It happens and has happened to most matey, hardest to get and easiest to lose, took me 6 years to get my 1st and 2 months to lose it, then night before being promoted again got in the poo and waited another 6 months, such is life, lose the money with the tape.
I think what your mates were referring to is 'mark time' rates. This happens when a pay review is carried out and trades/ranks altered with quals. If you are in a position of being qualified under the current rules you do not lose pay, simply mark time on that rate until you re-qualify under the changed regs.
This happens with LOA changes overseas. If the rate goes down for families etc then they stay on that rate but when you get a pay rise you stay on the same money as the element of LOA is reduced to offset the pay rise. Technically you are no worse off (although you are cos the inflation has gone up!)
In terms of rank reduction, the pay rate is for the rank and is fixed, thus on reduction you lose the element of pay that applies to the rank only. Eg if you were a Cpl A1 and reduced to LCpl you would lose the rank element but remain as a LCpl A1
In addition if you transferred you should retain the element of your trade pay up until you re-graded in your new trade (I did). This is done to encourage transferees who would otherwise take a pay cut
Sorry to be a party pooper but your mate will take at least a 2% pay cut if he has been reduced in rank for disciplinary reasons! - If this has not happened as yet he would be best advised to inform his RAO as he may find himself with a big lump to repay. This should have been explained to him at the time!!"