How the benefits points system works
The benefit points system links your contributions and your employer-financed benefits. Understanding your benefit points will help you maximise the SASS benefits you accrue throughout your membership and for your retirement.
- Under the legislation governing SASS, you must contribute between 1% and 9% of your annual salary to your scheme.
- For each 1% of salary you contribute in a year, you accrue approximately 1 benefit point towards your retirement benefit, however members working part time receive a lower benefit point allocation.
- Each benefit point accrued provides an employer-financed benefit of 2.5%* of your final salary or final average salary. This employer-financed benefit depends on a number of factors including your age and reason for leaving employment.
- You can accrue a maximum average of six benefit points for each year of scheme membership, up to a lifetime maximum of 180 points.
Benefits points example
The following simple example highlights the value of maximising your benefit points.
If you joined SASS on 1 July 1988 and by the early retirement age (58) had contributed an average 6% of your salary for 30 years, you would accrue 180 benefit points (6 x 30 = 180).
If your final average salary was $100,000, this would provide an employer-financed benefit of 4.5 times your final average salary. In dollar terms that calculation is:
180 x 2.5% = 450%, and 450% of $100,000 = $450,000
Remember that the employer-financed benefit is in addition to your personal contributions, the earnings on those personal contributions, the basic benefit and where applicable any Additional Employer Contributions (AECs), Government co-contributions and low income super tax offset (LISTO) you have received.
How to maximise your employer-financed benefit
For every 1% of your current salary you contribute to SASS, you also secure an additional employer-financed benefit of approximately 2.12%** of your final average salary for when you retire – and the contributions you make to SASS also earn you investment returns.
Your scheme was designed to provide you with flexibility throughout the various stages of your life. While you can contribute between 1–9% each year, maximising your employer-financed benefit is based on making an average contribution of 6% per year. The maximum benefit points you can reach after 30 years of full time fund membership is 180 points.
If you are not contributing at the maximum rate, you may not receive the entire employer-financed benefit you could be entitled to come retirement.
To change your contribution rate this year, simply complete and return a contribution rate election form before 28 February each year. Your actual contributions will not change until 1 April that same year.
Further detail on benefits points system
The personal details section of your Annual Benefit Statement lists five different benefit point amounts:
- Points earned per year – The number of benefit points your contributions would 'buy' based on your contribution rate that year.
- Contributed benefit points – The benefit points your contributions have 'bought' since you joined SASS. In effect, this is how many benefit points you have already accrued.
- Maximum benefit points – The total number of benefit points you could have accrued had you contributed at an average 6% contribution rate for the current duration of your SASS membership. For example, after 20 years of membership, your maximum benefit points would be 120 points (that is, six benefit points per year for 20 years of membership: 120 maximum benefit points^).
- Accrued benefit points – Those benefit points you already 'own'. This amount is used to calculate the employer-financed benefit. Accrued benefit points are always the lower of the total of contributed benefit points and maximum benefit points, and can never exceed a total of 180 points.
- Prospective benefit points – The benefit points a member with Additional Benefit cover would potentially have earned at age 58. This projection is based on the member's average contribution rate at the date of death or invalidity (see the 'Optional Additional Cover' fact sheet for more information).
^Assuming you have always been a full-time employee and have not had any periods of ordinary leave without pay.
Your Annual Benefit Statement is your primary source of information when it comes to monitoring your benefit points situation, and ensuring you are maximising your points.
How to ensure you are maximising your benefit points
It is easy to find out if your accrued benefit points are currently less than your maximum benefit points. Simply check your last Annual Benefit Statement. If your accrued benefit points are less than your maximum benefit points you may need to contribute at a higher rate to bring your average contribution rate up to 6% and therefore optimise your employer-financed benefit.
If your accrued benefit points are less than your maximum benefit points, there are a number of steps you can take:
- Decide when you think you're going to retire and therefore how many years of SASS membership you have left.
- Calculate the contribution rate required to bring your average contribution rate up to 6% for the remainder of your SASS membership (remember, you can contribute up to a maximum of 9% per year).
- Make the required changes to your contribution rate.
To calculate how many years it will take you to catch up your benefit points:
- Subtract your total accrued benefit points from your total maximum benefit points. This is the number of benefit points you need to catch up. For simplicity we can call this the catch-up amount.
- Decide what extra level of contributions you want to make – or can afford to make – each year. To catch up your benefit points you will need to contribute at more than 6%. The amount you contribute above 6% is your increased contribution rate.
- Divide the catch-up amount by your increased contribution rate. The answer to that calculation is the extra amount you need to contribute.
You have been contributing for 15 years at 4%, giving you a total of 60 accrued benefit points (15 x 4). Your maximum benefit points total for that period of membership is 90 (that is, six benefit points per year x 15 years = 90).
90 – 60 = 30. Your catch-up amount is 30 benefit points.
Now you can decide on the appropriate increased contribution rate given the time remaining before your retirement and your other financial commitments:
30 points ÷ 1% additional contribution = 30 years' future contributions
@ 7% p.a.
30 ÷ 2% = 15 years @ 8% p.a.
30 ÷ 3% = 10 years @ 9% p.a.
As you can see, if you contributed 9% for the next 10 years you would catch up your benefit points, and be entitled to six new benefit points for each of those 10 years. Your total accrued benefit points after 25 years of membership would be 150, which is the maximum benefit points available to you for that period (that is, six benefit points a year x 25 years = 150).
This method should allow you to calculate what you need to do to catch up. This calculation also allows you to balance the increased contribution rate and the duration of that increased contribution. This should help you make a decision that suits your age and personal financial circumstances. (It is important to remember that you can only contribute at a maximum of 9% a year.)
Depending on your age, letting your average contribution rate drop below 6% can lower the value of benefits payable on death or total and permanent invalidity if your accrued benefit points total has not reached the maximum 180 benefit points (see the 'Optional Additional Benefit Cover' fact sheet).
- For most SASS members, each 1% of salary contributed in a year results in approximately one benefit point. This may vary for some members, including part-time employees.
- The employer-financed benefit is 3% for former members of the State Public Service Superannuation Fund (SPSSF).
- The maximum benefit points allowance for former members of SPSSF at age 55 is 162 points. At age 58 or after it is 180.
*This amount is after the reduction for the tax on employer contributions payable by the fund since July 1988. If you joined the scheme prior to 1 July 1988, the employer contributions tax is not applicable to the part of your benefit that accrued prior to 1 July 1988.
**Approximately 2.12% after the reduction for the tax on employer contributions payable by the Fund since 1 July 1988. Employer-financed benefits attributed to membership prior to 1 July 1988 do not attract contributions tax.