1 Defined Benefit Account Guide Including the Deferred Retirement Benefit Issued 7 September 2015
2 2 Defined Benefit Account Guide Who s this guide for? Read this guide if you have a Defined Benefit account and want to understand how it works, the benefits you get including insurance, and what happens when you leave the account. This guide does not cover Parliamentary, State and Police schemes Information about the closed Parliamentary account, and State and Police accounts is available in the forms and publications section of our website or call us and we ll send you the document you need.
3 3 Contents Contents p4 p5 p8 p10 p12 p14 p16 p20 p22 p28 p30 Your journey About the Defined Benefit account Growing your super How your final benefit is calculated Overview of our other accounts Retiring or transitioning to retirement Resigning and changing jobs Other ways of leaving the account Insurance Tax The differences for police officers The Defined Benefit account is now closed The Defined Benefit account is now closed to new members, so if you have an Accumulation account with us, unfortunately you can t choose to transfer to a Defined Benefit account. Your Defined Benefit account remains open until you leave a Defined Benefit employer or you decide to transfer your funds to another account. Important information You should consider the information contained in this guide and the QSuper Product Disclosure Statement for Accumulation and Income accounts (PDS) before making any decisions about your Defined Benefit account. If you need a copy of the PDS or associated guides, you can download them from our website, or give us a call and we ll send them to you. When we talk about Queensland Government employers in this guide, we also mean related entity employers. Keeping you informed There may be changes from time to time to information contained in this document and the guides. You can find out information about any changes that aren t materially adverse by visiting our website at qsuper.qld.gov.au or calling us on We ll also send you a copy of the updated information on request, free of charge.
4 4 Defined Benefit Account Guide Your journey Defined Benefit account Your benefit grows each year you work. Growing your super Voluntary contributions go into an Accumulation account. Insurance Automatically included, just in case. You can also arrange additional Accumulation account insurance. Changing jobs? Transition to Retirement Did you know you can use your Defined Benefit money to open a Transition to Retirement (TTR) Income account to help you prepare for retirement while still working? Only Queensland Government employers can keep your Defined Benefit open. However in most cases your new employer can contribute to a QSuper Accumulation account for you. Accumulation account Income account Your Defined Benefit automatically transfers to an Accumulation account when it closes unless you tell us otherwise. In some circumstances some of your benefit will be transferred to what s known as a Deferred Retirement Benefit. Enjoy retirement with regular payments.
5 5 About the Defined Benefit account About the Defined Benefit account With a Defined Benefit account, your retirement benefit is calculated by multiplying a number which reflects both your years of service and your contribution rate (your multiple) with your final salary. Simply, the longer you work and the higher the rate you contribute, the bigger the number that s multiplied by your final salary. This means your Defined Benefit isn t impacted by market movements so if the market crashes you still get the same defined amount. The account also comes with a number of other great benefits. Benefits of the account A generous scheme The average QSuper Defined Benefit account member retires with a balance nearly four times the Australian average. 1 A pension for your young children should you die If you die while holding a Defined Benefit account, your children will receive a fortnightly pension until they turn 18, or 25 if they re studying full-time, or for life if they have a permanent disability at the time of your death. Lifetime pension if you re under 55 If you are assessed as totally and permanently disabled before turning 55 years old, you have the option to receive a lifetime pension. Income protection If you can t temporarily work due to illness or injury, you may be paid an income of up to 75 per cent of your previous 1 July salary for up to two years while you re off work. Police officers don t have income protection as they have an alternate with the Sick Bank. Death and total and permanent disability protection This is automatically included as part of the account without additional charges. Protection from volatile markets Your retirement savings aren t subject to market fluctuations and you ll get a defined amount when you retire. A Global Financial Crisis won t affect your Defined Benefit amount. Your retirement savings are safe The Queensland Government is required to pay your Defined Benefit. You can relax knowing you will receive your super when you retire. 1 APRA reports the average balance of a person between years old as $109,517 as at financial year 2013 in Annual Superannuation Bulletin, Revised 5 Feb QSuper s Defined Benefit members between years old have an average super balance of $515,000 as at financial year 2014/2015. Please note, QSuper s Defined Benefit members tend to be working in long-serving positions and may have experienced more time in employment than the average Australian. Also the figures reported by APRA may be lower as Australians can have super in more than one super fund and the APRA figures show an average from each fund, whereas Defined Benefit members are more likely to have more of their super with us due to the long standing nature of working for the Queensland Government. These figures are intended to illustrate that the Defined Benefit scheme generally results in a retirement benefit which on average is higher than that achieved by contributing at the default super guarantee rate.
6 6 Defined Benefit Account Guide How the account works The Defined Benefit account was designed to provide you with a respectable retirement amount which reflects your service to the state. The scheme was designed around the idea that you would work for the government until you retire, with 55 originally designated as the earliest retirement age. This means if you leave before turning 55 some different rules apply to determine what happens with your super. How is my benefit calculated? At retirement, or when you leave the Defined Benefit account, your benefit is calculated as your multiple times your final salary. To see the latest estimate of how much you ll get, or a projection of how much you may get when you retire, log in to Member Online. Multiple = Final Salary Defined Benefit Each year your multiple grows in relation to the amount you contribute and work. By default your multiple increases by 0.21 each year, where 0.21 reflects 21 per cent of your final salary. For example, after 10 years contributing at the default rate your multiple will be 2.1, which means you ll get 2.1 times your final salary. What fees are payable? There are no fees with the Defined Benefit account as the amount you pay is determined by a formula. There are no fees on transactions either. What happens when I retire, change employers or leave the Defined Benefit account? Whether you re changing jobs, retiring, or just planning some changes to your super, you ll be able to use one of our other accounts which are summarised below and discussed in more detail later. Working Transitioning to retirement Retiring Accumulation account Great if you re still working or want additional insurance. TTR account Great if you re working and want to go part time or give your super a boost. Income account Great if you want to enjoy retirement with regular payments. 1 QInvest Limited (ABN , AFSL and Australian Credit Licence Number ) (QInvest) is ultimately owned by the QSuper Board (ABN ) as trustee for the QSuper Fund (ABN ). QInvest is responsible for the financial services and credit services it provides. Advice fees apply.
7 7 About the Defined Benefit account Our mission is to give you confidence in retirement We re Queensland s oldest super fund, helping Queenslanders reach their retirement goals for over 100 years. With more than 550,000 members and around $60 billion in funds under management, we re also the largest. 1 We re good at what we do it s why we re an industry-leading fund We re proud to be a leader in our industry and we have the recognition to show for it our products and services have been consistently ranked by independent ratings companies as being among the best in the country. We offer some of the lowest fees in Australia 2 We keep our fees as low as we can and we believe in keeping them simple too, so with QSuper you don t pay any entry fees, exit fees or commissions. We offer a range of financial advice to meet your needs If it s advice you need, we can help. Whether you want advice on a single super topic or comprehensive advice that considers your whole financial situation, talk to us. And you can choose how you get it too, from online, over the phone or face-to-face whatever you prefer. 3 A flexible range of investment options Whether you want us to manage your investments, or you want to choose your own investment strategy for your super, we ve got options to suit. We make it easy for you to keep track of your super Want your super at your fingertips? With our convenient Member Online portal you can do just that with personalised access to your super whenever it suits you. We help you get more out of your super Want to learn more about your super and some strategies to make the most of it? We run a range of seminars designed to give you the information you need to make super choices that are right for you. QInvest 3 are experts with QSuper s Defined Benefit account With over 21 years helping QSuper members with the Defined Benefit account, QInvest s financial advisers really understand how to make the most of this account, and help you plan your retirement. So why not have a conversation with QInvest and call today. 1 Based on Funds Under Management (FUM) information released 8 January 2014 by Australian Prudential Regulation Authority (APRA) Annual Superannuation Bulletin for the financial year to 30 June SuperRatings Fundamentals report as at June SuperRatings does not issue, sell, guarantee or underwrite this product. 3 QInvest Limited (ABN , AFSL and Australian Credit Licence Number ) (QInvest) is ultimately owned by the QSuper Board (ABN ) as trustee for the QSuper Fund (ABN ). QInvest is responsible for the financial services and credit services it provides. Advice fees apply.
8 8 Defined Benefit Account Guide Growing your super You have two different ways to grow your super with us Standard contributions You need to make these as part of your Defined Benefit account. Voluntary contributions Contributing a little bit more now can make a big difference later. Standard contributions You re required to make contributions towards your Defined Benefit (standard contributions) and the default rate is 5 per cent of your salary for super purposes. You can choose to contribute less, which means you ll have less when you retire. If you have previously lowered your contribution rate you can also catch back up later, albeit by contributing a percentage of salary likely at a higher rate. The table below shows the different percentage rates of your salary that you can contribute and how this grows your multiple. Lowering your contribution rate Default 1 Catching up previously lowered rates 2 Your contribution 2% 3% 4% 5% 6% 7% 8% Multiple growth Lowering your standard contributions You can choose to pay less than the default contribution rate of 5 per cent, down to a minimum of 2 per cent. This means your multiple won t grow as much, and therefore you won t have as much when you retire. To do this you ll need to ask your payroll office to make this change. To help, you can give your payroll office our Start or Change Regular Contributions to your Super form. Catching up previously lowered contributions If you previously chose to reduce your contribution rate, you may be able to catch up and temporarily increase your rate to make up for the contributions you didn t pay earlier. Just remember that if you choose to lower your contribution rate now, and catch up later, your salary is likely to have increased and therefore your catch-up contribution will be a percentage of your higher salary. Speak to your payroll office to see how your take-home pay could be affected. The catch up option isn t available for periods when you re on leave without pay but it might be available to you while you re receiving WorkCover benefits. Just call us if you d like more information about this. Remember, is equivalent to saying 21 per cent of your final salary. Each year we calculate your multiple growth by looking at your contribution rate and how much you have worked against a full time role as explained in the How your final benefit is calculated section. Salary sacrificing your standard contributions can be tax effective By default, your contributions are paid using after tax money. Salary sacrificing is when you contribute a portion of your salary to your super before you pay any tax on it, which can lower the amount of salary you pay tax on. This is helpful for people who pay more than 15 per cent personal tax. Speak to your payroll to find out how you can salary sacrifice your standard contributions to help lower your personal income tax. 4 Please note, when you salary sacrifice standard contributions they need to be increased to allow for contributions tax of 15 per cent, meaning that before tax contributions of the default 5 per cent are actually 5.88 per cent (5 per cent/85 per cent). 1 Police officers have different contribution rates see page 30 for details. 2 This rate is only available if you ve previously paid less than 5 per cent and are catching up. 3 Assumes you re working full time at full pay for the year. 4 Different tax rules apply if your adjusted earnings are more than $300,000 a year.
9 9 Growing your super Voluntary contributions It s never too late to give your retirement savings a boost. Anything extra you can add to your super can pay off in the long-term. The power of compounding means that even small amounts can add up over time. For example, contributing $20 each week for 30 years, could grow to over $80,000, and only $30,000 came from your own pocket. That s more than $50,000 of earnings just from compounding. 1 The light green sections of the illustrative graph show the effects of compounding earnings. The dark green shows the voluntary contributions. $75k Savings $50k $25k $0k Savings Earnings Years Any voluntary contributions you make go into an Accumulation account, and you ll be able to choose how you want your funds invested. Although our Accumulation account is unit based, it is the same principle of compounding that helps your super grow. You can find more information in the Accumulation account or Investment section of our website. How to make voluntary contributions Set up regular additional contributions into super Ask your payroll office how you can set up regular additional contribution including salary sacrificing. You may need to use RemServ.com.au or SmartSalary.com.au for salary sacrifice contributions. You should check your contribution limits, as if you have a high salary you may already be near or on the limit. The Tax section on page 28 has more details on the contribution caps. Complete a Deposit form Available on our website or ask us to send you a copy. Include a cheque or money order for the amount you want to deposit. Via BPAY Just use the individual BPAY details listed in Member Online or on your annual statement. If you can t find them, give us a call and we can help. Visit a Member Centre You can make contributions in person at one of our Member Centres. The maximum cash deposit amount is $1,000 and your bank sets your daily EFTPOS transaction limit. 1 Assumptions - The figures are illustrative only and were calculated using the Money Smart calculator accessed August Assumptions: 1. The calculation assumes savings of $20 per week for a time period of 30 years. 2. The calculation assumes the interest compounds monthly. 3. The interest rate assumed is 6 per cent net of fees and taxes. 4. The calculation assumes that earnings are reinvested and fully credited at the end of each month. 5. The information should not be used as a guide to future performance of any investment. 6. Investment returns can be positive or negative and this does not guarantee a future outcome. 7. The total saved does not take inflation into account. 8. Check with your chosen savings product provider in regard to actual interest calculations. 9 The calculation provides an estimate of the future value of savings, which could vary significantly over time if any change is made to these assumptions. 10. These figures are provided only to demonstrate the principle of compounding. They are not intended to represent projected earnings in a QSuper Accumulation account. Registered to BPAY Pty Ltd ABN
10 10 Defined Benefit Account Guide How your final benefit is calculated Earlier we explained the basic formula of your multiple times your final salary to calculate how much you get. Here we explain how things like part time work affect your multiple growth and how we work out your final salary. Your multiple Your multiple grows each year according to your contribution rate and in proportion to how much you work. For example, after two years full time at the default contribution rate your multiple would be =0.42. If you worked 50 per cent of the second year, it would be 0.21+(0.21x50 per cent)=0.315 or 31.5 per cent of your final salary. Examples of how your multiple grows proportionally Part time If you work 3 days per week for the year, your multiple will grow at 3/5=60 per cent of your standard multiple growth rate. You can find out your part-time ratio by contacting your employer. Leave without pay Your multiple does not grow while you are taking leave without pay. If you are receiving WorkCover you may be able to continue growing your super and you should call us to find out more. Leave with half pay For the period of leave the multiple will only grow in proportion to the pay rate. In the half pay example, this means the multiple will grow at half the rate. Additional Transfer Multiple for members who transferred to the Defined Benefit account If, in the early 90s, you transferred from State or Police Super 1 to the Defined Benefit account, an additional transfer multiple (ATM) is applied each year as extra multiple growth until you reach age 60 (for State Super transfers) or age 55 (for Police Super transfers). Your ATM grows at the same rate each year and isn t affected by part-time hours or leave without pay. The ATM ensures your Defined Benefit account is equal to the benefit you would have been entitled to in State or Police Super if you hadn t transferred to the Defined Benefit account. 1 State Super and Police Super are closed legacy schemes that provided a lifetime pension in retirement.
11 11 How your final benefit is calculated Your final salary Each financial year your employer reports your salary for superannuation purposes to us, which is what we use to calculate your benefit. This is your permanent full time salary as at 1 July including allowances that have been approved by the Queensland Government (shift allowances, weekend penalties and locality allowances aren t included). If you re working in higher duties, the higher salary is only reported to us as your 1 July salary if you ve been acting in the higher role continuously for at least the 12 months preceding that 1 July. This also applies when you re seconded to another government department to act in a higher paid role. However, if you re 54 years old or over we calculate a final average salary If you leave the Defined Benefit account on or after turning age 54 your final salary is worked out by averaging your salary for superannuation purposes over the 12 months before you leave. To do this we proportion your two most recent salaries for superannuation purposes to get your final salary as shown below. If you re 54 years old, we only proportion your salary back to your 54th birthday. How Colin s final salary is calculated Colin retires on 1 September 2015 at age 62. His current salary for superannuation purposes is $85,000 however he has only contributed at this salary for 2 months. His previous salary for superannuation purposes was $80,000. To average these two salaries, we add the 10 months worth of salary at $80,000 per annum which equals $66,666 to the final 2 months of salary at $85,000 which equals $14,166. This gives Colin a final salary of $80, July salary 1 September (12 months before retirement) 1 July salary 1 September (Retirement) $80, months at $80,000 $85,000 2 months at $85,000 What happens if my salary is reduced? If your salary is lowered, you may be entitled to an additional amount called a salary reduction benefit to recognise the benefit you accrued on your previously higher salary. If you have more than one salary reduction during your employment, each one is calculated separately. The best way to see if you re eligible and how much you may receive is to call us and ask for a quote.
12 12 Defined Benefit Account Guide Overview of our other accounts Whether you re still in the Defined Benefit account or leaving the account you may be able to transfer your money into one of our other accounts. For example, voluntary contributions are placed in the Accumulation account, and if you re nearing retirement and still working you may also want to open a Transition to Retirement account. If you re still working If you re retiring Accumulation account The Accumulation account is the main account for people who are working. Insurance is offered by default and you can buy more insurance (within limits) or turn insurance off. Choose from a wide range of investment options so you can invest in a way that suits you. If you can access your super, than you can make unlimited withdrawals whenever you like. Unlike the Income account you don t need to withdraw a minimum amount per year and investment earnings are taxed up to 15 per cent. Please see the Accumulation account section of our website or the PDS for Accumulation and Income Accounts for more details on this account. Transition to Retirement account If you re still working and you ve reached your preservation age, you can transfer some or all of your Defined Benefit to a Transition to Retirement (TTR) Income account. The TTR Income account allows you to start receiving regular payments from your super, which is great if you want to work part time. It can also be used to boost your super as part of a smart tax strategy. If you start a TTR Income account using some of your Defined Benefit, your multiple will decrease proportionally to the amount you transfer based on your current salary. For example if you transferred $300,000 to a TTR Income account, we would reduce your multiple so your defined benefit is worth $300,000 less. Remember, once money is transferred out of your Defined Benefit account, you can t transfer it back, so it s a good idea to get personal financial advice before you start a TTR Income account using Defined Benefit money. Please see the Transition to Retirement section of our website, or the Income Account Guide for more details on the TTR Income account, and to access the application form. Income account If you re retiring from the workforce you can transfer your Defined Benefit to an Income account to receive ongoing payments from your super to support yourself in retirement. The Income account is our most popular retirement account and provides a wide range of investment options. Investment earnings are tax free, and if you are over 60 payments from the account are also tax-free. You can make unlimited additional withdrawals. Most retiring members choose to speak to a financial planner to create a retirement plan to help decide how much to spend in retirement and how to sort your finances out. Please see the Income account section of our website or, the Income Account Guide for more details, and to access the application form.
14 14 Defined Benefit Account Guide Retiring or transitioning to retirement Your super is designed to support you financially in retirement, which is why it s generally locked away until you retire or start transitioning to retirement. Generally you can access your super for retirement by: Establishing a Transition to Retirement Income account while working after reaching your preservation age. Reaching your preservation age and retiring. Ending an employment arrangement on or after age 60. At age 65 you can access your super regardless of your employment status. Your preservation age Date of birth Your preservation age Before 1 July From 1 July 1960 until 30 June From 1 July 1961 until 30 June From 1 July 1962 until 30 June From 1 July 1963 until 30 June On or after 1 July Planning retirement Financial planners can help you plan your retirement and make the most out of your benefits. QInvest specialise in helping you plan for retirement and are experts in understanding the Defined Benefit account. Transition to Retirement (TTR) You can transfer a portion or all of your Defined Benefit to a TTR Income account if you re still working and have reached your preservation age. When you transfer funds from the Defined Benefit account we reduce your multiple to reflect the amount of funds you transferred out. Your Defined Benefit account will remain open. The TTR account allows you to use smart tax strategies to boost your super in preparation for retirement and also allows you to shift to part time work and boost your income to cover your expenses on a lower part time salary. See the Transition to Retirement section of our website for more details. If you would like to take advantage of the transition to retirement option, please read the Income Account Guide available on our website. Retiring with an Income account If you want to start receiving regular payments from your super to support yourself in retirement, then you can transfer your Defined Benefit directly to an Income account by sending us the application form located in the back of the Income Account Guide. You can download this from our website, or call us and we ll send you a copy. By default your money will transfer into the Accumulation account When we find out you re retiring, we ll send you a form asking what you want to do with your Defined Benefit. If you don t return the form to us, by default we ll transfer your benefit to an Accumulation account. You ll also receive the default Accumulation account insurance arrangements as explained in the Insurance section of our website.
15 15 Retiring or transitioning into retirement
16 16 Defined Benefit Account Guide Resigning and changing jobs When you resign from your employer your Defined Benefit account will close unless within one month of leaving your original employer you move to another Queensland Government employer who can pay into a Defined Benefit account. When we hear from your employer that you ve resigned, we ll send you a form which allows you to give us instructions for how you want your money invested. If you don t return the form to us, we ll transfer your benefit as explained below. What happens to your benefit, depends on your age If you re over 55 years old when you resign or voluntarily leave All of your funds will be transferred to an Accumulation account. If you re under 55 years old when you resign or voluntarily leave We calculate your benefit and then split it into two parts. We move the money you contributed including your associated interest (your part) into an Accumulation account following your investment preference or the default investment preference of Lifetime. The remaining amount representing your employer s part is retained as a Deferred Retirement Benefit (DRB) unless you ask us to transfer a discounted amount to the Accumulation account instead. Your part Employer s part If you re over age 55 we transfer your employer s part directly to the Accumulation account. Accumulation account If you re under age 55 we transfer your employer s part to the DRB. You can opt-out and transfer a discounted amount to the Accumulation account. At age 55 we transfer your full and final DRB to the Accumulation account. Deferred Retirement Benefit (DRB)
17 17 Resigning and changing jobs Deferred Retirement Benefit Your employer s part of your Defined Benefit is placed in a Deferred Retirement Benefit (DRB) until you turn 55. From the time of deferral, your DRB increases every quarter in line with average weekly ordinary time earnings (AWOTE). 1 This increase is intended to reflect the salary growth you might have earned if you d stayed a member with a Defined Benefit account. We previously referred to this as the Average Wage Option. When you turn 55, we ll transfer your DRB to an Accumulation account. We ll get in touch with you before you turn 55 to check how you d like your money invested. If we don t hear back from you before your 55th birthday, we ll use your Accumulation account investment preference or the default investment option. Opting-out of the DRB and transferring to the Accumulation account Instead of the DRB, you can choose to transfer a discounted transfer value to the Accumulation account. You can choose this option when you re leaving the Defined Benefit account, or at any point while in the DRB. We previously referred to this as the Investment Linked Option. For details on the Accumulation account, please see the PDS for Accumulation and Income Accounts. How much is the discounted transfer value? The table below shows how much the amount transferred will be discounted by, and you can find your transfer value on quotes and statements we send you, or call us for help. Age at calculation Transfer value Age at calculation Transfer value Why is the amount discounted? The scheme was designed for you to stay in it until at least age 55. To determine how much your employer should contribute to fund your benefit by age 55, the Queensland Government uses an assumed investment return rate of 7 per cent. This means that if you transfer your funds out before age 55, we need to discount the amount transferred to reflect the investment earnings not yet received. However, if you leave before age 55, the employers part of your benefit is placed in a Deferred Retirement Benefit which increases in value in line with average weekly ordinary time earnings (AWOTE). The Queensland Government assumes an average wage of 4 per cent. Therefore, the transfer amount is discounted to reflect the 7 per cent investment returns not received offset by the 4 per cent wage growth which doesn t need to be paid. The discount formula is: Transfer value DRB value = 1 / (55 your age) For the technical and inquisitively minded, is 1.07/1.04 reflecting the 7 per cent assumed investment returns offset by the 4 per cent assumed AWOTE growth. This means, if AWOTE grows at 4 per cent each year, you ll need to earn 7 per cent interest each year on your transfer value to have the same amount as the DRB when you reach age % % % % % % % % % % % % % % % % % % % % % % % % % % % % 1 AWOTE is a measure of wage levels across Australia and is calculated by the Australian Bureau of Statistics.
18 18 Defined Benefit Account Guide What s the difference between a DRB and transferring a discounted value to the Accumulation account? Deferred Retirement Benefit (default action) The full amount of money representing your employer part is placed into a DRB and increased each quarter with AWOTE. Insurance cover changes Your DRB doesn t include insurance (however if you die or are assessed as being totally and permanently disabled you can receive your benefit at a non-discounted rate). The portion of money that you contributed will be transferred into an Accumulation account meaning you ll receive the Accumulation account default insurance arrangements explained in the Insurance section of our website and in our Accumulation Account Insurance Guide. Funds may be available at age 55 Some people have a portion of money in their DRB which we report to them as available to withdraw when they turn 55. This money doesn t require you to meet the standard conditions to access you super. When we close your DRB at age 55, you may have the option to withdraw this amount if you aren t working for the same Defined Benefit employer. By default you ll receive the DRB You don t need to do anything to receive the DRB. Transfer a discounted value to an Accumulation account The transfer value is a discounted amount of your employer part to reflect the investment earnings not yet received. This is known as the present day value of the funds, measured between the time you leave and the time you turn 55. We tell you the transfer value in quotes and letters we send. Insurance cover changes You ll receive the Accumulation account default insurance arrangements as explained in the Insurance section of our website and in our Accumulation Account Insurance Guide. NO funds will be available at age 55 If you choose to transfer this money to the Accumulation account you won t be able to access the portion of money we reported to you as available to withdraw when you turn age 55. Within the Accumulation account, this amount will only be available for you to withdraw when you meet the regular conditions allowing you to access your super. We call these preserved funds. You must actively choose this option if you want it By default you ll receive the DRB unless you send us instructions choosing instead to transfer a discounted value to the Accumulation account. We ll send you a form when we hear you re leaving the account, or you can use the form in the back of this guide. If you already have a DRB, you can choose to close it at any time by sending us the Close your Deferred Retirement Benefit form. Remember the transfer value is calculated on the day of transfer. Keep in mind that if you choose to transfer to the Accumulation account, you can t transfer back to a DRB.
19 19 Resigning and changing jobs Choosing between DRB and transferring out Your DRB isn t affected by stock market fluctuations and losses as your employer assumes the risk of the market returns. If you transfer out, you will take on the risk of the market returns. For this reason it s not easy to compare the two outcomes, so we recommend you speak with a financial adviser to help you make a decision. Example Gary resigns at age 40 with a DRB of $200,000 and a transfer value of $130,636. We use an estimate of wages growth at 4 per cent per annum for his DRB. The investment returns Gary receives will depend on the investment options he chooses and how the market performs. Investment returns are more volatile so we have included three different outcomes for funds transferred to an Accumulation account. We use a 15 year term as the DRB closes when Gary turns 55. DRB projection Transfer value projection in Accumulation account Initial amount at age 40 $200,000 $130,636 Growth rate example 4% 5% 7% 9% Initial amount x (1+rate) term $200,000 x $130,636 x $130,636 x $130,636 x Projected amount at age 55 $360,188 $271,582 $360,428 $475,839 This example shows that because of the discounted amount available for transfer, Gary would need to earn at least 7 per cent interest for 15 years to achieve the same outcome as compared to keeping his DRB, albeit with Gary taking on the risk of market returns. Please keep in mind that actual outcomes may vary from the projections. These projections aren t meant to be relied on to make a decision in relation to a financial product, including a decision in relation to a particular product, fund, or strategy. The QSuper Board and QInvest Limited expressly excludes all liability and responsibility to any person who relies, or partially relies, upon this information or these projections. Before you act on this information, you should consider getting financial advice. Historical AWOTE figures Past figures may not reflect future AWOTE performance. Financial year AWOTE Financial year AWOTE 2009/ % 2012/ % 2010/ % 2013/ % 2011/ % 2014/ % 5-year average 3.79% 10-year average 4.23%
20 20 Defined Benefit Account Guide Other ways of leaving the account Choosing to close your Defined Benefit account If you re still working, but would prefer an Accumulation account (where you control how your money is invested) rather than a Defined Benefit account, you can send us a form asking us to close your Defined Benefit account and transfer it to an Accumulation account. If you re under 55 years old when you choose to leave the account, then we will transfer your funds as explained in the Deferred Retirement Benefit section. It s not easy to compare an Accumulation account to a Defined Benefit account as with the Accumulation account you bear the risk of a market fall, whereas with the Defined Benefit account your employer bears the risk (and you get paid a defined amount regardless of market conditions). If you choose to leave the Defined Benefit account you can t re-join later. The Defined Benefit account also offers some unique benefits, such as a pension for your young children if you die, and the option to receive a lifetime pension if you re totally and permanently disabled under the age of 55. For these reasons, we recommend you speak to a financial planner before choosing to close your Defined Benefit account. Retrenchment or redundancy If you receive or accept a redundancy package your entire benefit will be transferred to an Accumulation account. Your employer will tell you if your end of employment is considered redundancy. Unlike resigning or choosing to leave the account there is no DRB for those under 55 years old. This means your contributions and the employer part of your benefit are transferred in full to the Accumulation account. The employer part is not discounted as is the case if you voluntarily choose to leave the Deferred Retirement Benefit option. Disability insurance claim If you re approved for a total and permanent disability insurance claim or approved for a terminal medical condition you generally will have access to some or all of your funds depending on the type of claim approved. Your Defined Benefit account will need to close and your money will be transferred to an Accumulation account (unless you are over 55 and able to continue working for the same employer). You will no longer be eligible for any further insurance and therefore your Accumulation account insurance will end. For more details on these claims please read the Insurance section on page 22. Turning 75 years old (while still holding a Defined Benefit account) When you turn 75, your employer is no longer obligated to pay your super, which means you re no longer eligible to hold a Defined Benefit account. We ll send you a form before your 75th birthday asking you how you want your money invested when your account is closed and transferred to an Accumulation account. Claiming severe financial hardship or access on compassionate grounds Download the Early Release of Superannuation Benefits due to Severe Financial Hardship factsheet or Compassionate Grounds Guide available on our website which explains the criteria you need to meet and provides the forms you need as well. If you re unsure whether your end of employment is considered redundancy for these purposes, talk to your employer. The Australian tax office (ATO) defines redundancy as a payment made to an employee who is dismissed because the job they were doing has been abolished. Refer to the ATO website for details on this as well as the concessional tax treatments which may be applied to your redundancy payments. You may have a portion of money which was contributed under old super rules which becomes available to you upon redundancy for withdrawal as cash. We ll report this to you as an amount available to withdraw as cash.
21 21 Other ways of leaving the account
22 22 Defined Benefit Account Guide Insurance As a Defined Benefit account member, you automatically receive insurance as part of your package of benefits. There are no premiums for this insurance and it can t be cancelled. Types of insurance and benefits included with the account Income Protection Receive up to 75 per cent of your salary for up to 2 years. Permanent & Partial Disability Access some of your super if you re permanently but not totally disabled. Total & Permanent Disability Receive what you would have got had you worked to age 55. Terminal Medical Condition Access your death benefit up to two years before death. Death Your loved ones receive what you would have got had you worked to 55. Lifetime pension Option to receive up to 75 per cent of your salary for life if under age 55. Child s pension Fortnightly payments to your young children. The insurance cover represents the difference between the balance you accrued at the time of the incident you are claiming for and the projection of what you would have accrued had you worked to age 55 contributing at the default rate of 5 per cent (6 per cent for police officers). This means the Defined Benefit account insurance other than income protection ceases at age 55; as from age 55 you ll just receive your current benefit amount. Income protection ceases at age 75. Plus additional insurance is available using the Accumulation account see page 26 Your Defined Benefit account insurance ends: when you turn 55 years old (income protection continues until age 75) although you may get some tax benefits when receiving total and permanent disability or death benefits on the date that the QSuper Board determines that you re totally and permanently disabled when you finish up working for the Queensland Government or a related entity if you stop being a Defined Benefit account member when you pass away.
23 23 Insurance Income protection Income protection is available up to age 75. If you re temporarily unable to work due to illness or injury, income protection may provide regular benefit payments of up to 75 per cent of your salary, for up to two years. Before your income protection benefits can kick in, you need to use up all your paid sick leave, and then take 14 consecutive days of unpaid sick leave. You can t take any paid leave (like annual or long service leave) during this period, but you may be able to apply to Centrelink for income support benefits. During your first five years of continuous cover, income protection benefits won t be paid if your temporary disablement is related to a pre-existing condition as explained in our Income Protection Benefit Guide. Once your claim s approved, we ll pay your benefit straight into your nominated bank account. We ll also backdate your benefit to the end of your waiting period. While you re on income protection, you don t have to make standard member contributions and your multiple will continue to grow as if you were making contributions at 5 per cent. What happens if my situation changes? There are some cases where we may have to reduce or stop your income protection benefit. You need to let us know if you: return to work or start a graduated return to work program earn additional income engage in a business or occupation have a WorkCover claim approved for the condition or illness. Keep in mind that you ll need to pay back any overpayment of benefits, so it s important you tell us as soon as possible if your situation changes.
24 24 Defined Benefit Account Guide Total and permanent disability (TPD) If the QSuper Board of Trustees is satisfied that you re unlikely to ever work again in any job for which you re reasonably qualified by education, training or experience, you ll be paid a TPD benefit. If you re under 55 you ll be paid the balance of your account plus your projected Defined Benefit entitlement to age 55. If you re over 55 years old you ll just be paid the balance of your account. If you have been assessed as TPD an additional portion of your benefit may become tax-free. You can read more on tax in the tax and fees section on page 28. You can choose to take your benefit as either a lump sum or a lifetime pension (if under 55) Lump sum option The lump sum benefit is made up of two parts 1. Your current benefit (including any extra benefits you may have in an Accumulation account). 2. Your insurance benefit - the difference between what you have in your Defined Benefit account so far, and what your account would ve grown to if you d continued in your role until age 55 and contributed 5 per cent 1 of your salary. Even if you re not contributing the standard 5 per cent, 1 we ll still calculate your insurance benefit using this rate from the date of your total and permanent disability. If you ve worked full-time since you started contributing to your Defined Benefit account, and you re approved for the TPD benefit, you ll receive a multiple growth of 21 per cent 2 for each year you re unable to work until age 55. If you ve worked part-time, we ll calculate a part time equivalent portion of 21 per cent 2 for each year you re unable to work until age 55. We ll use your final salary as explained in the How your final benefit is calculated section on page 10. If you re entitled to an additional transfer multiple (ATM), we ll include this when we calculate your benefit. If you choose to take your benefit as a lump sum payment but pass away within 12 months of being paid, your dependent children may still receive the fortnightly pension if the cause of your death is related to the condition which prompted your TPD benefit. You can find details about your TPD lump sum benefit on your annual statement, or call us and we ll let you know. Lifetime pension if you re under 55 years old The lifetime pension amount you receive depends on your multiple and final salary as at the time you re assessed as TPD up to a maximum of 75 per cent of your salary for super purposes. Your pension is indexed each August in line with movements in the Consumer Price Index All Groups Brisbane. The maximum lifetime pension amount you can receive is 75% of your current salary. However the amount you are paid is meant to reflect your years of service, so we also take into account the multiple you have accrued within your Defined Benefit account. If your multiple is 7.35 (8.575 for police officers) or greater, you will receive the maximum 75% of your salary. However if it is less than 7.35 (or 8.575), we apply a formula to calculate your pension amount. This formula is: (salary 75%) (your multiple 7.35) We pay your pension into your nominated bank account fortnightly, less any tax payable. If you want to take your benefit as a pension, you ll need to tell us within three months from the time you re determined as totally and permanently disabled. If you were to die within five years of your pension starting, a lump sum equal to pension payments for the remainder of the five years will be paid as a death benefit. The lifetime pension may be reduced or suspended if you receive income from any business, occupation or employment. If you receive or plan on receiving payments from Centrelink, you should contact them to see what impact this will have on any payments you may receive. 1 6 per cent for police officers per cent for police officers.
25 25 Insurance Example So let s assume at age 32 you re badly injured and not expected to work again. You re employed on a full-time basis and your last salary for super purposes was $65,000. You ve contributed at a rate of 5 per cent since you joined at age 24, and you don t have any additional units of cover. Your lump sum TPD benefit would equal your accrued benefit plus your insurance benefit. Your accrued benefit your years of contribution 8 years your projected membership 23 years (until age 55) your benefit accrual rate 21 per cent your annual insurance benefit accrual rate 21 per cent Your insured benefit your last 1 July salary $65,000 your last 1 July salary $65,000 TPD benefit = $423,150 + = = $109,200 $313,950 Permanent and Partial Disability (PPD) If you don t qualify for the total and permanent disability conditions, you may qualify for permanent and partial disability (PPD). There is no insurance component payable with a PPD benefit, however it may allow you access to some of your existing super. We ll need to consider medical opinions to determine whether you re considered permanently unfit or permanently incapable of performing your normal duties efficiently, but your illness or injury is not a total and permanent disablement. If you or your employer requests QSuper investigate a permanent disability benefit, a detailed medical report addressing specific questions will be required from your treating medical specialist. You, or your employer, will be responsible for the cost of this initial report if it s required. QSuper will pay for the costs of any subsequent medical information required to assess your claim. If you re found eligible for PPD, you may be able to access a portion of your existing super. The remaining portion must remain in super. If you re more than 55 years old and remain working with the same employer in a different role you may be eligible to continue in the Defined Benefit account. Terminal Medical Condition (TMC) If you re diagnosed with a terminal medical condition, you may be able to access your entire super tax-free by transferring your Defined Benefit to an Accumulation account. Keep in mind that if you do this you won t be able to transfer back to your Defined Benefit account. You might like to seek financial advice before making a decision, to work out what s best for you. Before we can release your super, we need two registered medical practitioners to certify you have a terminal medical condition or injury and that you re likely to pass away within two years. At least one of the registered practitioners must be a specialist practising in the area related to the illness you re suffering from. If you have Accumulation account insurance, this amount is generally available to you at the same time, please refer to the Accumulation Account Insurance Guide for more details. To apply to access your super for a terminal medical condition, use the Terminal Illness Claim form. Just head to qsuper.qld.gov.au or call us and we ll send you a copy.