How does your ESSSuper Defined Benefit Fund work?

Do you understand how your ESSuper Defined Benefit Fund (ESSS DB) works? How do the different contribution rates affect your benefit? Or your insurance cover? Here are some answers to help you navigate your path to financial peace of mind.

As a member of an ESSS DB Fund, you’re already in a better position than most people to achieve a good result from your super. But to maximise that advantage, it’s helpful to understand the rules that regulate how you contribute, how your super grows and how contributions can affect your insurance cover.

Your ESSS DB Fund is backed by the State Government and because it’s a defined benefit fund, it’s not impacted by the ups and downs of investment markets. There are no entry or exit fees for contributions. And you can choose the percentage of your salary you contribute within a set range.

How is your defined benefit calculated?

In your ESSS DB Fund, your final benefit is based on:

your contribution rate, that is the percentage of your salary you contribute

how long you are a member of the fund; and

your final average salary when you retire.

The aim is to reach your ‘Maximum Benefit Multiple’. The quickest way to do this, is to contribute at the highest contribution rate over your years of membership, so when you retire, it will pay off as the highest multiple of your final average salary.

What’s your contribution rate?

You can choose to contribute between 3% and 7% of your salary before tax (or 3.6% up to 8.3% after tax). But remember, contributing at the maximum rate is the quickest way to maximise your defined benefit. Increasing your contribution rate is one of the most effective things you can do to increase your super.

While it’s never too late to start contributing at the maximum rate, it pays to get in early. If you haven’t been contributing at the maximum rate, you may be able to take advantage of a higher ‘catch up’ rate.

How does working part-time affect you?

The quickest way to maximise your defined benefit is to work full-time uninterrupted for many years, but that’s not possible for all members. Working part time means your super contributions are calculated pro rata. So if you’re working 50% of full time (time fraction of 0.5), your contributions are 0.5 of your chosen contribution rate. However, by maintaining contributions at the maximum rate , you’ll still be helping to reach your Maximum Benefit faster.

Do contribution rates affect your insurance?

Your ESSS DB fund provides automatic Death and Total and Permanent Disablement protection. However, it’s important to be aware that the level of cover you receive is affected by your contribution rate, age when you joined, full/part time status and the type of work you do.

If you become disabled, or pass away, your benefit is based on the accrued benefit multiple at the date you become disabled or pass away, plus a projected benefit from the date of the event up to the age of 55 or 60. So if you are contributing at a lower rate, your benefit will be less.

Here’s an example of how you could be affected

Let’s say ‘Joanne’ joined the ESSS DB Fund at age 25 and claimed a disability benefit at age 45, when she had a final average salary of $70,000. If she had contributed at 3% throughout her membership, her disability benefit would be $1,436 per fortnight. However, if she had contributed at 7%, her disability benefit would be $1,885 per fortnight.¹

Understanding how your ESSS DB Fund works can make a real difference to your current and long-term financial peace of mind. And it’s good to know, that as a rule of thumb, to receive the maximum benefits and insurance protection, you need to contribute at the maximum contribution rate.

Find out more

For more information about your ESSS DB Fund, different contribution rates and Death, Total and Permanent Disablement benefits, please see the ESSSuper Defined Benefit Fund Product Disclosure Statement available on the ESSSuper website or make a time to talk with one of our Member Education Consultants.

1. ESSSuper Fact Sheet FS108 – ESSS DB Fund Members – Frequently Asked Questions about your benefits

The information contained in this article is of a general nature only. It should not be considered as a substitute for reading ESSSuper’s Product Disclosure Statement (PDS) that contains detailed information about ESSSuper products, services and features. Before making a decision about an ESSSuper product, you should consider the appropriateness of the product to your personal objectives, financial situation and needs. It may also be beneficial to seek professional advice from a licensed financial planner or adviser. An ESSSuper PDS is available at www.esssuper.com.au or by calling 1300 650 161.

How does your ESSSuper Defined Benefit Fund work?

Do you understand how your ESSuper Defined Benefit Fund (ESSS DB) works? How do the different contribution rates affect your benefit? Or your insurance cover? Here are some answers to help you navigate your path to financial peace of mind.

How is your defined benefit calculated?

What’s your contribution rate?

How does working part-time affect you?

Do contribution rates affect your insurance?

Here’s an example of how you could be affected

Find out more

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