Do you need to max out your member contributions?
Many members of the CSS, PSS or Military Super increase their member contribution levels to the maximum – without another thought. But this is not the only option available. Making high contribution rates in defined benefit schemes may not be the best strategy for everyone. There are others strategies including paying down debt, salary sacrificing into another super fund or building your wealth outside super through managed funds or direct investments.
But I can’t salary sacrifice into my defined benefit fund!
Generally you are not able to make salary sacrifice contributions into the PSS, CSS or most other defined benefit funds. However, this should not stop you from contributing into a new super fund. Everyone’s situation is different, however, having another super fund where you can make salary sacrifice contributions, have some say over how your assets are invested, top up your insurance or receive a more flexible pension in retirement, could give you a better outcome than increasing your after tax member contributions.
What about paying down my debt?
Many members of a defined benefit fund receive generous retirement benefits, but they feel ‘cashflow poor’ during their working lives because they are making high member contributions. They have other goals to achieve, but can’t make much headway due to their restricted cashflow. It is possible to achieve these things and still maintain your generous PSS or CSS benefits. Milestone’s modelling software can show you, based on your personal situation, what is the best strategy for you to help you achieve all of your goals.
I’ve heard of the 10 year rule – is this when I should increase my contributions?
If you are member of the PSS, you may have heard of the ‘10 Year Rule’. The generally held belief is that you should increase your contributions after 10 years to the maximum member level of 10% of salary. However, this may not be the best strategy for everyone. If you have 10 years’ service or less, we recommend that you seek advice from Milestone to discuss how to maximise the PSS 10 year rule.
For more information about this article, please contact your Milestone Financial adviser today.