Make the most of your Defined Benefit – Division 2 members

Defined benefit super can be complex. To make it easier, we’ve put together the questions you might ask and provided the answers to help you understand your defined benefit and make the most of your super.

This information applies to members of TelstraSuper Division 2. If you’re a member of TelstraSuper Division 5, refer to your Super Guide for more information or contact us with your questions.

Find out about the benefits and services to you as a Defined Benefit member.

Frequently Asked Questions

  • How is my super salary determined?

    Your super salary is calculated as a percentage of your fixed remuneration. The percentage applied will depend on your Telstra employment band and job category:

    Band Superannuation salary
    Non Sales: Bands A, B, C, 1 77% of Fixed Remuneration
    Non Sales: Bands 2, 3, 4 87% of Fixed Remuneration
    Sales: Band 1 and 2* 87% of Fixed Remuneration
    Sales: Band 3 and 4 100% of Fixed Remuneration
    *Band 1 and 2 Sales roles on 20% or 25% commission have a superannuation salary of 77%

    Here’s how it works

    For full-time employees

    Sarah is employed in a Band 2 Sales job on a 30% commission plan. Her fixed remuneration is $100,000. The super salary used to calculate Sarah’s Final Average Salary (FAS) and her super benefit is $87,000 (87% of $100,000).

    For part-time employees

    The full-time equivalent super salary is used to calculate the defined benefit for part-time employees.

  • How does my salary package fund my defined benefit?

    Your defined benefit is supported by a notional employer superannuation contribution which is costed against your fixed remuneration. The value of the notional employer superannuation contribution is calculated as 15% of your superannuation salary.

    Here’s how it works

    Dave has a superannuation salary of $87,000. His notional employer superannuation contribution is $13,050, which is 15% of $87,000. In this example, the notional value of $13,050 forms part of Dave’s fixed remuneration of $100,000. The remaining balance of $86,950 is available to be taken as cash salary or applied towards his defined benefit through salary sacrifice arrangements.

  • Can I reduce the amount going into my super from my employer so I can receive more cash salary?
    No, the notional employer superannuation contribution amount can’t be reduced to the minimum Super Guarantee rate (currently 10%) to receive more cash salary. The only way to do this is to leave the defined benefit scheme and move to the TelstraSuper Corporate Plus accumulation scheme.
  • How is my Final Average Salary (FAS) calculated?
    Your Final Average Salary is the average of the last three years of super salary at your birthday.
  • How much should I contribute to my defined benefit?

    TelstraSuper Division 2 defined benefit 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:

    Average Contribution Rate tables

    Everyone’s situation is different, so how much you should contribute is a personal choice. However, in most situations, maintaining an average contribution rate of 5% over the period of your defined benefit membership is the optimum amount to contribute to maximise your employer support and benefit. As Table A shows, when your average contribution rate falls below 5% there is an opportunity to ‘catch up’ by making contributions between 6% and 10%. Table B shows that once you reach an average contribution rate of 5%, additional contributions above 5% don’t attract additional employer support.

    It’s important to realise that the notional employer superannuation contribution amount won’t change if you elect to change your contribution rate.

    When considering what contribution rate you should 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 TelstraSuper Division 2 Super Guide.

    A TelstraSuper Financial Advisor can assist you in choosing the right contribution rate for you. Call us on 1300 033 166.

  • How do I calculate my average contribution rate?

    Your average contribution rate is the average of your Elected Contribution Rates for your entire TelstraSuper Division 2 membership.

    Here’s an example of how to calculate your average contribution rate.

    Liz has been a Division 2 member for 10 years and contributed at the following rates during the period of her membership:

    • Elected contribution rate of 5% for 4 years
    • Elected contribution rate of 8% for 4 years
    • Elected contribution rate of 4% for 2 years

    Her average contribution rate is calculated as:
    = [(5% x 4) + (8% x 4) + (4% x 2)] / 10
    = (20% + 32% + 8%) / 10
    = 6%

    Therefore, Liz’s average contribution rate is 6%.

  • How is my benefit multiple calculated?

    To calculate your benefit multiple, you need to multiply the accrual percentage applicable to your elected contribution rate by the membership period during which the elected contribution rate applied. This is the percentage listed in Tables A and B. If your elected contribution rate changes throughout your defined benefit membership, a separate multiple is calculated for each period. These multiples are added together with any additional multiples to make up your benefit multiple.

    Here’s how it works

    Liz has been a defined benefit member for 10 years and contributed at the following rates during the period of her membership:

    • Elected contribution rate of 5% for 4 years, giving an accrual rate of 20%*
    • Elected contribution rate of 8% for 4 years, giving an accrual rate of 23%*
    • Elected contribution rate of 4% for 2 years, giving an accrual rate of 17.6%*

    Her benefit multiple is calculated:
    = (4 x 20%) + (4 x 23%) + (2 x 17.6%)
    = 0.8 + 0.92 + 0.352
    = 2.072
    Liz’s benefit multiple is 2.072

    *Accrual rate is based on Liz’s average contribution rate at the time of her elected contribution which is greater than 5% at each time the member changes their elected contribution rate
  • What is the defined benefit formula?

    Your defined benefit is calculated according to a particular formula. Here’s how it works:

    Defined Benefit formula

    • Accrual % rate is linked to your elected contribution rate
    • Your benefit multiple is based upon the rate or rates at which you contribute to your defined benefit and for how long you contribute at that particular rate. (see the question “How is my multiple calculated?” for further clarification)
    • Final Average Super Salary (FAS) is calculated using the average of the last three years of super salary at your birthday. 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.
  • Should I stay in DB or would I be best to change to an accumulation account?

    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 and seek appropriate financial advice.

    You should consider:

    • your current average contribution rate, particularly if your average 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

    TelstraSuper Financial Planning can help you consider your situation. Call 1300 033 166 to speak with an Adviser.

  • My salary has plateaued and I don’t expect much growth from now until I retire in about 10 years. How will this affect my defined benefit?

    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.

  • I’ve checked how much I’m likely to retire with and I’d like to contribute more while I’m still working. What are my options?

    There are three options to consider:

    1. Optimise your defined benefit

    An average contribution rate of 5% provides you with the maximum employer support to your defined benefit. If your average contribution rate is below 5%, you can increase your elected contribution rate to reach an overall average 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. If you wish to further grow your benefit, you can make additional contributions to your Voluntary Accumulation Account (VAA). You should consider your future expected salary growth.

    3. Transfer to the TelstraSuper Corporate Plus accumulation account

    If the return on your defined benefit is low you may wish to consider transferring out of the defined benefit scheme into the TelstraSuper Corporate Plus 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 once you leave the defined benefit scheme, you can’t rejoin the scheme so it’s important to seek financial advice before making any decisions.

  • How do I calculate the defined benefit concessional contributions which count towards my concessional contributions cap?

    Pre-tax member and employer contributions to defined benefits (which count towards contribution caps) are calculated using the formula below and are known as Notional Taxed Contributions.*

    Formula

    [(Notional Contribution Rate    x     Superannuation Salary at 1 July)
    minus any post-tax member contributions]
    x  1.2
    *The formula is adapted for members who work part-time or leave during the year.
  • What happens to my defined benefit if I go part-time?

    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
  • I’m planning to take some leave without pay in the next year. How will this impact my defined benefit?

    Periods of leave without pay may not count as superannuation membership for the purposes of calculating your TelstraSuper Division 2 Defined Benefit.

    For details regarding the treatment of leave without pay, check with your HR/personnel unit. If you would like information regarding contributions during leave without pay, or how leave without pay affects the calculation of your benefit, please call us on 1300 033 166.

    If you take leave without pay for less than 12 weeks your benefit will continue to accrue however, for your accrual rate to remain unchanged, you’ll need to maintain your elected contribution rate.

    If you take leave without pay for more than 12 weeks, you’re not able to continue to make defined benefit contributions and you won’t receive employer support. As a result, your benefit won’t continue to accrue during this time. If you’ve taken leave without pay for more than 12 weeks, you can choose to continue making contributions to your Voluntary Accumulation Account (VAA).

    If you’ve been granted leave without pay for less than 12 weeks, and that leave is subsequently extended, any defined benefit contributions you’ve paid to the scheme will be repaid to you.

    Leave without pay doesn’t impact your Death & TPD benefit.

  • What happens to my defined benefit if I go on Long Service Leave?
    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.
  • What happens if go on Long Service Leave at half pay?

    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 TelstraSuper has is incorrect, what do I do?
    You should contact your Telstra payroll office as Telstra provides TelstraSuper with your superannuation salary details to enable us to calculate the defined benefit.
  • Can I access my DB under compassionate grounds?

    Yes, you can access your defined benefit if you meet certain criteria prescribed by the Australian Tax Office. Check their website for details.

    If your application is approved by the ATO the withdrawal can be made from your defined benefit and/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.

  • Can my TelstraSuper Division 2 Defined Benefit go backwards/ drop in value?

    No, your defined benefit is based on a set formula which is independent of investment performance.

    If you also have a Voluntary Accumulation Account the benefit will be subject to the investment performance of the investment option you are invested in.

  • How is my defined benefit impacted if I move to a role with a lower salary?
    Your superannuation salary cannot decrease within the defined benefit arrangement. If your salary reduction results in a lower superannuation salary, the previous higher superannuation salary will be retained and contributions will continue to be based on the higher superannuation salary amount. In this situation, it’s important to realise that although the dollar cost to your salary package won’t change, the percentage cost to your reduced salary may be higher.
  • When can I access the Restricted Non Preserved amount detailed on my DB statement?
    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.
  • Can I access my TelstraSuper Division 2 Defined Benefit when I turn 65?
    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 TelstraSuper Division 2 Defined Benefit arrangement. However, if a withdrawal is made from your defined benefit, your Total Benefit Multiple will be reduced and will affect your final defined benefit balance.
  • I’m thinking about retiring in a few years. Is there anything I should know about choosing the best time to make the most of my super?
    Your Final Average Salary (FAS) is calculated as the average of the last three years of your superannuation salary as at your birthday. In order to maximise your defined benefit, there may be value in waiting until your birthday of the year you retire. It’s important to speak to a financial adviser as other factors may impact the timing of your retirement. You can speak to a TelstraSuper Financial Planning Adviser by calling 1300 033 166.
  • I’m expecting a good salary increase in the next few months. How will this impact my super?
    Your super salary is calculated as a percentage of your fixed remuneration (77%, 87% or 100%). The percentage will depend on your employment band and job category. If your salary increase is accompanied with a change in your employment band and job category, it’s important to understand what band and category you’re moving into. This will help you understand the impact a salary increase may have on your super salary and, subsequently, your defined benefit.
  • What insurance do I have in my defined benefit?

    You’re provided with base level Death and Total and Permanent (TPD) cover at no cost through your defined benefit. This cover is included as part of your defined benefit membership until the age of 60.

    If you die or qualify for a TPD benefit before you reach 60, your defined benefit will be calculated using the benefit multiple built up at the date of your death of 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. The Prospective Multiple assumes an Average Contribution Rate of 5% from the date of your death or TPD until age 60, and assumes that your FAS remains the same for that period.

    If you’re older than 60, 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.

    When we’re notified that you’re leaving Telstra your account balance will be transferred into our portable, flexible product TelstraSuper Personal Plus.
    The Death and TPD insurance that is transferred to Personal Plus will be based on your prospective benefit (this is the difference between your benefit when you are made redundant and your benefit if you had retired at age 60).

    For example, if you’re currently aged 50 and your benefit is equal to $400,000 but your benefit at age 60 would be $600,000 - your insurance cover in Personal Plus would be equal to $200,000. Your cover will be split between base cover and top up cover up to the same total value. How much insurance you receive depends on your individual circumstances.

    You can also top up your Death & TPD cover at any time through your VAA.

    We can help you work out the right level of insurance cover for your needs. You can speak to TelstraSuper Financial Planning’s phone based Advisers at no additional cost, as this service is included in your TelstraSuper membership. Contact us on 1300 033 166 or fill in our online contact form.

  • What happens to my defined benefit if I leave Telstra?

    If you leave Telstra, whether to retire or to go to another job, your account balance will be transferred into our accumulation product, TelstraSuper Personal Plus. If you’ve retired, the funds can be used to set up a TelstraSuper RetireAccess income stream account. If you’re leaving Telstra because of redundancy you can find out what will happen with your defined benefit.

    Here’s how it works

    Your account Your insurance
    Benefit calculated on final day of employment at Telstra  
    Transfer automatically to TelstraSuper Personal Plus Base default and top-up death and TPD cover transferred to TelstraSuper Personal Plus
    Defined Benefit portion invested in Cash option for 90 days, then invested in MySuper lifecycle default or the Voluntary Accumulation Account previously elected investment option Premiums become member paid
    VAA investment option stays unchanged Can apply for income protection when continuously employed with new employer
    Benefit calculation details mailed out  

How we can help

You can learn more about your defined benefit super by: