There are many different types of super funds – retail funds, industry funds, corporate or public sector funds, and more – but it’s how the money within the fund is handled that determines if it’s an accumulation fund or a defined benefit fund.
An accumulation fund is a super fund where your retirement benefits depend on the money put in by you and your employer, and the return generated by the fund.
A defined benefit fund is a super fund where the benefits are calculated by a predetermined formula. Unlike an accumulation fund where investments in the fund are subject to fluctuations, market changes in general have limited effect on the value of a defined benefit fund.
Some funds, like Qantas Super, are both accumulation and defined benefit funds.
So how do you know if you’re in a defined benefit fund?
Check your superannuation statement – it will state if you have a defined benefit amount and details. Still unsure? Ring us and ask.
In Qantas Super, Divisions 1, 2, 3, 4, and 15 provide defined benefits.
Learning the lingo
Defined benefits are calculated by a formula. Here are a couple of common terms used in the defined benefit formula that calculates your benefit.
The salary amount used by your payroll department to determine how much your employer must contribute to your superannuation fund. It’s based on your ordinary earnings and generally excludes overtime. Depending on your division and your occupation it may also include allowances, loadings, and other benefits.
Final average salary
An average of your superannuation salary over a period of time, for example over the last three years.
This is a fixed percentage that is used in the formula to calculate your defined benefit, along with your super salary, your age, and the number of years you have been a defined benefit member.
You can learn more about how your defined benefit is calculated by viewing a recent statement online.
Your fund is required by law to detail any fees that are payable. Here are some common ones:
Insurance through your super
Case study: Betty
Here’s an example of how a defined benefit works, using a Qantas Super member.
Betty is in Division 3 and has worked for Qantas for 20 years full-time. Her superannuation salaries in the last three years were $58,000, $60,000, and $63,000.
Betty is retiring next week and also has a Rollover Account of $150,000.
Let’s take a look at the benefit Betty will receive.
Other info you might be interested in
We're here to help
If you want to learn more or need help with making a decision about your super, you can get simple advice over the phone or face to face. It’s included as a part of your membership so there’s no extra cost.