Financial planning isn’t just about retirement planning or investing. When you get right down to it, it’s about steering a course through our financial past, present and future.Narelle HassanFinancial Planner SSFS
SSS is a defined benefit scheme and 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 the ups and downs of investment markets.
Pension or Lump Sum?
When you retire and access your final SSS benefit, you generally have the option of:
- taking it as a pension;
- converting it to 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’s 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.
If you commence your pension on or after age 55, you need to elect to convert a lump sum within 6 months either before or after your pension commences. If you don’t make an application before reaching age 60, you have a second chance to apply within 6 months of your 60th birthday. However if you commence your pension after age 60, there is no second opportunity.
There are also different rates which apply depending on when your pension is exchanged for a lump sum, so you really need to know your scheme options to make sure you’re maximising your benefit.
Deciding whether to convert any amount of your SSS 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 at specific times, it’s important you speak with your financial planning team at SSFS to ensure you understand your options and can 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 understand your SSS scheme choices.
Concessional Contributions Caps for SSS 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 special conditions do apply for SSS members.
Members of the State Superannuation Scheme (SSS) receive favourable treatment in the calculation of concessional contributions.
If SSS is your only super fund, you cannot exceed the concessional contributions cap. That’s because under special regulations applying to defined benefits funds, a SSS member who would otherwise exceed the cap is deemed to be within the cap. However, if a SSS member is making any additional concessional contributions to another fund, you should ensure total contributions across all super accounts are within the cap. The concessional contribution cap for the 2015/16 financial year is $30,000, unless you were age 49 or older on 30 June 2015, in which case it is $35,000.
For most members of SSS (retirement age 60) employer concessional contributions are calculated as 4.8% of superable salary. For those with a normal retirement age of 55, employer concessional contributions are calculated at 6.0% of superable salary. If you continue to work beyond your normal retirement age, 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: John, age 49, is a SSS member earning $150,000 pa with a retirement age of 60. His employer concessional contributions are calculated as $150,000 x 4.8% = $7,200. He is also salary sacrificing his member contributions of $23,000 pa. While the $7,200 of employer contributions and $23,000 of salary sacrifice contributions to SSS mean John has $30,200 of concessional superannuation contributions, SSS will only report $30,000 of concessional contributions. Any other pre-tax superannuation contributions John receives will be excess contributions.
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 SSS scheme member. Find out more by calling 1800 620 305 or send us an email.