Commonwealth Superannuation Corporation Annual Report 2017–18

7. Our Superannuation Schemes

MilitarySuper

Military Superannuation and Benefits Scheme

Overview of MilitarySuper

MilitarySuper was established on 1 October 1991 by the MilitarySuper Act. MilitarySuper closed to new ADF entrants on 30 June 2016. ADF Super is now available to new ADF entrants. MilitarySuper contributors may choose to move to ADF Super or remain in MilitarySuper.

MilitarySuper is a hybrid scheme (part accumulation and defined benefit). Benefits derive from a member and employer component. The member component is the accumulation part. It consists of member contributions, any amounts notionally brought over from DFRDB, plus Fund earnings on those amounts. The employer component is the defined benefit part. It is based on a member’s period of membership and final average salary.

It is unfunded except for the portion relating to the employer 3% productivity contributions paid each fortnight to the Fund by the Department of Defence, plus Fund earnings. Unfunded benefits are paid by the Australian Government.

MilitarySuper also offers an Ancillary membership to eligible DFRDB members who wish to make additional contributions and transfers, such as additional personal, salary sacrifice and spouse contributions.

MilitarySuper membership

Figure 11. MilitarySuper members and pensioners over five years

Note: Figures are at 30 June of each year; ancillary members are not included; ‘pensioners’ represent the number of pension accounts, not the exact number of pensions (e.g. multiple recipients such as a spouse and orphan children may be paid under one account).

MilitarySuper administration

Member contributions

The basic contribution rate is 5% of salary, including higher duties and other superannuate allowances as deemed by the Department of Defence. Members can elect to contribute up to 10% of their superannuation salary. Ancillary contributions are also accepted into the Fund from contributing members, including both pre - and post-tax contributions such as additional personal, salary sacrifice and spouse contributions.

Figure 12. MilitarySuper member contributions over five years

Note: This chart shows basic and ancillary contributions.

Ancillary contributions

Ancillary contributions can be made by contributing MilitarySuper and contributing DFRDB ancillary members to accumulate a separate superannuation interest called an Ancillary benefit. It accrues as a separate accumulation interest, which has fund earnings applied in line with the relevant investment option returns.

Ancillary contributions do not count towards a member’s Maximum Benefit Limit in MilitarySuper nor impact the retirement pay benefit of a member’s DFRDB entitlement. Ancillary contributions are only paid as a cash lump sum from a member’s preservation age, or can be rolled over to another superannuation fund at any age.

Benefit payments

Pensions and lump sums

MilitarySuper members who exit the scheme are entitled to a preserved benefit, to roll out to another superannuation fund or, if they have a pre-1999 component, to receive that portion of their member benefit regardless of their reason for leaving the ADF. Exiting members must meet a criteria to be entitled to their employer benefit, the amount of which varies based on the reason for their scheme exit.

A member’s employer benefit is generally preserved until the member reaches age 55. The employer benefit may be paid as a pension before a member reaches age 55 if the member exits the scheme under invalidity or redundancy.

Figure 13. MilitarySuper pension payments over five years

Figure 14. MilitarySuper lump sum payments over five years

Note: Lump sums are paid from the MilitarySuper fund and by the Australian Government.

Invalidity and death benefits

MilitarySuper provides partial invalidity, full invalidity and death benefits. If a member becomes disabled and is unable to continue their ADF service, invalidity benefits help them to resettle into civilian employment.

Invalidity classifications

There are three levels of invalidity classification:

• Class A: Significant incapacity
• Class B: Moderate incapacity
• Class C: Low incapacity (no entitlement to an invalidity pension).

Table 24. New invalidity classifications in MilitarySuper

	2016–17	2017–18
Initial classifications	1,288	1,523
Pensions granted	1,130	1,366
Pensions not granted	158	157

Note: Figures in the table vary slightly to invalidity exits quoted elsewhere due to some cases relating to members discharged in the previous financial year; these figures do not include members who were medically discharged under Rule 32 with no invalidity pension payable having been deemed by a delegate of the Board to have been retired on a pre-existing condition within two years of enlistment.

Table 25. Breakdown of new invalidity classifications in MilitarySuper in 2017–18

	Army			Navy			Air Force
Class	Class A	Class B	Class C	Class A	Class B	Class C	Class A	Class B	Class C
Membership	759	139	97	169	34	29	155	20	15

Note: This table shows the number of new invalidity retirement certificates issued in the relevant reporting year (not the total number of invalidity pensioners).

Invalidity classification review

Members classified Class A or Class B may be subject to review until age 55 by CSC or its delegate. Members can also initiate a classification level review up to age 65.

Members classified Class C at retirement are not subject to periodic reviews but can request the initial classification be reconsidered. Their request must generally be made within 30 days of when the initial classification was determined.

Complaints

Table 26. Complaints received by MilitarySuper

	2016–17	2017–18
Complaints received	188	155

All complaints were resolved by 30 June 2018. Many complaints related to communication between CSC and the complainant, or to superannuation legislation.

Changes to MilitarySuper’s legislation and trust deed

No changes were made to the Military Superannuation and Benefits Act 1991 or the Military Superannuation and Benefits Trust Deed in 2017–18.

In February 2018, the Treasury Laws Amendment (Putting Consumers First—Establishment of the Australian Financial Complaints Authority) Act 2018 was passed by Parliament which amended the Corporations Act 2001 and repealed the Superannuation (Resolution of Complaints) Act 1993.