QSuper deferred retirement benefits explained
If you’re a former employee of the Queensland public service, you may have a Deferred Retirement Benefit account with QSuper but are unaware of its unique features. We examine how these accounts work and provide some tips on what you can do now to realise the financial value.
Understanding the structure and features
A deferred retirement benefit is effectively a holding account for those who have ceased contributing to the QSuper Defined Benefit account and are under 55 years of age.
However, although you’re unable to make any additional contributions to the account, what money is sitting in the account will still increase quarterly in line with average weekly ordinary time earnings (AWOTE). This may be lower than what is received from a diversified investment option with other types of super funds, but the financial stability the accounts offer can provide an effective buffer against market volatility when you also consider the investment risk remains with QSuper.
You (or your current employer) can also choose to make contributions into a QSuper Accumulation account linked to the deferred retirement benefit, or an accumulation account with a different fund.
Can I transfer my deferred retirement benefit to my existing super fund before age 55?
Technically you can switch out of the account prior to age 55 to rollover your benefits to an accumulation account with QSuper or another super fund. However, as you will lose some of your benefits, it is unlikely to be attractive ― particularly if you are a while away from age 55. Specifically, if you rollover your account prior to age 55 you will see your current valued discounted or reduced by a factor depending upon your age.
For example, if someone aged 50 wanted to transfer an account balance of $100,000 held within a QSuper Deferred Retirement Benefit account, the benefit would be reduced to $86,770 (or 86.77 per cent of the value, based on QSuper’s formula). You should discuss this option with your adviser before making a decision, as it is unlikely to be favourable to transfer your benefits before the age of 55. The closer you get to age 55, the smaller the discount is ― but generally speaking, waiting to age 55 will provide the best outcome as there is no penalty applied if you are 55 or over.
What happens when you reach age 55?
If you retain this account until age 55 it will automatically be transferred to a QSuper Accumulation account. You will be notified of this prior to your 55th birthday and there will be no specific or further action required. Alternatively, if you do choose to transfer your balance to another super fund at this time, no penalty would be incurred and the full value could simply be rolled over. Once again, you should discuss this with your adviser before making a final decision.
Once your benefit has been transferred to an accumulation account, what else do you need to consider?
Whether you wish to retain an accumulation account with QSuper or another fund, you’ll then need to take responsibility for choosing an appropriate investment option that aligns with your tolerance to risk, personal preferences and investment goals. You should be aware that if you don’t choose an investment option, a default selection will be made for you which may not be in line with your personal financial objectives.
As with any type of accumulation account it is advisable to review other superannuation considerations, for example, revising your arrangements in relation to your contribution strategy, insurance benefits, death benefit nominations and your eligibility to commence a pension.
You should also consider other ways you may be able to improve your retirement balance such as salary sacrificing, reviewing the fees and performance of your current fund to see whether they’re competitive and investigating whether you may be eligible for any other benefits or concessions.
If you have a deferred retirement benefit account with QSuper and want to find out more about your options, you can speak to one of our experienced financial advisers.
This insight may contain general financial advice and was prepared without taking into account your objectives, financial situation or needs. Before acting on any advice, you should consider whether the advice is appropriate to you. Seeking professional personal advice is always highly recommended. Any forward-looking statements are based on current expectations at the time of writing. No assurance can be given that such expectations will prove to be correct.
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