We all have those moments when the thought of retiring early crosses our mind, whether due to tough days at work, wanting more time for ourselves or to care for loved ones, or exploring new pursuits like study, volunteering, music, or art. Whatever the reason, you might wonder how your SASS account affects this plan and whether you can get access to your money.
This article explores what happens to your SASS account when you retire early and some important considerations.
If you are not yet at 180 accrued points, you may not maximise the contribution to your retirement from your employer
The SASS benefit is calculated based on the points you’ve accrued over your working life to a maximum of 180 points.
Your accrued benefit points are an important driver of how much your employer will contribute to your retirement. When you retire, your employer financed benefit is calculated based on your accrued points at your last day of service. If you retire early and you haven’t yet reached 180 points, then you will be missing out on the potential contribution your employer would have made to your retirement.
Your insurance cover within SASS will cease
Additional Benefit Cover is optional insurance within your SASS account that protects you and your beneficiaries in the event of your death or permanent incapacity. The value of the insurance is the gap between what you have accrued to that point in time and the maximum your employer would have paid as a retirement benefit at your earliest retirement age. This cover ceases once you accrue 180 points or reach your earliest retirement age.
If you have opted in to the additional benefit cover within your SASS account and you retire before our earliest retirement age or achieving 180 points, this cover ceases upon you exiting SASS.
Resignation benefit before age 58
If you retire before your SASS retirement age (which is generally 58), you may be able to access your benefit. The benefit you receive on resignation will vary depending on factors including your age and the length of time you have been in the scheme.
As an alternative to receiving the withdrawal benefit immediately payable on resignation, dismissal, discharge or retrenchment (or the retirement benefit payable once reaching retirement age), you may choose to defer your entitlement in SASS. The deferred benefit can then be paid on application, after attaining the retirement age, on total and permanent invalidity or on death.
The deferred benefit option is designed to assist mobility of employment. It means if you stop working for a scheme employer, prior to attaining your scheme retirement age, you can keep your accrued rights in the scheme and receive a larger employer-financed benefit.
To learn more about the Resignation benefit go to SASS-Fact-Sheet-10-Resignation-withdrawal-benefit.pdf
You may be giving up an entitlement to a defined benefit pension
Most SASS members will receive their benefits as a lump sum. However, if you were transferred into SASS from one of the old schemes, NRF, LGPF or TRF scheme you may have kept the feature of that old scheme and have the option to take all, or part of your employer financed benefit as a defined benefit pension.
Generally, your pension will be paid when you retire after reaching age 60, or if you are totally and permanently incapacitated (TPI), or if you die before retirement age a reversionary pension may be paid to an eligible spouse. Your pension is payable for life.
If you retire from your SASS employer before age 60 but elect to defer your SASS benefit, you will lose this pension entitlement. Before making any decisions, you should refer to your annual statement to check whether your account has this option and make an informed decision about what you will be giving up.
You may not have time to plan your employment arrangements to maximise your final average salary
When you retire, the employer financed components of your benefit will be calculated based on a formula using your final average salary. This is the average of the superable salary reported by your employer on your exit date, alongside the salaries reported on 31 December of the previous 2 years.
Making a hasty decision to retire when you haven’t planned your work arrangements and your retirement date to get the highest superable salary could mean that you will receive less at retirement from your employer. Note that if you are retrenched before your earliest retirement age, the higher of the final salary or final average salary applies.
You may need to keep most of your money preserved in super
Your SASS benefit is subject to the super preservation rules. If you are age 60 or above, then you’ll be able to access all your money in SASS when you retire. If you are under age 60, you will have a preserved component that must remain preserved in super until you meet a condition of release such as leaving an employment arrangement once you reach age 60.
If you were counting on using your SASS benefit to pay down debt or to provide money to live, you’ll need to consider whether you can access your money or whether you’ll need to look at other sources of income.
Retirement may not be affordable
Understanding how much you will need to live on in retirement and projecting how long your money will last and the other sources of income you have in retirement is an important step in in making an informed decision to retire early. Throughout your retirement around 30% of the retirement income from super could come from investment earnings1. The rest is made up of your benefit before you retired.
Retiring early gives you less opportunity to build your wealth and if you are drawing down on your savings as an income before other sources of income such as the Age Pension become available this may mean you are depleting your capital leaving less invested to grow. That’s why it is important to project the outcomes of decisions and be informed. To get started all you need to do is enter a few details and choose the lifestyle options you want in retirement. Visit My Retirement Planner aware.com.au/ retirementcalculator