Chapter 8: Education & Awareness
Transitional education and awareness campaign
Ongoing education and awareness of superannuation
Emphasising the total remuneration package for recruitment and retention purposes
The proposed new scheme will require substantial effort by Defence, the new board and others to educate members not only during the transition but also on an ongoing basis.
Transitional education and awareness campaign
The education and awareness campaign conducted in 1991 to aid ADF members in choosing whether to transfer to the MSBS was extensive. The 12-month campaign involved base level information sessions, newspaper articles, what-if models and individualised information packages. The material has been reviewed and, on the face of it, it appears to be comprehensive and sufficient for members to make an informed decision. Nevertheless, the Review Team found that it was almost folklore across the ADF that members were misled into either remaining with the DFRDB or transferring to the MSBS (depending on the outcome in hindsight).
While hindsight will always cause some individuals to question their choices (and the advice on which those choices were made), the Review Team believes there are lessons to be learned from the way the campaign was conducted in 1991, notwithstanding the quality of the information presented and the access ADF members had to that information. In particular, the involvement of the command chain in providing information and advice may have detracted from the independence of the advice and reduced acceptance by individuals of their own responsibility in making a choice.
The lessons learnt from the DFRDB/MSBS transfer experience should be applied to the proposed transition. Firstly, it is much more widely known now that anyone who does not hold an appropriate Australian Financial Services Licence (AFSL), including commanders, must not give personal financial advice to ADF members. While this removes some of the risk of poor advice or the perception that members were not given a real choice, it makes the availability to ADF members of independent personal financial advice even more important.
The Review Team proposes that Defence arrange for professional financial planners across Australia to be trained to give individual financial advice relating to the transfer option. One model would see a panel of national financial planning providers agreeing a fixed price for the service and Defence subsidising a portion of the fee. For a majority of serving ADF members, the most appropriate transfer decision for them should be relatively easy and not require an external advisor. For some, however, the choice will not be simple, but will depend upon such factors as their future career aspirations including how certain they are about those aspirations. Whether or not the financial advice is availed upon, its availability at a subsidised price significantly reduces avenues for future complaint that the member’s decision was ill-informed.
The transition education and awareness campaign should comprise:
· national road-shows providing general information on MSBS and the proposed scheme, preferably given by a contracted organisation with an AFSL to provide general financial advice;
· continuous advice and information through Service communication channels such as newspapers and internal magazines;
· web-based (and DVD-based) calculators that allow members to generate their own scenarios based on their own circumstances and assumptions on length of service and long-term investment returns;
· personalised information packs that set out current accumulated entitlements and long term benefit comparisons based on a standard set of assumptions; and
· optional subsidised personal financial planning advice (limited to the issue of transferring or remaining with the current scheme).
To enhance the acceptance of independence of advice, the ADF Financial Services Consumer Council (ADFFSCC) should oversee the process, ensure quality control and represent the broad interests of ADF members.
Recommendation 10 Defence, with the ADF Financial Services Consumer Council and in consultation with the MSBS (or new) Board, should conduct an extensive education and awareness campaign to support informed choice by ADF members and MSBS preserved members to transfer to the new scheme or to remain in their current scheme. This campaign should include access to computer modelling to allow individuals to estimate the likely effect of transferring or not transferring given their personal situation, and access for current ADF members to subsidised financial advice.
Ongoing education and awareness of superannuation
The new scheme will require a very different approach by ADF members towards their superannuation into the future. It will involve a shift from the paternalism of the past to much greater responsibility being shouldered by members for the management of their superannuation savings. It will also offer Defence the opportunity to ‘sell’ its employer contributions towards superannuation as a generous element of the remuneration package, and to enhance its other recruitment and retention strategies. In both respects, this will require ongoing education and awareness of superannuation.
Throughout the consultation and focus group periods, the Review Team noted the significant lack of knowledge of superannuation in general, the military schemes in particular and the value of the overall remuneration package for the ADF. These deficiencies undermine the retention effects of the considerable funding allocated to ADF conditions of service and, if not addressed, could present risks to the success of the new scheme for the members themselves.
The primary problem is that young people who form the bulk of the ADF are not engaged by the long-term nature of superannuation. On the positive side, the Review Team noted that when even the current scheme (with the significant employer contributions) was explained, members became interested in the choices and control over money that was available to them. This level of engagement would clearly increase with the greater flexibility of the new scheme, providing the information was ‘pushed’ to ADF members.
There is no shortage of information available to members on their superannuation schemes or financial education in general. The ADFFSCC has a website that provides educational information on a wide range of financial topics. The DFRDB and MSBS have websites with the latest information and on-line calculators that provide some guidance on likely future benefits. The Military Superannuation Communication Committee oversees communication activities for both DFRDB and MSBS and provides two newsletters addressed directly to members, along with the annual members’ statements. The Superannuation Directorate in Defence provides information on current issues through a variety of internal publications.
Nevertheless, the nature of military service makes standard education and communication activities difficult. These factors include:
· The majority of ADF members are young and in their first job after school.
· The initial training period is very intense and any ‘extraneous information’ provided is not assimilated.
· Following entry to the trained workforce, members are difficult to contact because they are mobile, and often do not have common communication channels such as the internet available to them.
Notwithstanding these structural impediments and the inherent difficulty of getting younger ADF members engaged with superannuation, there are a number of other deficiencies with the current approaches:
· Superannuation is not marketed or even acknowledged as a component of the ADF remuneration package at all levels.
· The current schemes do not have positive support from the command chain.
· Information is provided in too many areas and there is a lack of coordination across the organisations providing communication and education. Much of the information is not in a form that engages the bulk of ADF membership.
In addition, of course, the structure of the current schemes makes it difficult to explain the value of the benefits members will receive.
The Review Team acknowledges the continuing efforts being made to improve financial education and communication on superannuation and remuneration more broadly, but emphasises the importance of addressing the current deficiencies and putting into place a much more effective approach. That approach should include the following specific improvements:
· The Board should provide ADF members with regular reports of their accumulated superannuation benefits, and regular reminders of the options available to vary the investment profile and their own contribution levels. The latter should be supported by ongoing access to information on investment performance and computer modelling.
· The ADF remuneration package should be specifically defined and marketed, internally and externally, with support from the command chain.
· The ADF should have a single website that addresses all conditions of service, including the superannuation schemes, from a member point of view, rather than the current organisational view. The current ADFFSCC website is a good example of style. The new website should also be accessed through the Single Service personnel portals.
· The ADF should provide greater access to the Defence intranet in accommodation and recreation areas in addition to the workplace.
· The ADF should incorporate education on remuneration, superannuation and conditions of service after completion of initial training, rather than at the commencement of training when the member’s focus is elsewhere.
· The ADF should incorporate further direct communication of the remuneration package, together with access to subsidised financial advice on superannuation, at critical retention points – e.g. prior to the expiry of fixed periods of service, when the employer contribution increases to 23% and 28% and prior to retirement.
· The ADFFSCC should oversee the content and represent the broad interests of ADF members in the presentation of information.
Emphasising the total remuneration package for recruitment and retention purposes
The Review Team believes that the introduction of the new Superannuation scheme will provide the opportunity to present, more clearly and positively than in the past, the total remuneration package for ADF members, thereby, maximising the package’s impact on recruitment and retention. The following suggests a way in which this might be done.
The ADF conditions of service package can be split into two broad categories – a remuneration package and an employment package. The remuneration package contains elements that should be used to compare with commercial employment conditions while the additional elements in the employment package generally relate to the special features of military service, some of which nonetheless are very attractive. Figure 8–1 is a diagrammatic representation of the total package.
Figure 8–1: Diagrammatic representation of the conditions of service package
In setting the remuneration and overall conditions of service packages, Defence should support both individual and organisational goals: to act in the best long term interests of members and to enhance the recruitment and retention value of the packages. The proposed superannuation scheme supports two key messages:
· Military superannuation is an important element of the remuneration package when considering enlistment and when considering external employment; and
· The features of military superannuation exceed community standards and increase with length of service.
The remuneration package compensates in cash terms for both the unique and special nature of military service and traditional work value. The remuneration package comprises salary, allowances and superannuation. At the basic entitlement where military work is conducted in peacetime conditions, the salary component of the remuneration package recognises civilian equivalent work conditions based on individual circumstances. The special nature of military work is then compensated through allowances that have similarities to some other work groups in the community. At the high end, unique deployment allowances and income taxation exemptions compensate for the unique stresses and risks of active service and are provided on the traditional military ‘all of one company’ principle.
ADF members have traditionally regarded the remuneration package as comprising only the basic salary for market comparison purposes. This was a common theme throughout the Review Team’s consultation and focus group process. This view is supported by the fact that the Defence Force Remuneration Tribunal is restricted to considering basic salary and certain salary-related allowances rather than the broader remuneration package. Defence itself publishes public salary tables that emphasise basic salary rather than military salary – the $10,098 pa Service Allowance paid to all members at Major (Equivalent) Rank and below is only noted on the brochures as a side comment rather than treated as an integral element of income. The defined benefit nature of the DFRDB and MSBS has precluded a meaningful assessment of the remuneration value of the employer contribution for market comparison purposes. The proposed new scheme offers an opportunity to significantly enhance the value of the ADF remuneration package for recruitment and retention purposes allowing a more realistic appraisal of ADF remuneration against the external employment market.
The Review Team suggests:
· General reference to ADF salaries in recruiting and retention literature should refer to military salaries (basic salary plus service allowance).
· The ADF ‘Compare Your Package’ calculator should be adjusted to emphasise all the remuneration elements of the package, including superannuation, and actively marketed to ADF members.
· Officers, Warrant Officers and Senior Non-Commissioned Officers should be familiarised with the concepts of a remuneration package and the elements of the ADF package as an aid to retention of subordinate personnel who are making choices at various stages of their career.