MINISTER FOR VETERANS' AFFAIRS

PARLIAMENT HOUSE

MINISTER ASSISTING THE MINISTER FOR DEFENCE

CANBERRA ACT

31 OCT 2001

Admiral Mike Hudson AC (Retd)

Federal President

The Naval Association of Australia

GPO Box 711

CANBERRA ACT 2601

Dear Admiral Hudson

Thank you for your letter of 8 June 2001 regarding the indexation of military superannuation pensions.

I am pleased to advise you that the Government is introducing twice yearly indexation for military superannuation scheme pensions from January 2002. This will include pensions paid under the Defence Force Retirement Benefits (DFRB) scheme, the Defence Force Retirement and Death Benefits (DFRDB) scheme and the Military Superannuation and Benefits Scheme (MSBS). Legislation to amend the DFRDB Act 1973 has now passed through Parliament and arrangements are being made to amend the MSBS Trust Deed and Ru1e.

The change will bring indexation arrangements for military pensions into line with the changes to Commonwealth superannuation pensions announced by the Treasurer, the Hon Peter Costello MP, in the 2001 Budget.

Currently DFRB, DFRDB and MSBS pensions are adjusted in July each year to reflect any increase in the Consumer Price Index (CPI) over the preceding 12 month period ending in the March quarter of that year. Specifically, that index is the all groups consumer price index number for the weighted average of the eight capital cities published by the Australian Bureau of Statistics in respect of the March quarter each year. Under the latest indexation change, all military pensions were increased by 6% from I July 200I.

Under twice yearly indexation arrangements pensions will now be adjusted on 1 January and 1 July each year reflecting any increase in the CPI for the 6 months ending in the September quarter and March quarter respectively.

Twice yearly indexation will reduce the delay between price increases and compensatory adjustments to superannuation pensions.

I trust this information has clarified this issue for you.

Yours sincerely

Bruce Scott MP