Each focus group comprised approximately ten members of various ranks but within targeted ADF years of service bands – three focus groups with members less than seven years of service, three focus groups with 8-22 years of service and two focus groups with more than 22 years of service. While members could raise any issues, the following topics were used to generate discussion and opinions:

• a comparison of defined benefit and defined contribution schemes;
• the need for compulsory member contributions;
• the trade-off between employer provided salary and superannuation;
• the level and structure of employer contribution rates;
• the impact of superannuation on recruitment and retention;
• the importance of military superannuation membership for family and post ADF service;
• the necessary level of disability benefits and work tests; and
• the relative importance of post retirement options such lump sums and indexed pensions.

Key Results - Less than seven years of service (generally less than 25 years of age). Several stated initially that the old DFRDB scheme was a good retention tool, and they favoured the scheme, but, when questioned, none of them were aware that the majority of ADF members (who completed less than 20 years of service) did not receive any benefit. Following discussion, the consensus view was that an accumulation plan provided the flexibility and portability that this age group desired. The transfer of investment risk to members, at a reasonable level, was not a concern, and defined contribution schemes were seen to be more in keeping with the arrangements applying to friends and family outside the ADF.

The majority of this age group said that superannuation was important but did not trust themselves to voluntarily contribute now. Most wanted some strong encouragement for member contributions, some preferring compulsory contributions to continue.

The majority of this age group did not know what the employer superannuation contribution currently is – some thought that it was the 9% Superannuation Guarantee. When the MSBS rates were explained, members expressed more positive views on their conditions of service and said it could be an influence (albeit not major) on their decision to continue in service. A more transparent and clearly defined employer contribution would have a greater impact.

In all cases, an indexed pension was seen as an important feature. While some of these members did not fully understand the concept of an indexed pension, it was a considerable influence on their parents who had encouraged them to join the Services.

Overall, these focus groups were strongly in favour of the proposed new scheme as outlined, believing it would enhance retention, provided members were educated on the benefits. The portability features and ability to have control over contributions and investments were welcomed, as was the suggestion of extending membership to spouses without an administration fee.

Key Results - 8-22 years of service (generally 25–40 years of age). Members in these focus groups were more knowledgeable on superannuation and more diverse in their views and opinions than the younger age group. While one or two initially said they would prefer to keep a defined benefit scheme where the employer looked after their interests, the others firmly favoured the choice and flexibility of a defined contribution scheme. Several highlighted how they might tailor a defined contribution scheme to their own family situation.

While some supported compulsory member contributions both for themselves and for younger members of the ADF, most favoured choice so long as there was some form of duty of care, to ensure that it was an informed decision.

Members of the group expressed the view that the availability of the pension option in the MSBS was very important, and most indicated that they would take a mix of pension and lump sum. The availability of the indexed pension was considered to be a significant retention factor. When the stepped-up contribution rates were explained, these members indicated that the 23%and 28% employer contribution rates would significantly influence a decision to separate or remain in the ADF, so long as the steps were at relevant stages of their careers.

There was strong support for extending membership to spouse and children, with no administrative fees. Several spoke of having small sums in many accounts with significant administrative fees.

Key Results - Over 22 years of service (generally over 40 years of age). Members of these focus groups represent some 13% of the ADF. Most were MSBS members, though some belonged to the DFRDB. The current scheme knowledge was generally greater than amongst the younger groups. The group was split between members who were strongly paternalistic (eg “soldiers are only interested in the end result not the journey”, “young members aren’t able to make the complex decisions so leave it as it is”) and those who believe the modern generation wants choice and flexibility and should be expected to take more responsibility for their outcomes. Almost all thought that, at this point in their own career, they would probably choose to stay in their current scheme (either DFRDB or MSBS), but most considered that a defined contribution scheme made more sense for new ADF members.

Superannuation was a retention factor for most, though they were not sure of the value of their current employer contribution.

Almost all considered that there should be compulsory member contributions, and all strongly favoured indexed pensions.

Outcomes of the Focus Groups

The Review Team concluded that there would be general support for a funded and taxed accumulation plan. The current MSBS was poorly understood although recognised as having many good features once they were explained. The greatest deficiencies identified in the current schemes were the inability to accurately measure the value of the employer contribution and the inability of members to exert any control over their entitlement.

While confirming the general direction of the Review Team’s proposals, the focus group discussions contributed to the Review Team revising its recommendations to:

• introduce the concept of a default opt-out member contribution;
• change the indexed pension qualification point from 20 years to 15 years; and
• reduce the initial employer contribution step from the start of the eighth year of service to start of the seventh year.