In recent times, some members of the ADF have expressed concerns about the Military Superannuation Benefits Scheme (MSBS). Particularly highlighted are the conditions governing the MSBS preserved employer component when members leave the scheme.

Minister Bruce Scott has received numerous letters on this matter, The Armed Forces Federation has raised specific questions, and recently Paul Clitheroe drew attention to Defence's Superannuation scheme in 'Money Magazine'.

To address the primary questions surrounding MSBS, we include the Minister's response to Arffa questions and Paul Clitheroe's comments published in 'Money'.

From Minister Scott:

"Recently I have received a considerable number of letters concerning the conditions governing the preserved employer benefit in the Military Superannuation and Benefits Scheme (MSBS). I would like to explain, in a little detail, why I am unable to accept the claim that the employer-provided component of the MSBS superannuation scheme should be available to members of the Australian Defence Force (ADF) who discharge prior to age 55. First, the MSBS is regulated under the Superannuation Industry (Supervision) Act 1993 and, as such, it complies with the retirement income policy of successive governments that apply to all superannuation schemes regulated by that Act. The preservation arrangements of the MSBS employer benefit are consistent with other Commonwealth superannuation schemes. Second, the employer-provided benefit in the MSBS reflects what the Parliament and Government believe is fair and reasonable to provide not only at the point of retirement, but on earlier death or invalidity. Most importantly, these benefits are provided regardless of investment performance. In other words, members can be confident of receiving the benefits defined under the rules of the scheme. Third, apart from the relatively minor productivity component, money is not set aside for the purpose of funding benefits. It is not true, as has been suggested, that the money is "actually held in government consolidated revenue". Rather, the Government meets its obligations to individuals as they fall due. Fourth, the proposition that the so-called employer contribution should be able to be rolled over into another superannuation fund at the point of separation, is fundamentally at odds with the whole nature of the current scheme. If the Government was to make that money available now rather than when individuals turn 55, the costs of the scheme would be significantly increased. For example, if all existing preserved benefits were to be funded, the Government would need to find over $1 billion, around 10% of the annual Defence budget. It would also raise similar questions in relation to the civilian superannuation schemes with an associated cost many times that of the MSBS. Finally, the MSBS Scheme is generous by community standards. For example: The MSBS provides an employer benefit that accrues at between 18-28% of final average salary. The minimum employer contribution under the Superannuation Guarantee Act is 8%. The MSBS provides a member benefit, comprising members' own contributions and the interest they earn from the MSB Fund, that is paid in addition to the employer benefit. In most other defined benefit schemes, including the civilian Commonwealth Schemes, member contributions and interest are included in the overall benefit. The MSBS provides a fully indexed pension payable for life; this is not a feature of many private sector schemes. The MSBS has comprehensive invalidity and death cover, provided by the employer. Not all private sector schemes offer invalidity and death benefits and those that do, do not provide an indexed pension payable for life such as is available in the MSBS. Unlike other employees, including Commonwealth civilian employees who have to be considered totally and permanently incapacitated from the workforce before an invalidity benefit is payable, MSBS members receive an invalidity benefit if they are medically discharged from the ADF. In the event of death, eligible spouses and children of MSBS members are entitled to receive a benefit that can be in the form of an indexed pension - in the case of spouses this is paid for life irrespective of any other income. Again, these benefits are not available in the private sector. MSBS administration fees, as with the other Commonwealth superannuation schemes, are paid by the employer rather than the members. Most private sector schemes charge these costs to members in addition to entry and exit fees. In short, I cannot accept the claim that the current arrangements for the MSB Scheme are discriminatory. They are different from other superannuation schemes and in many ways they are considerably more advantageous. The vast majority of people in the Australian community would not have as good a superannuation scheme as the ADF. With regard to questions posed about the future of MSBS, the scheme remains an important component of the remuneration package provided for members of the ADF. The Government has no intention of closing the MSBS at this time. Accordingly, it would be inappropriate to speculate on any other arrangements that might, or might not exist, if the scheme was to be closed. I would like to assure you that superannuation and other benefits for members of the ADF will continue to be determined on their merits in line with the Government's commitment to providing the most appropriate levels of support to current and former serving members." Yours sincerely BRUCE SCOTT MP

Paul Clitheroe rates long term benefits highly

Paul Clitheroe