Understanding the recent legislative changes regarding Defined Benefit multiples

Friday, 2 December 2016

You’ve probably seen the news that the Queensland Parliament has passed legislation giving Queensland Government employees’ choice of super fund and, excitingly, allowing anyone to apply to join QSuper. This legislation is due to take effect by 30 June 2017 and more information is available about what this means for members.

You may also have seen reports this legislation allows the Government Superannuation Officer (GSO) to alter a person’s Defined Benefit multiple, and understandably you may be concerned as to what this could mean for you.

What does the change mean?

For nearly every QSuper member, the short answer is absolutely nothing.

It will not impact the vast majority of Defined Benefit account members. It will only affect Defined Benefit accounts in very rare cases where there is an artificial increase in a person’s salary for superannuation purpose. This may occur due to the inclusion of certain allowances that are not currently included in salary for superannuation purposes.

The legislative changes passed on 1 December mean a multiple can only be decreased to offset the windfall gain in a person’s Defined Benefit which is caused solely by an artificial salary increase.

This change has NO impact on Accumulation or Income accounts (which are the accounts held by the majority of members).

So what types of salary increases could impact the multiple?

There is no impact where your salary grows due to normal salary increases such as when you receive a promotion. To put it simply, a multiple may be decreased where an allowance that is not recognised, and which you are already being paid, becomes included in your salary for superannuation purposes.

It’s important to note that it does not affect allowances already recognised  as part of your salary for superannuation purposes. These will continue to be recognised as part of your accrued benefit calculation.

Why has this change been made?

The State Actuary forecasts how much money will be needed to pay the benefits of Defined Benefit members. This is based on a large number of assumptions including salary increases and promotions. However the inclusion of unrecognised allowances in your salary for superannuation purposes cannot be predicted and is not included in these forecasts. It creates an increase in the value of an employee’s Defined Benefit account, for which super contributions have never been paid.

It’s for this reason that the State Government has decided that in these limited circumstances, a multiple can only be decreased to offset the impact of the artificial increase in salary. It’s also worth noting that before taking this step, the GSO will have to consult with both the QSuper Board, who has fiduciary responsibilities to protect members’ interests, and the Under Treasurer.

For more information on how your Defined Benefit is calculated, see the Defined Benefit Guide. For further clarification regarding your allowances, please contact your payroll office.