QSuper Defined Benefit Superannuation
Are you playing it too safe with your retirement nest egg?
One of the the greatest advantages of a Defined Benefit Scheme is that it carries no investment risk. As a formula based value the benefit grows every year regardless of investment markets. Safe and secure....set and forget!
But are you sure your Defined Benefit is going to give you the best result possible?
A Closer Look
Over the years we have found many retirement planning solutions for Queensland Public Servants who hold a QSuper account. In this article we look closely at the Defined Benefit Scheme.
The QSuper Defined Benefit (QSDB) relies on three components that make up the formula:
1. Your contributions are at 5% net (except for police officers)
2. Your final average salary (FAS) over the last two years (as of the 1st July each year)
3. Your time in the fund. The accrual benefit multiple (ABM) is usually 0.21 for each full year of service.
Now let’s say your FAS is $100,000 and your ABM is 5. Your investment risk free lump sum benefit is $500,000.
You are approaching or have reached age 55 and whilst you do have retirement options you decide to do nothing and work for 5 more years or so to boost your retirement benefit.
This seems to be a familiar retirement plan for many Queensland Public Servants.
If we assume that you do not expect a real increase in salary for the next 5 years your retirement benefit will be
$100,000 * 6.05 or $605,000. Great outcome. At least a guaranteed 5% return each year which is just above the long term cash interest rate.
As planned you retire at age 60 and under the current QSuper rules your QSuper Defined Benefit is moved to the QSuper Balanced option within 28 days of retirement and your retirement assets are now exposed to growth assets including Australian Shares and International Shares.
What now, enjoy the ride or panic!
Your Potential Result
In the example above with the right financial advice, we could create an opportunity to boost the original $500,000 balance to over $760,000 simply by using current superannuation legislation and retaining the existing QSuper Defined Benefit account.
Our Senior Financial Advisers have many years of experience with Defined Benefit Schemes and in particular QSuper.
For a no obligation discussion on your retirement options please call us on Ph: 07 3262 4000 or submit the form below.