Australian Government, Australian Government Actuary

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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