From July 2014, payments to members of two military super schemes that have been closed since the early 1970s, will have their retirement incomes indexed in the same way as the Centrelink aged pension.

But the increases in indexation will only apply to members of the Defence Force Retirement Benefit and death benefits schemes who are over 65.

The Coalition has already committed to changes that would see changes to indexation for military retirees aged 55 and over, but announcing the reforms in Canberra on Tuesday, Minster for Defence Materiel Mike Kelly said Labor had decided such a move would be too expensive.

"The fiscal implications are very very significant, it would increase the cost dramatically if we had cut it in earlier," the minister said.

"This nation needs to address retirement incomes and the huge challenges we face.

"This measure deals with able-bodied former service personnel who are not veterans and we would expect people in that space to earn a living until retirement age.

"The country and the economy can't afford not to have them out there and they are very valuable people."

Dr Kelly said the changes would have a cash impact of $34 million over the four-year forward estimates period and a fiscal impact of $290 million during the same period.

"This reform today will be achieved through offsets and saving in the budget," he said.