‘ADF Super’ – What it Means to You

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Background

Superannuation is about providing our ADF personnel with income for their retirement. These retirement savings grow in two ways: The ADF member pays into their superannuation scheme, and Defence also pays into the scheme for them.

Benefits are usually paid when the ADF member retires from the workforce. If they are discharged due to injury or illness they may be eligible to receive benefits from their scheme. If they die, their dependants may be eligible to receive benefits from their scheme.

Currently, ADF members can be members of one oftwo superannuation schemes:
· Defence Force Retirement and Death Benefits (DFRDB) scheme. This scheme was closed to new members on 1 October 1991.
· Military Superannuation and Benefits Scheme (MSBS). This is commonly known as Military Super.

The Government has announced it will seek to introduce new military superannuation arrangements from 1 July 2016.

The proposed new military superannuation arrangements will apply to:
Those joining the ADF for the first time on and after 1 July 2016
– Serving (contributing) MSBS members who choose to join ADF Super; Current serving (contributing) MSBS members will not be compelled to move to ADF Super.
– Former serving (preserved) MSBS members who re-join the ADF and choose to become a member of ADF Super; and
– MSBS and Defence Force Retirement and Death Benefits (DFRDB) scheme members who receive retirement pay and re-join the ADF on a full time basis or as a Reservist on Continuous Full Time Service on or after 1 July 2016.

Current serving (contributing) DFRDB members are unable to transfer to ADF Super.
The proposed new military superannuation arrangements will establish ADF Super and ADF Cover and the current MSBS will close to new members from 1 July 2016.

ADF Super – What’s different?

From 1 July 2016, ADF Super will be the default fund for anyone joining the permanent ADF for the first time.
ADF Super is a fully-funded accumulation plan with an employer contribution rate of 16.4 per cent.
ADF Super is underpinned by a new death and invalidity scheme (ADF Cover)
Members will be able to transfer their accumulated benefits to a new fund at any time.
Members will not be required to make personal contributions, unless they wish to.
Members will be able to make salary sacrifice contributions in line with relevant superannuation or taxation legislation.
ADF Super members will be able to choose any complying fund.

Frequently asked questions:

1. Why is the Government setting up a new military superannuation arrangement?
The introduction of the new military superannuation arrangement forms an important part of the Government’s plan to provide flexible working conditions for all ADF members under Project SUAKIN, the ADF’s future workforce model.
The new arrangement provides flexibility to accommodate modern working/lifestyle choices of ADF members that are not available under the current military defined benefit schemes.  For the first time, the new arrangement will give members choice of fund which includes the ability to transfer their accumulated benefits to a new fund if they leave the ADF. This is an important consideration as the majority of ADF members serve for less than ten years.
Importantly, members of the Military Superannuation and Benefits Scheme (MSBS) who are currently serving can choose to stay in their current scheme, or move to the new arrangement. There will be no compulsion to transfer to the new arrangement.
There will be no requirement for members to contribute under the new arrangement. This provides greater choice for individuals in how they manage their finances at various stages of their working life. It also gives members the ability to work part-time without having to make contributions to superannuation as if they were working full-time.

2. What will the new military superannuation arrangement look like?
The new arrangement includes a fully funded superannuation accumulation fund, to be known as ADF Super. The employer contribution rate will be 16.4 per cent, in recognition of the unique nature of military service.
The new arrangement will commence on 1 July 2016 and apply to:
-Those joining the ADF for the first time on and after 1 July 2016;
– Serving (contributing) MSBS members who choose to join ADF Super;
– Current serving (contributing) MSBS members will not be compelled to move to ADF Super;
– Former serving (preserved) MSBS members who re-join the ADF and choose to become a member of ADF Super; and
– MSBS and Defence Force Retirement and Death Benefits (DFRDB) scheme members who receive retirement pay and re-join the ADF on a full time basis or as a Reservist on Continuous Full Time Service on or after 1 July 2016.
Current serving (contributing) DFRDB members are unable to transfer to ADF Super.
Unlike the Defence Force Retirement and Death Benefits (DFRDB) scheme and the MSBS that require compulsory contributions by the member, the new arrangement will not require members to contribute to their superannuation.
Under the new arrangements, existing members will be able to choose which superannuation fund they belong to and, for the first time, will be able to transfer their accumulated benefits to a new fund at any time. This is an important consideration as the majority of ADF members serve for less than ten years.
ADF Super will be the default fund and will be managed by the Commonwealth Superannuation Corporation, which currently administers all other Commonwealth schemes, including the current and past military superannuation schemes.
Recognising the unique nature of military service, the new arrangement will continue to provide ADF members with statutory death and invalidity cover. Importantly, these benefits will be consistent with those provided by the MSBS.
MSBS will be closed to new members from 1 July 2016.

3.  I am currently serving in the ADF. Do I have to move to the new military superannuation arrangement?
No. There is no compulsion for current serving permanent ADF members to move to the new military superannuation arrangement.

4.  Can I transfer my MSBS benefits into ADF Super?
MSBS members who choose to join ADF Super must preserve their employer benefit in MSBS but can choose to transfer their member and ancillary benefits to ADF Super.  These members will begin accumulating superannuation in the new scheme upon transfer.

5. Can I transfer my DFRDB scheme benefit into ADF Super?
No. There are no changes for current serving permanent DFRDB members under this new arrangement.

6.  As a current serving permanent MSBS member, can I move to the new ADF Super from 1 July 2016 and then move back to MSBS at a later date?
No. Once you elect to move to the new ADF Super you cannot move back to MSBS.

7. Will I be required to make contributions under the new military superannuation arrangement?
No. There will be no requirement to make personal contributions under the new military superannuation arrangement.  Members will be able to make voluntary personal contributions into their choice of super fund.

8. Can I salary sacrifice under the new military superannuation arrangement?
Yes. You will be able to make salary sacrifice contributions under the new military superannuation arrangement in accordance with relevant superannuation/taxation legislation.

9.  I’m a Reservist, can I contribute to ADF Super?
Reservists not undertaking continuous full-time service cannot contribute to ADF Super.  Reservists working part-time days and earning tax free salary do not qualify for the Superannuation Guarantee (SG) and are not paid superannuation under current arrangements.
Reservists commencing continuous full-time service for the first time, on or after 1 July 2016, will be covered by the new arrangement and can join ADF Super or another fund of their choice.  Under the new arrangement, there will be no requirement for members to contribute to their superannuation; however, members may make voluntary contributions.

10.  I am returning for a period of continuous full time service after 1 July 2016. Do I have to move to the new military superannuation arrangement?
Members who have their MSBS employer benefits preserved will automatically return to MSBS membership. These members may choose to move to the new superannuation arrangement.

11. I have reached my MSBS Maximum Benefit Limit (MBL), what happens if I move to ADF Super?
Members who have reached their MBL and choose to join ADF Super, will have their employer benefit preserved in the MSBS and they will begin accumulating superannuation in ADF Super. Members may also choose to roll their MSBS member benefit into ADF Super.

12. Can I choose another superannuation scheme?
Yes. Employer super contributions made under the new military superannuation arrangement can be paid into any fund that can accept Superannuation Guarantee contributions, provided that fund accepts payments by electronic funds transfer.

13. What should I do if I am approached by a superannuation provider asking me to join their fund?
A decision to move to the new arrangement will close off the option for a member to return to the MSBS.  It would be appropriate to wait for further details on implementation of the new arrangement prior to seeking independent financial advice and before making any decision.

14. How does the default option work in the new military superannuation arrangement?
If a member does not nominate an alternative scheme for their employer contributions to be paid into, those contributions will be paid into the default fund to be known as ADF Super. ADF Super will be established and managed by the Commonwealth Superannuation Corporation which currently administers all other Commonwealth schemes, including the current and past military superannuation schemes.

15. How will ADF Super be taxed?
ADF Super will be taxed in the same way that all funded accumulation superannuation is taxed.  Further information is available from the Australian Taxation Office.

16. What fees and charges will I have to pay under ADF Super?
These details will be worked out as part of the implementation plan for ADF Super and will be made available before the new scheme commences.

17. How long will I have to decide if I want to move to ADF Super?
You will not be able to move to ADF Super until the new superannuation arrangement commences on 1 July 2016. There is no time pressure to decide. Existing MSBS members may elect to move to the new military superannuation arrangement at any time after 1 July 2016.

18. Will ADF Super provide death and invalidity cover?
Yes. Recognising the unique nature of military service, the new military superannuation arrangement will continue to provide cover for death and invalidity. Importantly, these benefits will be consistent with those provided by the MSBS.

19. How will I know if it is beneficial for me to move to the new military superannuation arrangement or remain in my existing scheme?
Members contemplating moving to the new military superannuation arrangement should seek independent financial advice closer to the date of commencement, which is 1 July 2016.

20. Will Defence pay for independent financial advice that I seek in relation to seeing if the new military superannuation arrangement is better for me?
As there is no compulsion to move to the new military superannuation arrangement, Defence will not be providing financial support to members who seek financial advice.

21. What is the superannuation guarantee and does ADF Super comply?
Superannuation Guarantee (SG) is the compulsory superannuation contributions made by employers on behalf of their employees. ADF Super will comply with the requirements of SG legislation.

Sample Case Studies

The following scenarios are illustrative of how the new superannuation arrangement will enable current and future ADF members to make superannuation choices relevant to their circumstances.

Any information provided in the following scenarios is general information only and does not take into account a member’s personal objectives, financial situation or needs. This information is not financial advice. Defence recommends obtaining financial advice specific to your personal situation before making any financial or investment decision.

Brendan
Brendan joined the ADF in 2000 and is a member of MSBS. He is wondering if he has to move to ADF Super or make a choice between MSBS and ADF Super.

As a current MSBS member Brendan will not be compelled to make a choice as to which scheme he belongs. Brendan can continue in MSBS with no change to his MSBS arrangements or he can choose to join ADF Super. Brendan understands that if he chooses to join ADF Super he cannot move back to MSBS.

Mark
Mark joined the ADF in 2013 and is a member of MSBS. He is thinking he will serve for about eight years before looking for a job in the private sector. Mark is considering moving to ADF Super on 1 July 2016 because he can move any accrued super benefit in ADF Super to another super scheme when he leaves the ADF.

Mark also knows that as a member of ADF Super he will no longer have to make mandatory 5 per cent contributions, providing him with more take home pay to meet expenses in his private life.

Sally
Sally is in MSBS having joined the ADF in 2010. She is on part-time leave without pay and, although she is being paid on a pro-rata basis, she has to contribute to MSBS at the full-time rate in accordance with the conditions of MSBS. Sally moves to a permanent part-time arrangement in August 2016, after the new military superannuation arrangements have been introduced.

Moving to ADF Super enables Sally to stop making mandatory contributions of 5 per cent of her pay, which will offset some of the financial loss of not earning a full-time wage. She will also be able to move her super benefit accrued in ADF Super when she leaves the ADF in the future. Sally seeks financial advice to help her decide if ADF Super is best suited to her circumstances.

Michelle
Michelle is joining the ADF as an Officer, having already had a successful career in teaching. She will commence work in August 2016, after the new superannuation arrangements have been introduced.

Michelle already has a superannuation fund in her current career and wishes to continue in that fund. Michelle can nominate for her Defence employer contributions of 16.4 per cent to be paid into her existing super fund. This is what she nominates when she joins the ADF. Alternatively, she could have decided to move the funds in her current super fund to the new default military fund, ADF Super.

Brett
Brett is a qualified independent mechanic looking to join the ADF full-time to expand his skills and knowledge. To date, Brett has been paying into a self-managed superannuation fund and wishes to continue to do so when he joins the ADF. He commences work in the ADF in August 2016, after the new superannuation arrangements have been introduced.

Brett can choose whether to have his employer super contributions paid into a retail super fund, his self-managed super fund or ADF Super, which is the default option that applies if Brett makes no choice. Brett seeks financial advice to help him decide which is the best option for his circumstances. Importantly, even if Brett chooses a fund other than ADF Super, he is still covered by the ADF’s statutory death and invalidity scheme, ADF Cover.

Alice
Alice is in the Navy Reserve having retired from the permanent Navy in 2010. As a member of MSBS, she was required to preserve her employer benefit in that scheme. She commences a period of continuous full-time service in August 2016, after the new military superannuation arrangements have been introduced.

As a returning member, Alice can again be a contributing member of MSBS or she can choose to join ADF Super. If Alice chooses to join ADF Super, her MSBS employer benefit remains preserved in the MSBS and she will begin accumulating superannuation in ADF Super.

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