Aware Super Defined Benefit - Telstra Plan FAQ

Your Final Average Salary is the average of the last three years of super salary at your birthday (for quote, exit statement or annual statement).

Aware Super Defined Benefit – Telstra Plan members may elect to contribute between 0% and 10% in multiples of 1%. The amount you contribute will impact the accrual percentage rate used to calculate your retirement benefit, as shown:

The following table outlines the Accrual Percentage for each level of Elected contribution rates. 

Everyone’s situation is different, so how much you contribute is a personal choice. However, in most situations, maintaining an average contribution rate of 5% over the period of your defined benefit membership provides the maximum employer support and benefit.

When considering what contribution rate you elect, you need to consider:

• your current average contribution rate;
• your potential future salary growth; and
• any potential loss in grandfathering of your notional taxed contributions.

There is further information about grandfathering in the Aware Super Defined Benefit – Telstra Plan Guide available at aware.com.au/pds to find out more.

An Aware Super Financial Advisor can assist you in choosing the right contribution rate for you. Call us on 1300 650 873
 

To calculate your Benefit Multiple, you first need to calculate your Accrued Multiple and Telstra Support Multiple. Here is how these are worked out:

Let’s look at an example to work out how these multiples are calculated.

Alec is 58 and has been a member of Aware Super Defined Benefit - Telstra Plan (plus previous TelstraSuper Defined Benefit Division 2) for 20 years. Alec's Accrued Multiple is calculated for each contribution period as follows:

Based on Alec’s eligible membership, his Telstra Support Multiple is calculated assuming Alec made 5% member contributions during the period of eligible membership.
 

Alec’s Accrued Multiple is higher than his Telstra Support Multiple. This is because during this eligible membership period, Alec’s average Elected contribution rate is higher than 5% (it is 5.25%).

As Alec’s Accrued Multiple is higher than Telstra Support Multiple, he would have an Excess Contribution Multiple. This is calculated as follows:

Alec has no other Additional Multiples so Alec’s Benefit Multiple is calculated as follows:

Your defined benefit is calculated using the following formula.

The benefit payable to you must be equal to or greater than the benefit required under Superannuation Guarantee (SG) legislation. This means that the benefit payable to you will be the greater of your defined benefit and SG benefit. The SG benefit is the minimum amount of superannuation support your employer must provide to you by law.

Everyone’s situation is different so it’s important to consider your own personal situation when deciding whether to stay in defined benefit or move to an accumulation account. Before making any decision, we recommend you seek appropriate financial advice.

You should consider:

• your current average elected contribution rate, particularly if your average elected contribution rate is below 5%
• the cost against your package compared with the accumulation scheme
• your expected growth in super salary and subsequent expected growth in Final Average Salary (FAS), as this will impact the growth in your defined benefit value
• your desire for certainty of benefit versus risk of investment loss
• your appetite for exposure to the investment markets to achieve potentially higher returns
• insurance cover
• if you’d like to start a Transition To Retirement income stream, if you’re still working
  
• the grandfathering status of your notional taxed contributions.

Due to the way your defined benefit is calculated, future salary growth has a significant impact on your defined benefit. If your salary begins to plateau, your Final Average Salary (FAS) does also. This, in turn, impacts the annual growth rate of your overall defined benefit.

If you expect minimal salary growth for the rest of your career, you may wish to speak to a financial adviser to assess if the defined benefit scheme is still the most appropriate option for you before making any decisions

There are three options to consider:

1. Optimise your defined benefit
An average elected contribution rate of 5% provides you with the maximum employer support to your defined benefit. If your average elected contribution rate is below 5%, you can increase your elected contribution rate to reach an overall average elected contribution rate of 5%. It’s important to understand the cost to your package if you’re considering ’catching up’. There may also be grandfathering implications with regarding your notional taxed contributions so it’s important to seek financial advice before you make any decisions.

2. Contribute extra to your Voluntary Accumulation Account (VAA)
Once your average contribution rate reaches 5%, any elected contribution above 5% does not receive any additional employer support but it will still increase your Benefit Multiple. If you wish to further grow your benefit, you can make additional contributions to your Voluntary Accumulation Account (VAA) as either pre or post tax voluntary contributions. It is important to note that these contributions count towards the concessional and non-concessional contribution caps.

3. Transfer to the Aware Super Future Saver account
If the return on your defined benefit is low you may wish to consider transferring out of the defined benefit scheme into the Aware Super Future Saver accumulation scheme. The cost to your package from the defined benefit scheme can then be used to help grow your super benefit in the accumulation division.

It’s important to realise that if you transfer to Future Saver:

1. once you leave the defined benefit scheme, you can’t rejoin the scheme
2. There are additional considerations such as:
   1. changes to insurance,
   2. loss of employer paid Account Keeping fees / default insurance, and
   3. exposure to market movements in returns (your Aware Defined Benefit is based on a set formula which is independent of market volatility).

We recommend you discuss this with a financial adviser before making any decision.

There will be no impact on your Final Average Salary (FAS), as your equivalent full-time salary is used to calculate your FAS, but going part-time will impact the future growth of your defined benefit. This is because your benefit multiple will be calculated on a pro-rata basis.

For example, if you worked three days per week at an elected contribution rate of 5%, your multiple for the year would be 0.6 x 20%* = 0.12 (12%).

When you work part-time, your prospective multiple used to calculate your base level Death & TPD cover will reflect your part-time hours.

*This is the accrual rate based on the 5% elected contribution rate

There will be no change to your defined benefit as you will continue to contribute at your elected contribution rate and you’ll receive employer support based on the rate you are contributing.

There will be no change to your defined benefit as your defined benefit will continue to accrue at the same rate. The elected contribution amount will not change but, as your salary will be lower if you’re going on half pay, you will need to fund this amount out of your reduced salary.

Here’s how it will work:

Peter decides to take his long service leave at half pay. Before commencing his long service leave, his full pay equivalent Super Salary is $100,000 and his elected contribution rate is 5%. This means his annual elected contribution amount is $5,000 or $192.31 per fortnight. When Peter commences his long service leave on half pay, his elected contribution amount remains at $192.31 per fortnight, which will be deducted from his reduced salary. His defined benefit will continue to accrue at the same rate as it did before commencing long service leave.

The superannuation salary that Aware Super has is incorrect, what do I do?

You should contact your Telstra payroll office as Telstra provides Aware Super with your superannuation salary details to enable us to calculate the defined benefit.

Yes, you can access your defined benefit if you meet certain criteria. An application is made by form available from the Aware Super website. For compassionate grounds a prior Australian Tax Office approval letter is required.

If your application is approved the withdrawal can be made from your defined benefit or your Voluntary Accumulation Account.

If withdrawn from your defined benefit, your Total Benefit Multiple will be reduced and will, therefore, affect the final defined benefit balance. You should be aware that tax may be payable when accessing these benefits.

Your superannuation salary may decrease within the defined benefit arrangement. If your salary reduction results in a lower superannuation salary, your salary reported to us by your employer may decrease, therefore resulting in a lower overall FAS.

When you leave Telstra this amount generally becomes available to you. You should be aware that tax may be payable when accessing these benefits and this will differ depending on your age. It’s important to seek financial advice before accessing your super.

Yes, you can access your defined benefit and Voluntary Accumulation Account benefits when you turn 65 (regardless of whether or not you are still working).You can continue to be a member of the Aware Super Defined Benefit – Telstra Plan. However, if a withdrawal is made from your defined benefit, your Benefit Multiple will be reduced and will affect your final defined benefit balance.

Your Final Average Salary (FAS) is calculated on exit as the average of the last three years of your superannuation salary as at your birthday. If your superannuation salary is increasing, then this increase won’t be reflected in FAS until your next birthday. It’s important to speak to a financial adviser as other factors may impact the timing of your retirement. You can speak to a Aware Super Financial Planning Adviser by calling 1300 650 873.

Your super salary may increase. In order to determine what your super salary will be, you need to refer to your employers payroll for further information relating salary increases and your remuneration.

You’re provided with a Death and Total and Permanent (TPD) benefit through your defined benefit that is paid for by your employer This benefit is included as part of your defined benefit membership until the age of 60 for former Division 2 members, and 65 for former Division 5 members.

If you die or qualify for a TPD benefit before you reach the applicable age as noted above, your defined benefit will be calculated using the benefit multiple built up at the date of your death or TPD. There will also be a prospective multiple that represents the period of time between your date of death or TPD and the date you would have reached age 60 (former Division 2 members) or age 65 (former Division 5 members). The Prospective Multiple assumes an

Average Contribution Rate of 5% from the date of your death or TPD until the applicable age, and assumes that your FAS remains the same for that period (former Division 2 members) or Superannuation Salary remains the same for that period (former Division 5 members).

If you’re older than 60 (former Division 2 members) or 65 (former Division 5 members), your death or TPD benefit is calculated in the same way as if you’d retired on the day of your death or TPD, using the benefit multiple you had accrued to that date.

After your Employer notifies us of your termination date, any amount of death and TPD insurance cover you hold will be transferred^{^} into a new Aware Super Future Saver account as fixed cover, effective the day following the date you cease employment. This includes any prospective death and TPD benefit, as well as any additional death and TPD insurance cover you may have. You can also apply for additional Death and TPD cover with the insurer

In addition to the death and TPD benefit as part of the defined benefit, former Division 5 members are also provided Default Income Protection (IP) cover up to age 65 as part of their defined benefit arrangements. Former Division 5 members are not eligible to increase their IP cover above the Default IP cover level provided under the Plan. When you leave your employer and transfer to Aware Super Future Saver, you have the option to continue your IP cover. To take up this option you must request this within 90 days and meet the eligibility conditions as outlined in the Aware Super Defined Benefit – Telstra Plan Guide.

For more information relating to insurance options on your defined benefit account, you can refer to the Aware Super Defined Benefit – Telstra Plan Guide at aware.com.au/pds

^{^}Subject to the 'At work' requirements and other eligibility criteria and exclusions contained in the policy.

*This is general and simple personal advice about your Aware Super account over the phone. Simple personal advice for defined benefit members is advice about contributions and insurance cover within your Aware Super account.

If you leave your Defined Benefit employer, whether to retire, go to another job, or are made redundant, your account balance will be transferred into our accumulation product, Aware Super Future Saver. If you’ve retired, the funds can be used to set up an Aware Super income stream account once the funds have been transferred to Future Saver.

Here’s how it works