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B63/1994 BRITISH RETIREMENT INCOME (BRI) - CURRENT METHOD OF CALCULATION
DATE OF ISSUE: 16 DECEMBER 1994
BRITISH RETIREMENT INCOME (BRI) - CURRENT METHOD OF CALCULATION
The purpose of this Departmental Instruction (DI) is to outline the current method of calculation of the exchange rate from pounds Sterling to Australian dollars, when converting the income received from the British Retirement Income (BRI), for service pension assessment purposes.
2.This DI replaces DI No. B33/90.
3.The Department of Veterans' Affairs (DVA) has approximately 30,000 service pensioners in receipt of BRI. There are two types of BRI pension, identified as superannuation type 08 (non-indexed) and superannuation type 09 (indexed).
4.The British Department of Social Security does not transmit all pensions to Australia at the same time and as the exchange rate varies up to four times each day, it is impossible for DVA to determine the exchange rate received and the day on which each of its pensioners are paid their pension from England.
5.Prior to May 1990, a 'notional' exchange rate applied to pounds Sterling. The rate was set by an administrative process and was varied when the trend in the average market rate varied from the notional rate by 5 cents or more.
6.In the period of May 1990 to November 1992 a 'base' exchange rate was applied four times a year. The base rate was determined by averaging the previous three months market rates. The base exchange rate would remain unless there was a 10% change in the rate over 10 working days. For more information refer to DI No. B33/90.
Changes to the Method of Calculation - November 1992
7.The quarterly mechanism was seen as unresponsive to variation in market rates. In November 1992, the Repatriation Commission agreed to:
rescind its determination that the provision ss47(1) of the VEA applies to the conversion of pounds Sterling;
adjust the current base exchange rate from the payday 26 November 1992, in line with action taken by the Department of Social Security (DSS); and
use the same exchange rate calculated by DSS for that and any other exercise there after.
8.On payday 26 November 1992 a base exchange rate was set. This base exchange rate was the average of the daily market rates for the last fortnight of October 92. If the average rate for any subsequent fortnight varies by plus or minus 2.5 per cent from the base rate then that new rate is applied from the next possible payday.
9.Both DVA and DSS monitor the daily market exchange rates. The exchange rate used during the monitoring period is the "On Demand Airmail Buying Rate" as supplied by the Commonwealth Bank. This is the closest to the rate used by the Bank of Scotland when it converts British pension to Australian Dollars prior to payment in Australia.
10.The two week monitoring period ends three weeks before a given pension payday. This allows time to organise the exercise and associated advices to pensioners before the relevant payday.
11.For further information the contact officer is Ferri Ghazi (06) 289 6436.
G J COLLINS
A/G NATIONAL PROGRAM DIRECTOR
12 DECEMBER 1994