Military Superannuation and Benefits Amendment Trust Deed 2001 (No. 1)

Administered by Department of Defence

Legislation au F2005B00821 Not in force Legislative Instrument

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EXPLANATORY MEMORANDUM

MILITARY SUPERANNUATION AND BENEFITS AMENDMENT TRUST DEED 2001 (No l) ISSUED BY THE AUTHORITY OF THE MINISTER OF VETERAN'S AFFAIRS

The Schedule of the Trust Deed made by the Minister for Veteran's Affairs under section 5 of the Military Superannuation and Benefits Act 1991 ("the MSB Act'') contains Rules ("the MSB Rules") which deal with the benefits to be provided to members of the MSB Scheme upon retirement or to dependants of deceased members of the scheme. The benefits payable are a member benefit based on member contributions and interest accrued and an employer benefit which includes employer contributions.

The Minister is empowered, by section 5 of the MSB Act, to amend the Trust Deed (including the MSB Rules), by an instrument which, by subsection 49 (1) of the MSB Act, is a disallowable instrument for the purposes of section 46A of the Acts Interpretation Act 1901.

The amendments made by the Military Superannuation and Benefits Amendment Trust Deed 2001 (No 1) change the MSB Rules to allow for twice yearly indexation of pensions paid under the MSB Act.

Currently pensions payable under the MSB Act are subject to indexation on an annual basis. An increase is payable from the first payday in July and is based on any increase in the Consumer Price Index (CPI) as measured in the preceding March quarter. Pensions are not reduced when there is a decrease in the CPI, however, that decrease will be offset against the next or subsequent increase in calculating the indexation amount.

The Superannuation Legislation Amendment (Indexation) Act No.148, 2001 amended the Superannuation Act 1922, the Superannuation Act 1976, and the Defence Force Retirement and Death Benefits Act 1973 to provide for twice-yearly indexation of superannuation pensions in place of existing annual indexation. The Amendment Trust Deed brings the MSB Scheme into line with the other Commonwealth superannuation schemes.

The amendments made by the Military Superannuation and Benefits Amendment Trust Deed 2001 (No 1) provides that indexed pensions payable under the MSB Act may be increased in January and July of every year. Pensions will be increased where, after any offsets, there has been a half yearly increase in the CPI as measured at the previous September or March quarter respectively.

Clause 1- Name of Trust Deed

This clause is formal.

Clause 2 - Commencement

This clause provides commencement on gazettal.

Clause 3 -Amendment of Trust Deed made under the Military Superannuation and Benefits Act 1991.

This clause is formal.

Schedule 1 -Amendments

This schedule amends the Military Superannuation and Benefits Trust Deed (incorporating the MSB Rules) made under the MSB Act to provide for twice yearly indexation of pensions.

Item 1 - Rules, Part 6, Division 2, heading

This item amends the heading of Part 6, Division 2 of the Rules from Division 2 - Increases in Pensions and Certain Unfunded Preserved Benefits to Division 2 - Increases in Pensions. While pensions will be indexed twice yearly, this will not apply to certain unfunded preserved benefits which will continue to be indexed yearly.

Item 2 - Rules, Part 6, rule 56, heading

This item amends the heading of Part 6, rule 56 from 56 Increases in pensions and certain unfunded preserved benefits to 56 increases in pensions.

Item 3 - Rules, subrule 56 (1)

This item amends subrule 56 (1) to reflect that indexation will be undertaken twice yearly,

based changes to the Consumer Price Index measured at the March and September quarter.

Item 4 - Rules, subrule 56 (1)

This item amends subrule 56 (1) so that it only relates to increases in pensions. Indexation of certain unfunded preserved benefits are now covered in the new Division 3 - Increases in Certain Unfunded Preserved Benefits.

Item 5 - Rules, subrule 56 (2)

This item amends subrule 56 (2) to remove references to unfunded preserved benefits from Division 2.

Item 6 - Rules, subrule 56 (2)

This item amends subrule 56 (1) to reflect that indexation will be undertaken twice yearly,

based changes to the Consumer Price Index measured at the March and September quarter.

Item 7 - Rules, subrule 56 (3)

This item amends subrule 56 (3) by inserting or 31 December to reflect the new half-yearly regime required to undertaken twice-yearly indexation.

Item 8 - Rules, subrule 58 (2)

This item amends subrule 58 (2) by inserting or 16 December to reflect the new half-yearly regime required to undertaken twice-yearly indexation.

Item 9 - Rules, subrule 58 (3)

This item amends subrule 58 (3) by inserting or 16 December to reflect the new half-yearly regime required to undertaken twice-yearly indexation.

Item 10 - Rules, subrule 58 (3), formula

This item amends subrule 58 (2) denominator in the formula from 12 to 6 to reflect the new half yearly regime required to undertaken twice yearly indexation, whereby the number of months will be 6 months rather than 12 months.

Item 11 - Rules, subrule 58 (3)

This item amends subrule 58 (3) by inserting or 31 December to reflect the new half-yearly regime required to undertaken twice-yearly indexation.

Item 12 - Rules, subrule 58 (6)

This item omits subrule 58 (6) to remove references to unfunded preserved benefits from Division 2.

Item 13- Rules, subrule 59 (4)

This item omits subrule 59 (4) to remove references to unfunded preserved benefits from Division 2.

Item 14 - Rules, subrule 60 (1)

This item amends subrule 60 by removing the "(l)". Item 16 removes subrule 60 (2).

Item 15 - Rules, subrule 60 (1)

This item amends subrule 60 (1) by inserting or 31 December to reflect the new half yearly regime required to undertaken twice yearly indexation.

Item 16 - Rules, subrule 60 (2)

This item omits subrule 60 (2) to remove references to unfunded preserved benefits from Division 2.

Item 17 - Rules, subrule 61 (1)

This item amends subrule 56 (1) to reflect that indexation will be undertaken twice yearly. The insertion of and September quarter provides for the new indexation that will take effect in January of each year.

Item 18 - Rules, Part 6, after Division 2

This item creates Division 3 of Part 6 of the Rules. The heading is Division 3 - Increase in Certain Unfunded Preserved Benefits. Division 3 comprises clauses previously included in Part 6, Division 2 relating to the indexation of certain unpreserved benefits.

Item 19 - Rules, Schedule 1, Part 1, after definition of prescribed fee

This item defines prescribed half-year.

Item 20 - Further Amendments

This item replaces various expressions of year with half-year to reflect the new half-yearly regime required to undertaken twice yearly indexation.

Overview

The Military Superannuation and Benefits Amendment Trust Deed 2001 (No 1) was enacted to address the need for more frequent indexation of pensions under the Military Superannuation and Benefits Act 1991 (MSB Act). This was introduced by the Minister for Veteran's Affairs under the authority granted by section 5 of the MSB Act, and is a disallowable instrument as per section 49(1) of the MSB Act and section 46A of the Acts Interpretation Act 1901. The policy objective was to align the Military Superannuation and Benefits Scheme with other Commonwealth superannuation schemes by transitioning from annual to twice-yearly indexation of pensions. This change was prompted by the Superannuation Legislation Amendment (Indexation) Act No. 148, 2001, which similarly amended the Superannuation Act 1922, the Superannuation Act 1976, and the Defence Force Retirement and Death Benefits Act 1973. The Trust Deed amendment ensures that pensions are adjusted twice a year, in January and July, based on changes in the Consumer Price Index measured in the previous March and September quarters, respectively. This approach maintains the existing practice of not reducing pensions in response to decreases in the CPI, but offsets such decreases against future increases.

Scope and Application

The Military Superannuation and Benefits Amendment Trust Deed 2001 (No 1) made by the Minister for Veteran's Affairs under section 5 of the Military Superannuation and Benefits Act 1991, applies to the Military Superannuation and Benefits (MSB) Scheme, which provides benefits to members upon retirement or to dependents of deceased members of the scheme. This Act modifies the MSB Rules to allow for twice yearly indexation of pensions paid under the MSB Act. This change aligns the MSB Scheme with other Commonwealth superannuation schemes by replacing the existing annual indexation with a new system that indexes pensions in January and July of every year. The indexation is based on changes to the Consumer Price Index measured in the preceding September or March quarter, respectively. The Act is a Commonwealth instrument and applies across Australia, governed by the authority of the Minister for Veteran's Affairs. There are no explicit exclusions or exemptions mentioned in the explanatory statement, and the amendments made by this Act are extensive, covering various rules and subrules to accommodate the new twice-yearly indexation regime.

Key Provisions

The Military Superannuation and Benefits Amendment Trust Deed 2001 (No 1) modifies the Military Superannuation and Benefits Trust Deed to change the indexation of pensions from annual to twice yearly. This is achieved through various amendments to the Rules (MSB Rules) outlined in the Schedule of the Trust Deed, which are governed by the Military Superannuation and Benefits Act 1991 (MSB Act). The amendments specify that pensions payable under the MSB Act will now be indexed twice a year, in January and July, based on the Consumer Price Index measured at the previous September and March quarters respectively (Items 3, 6, 17). Certain unfunded preserved benefits will continue to be indexed annually (Items 4, 12, 16). The MSB Rules are amended to reflect this new twice-yearly indexation regime. For instance, the heading of Part 6, Division 2 of the Rules is altered from "Increases in Pensions and Certain Unfunded Preserved Benefits" to "Increases in Pensions" (Item 1). Similarly, the heading of Part 6, rule 56 is changed from "Increases in pensions and certain unfunded preserved benefits" to "Increases in pensions" (Item 2). Other subrules are also modified to remove references to unfunded preserved benefits (Items 5, 13, 14, 15). New Division 3, titled "Increase in Certain Unfunded Preserved Benefits," is created to handle the indexation of unfunded preserved benefits (Item 18). Additionally, the new half-yearly regime is reflected by inserting or 31 December and changing the denominator in the formula from 12 to 6 (Items 7, 8, 9, 10, 11, 15, 19). Under the Military Superannuation and Benefits Amendment Trust Deed 2001 (No 1), there are no specific offences, penalties, or consequences for non-compliance outlined within the text. However, the Trust Deed itself is subject to the authority of the Minister for Veteran's Affairs, and any failure to comply with the amended MSB Rules may be subject to the general enforcement mechanisms provided by the MSB Act or other applicable legislation. Given the nature of the amendments, which primarily involve procedural changes to indexation schedules, the primary consequence of non-compliance would likely be the improper calculation and payment of pensions or benefits to eligible members or their dependants.

Area of Law: Pension Law
Instrument: Trust Deed
Concepts: Definitions & Interpretation; Commencement Provisions; Regulatory Standards

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