Financial planning can be complex but I work hard to ensure clients understand their choices. This can give clients peace of mind and provide them with the strategies they need to help maximise their income before and during retirement.Tom BorderFinancial Planner SSFS
Police Super (PSS)
This is a defined benefit scheme. Your final superannuation payment will be based on a formula unique to your particular fund. This means that your retirement benefit is not affected by market conditions.
Pension or Lump Sum?
When you retire and access your final Police Superannuation Scheme (PSS) benefit, you generally have the option of:
- taking it as a pension;
- electing to convert it into a lump sum; or
- taking a combination of pension and lump sum.
Deciding whether to convert some of your pension (if any) to a lump sum and how much to convert will depend on your individual circumstances, your goals and lifestyle objectives. However, it is important to know that you can only ever make the decision to convert your pension to a lump sum once and then only at prescribed times.
The rate at which a pension can be exchanged for a lump sum depends on your age and period of service. The calculation is made by multiplying your final superable salary by your age and length of service, with the maximum amount achieved after 30 years of full-time service.
On the death of a retired PSS member, where the scheme member elected to receive a pension, a spouse pension is also generally payable to an eligible person (including de facto and same sex partner). If a member converted a portion of their pension to a lump sum, the spouse’s pension entitlement is reduced on a proportional basis. A person receiving a spouse pension as a result of the death of a retired member does not have the option to convert the pension to a lump sum.
A spouse pension is not payable where the member has exchanged the whole of their pension entitlement for a lump sum.
Deciding whether to convert any amount of your PSS pension to a lump sum is an important lifestyle decision and will be different for each individual. As it can only be done once and will affect what entitlement your spouse may or may not be eligible for, it’s important you speak with your financial planning team at SSFS to help ensure you make the decision that’s right for you. You can meet with one of our professional financial planners without cost or obligation. At SSFS product and advice fees apply only when you decide to invest and partner with us on an ongoing basis. So give your member service team a call on 1800 620 305 and speak to the experts who have an in-depth understanding of your PSS scheme choices.
If you retire from the Police force due to a disability whilst a member of the Police Superannuation Scheme (PSS), you may be entitled to an invalidity benefit:
- General Benefit (not Hurt on Duty)
- Lump sum if retired with less than 20 years of service
- Pension if retired with more than 20 years of service; or
- Hurt on Duty Benefit
- Pension with no age or service restrictions
If you meet the medical conditions for a General Invalidity Benefit and you retire with less than 20 years service, you’re entitled to a lump sum payment, equal to twice your superable salary at the time you retire.
If you retire with more than 20 years service and meet the medical conditions for a General Invalidity Benefit, then you’re entitled to an indexed fortnightly pension. This is a percentage of your superable salary and depends on your length of scheme membership.
Hurt on Duty Benefit
If you retire due to a disability caused by being Hurt on Duty, you’re generally entitled to an indexed fortnightly pension based on a percentage of your superable salary at the time of your retirement. This percentage is usually 72.75% but the trustee has the discretion to increase it to 85% or 100% depending on your potential (if any) to receive further employment outside of the Police Service.
Convert Pension to Lump Sum
When you reach age 55, or age 60 if not commuted previously, or at start of pension if after age 55 and are receiving an invalidity pension, you have the opportunity to exchange (commute) all or part of your pension for a lump sum. However, you do need to carefully consider whether this option is right for you given your individual circumstances.
Importance of the right advice
Retiring from the Police Service on invalidity grounds is obviously a stressful situation and can have a big impact on your current and future lifestyle. Your financial planners at SSFS can help you understand your entitlements and how your benefit can be structured to meet your future needs. You can meet with one of our professional financial planners without cost or obligation. At SSFS product and advice fees apply only when you decide to invest and partner with us on an ongoing basis. So give your member service team a call on 1800 620 305 and speak to the experts who have an in-depth understanding of your PSS scheme choices.
Concessional Contributions Caps for PSS Members
For most of us there are limits to the amount of concessional, or before tax, contributions we can make tax effectively into our super. However, if you’re a member of the Police Superannuation Scheme (PSS), there are special conditions which apply to how your concessional contributions are calculated. Your concessional contributions include both your employer contributions as well as any salary sacrifice amounts you make to the PSS scheme.
If the PSS scheme is your only fund, you cannot exceed the concessional contributions cap. That’s because under special regulations applying to defined benefits funds, a PSS member who would otherwise exceed the cap is deemed to be within the cap. However, if you’re making any additional concessional contributions to another fund, you should ensure total contributions across all super accounts are within the cap. The concessional contributions cap for the 2014/15 financial year is $30,000, unless you were age 49 or older on June 2014, in which case it is $35,000.
For most members of PSS, employer concessional contributions are calculated as 8.4% of superable salary. If you continue to work beyond age 60, or reach 30 or more years of Police Super membership, then your employer concessional contributions will be 1.2% of your salary.
Of course, if you salary sacrifice your member contributions, these will also be counted. For example:
Sally is a PSS member earning $85,000pa with a retirement age of 60. Her employer concessional contributions are calculated as $85,000 x 8.4% = $7,140. She is also salary sacrificing her member contributions of $6,000pa. PSS will therefore report $13,140 of concessional contributions for the 2014/15 financial year. Any other pre-tax superannuation contributions Sally makes should remain below her concessional contributions cap.
See our Building Your Wealth page for more information on the concessional contribution caps.
It’s important you speak with your financial planning team at SSFS to make sure you’re maximising the opportunities which come from being a Police scheme member. Find out more by calling 1800 620 305 or send us an email.