2005 Military Superannuation and Benefits Scheme and Defence Force Retirement and Death Benefits Scheme (MSBS and DFRDB)

APPENDIX C

Demographic assumptions

Set out below is a summary of the demographic assumptions for the MSBS and the DFRDB.

Contributor exits by death and invalidity

The tables below set out the rates adopted for death and invalidity per 1,000 contributors at each age shown. The rates for males and females are assumed to be the same.

MSBS death and invalidity rates (per 1,000 contributors)


		Invalidity ‘A’		Invalidity ‘B’		Invalidity ‘C’
Age	Death	Officers and cadets	Other ranks	Officers and cadets	Other ranks	Officers and cadets	Other ranks
20	0.49	0.11	0.36	0.51	2.86	1.10	4.58
25	0.54	0.46	1.13	1.08	6.48	2.51	5.20
30	0.56	0.75	1.87	1.65	7.92	2.24	5.20
35	0.58	0.93	2.43	2.23	9.26	2.23	5.20
40	0.59	1.07	2.87	2.80	10.45	2.21	5.20
45	0.61	1.14	3.10	3.37	10.81	2.19	5.20
50	0.76	1.13	3.10	3.60	10.83	2.18	5.20
54	1.17	1.13	3.10	3.60	10.83	2.18	5.20

DFRDB death and invalidity rates (per 1,000 contributors)


		Invalidity ‘A’		Invalidity ‘B’		Invalidity ‘C’
Age	Death	Officers and cadets	Other ranks	Officers and cadets	Other ranks	Officers and cadets	Other ranks
30	0.56	0.45	1.13	0.90	3.54	0.67	2.72
35	0.58	0.45	1.57	0.54	2.36	0.40	1.92
40	0.59	0.41	1.66	0.23	1.42	0.17	1.24
45	0.61	0.31	1.39	0.10	0.70	0.07	0.69
50	0.76	0.16	0.73	0.04	0.24	0.03	0.27
54	1.17	0.03	0.01	0.03	0.00	0.02	0.00

Contributor exits by retirement and resignation

All contributors who attain age 55 are assumed to retire at age 55. The tables below set out the rates adopted for resignation below this age. The figures represent the numbers leaving per 1,000 contributors at each duration shown.

MSBS resignation rates (per 1,000 contributors)


Years of	Officers		Other ranks		Cadets
service	Male	Female	Male	Female	Male & Female
0	180	180	120	200	109
1	44	67	50	68	77
2	40	47	50	39	53
3	35	40	50	67	37
4	34	40	120	95	34
5	33	43	90	123	37
6	43	49	120	150	43
7	54	56	110	126	54
8	51	67	100	102	51
9	45	82	60	78	45
10	89	125	120	200	89
11	84	82	105	127	84
12	78	91	93	124	78
13	73	97	85	121	73
14	67	101	78	118	67
15	61	80	69	98	61
16	56	67	62	78	56
17	50	61	55	80	50
18	70	60	52	80	70
19	89	68	50	80	89
20	109	121	160	249	109
21	93	120	128	238	93
22	88	120	114	227	88
23	85	120	106	216	85
24	80	120	98	205	80
25	76	120	90	194	76
26	73	120	85	183	73
27	75	120	83	172	75
28	81	120	82	172	81
29	91	120	90	172	91
30	103	130	111	172	103

DFRDB resignation rates (per 1,000 contributors)


Years of	Officers		Other ranks
service	Male	Female	Male	Female
14	20	38	20	20
15	20	34	15	20
16	20	20	10	10
17	20	20	10	10
18	20	20	10	10
19	20	20	15	10
20	124	180	300	366
21	108	122	207	299
22	100	115	186	256
23	95	115	170	235
24	94	115	157	218
25	93	116	148	200
26	93	118	139	200
27	94	120	134	200
28	98	126	130	200
29	103	135	131	200
30	112	149	135	200
31	121	164	139	200
32	133	164	148	200
33	149	164	163	200
34	176	164	192	200
35	216	164	231	215

The DFRDB has been closed to new entrants since 1991.

Retrenchment and redundancy

No allowance has been made for the effects of retrenchments and redundancies as the retrenchment and redundancy decision is unpredictable and impossible to model with any confidence.

New entrants (MSBS)

The following table shows figures for the assumed age distribution and average salaries of male new entrants.

New entrants (males)


	Officers		Other ranks		Cadets
Age	%	Average salary ($)	%	Average salary ($)	%	Average salary ($)
17	-	-	0.1	29,996	0.1	18,558
18	0.6	35,598	12.0	29,996	22.0	19,592
19	1.1	37,232	20.0	30,639	24.0	21,583
20	1.5	38,867	16.0	31,281	15.0	24,002
21	2.0	40,502	10.0	31,924	8.7	26,242
22	3.4	42,137	7.0	32,567	7.6	27,358
23	5.5	43,772	5.6	33,210	6.5	27,783
24	5.5	45,407	4.7	33,853	5.4	28,157
25	5.5	47,042	3.9	34,496	4.3	28,435
26	5.5	48,676	3.3	35,139	3.2	28,618
27	5.0	50,311	2.9	35,782	2.1	29,217
28	4.5	51,946	2.4	36,425	1.0	29,348
29	4.1	53,581	1.9	37,068	0.1	29,400
30	3.7	55,216	1.4	37,711	-	-
31	3.4	56,851	1.2	38,354	-	-
32	3.2	58,486	0.9	38,997	-	-
33	3.0	60,121	0.8	39,640	-	-
34	2.8	61,755	0.7	40,283	-	-
35	2.7	63,390	0.6	40,926	-	-
36	2.5	65,025	0.5	41,569	-	-
37	2.4	66,660	0.4	42,211	-	-
38	2.4	68,295	0.3	42,854	-	-
39	2.4	69,930	0.3	43,497	-	-
40	2.4	71,565	0.3	44,140	-	-
41	2.4	71,565	0.3	44,783	-	-
42	2.4	71,565	0.3	45,426	-	-
43	2.4	71,565	0.3	46,069	-	-
44	2.4	71,565	0.3	46,712	-	-
45	2.4	71,565	0.3	46,712	-	-
46	2.4	71,565	0.3	46,712	-	-
47	2.4	71,565	0.3	46,712	-	-
48	2.1	71,565	0.3	46,712	-	-
49	1.8	71,565	0.2	46,712	-	-
50	1.5	71,565	0.1	46,712	-	-
51	1.2	71,565	0.1	46,712	-	-
52	0.9	71,565	-	-	-	-
53	0.6	71,565	-	-	-	-

The corresponding figures for females are:

New entrants (females)


	Officers		Other ranks		Cadets
Age	%	Average salary ($)	%	Average salary ($)	%	Average salary ($)
17	-	-	-	-	0.1	18,558
18	-	-	14.0	29,996	22.0	19,592
19	-	-	12.7	30,639	24.0	21,583
20	1.0	38,867	9.0	31,281	15.0	24,002
21	4.1	40,502	5.9	31,924	8.7	26,242
22	6.0	42,137	5.6	32,567	7.6	27,358
23	8.2	43,772	5.3	33,210	6.5	27,783
24	8.2	45,407	5.0	33,853	5.4	28,157
25	7.2	47,042	4.7	34,496	4.3	28,435
26	6.1	48,676	4.4	35,139	3.2	28,618
27	5.3	50,311	4.2	35,782	2.1	29,217
28	4.4	51,946	3.9	36,425	1.0	29,348
29	3.8	53,581	3.6	37,068	0.1	29,400
30	3.4	55,216	3.3	37,711	-	-
31	3.0	56,851	3.1	38,354	-	-
32	2.8	58,486	2.8	38,997	-	-
33	2.5	60,121	2.5	39,640	-	-
34	2.4	61,755	2.2	40,283	-	-
35	2.3	63,390	1.9	40,926	-	-
36	2.2	65,025	1.7	41,569	-	-
37	2.2	66,660	1.4	42,211	-	-
38	2.2	68,295	1.1	42,854	-	-
39	2.2	69,930	0.8	43,497	-	-
40	2.2	71,565	0.6	44,140	-	-
41	2.2	71,565	0.3	44,783	-	-
42	2.2	71,565	-	-	-	-
43	2.2	71,565	-	-	-	-
44	2.2	71,565	-	-	-	-
45	2.1	71,565	-	-	-	-
46	2.1	71,565	-	-	-	-
47	2.1	71,565	-	-	-	-
48	2.1	71,565	-	-	-	-
49	1.1	71,565	-	-	-	-

Promotional salary increases

An extract from the assumed scale of salary progression (excluding general salary increases due to inflation) is set out below. Officer and cadet promotional salaries are related to both period of service and entry age. Other rank salaries are only related to period of service. Since the officer and cadet promotional salary scales are two-dimensional, they cannot all be tabulated below. A cross-section of the salary scales is presented for a selection of entry ages.

Salary progression — male and female MSBS officers


Entry	Duration
Age	0	1	5	10	20	30
20	1.000	1.044	1.219	1.432	1.760	2.081
23	1.000	1.068	1.314	1.503	1.798	2.202
27	1.000	1.034	1.155	1.279	1.506	1.852

Salary progression — male DFRDB officers


Entry	Duration
Age	0	1	5	10	20	30
20	1.000	1.039	1.193	1.377	1.654	1.948
23	1.000	1.065	1.309	1.447	1.723	2.055
27	1.000	1.040	1.128	1.237	1.457	1.769

Salary progression — female DFRDB officers


Entry	Duration
Age	0	1	5	10	20	30
20	1.000	1.039	1.193	1.377	1.654	1.827
23	1.000	1.065	1.309	1.447	1.689	1.866
27	1.000	1.040	1.128	1.237	1.396	1.542

Salary progression — cadets


Entry	Duration
Age	0	1	5	10	20	30
18	1.000	1.074	2.654	3.330	4.047	4.767
21	1.000	1.022	1.993	2.436	2.918	3.484
25	1.000	1.000	1.802	2.525	2.998	3.722

Salary progression — all other ranks


Duration
0	1	5	10	20	30
1.000	1.280	1.529	1.678	1.945	2.102

As an example, consider an MSBS female officer who joined at age 23. The salary of such a person at age 33 would, in the absence of inflation, be assumed to be 1.503 times the commencing salary at age 23.

Pensioner mortality

The Table below shows the mortality rates assumed for pensioners in the 2005/2006 year.

Pensioner mortality (per 1,000 pensioners)


	Males		Females
Age	Age Retired	Invalid Retired	Age Retired	Invalid Retired
20	-	6.50	-	6.50
30	0.24	6.50	0.48	6.50
40	0.73	6.50	0.72	6.50
50	2.18	11.01	2.04	11.01
55	3.78	12.41	3.36	12.41
60	6.55	15.15	5.14	15.15
65	11.35	22.50	8.09	22.50
70	19.66	45.24	13.49	45.24
75	34.06	67.91	22.64	67.91
80	59.00	92.35	38.59	92.35
90	161.91	197.73	129.39	197.73
100	244.79	353.55	238.27	353.55

Widows are assumed to have the same mortality rates as female age retirements. Likewise widowers are assumed to have the same mortality rates as male age retirements.

Improvements in pensioner mortality

The following table summarises the assumed rates of improvement in future mortality of age retirements. No allowance has been made for future improvements in mortality for invalid retirements.

Assumed rates of mortality reduction (per cent per annum)

Age	Male	Female
60	2.4	1.9
70	2.0	2.0
80	1.5	1.9
90	1.1	1.3
100	1.3	1.1

Proportions married and age differences

The assumed proportions married at each age is shown below:

Proportions married

Age	Males (%)	Females (%)
20	2	7
30	49	55
40	76	55
50	76	55
60	76	50
70	70	37
80	59	16

Married male members are assumed to be married to females four years their junior on death.

Married female members are assumed to be married to males three years their senior on death.

GDP increases

GDP growth rates are based on Commonwealth Treasury projections of nominal GDP values adjusted for consistency with the wage growth assumption adopted for this valuation. Given this adjustment, they should not be regarded as official Commonwealth Treasury projections.

Real GDP growth rates

Year	Per cent per annum
2005/06	2.2
2006/07	3.0
2007/08	2.9
2008/09	2.9
2009/10	2.9
2010/11	2.8
2011/12	2.7
2012/13	2.6
2013/14	2.5
2014/15	2.5
2015/16	2.4
2016/17	2.3
2017/18	2.3
2018/19	2.2
2019/20	2.2
2020/21	2.2
2021/22	2.2
2022/23	2.1
2023/24	2.1
2024/25	2.1
2025/26	2.1
2026/27	2.1
2027/28	2.1
2028/29	2.1
2029/30	2.1
2030/31	2.1
2031/32	2.1
2032/33	2.1
2033/34	2.1
2034/35	2.1
2035/36	2.1
2036/37	2.1
2037/38	2.1
2038/39	2.1
2039/40	2.1
2040/41 to 2044/45	2.0

Clawback

The main additional assumptions used in the clawback calculations are summarised below:

taxation, social security and Medicare legislation will remain unchanged, apart from inflationary increases in benefit levels and thresholds. Note that the proposed changes to the taxation treatment of superannuation announced in the 2006-07 Budget have not been taken into account;
the long term rate of increase in social security benefit levels and thresholds, and the cost of pensioner fringe benefits will be 4.0 per cent per annum;
the long term rate of increase in taxation and Medicare levy thresholds will be 4.0 per cent per annum;
married couples will split their income so far as is possible;
MSBS employer component lump sum benefits will be distributed as follows for the purpose of lump sum tax:
- 85 per cent from an untaxed source; and
- 15 per cent from a taxed source.

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