Do you have a preserved Public Sector Superannuation (PSS) scheme benefit? These two tips apply to you!
Tip 1 — If you work for ACT or Commonwealth Government and have a preserved PSS benefit, you may be missing out on generous employer contributions.
A PSS preserved benefit is when you no longer make fortnightly contributions in to the Fund, for example, you resign from the public service and your PSS benefit remains in the scheme to accrue Consumer Price Index (CPI) and investment earnings. Your annual member statement will confirm whether you have a preserved benefit.
The PSS is a generous defined benefit scheme that has been closed to new members since 30 June 2005. However, if you leave the public service, preserved your PSS benefit and re-join a Department or agency for the Commonwealth or ACT Government who can contribute to PSS, you may be required or can request to re-join PSS again (see the Department of Finance website for a list of eligibly criteria). This means you will be entitled to generous employer contributions and potentially re-instate the life time pension option.
Unfortunately, some HR areas are unaware of this and don’t ensure their new employee re-joins the PSS as a contributing member or is given the option to do so. Equally so, some new employees aren’t aware they should inform their HR area of their PSS preserved benefit. This miscommunication can mean that people aren’t contributing to the PSS, resulting in potential loss of generous retirement benefits.
For example, I had a client approach me for retirement advice. She worked for the ACT Government and was contributing to their default superannuation fund, First State Super. She also had a preserved PSS benefit. On further investigation into her personal situation and circumstances, I discovered that for the last six years my client was contributing to the wrong superannuation fund and had she retired without seeking advice, she would have forfeited generous employer contributions and the life time pension as she had elected a refund of her accumulated member contributions when she resigned from her former employer.
I assisted my client to re-instate her PSS benefit, which resulted in a back payment of member contributions. Although it took months of preparation and negotiations, my client was put in a better financial position because she was eligible for a life time PSS pension. This resulted in my client being able to afford to retire more comfortably.
If you were provided with incorrect advice about re-joining the PSS, you may be able to make a compensation claim. Snedden Hall and Gallop were integral in the Cornwell cases that went all the way up to the High Court. They successfully sued the Commonwealth on behalf of Mr Cornwell who was advised by his Commonwealth employer he could not join the Commonwealth Superannuation Scheme because he was a blue collar worker. SHG said that this precedent may also apply in relation to negligent advice about re-joining the PSS as a contributing member, but any claim would need to be brought within 6 years of you leaving eligible employment.
So the biggest tip is – if you are in the ACT or Commonwealth Public Service and have a preserved PSS benefit, firstly contact Commonwealth Superannuation Corporation (the PSS administrator) to confirm whether you were eligible to join the Fund and let me help you understand the scheme rules well.
Tip 2 — You may be able to claim your PSS preserved benefit after age 60
Do you have a PSS preserved benefit and changed employers after age 60? Although the PSS preserved benefit application form doesn’t provide the option to do so, you may be eligible to claim your PSS preserved benefit. This means, you may also be eligible for the lifetime PSS pension option, even if you are still working (if you are eligible for the pension option).
Another benefit includes an option to roll over your lump sum to another superannuation fund or take it as a cash payment. If you elect to roll over your PSS lump sum in to another superannuation fund, the unfunded component which is currently only indexed by the Consumer Price Index, can be invested in the nominated roll over fund to accrue fund earnings (there will be 15% tax on the unfunded component when it is received by the other fund, to convert it from an ‘unfunded component’ to a ‘funded component’). If you elect to cash out the lump sum (or elect part pension/part lump sum) this injection of capital could be used to pay off debt or finance other capital expenses.
Here is an example. A former Commonwealth Government employee preserved their PSS benefit. They now work for the private sector and changed employers after their 60th birthday. They can apply for their PSS benefit, as changing employers after age 60 is a condition of release.
I have applied this ruling for several clients. As the PSS form does not provide this option, I simply attached a letter to the application form to state the reason for claim. However, take note that by claiming your PSS preserved benefit, it will mean that you cannot contribute to the PSS in the future if you work for the ACT Government or Commonwealth Government again. Also, if the PSS pension is elected, you’ll need to be mindful of marginal tax rates due to the untaxed component, particularly if there is other taxable income such as investment income or employment income — but there are sometimes thing we can do to reduce this income tax. Tax is also generally applicable to lump sum payments.
So the tip is, if you have a PSS preserved benefit and changed employers after your 60th birthday, you may be able to claim a pension and/or lump sum.
Gianna Thomson and Thomson Wealth Pty Ltd ACN 626 920 161 trading as Gianna Thomson are authorised representatives of Fitzpatricks Private Wealth Pty Ltd, ABN 33 093 667 595, AFSL 247 429. This is general information only and does not consider your personal circumstances, needs and objectives. It is important you seek advice from a professional financial adviser prior to making any decisions.