What options do I have when leave my DB employer?
If you were lucky enough to be employed by local government or certain water authorities before 1994, you may have a Vision Super Defined Benefit (DB) benefit. A DB benefit is very different to an accumulation account as your DB benefit is based on a formula, rather than an account balance which includes investment returns.
If you leave your DB employer and you are not re-employed by another DB employer within two months of your departure, you will be required to make some important decisions about your benefit. For example, do you want to defer taking your DB benefit or move it into an income stream? You also need to make some decisions if you have reached age 65 or you have 40 years or more of service.
While we know all of this sounds daunting, don’t forget Vision Super’s financial advisors are on hand to help you.
What happens when I leave employment?
Your DB employer will advise Vision Super of your departure, including:
- Your salary at the time of your departure and years of employment, and
- The reason for your departure, for example, retirement, retrenchment, disability, resignation.
Your employer may provide this information to us either just before or after your actual departure. When all the correct information has been received by Vision Super, we will calculate your DB benefit entitlements, and write to you explaining your DB benefit entitlement and the next steps.
There are several options to choose from as your next step. For example, if you resigned from your DB employer, you may choose to take your resignation benefit as a cash payment, transfer it into a Vision Super Deferred Retirement Benefit account with the Vision Super DB fund, open an accumulation account or set up an Income Stream (also known as a pension). There may also be circumstances where you may be entitled to a lifetime pension from the Vision Super DB fund. You can potentially choose more than one of these options, which means it’s important to get the right advice.
A Vision Super Deferred Retirement Benefit
If you transfer your DB benefit into a Deferred Retirement Benefit account, you are electing to defer taking your DB lump sum until a later date. A Deferred Retirement Benefit account is established in your name and your DB retirement benefit is credited to this account. As this account is still in the Vision Super DB fund, contributions and rollovers from other funds cannot be added to this account. However, it is invested for you based on choices that you make which means your benefits fluctuate with the market. However, unlike an accumulation account, there is a ‘DB underpin’ which guarantees a minimum benefit which will be paid to you.
Your Deferred Retirement Benefit must remain in the Vision Super DB fund and can only be paid in the following circumstances:
- After you reach your preservation age (between 55-60years depending on your date of birth)
- On your total and permanent disablement as determined by the Trustee, or
- On your death.
Once you reach your preservation age, your Deferred Retirement Benefit can be paid to you or transferred to another Vision Super account or rolled over to another fund.
An income stream/pension is available for people who have met their preservation age. If you choose to transfer your DB benefit into an income stream/pension, like an account-based pension, regular pension payments will be made to you based on a pre-determined pension amount that you choose each year. You must take out a minimum amount each financial year and you will also need to make decisions about how your account-based pension is invested.
Depending on your circumstances, you may choose to take an account-based pension or a non-commutable account-based pension (otherwise known as “transition to retirement”). If you take an account-based pension, you can also make lump sum withdrawals and your investment earnings are tax free. You may also decide to adopt the “Three bucket pension” investment strategy, where your account is invested in three investment options (Cash, Conservative and Growth) in proportions that are determined by the annual pension withdrawals you set. This is only available if you have an account-based pension.
If you take a non-commutable account-based pension, you are unable to make lump sum withdrawals and your investment earnings are subject to tax.
Need to talk one-on-one?
Our Financial Planners are superannuation and DB specialists and understand the intricacies of the Vision Super DB benefit and what is available to you. Their job is to help members plan their retirement and they do not receive brokerage, fees, bonuses or commissions for recommending products. If you choose to obtain advice from a Vision Super Financial Planner, you may be charged a fee. If any fees are applicable, they will be discussed with you before any financial advice is provided. Call the Member Services team on 1300 300 820 Monday to Friday 8:30am to 5pm to set up a time.