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How to add extra to your super if you have a Defined Benefit account
With a Defined Benefit account, you and your employer put money into a pool and your retirement benefit is calculated using a formula. You can also make contributions to your super in an attached Accumulation account.
There are three different types of contributions you can make when you have a Defined Benefit account:
You are required to make contributions towards your defined benefit (standard contributions), and the standard rate is 5% of your salary for super purposes.
You can choose to contribute less than 5%, which means you’ll have less when you retire. If you've previously lowered your contribution rate below 5%, you can catch back up later by contributing a percentage of your salary at a higher rate.
Contributing at different rates will affect your multiple, which is a major part of how your final benefit is calculated. The table below shows the different percentage rates of your salary you can contribute and how this grows your multiple. A multiple of 0.210 means 21% of your final salary.
Note that you can only make the higher rates of 6-8% if you are catching up after paying less than 5%.
See the Police Account Guide (pdf) and the Defined Benefit Guide (pdf) for more details.
You can choose to pay less than the default contribution rate of 5%, down to a minimum of 2%. However, this means your multiple won’t grow as much, so you won’t have as much when you retire.
To lower your standard contributions, ask your payroll office to make this change or give them our Start or Change Regular Contributions to your Super form (pdf).
If you previously reduced 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. Remember that if you lower your contribution rate now and catch up later, your later salary is likely to have increased, so your catch-up contribution would 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. Contact us if you’d like more information about this.
Your standard contributions are normally paid using after-tax money, but you could choose to pay them using before-tax money by salary sacrificing. This is when you contribute part of your salary to your super before you pay tax on it, which lowers the amount of salary you pay tax on. This is helpful for people who pay more than 15% in tax.
You should check your contribution limits in the Defined Benefit Guide (pdf) if you have a high salary, because you may already be near or on the limit.
Speak to your payroll about salary sacrificing your standard contributions. They might advise that your organisation uses RemServ or SmartSalary to process salary sacrifice contributions.
When you salary sacrifice standard contributions, you need to increase the amount you pay because your superannuation contributions are taxed at 15%. This means before-tax contributions of 5% would actually need to be 5.88%.
It’s never too late to give your retirement savings a boost, and anything extra you can add to your super can pay off in the long-term. Any voluntary contributions you make go into an Accumulation account, and you’ll be able to choose how you want your funds invested. This can make an extra part of your retirement nest egg in addition to your Defined Benefit account.
The power of compound interest means that even small amounts can add up over time. For example, contributing $20 each week for 30 years, could grow to over $87,000, and only $31,000 came from your own pocket. That means you would earn more than $55,000 from compound interest.1
Ask your payroll office how you can set up regular additional contributions by salary sacrificing.
Just use the individual BPAY details listed in Member Online, our app, or your annual statement. If you can’t find them, contact us and we can help.
Complete a deposit form and a cheque or money order for the amount you want to deposit.
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.
Get advice about making extra contributions to your super over the phone, at no additional cost.2
1. The diagram is for illustration purposes only and the figures were calculated using the MoneySmart compound interest calculator, accessed November 2020. The calculation assumes savings of $20 per week for a time period of 30 years, with interest compounding monthly. The interest rate assumed is 6%, net of fees and taxes. The calculation assumes that earnings are reinvested and fully credited at the end of each month. The information should not be used as a guide to future performance of any investment. Investment returns can be positive or negative and this does not guarantee a future outcome. The total saved does not take inflation into account. Check with your chosen savings product provider in regard to actual interest calculations. 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. These figures are provided only to demonstrate the principle of compounding. They are not intended to represent projected earnings in a QSuper Accumulation account.
2.You can find out more about financial advice options or contact us.
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