DEFENCE SUPERANNUATION PENSIONS AND CPI
| Changing the indexation base for Commonwealth & Defence Superannuation Pensions
Clarifying some terminology At the present time Commonwealth and Defence superannuation pensions are indexed twice each year, inline with positive movements in the Consumer Price Index [CPI]. CPI is an inflation index and measures the movement in a basket of items determined by the Australian Bureau of Statistics. At best, it is a Cost of Living index. Although some would argue, that for retirees, it does not accurately reflect the change in the cost of living for those of us in retirement. On the other hand, our Standard of Living is more accurately reflected in the movement in wages generally in the community. Typical indices used to measure the overall movement in wages are Average Weekly Ordinary Time Earnings [AWOTE] and Male Total Average Weekly Earnings [MTAWE]. Because AWOTE does not include overtime and covers all workers, male & female, it tends to rise at a slower rate than MTAWE. Generally, over time, Australians have enjoyed an improving standard of living. This can be seen in the rate at which earnings increase compared to CPI. For example, over the past 10 years [to December 2004] CPI increased by around 30%. However, over the same time period AWOTE increased by some 54%. I have used the figures to December 2004 simply because they were readily at hand. Not dissimilar results will be found by looking at both shorter and longer time periods. What does this tell us? With our Defence Superannuation pensions tied to CPI we are locked into the standard of living that prevailed at the time we retired from the Defence Force. Thus, as time passes our relative standard of living will slowly fall compared to those still in the workforce – because their salary or wages will the increasing at least in line with AWOTE, MTAWE or some other similar index. This fact has been recognised by the Government on several fronts. Because the Government believed those on Age [Centrelink] or Service [DVA] pensions should share in the improvement in living standards generally in the community they committed to maintaining these pensions at 25% of AWOTE or the movement in CPI, whichever is the greater. You will not be surprised to learn that the Government also saw fit to approve a range of improvements in the indexation of Parliamentary Superannuation Pensions. Qualifying parliamentarians have their pensions tied to a range of indices including the remuneration of current members of parliament. They will, therefore, benefit from improvements in the standard of living by having their pensions tied to indices that are increasing at a greater rate than CPI. What about those on Defence and other Commonwealth Superannuation Pensions? Since 1997, we have had a number of Senate Select Committees examine our superannuation arrangements and superannuation in general. To cut a long story short, they have, amongst other things, recommended that the Government “consider indexing Commonwealth funded superannuation benefits to Male Total Average Weekly Earnings [MTAWE] or the Consumer Price Index [CPI], whichever is the higher, in order that recipients share in the increases in living standards enjoyed by the wider community”. This also included Defence Force Superannuation pensions. The Government has assiduously ignored these recommendations. As recently as the 4th July 2005 the Minister for Veterans’ Affairs and Minister Assisting the Minister for Defence, the Hon. De-Anne Kelly, in reply to a letter on the above subject said: ‘The Government at this time has no plans to change the indexation method for Australian Government Civilian (and Defence Force members) superannuation pensions.’ The Government happily confuses Cost of Living [as measured by CPI] with the Standard of Living when arguing against changing the indexation base of our superannuation benefits. It suits their case. This is despite the fact that the Government and Opposition saw fit to approve changing their own Parliamentary Superannuation Pension scheme to include indexation of their pensions to a Standard of Living index. Where to from here? It is obvious that to change the Government’s mindset on this matter all Commonwealth and Defence pensioners [and we would hope, current employees who will one day retire and be eligible for a Commonwealth funded superannuation pension] need to make ministers and their local members aware of this injustice. Some lobbying of ministers has already taken place. However, when ministers learn that organizations such as the Australian Council of Public Service Retiree Organizations [ACPSRO] and other groups such as the Regular Defence Force Welfare Association [RDFWA] only represent a small minority of Commonwealth pensioners, this lobbying effort is ignored. If we are to succeed, we need to increase the membership of those organizations that will lobby for change. Strength comes with numbers. Furthermore, ministers and local members need to be clearly reminded of our voting power at elections. Hence the value of having all Commonwealth funded superannuation pensioners [and potential pensioners] write to senior ministers in Cabinet and our local Member of Parliament to seek a change in the indexation of our pensions in line with that recommended by numerous Senate Select Committees. If this matter, and other activities of our Association, is of interest to you, please make sure that your name is on the RAAF Engineer Officers Association [R.E.O.A.] database. Email Noel Hadfield details of your full name, postal and email address, and telephone number at nhadfield@optusnet.com.au Richard Orr 11th December 2005 |
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REOA VISIT TO RAAF MUSEUM POINT COOK 13 JULY 2005
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