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Resignation Benefits - Less than 20 years service

Introduction

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The DFRDB Scheme offers:

  • retirement benefits that become available when you have completed:
    • 20 years' effective service, or
    • 15 years' effective service and you have reached your retiring age for rank
  • invalidity benefits if you retire from the ADF for medical reasons
  • benefits for your dependants when you die.

Some Members contacting the Customer Service Centre are interested to know what benefits are payable to Members leaving the ADF after less than 20 years service and how those benefits are calculated.

This online seminar will address these queries and clarify a couple of the areas where we get the most questions.

The following topics are addressed:

  • Your Benefits on Resignation with Less than 20 Years Service
  • Calculating Retirement Pay
  • Commutation
  • Preservation
  • Re-Entering the ADF

Invalidity and Death Benefits Info

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For information on invalidity and death benefits, or retirement after 20 years or more service, please refer to the other online seminars available on this site.

The seminar is designed to help you gain a general understanding of your entitlements as a DFRDB Scheme Member with less than 20 years service. However, should you need any additional information, please ring ComSuper on 1300 001 677, send us an email, or continue looking through this web site.

Entitlements: Less than 20 Years

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Please Note: If you are thinking about resigning from the ADF, one of the things to check is whether you are eligible for Retirement Pay

You will be eligible for retirement pay if you have completed;

  • 20 years effective service or
  • 15 years effective service and you have reached the retirement age for your rank.

You might think it worthwhile to keep serving until you qualify for retirement pay.

The DFRDB Scheme has been closed to new members since October 1991 when the MilitarySuper Scheme commenced. Therefore it is likely that most current Members will have indeed completed 15 or more years of effective service. You can find out how much effective service you have by looking at your most recent Annual Member Information Statement and then adding the effective service that you have accumulated since the date on your statement.

How is My Benefit Calculated?

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The two factors used to work out your retirement pay are:

  • your annual rate of pay and
  • your completed years of effective service

If you qualify for retirement pay, it is worked out as a percentage of your annual rate of pay when you retire. The two factors used to work out your retirement pay are your annual rate of pay and your completed years of effective service.

Your annual rate of pay, for the purposes of calculating your retirement pay, is the maximum rate of pay which applies to your substantive, provisional or probationary rank and pay level at the date of your discharge, including any service allowance or recognised environmental allowance.

Completed Years of Service

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Effective service is the total of your continuous full-time contributory Defence Force service in completed years, plus any periods of past service you may have bought back.

Remember: Benefits in the DFRDB Scheme are calculated on the basis of COMPLETED YEARS OF EFFECTIVE SERVICE. For example:

  • 14 years and 350 days is 14 years of effective service
  • 15 years and 363 days is 15 years of effective service

Retirement Pay as a Percentage

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Retirement pay as a percentage of your annual salary (up to 20 years of effective service):

Completed Years
%
15
30
16
31
17
32
18
33
19
34
20
35
20+
Higher percentages apply

This table shows the amount of retirement pay you can expect to receive, depending on your annual rate of pay and your completed years of effective service (up to 20 years).

Your benefit is worked out by multiplying your Annual Rate of Pay by the Percentage that applies to your Completed Years of Service.

What is Commutation?

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  • In short Commutation is the conversion of part of your retirement pay to a lump sum
  • The maximum amount that you may commute is five times your annual rate of retirement pay on exit.
  • Commutation of a benefit results in a PERMANENT REDUCTION in your pension.
  • If you outlive your life expectancy your retirement pay is NOT restored to the pre-commutation rate.
  • Make your election up to 3 months before retirement, or up to six months after retirement or the date on which a deferred benefit becomes payable
  • An election to commute can only be made by completing the D20 form - Application for Retirement Pay, Commutation & Superannuation Productivity

No Entitlement to Retirement Pay

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You are eligible for a resignation benefit if you have retired from the DFRDB scheme with:

  • less than 15 completed years of effective service, or
  • less than 20 completed years of effective service and you have not reached your retiring age for rank

In these circumstances, you are entitled to the following benefits:

  • a lump sum refund of your contributions paid into the Scheme, PLUS
  • a productivity benefit and superannuation guarantee top-up (that must be rolled over to another fund until you reach your preservation age), PLUS
  • a gratuity in some cases, OR
  • preservation of your benefit (in limited circumstances)

Option 1: Preservation

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The preservation provisions are designed to allow you to move from one scheme to another or in and out of the workforce, without losing the accumulated value of your superannuation.

Generally speaking, there are a couple of basic requirements you will have to fulfil if you want to preserve your benefits:

  • Firstly, you can only elect to preserve your benefits if you are not entitled to receive retirement pay or invalidity pay at the time you leave the Defence Force.
  • Secondly, your preservation election will only be valid if you have accepted some form of full-time Government employment within 90 days of leaving the Defence Force.

If you are entitled to preserve your benefits, you will have one of two options open to you. The first is known as a transfer value; the second is known as a deferred benefit.

Eligibility:

Available if you:

  • are not entitled to retirement or invalidity pay
  • have moved to specified full-time Government employment within 90 days of your discharge

Options:

  • Transfer Value payable to another scheme (not Military Super), OR
  • DFRDB Deferred Benefit

A transfer value is a transfer of your accumulated DFRDB entitlements into another eligible superannuation scheme associated with Government employment. The idea of the transfer value is that your entitlements should be transferred into a scheme which is linked to your new Government employment. For this reason, the eligible schemes are schemes linked to certain types of Government employment. A list of the eligible schemes can be found in the 'Preserved Benefits' Fact Sheet (DB03) available on this website, or by contacting the Customer Service Centre. Please note that MilitarySuper is not an eligible super scheme. This means you cannot pay a transfer value from the DFRDB Scheme into the MilitarySuper scheme.

You can elect to preserve your benefits by filling out the D60, Election for Preservation of DFRDB Rights & Superannuation Productivity.

Option 2: Deferred Benefit

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The second option, a deferred benefit, is a benefit that may be available to you if you want to preserve your entitlements in the DFRDB Scheme but you are unable to take advantage of the transfer value. It is actually a form of deferred retirement benefit, and it is similar to retirement pay.

The idea of the deferred benefit is that you can become eligible to receive retirement pay, at a later date, if you are able to meet some important conditions.

Again, you will have to become employed in full-time Government employment within 90 days of leaving the Defence Force. Secondly, you have to stay in full-time Government employment long enough to qualify for the deferred benefit. ComSuper generally works out your qualifying period by adding together any periods of time that you have served in the Defence Force and any periods of time you then spend full-time Government employment. You will normally qualify for a deferred benefit when the combination of the two reaches twenty years, and your benefit will then become payable.

Eligibility:

  • you must be in full-time Government employment within 90 days of discharge
  • you must stay in full-time Government employment continuously until your total combined service in DFRDB and Government employment reaches 20 years

Deferred retirement pay:

  • your deferred retirement pay is 1.75% of the following two items multiplied together:
    • your annual rate of pay at discharge, and
    • your completed years of DFRDB service

A deferred benefit is worked out by using a formula based on your salary at the time you leave the Defence Force and the number of years of effective service in the DFRDB Scheme that you have completed at that time.

Essentially, the formula involves multiplying your annual rate of pay at discharge by your completed years of service, and then working out 1.75 per cent of the total.

In the next slide, we look at Adam, he is a Captain in the Army and has 17 years service. He is leaving the ADF and going to other Government employment. He will not be joining one of the eligible schemes, so a transfer value is not available to him. He instead elects to defer his benefits.

Adam will need to stay in Govt employment for 3 continuous years to qualify for the deferred benefit.

To work out how much Adam will receive at the end of the 3 continuous years, we use the formula mentioned earlier:

Deferred benefit:

Calculating Adam's Annual Retirement Pay

Annual rate of pay at discharge × completed years of service × 1.75%

$74,963 × 17 years × 1.75% = $22,301.49 per year (before tax)

First, we multiply his annual rate of pay by the number of completed years of service then multiply this by 1.75%. In this example, we see that Adam's Annual rate of retirement pay would be $22,301.49 per year (before tax).

Adam can elect to commute a portion of his deferred benefit to a lump sum, just as he would be able to commute retirement pay more information regarding this can be found in other online seminars, and in the DFRDB Book, available on this website. The benefit is also subject to tax just as retirement pay is subject to tax, and is adjusted twice each year in line with increases in the Consumer Price Index (CPI).

Features of Your Retirement Pay

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Generally, retirement pay is paid fortnightly by direct deposit to an account with any approved bank, building society or credit union. The account must be with a financial institution in Australia and must be in your name. It may be a joint account, provided your name is one of the account holders.

If you have chosen to receive a lump sum as part of your benefit, the amount is generally paid to your nominated account within 15 working days of your discharge date or the date we receive your correctly completed paperwork, whichever occurs later. You may choose to take that lump sum (minus tax) or roll over all or part of it to a suitable superannuation fund of your choice if you are under 65.

Your pension will generally commence on the first available pension payday after your discharge date, date you qualify for your deferred benefit, or the date that we receive all your correctly completed documentation, whichever date is later.

Please bear in mind that processing times are subject to workloads at the time a benefit application is received. Ensuring that you have completed the paperwork properly will help to lessen the likelihood of delays.

If you are anxious to know how the processing of your benefit is proceeding, you can ring the Customer Service Centre.

Resuming Full-Time ADF Service

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Don't forget, just because you've left the Defence Force for now doesn't mean you won't ever want to go back.

The DFRDB Scheme has been closed since 1991 when MilitarySuper began. Therefore, when you return to the Defence Force performing full-time service, you will join MilitarySuper - unless your circumstances allow you to make a DFRDB or MilitarySuper scheme election and you elect not to join MilitarySuper.

You must make a scheme election BEFORE the start of your full-time Defence Force service.

You must also make a scheme election every time you have a BREAK between periods of full-time Defence Force service. You must make your election BEFORE the start of the next engagement.

If you don't make a valid election, you automatically join MilitarySuper.

Membership of MilitarySuper is FINAL AND IRREVERSIBLE for your engagement and all future full-time Defence Force engagements.

Please note that Invalidity Pay recipients considering resuming full time ADF service should contact ComSuper, as different arrangements may apply

Re-entering the ADF

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Not everyone gets the option to decide whether or not to join Military Super.

Some people must join MilitarySuper as a contributor.

The following people returning to the Defence Force on full-time service MUST join MilitarySuper:

  • You received a refund of contributions:

Any person who took a refund of contributions from the DFRDB Scheme at the end of their Defence Force service must join MilitarySuper. Your previous DFRDB service counts for MilitarySuper purposes.

  • You have a deferred benefit and you are returning to the Reserves for less than 12 months:

Any person with a DFRDB Scheme deferred benefit who is returning to the Defence Force on continuous full-time service (CFTS) in the Reserves for less than 12 months must join Military Super.

You will receive a credit towards your MilitarySuper benefit.

  • You paid a transfer value paid out of the DFRDB Scheme:

Any person who paid their DFRDB Scheme entitlement into another superannuation scheme as a transfer value must join MilitarySuper.

  • You were required to make a scheme election before the start of your Defence Force service and you did not make an election:

Lastly, any person who does not make a DFRDB or MilitarySuper scheme election before the start of their full-time Defence Force service must join MilitarySuper.

Remember to contact ComSuper immediately if you are considering re-entering the Defence Force.

DFRDB Scheme Election

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Each of the following people must make a DFRDB or MilitarySuper scheme election:

  • Recipients of retirement pay
  • Members who have a DFRDB deferred benefit and are resuming full-time Defence Force service in the Reserves for 12 months or more

When re-entering the Defence Force, there are some important things to remember...

You can make your election by completing the D100 form available from this website.

You must make a valid election before any of the following events:

  • Every time you resume full-time Defence Force service in the Permanent Forces, or continuous full time service in the Reserves, you must make a valid scheme election before you start the service.
  • Every time you have a break in service in the Defence Force, you must make another valid scheme election before you start your next period of full-time Defence Force service.
  • If you complete continuous full time service of less than 12 months in the Reserves then, without a break in service, you change to the Permanent Forces, or continuous full time service of 12 months or more in the Reserves, you must elect again before the start of the continued service.

It is important to remember that ifyou don't make a valid election before the start of your full-time Defence Force service, you will automatically join MilitarySuper. Membership of MilitarySuper is FINAL AND IRREVERSIBLE for your engagement and all future full-time Defence Force engagements.

You will always return to MilitarySuper each time you return to full-time service in the Defence Force.

Joining MilitarySuper

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If you elect to join MilitarySuper:

  • You automatically join MilitarySuper as a Contributor, and you will accrue a MilitarySuper benefit.

It is important to note that you will also join MilitarySuper if your election is made after you return to full-time Defence Force service or you don't make any election.

  • Membership of MilitarySuper will apply for this, all future periods of full-time Defence Force service
  • Your DFRDB retirement pay is suspended for the duration of full time service. Payment will resume after the service ends and will include any CPI increases that were applicable over the period

For more information please visit the DFRDB website or contact the Customer Service Centre.

Declining to Join MilitarySuper

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The result of not joining MilitarySuper depends on the nature of your engagement. There are two possible situations:

The first situation is that you resume continuous full-time Defence Force service in the Reserves on an engagement of less than 12 months.

The second situation is that you resume full-time Defence Force service either in the Reserves on continuous full-time service on an engagement of 12 months or more, or in the Permanent Forces.

These two situations are discussed over the next two pages.

Declining to Join: Situation 1

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Returning to the Reserves on Continuous Full-Time Service of less than 12 months

If you return to the Defence Force in the Reserves on a continuous full-time engagement of less than 12 months and don't join Military Super, the consequences are as follows:

  • you will continue to receive your DFRDB Scheme retirement during the period of your re-engagement
  • you will not contribute to the DFRDB Scheme during your engagement
  • but you will accrue a productivity benefit during the period of your engagement.

Declining to Join: Situation 2

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If you resume full-time Defence Force service either in the Reserves on a continuous full-time service n engagement of 12 months or more, or in the Permanent Forces, and don't choose Military Super, the consequences are as follows:

  • you will contribute to the DFRDB Scheme for your period of service (including any extension or continuation of that service without a break)
  • your DFRDB Scheme retirement pay will be cancelled during the period of your engagement
  • at the end of your service, your retirement pay will be re-calculated based on total years of service (including your re-entry period) and:
    • your retirement pay will recommence at equal or higher rate than before your service
    • you may also be entitled to an additional DFRDB Scheme commutation lump sum on your exit

More Information

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More information on resuming full-time Defence Force service may also be obtained from other fact sheets and online seminars available on this website

There is another online seminar dealing with retirement, called the "Retirement Benefits - More than 20 years"

There are two fact sheets dealing with re-entry. The first fact sheet is called "Re-Entering the ADF (former DFRDB contributors who received a refund of contributions)". This is the DF09A Fact Sheet. The second fact sheet is called "Re-Entering the ADF (DFRDB recipients of retirement pay or people with deferred benefits returning to the ADF)". This is the DF09B Fact Sheet.

There is also more information on the D100 scheme election Form. This form is called "Re-entering the ADF-Scheme Election D100 Form".

Forms and Fact Sheets

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What forms do I need and when can I expect to receive my benefit?

First, you need to obtain a benefit application form from your Pay Office or this website or by calling the Customer Service Centre. There are different forms and fact sheets to cater for different types of exit and each of them gives information on the range of benefit choices open to you.

Relevant forms and fact sheets are:

  • The D20 form - Application for Retirement Pay, Commutation & Superannuation Productivity
  • The D60 form – Election for Preservation of DFRDB Rights and Superannuation Productivity Benefit
  • The D1 form - Application for Refund and Gratuity and Superannuation Productivity
  • The D100 form - Re-entering the ADF Scheme election (D100)
  • About to Leave the ADF Fact Sheet (DB07)
  • Re-entering the ADF Fact Sheets (DF09A & DF09B)
  • Preserved Benefits Fact Sheet (DB03)

DFRDB Contacts

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More detailed information on anything discussed in this seminar can be obtained by contacting the Customer Service Centre.

Our helpful staff can also provide benefit estimates, general information, tax information and initial advice.

To speak to an experienced information officer about Retirement and resignation Benefits or any other superannuation related matter, please ring 1300 001 677 or 1300 001 877 (for pensioners).

Members overseas, please call the switchboard on 02 6272 9000.

Fax forms and queries to us on 02 6272 9617 or pop it in the mail.

You can also email your enquiry by following the link on this web site under 'Contact Us'

And finally...

Leaving work is one of the biggest decisions you will have to make and there are lots of things that you should consider before that final day. However, if you plan for your retirement and consider all your available options, you should be able to look forward to a long, happy and financially secure retirement.

We hope that this seminar has given you a few ideas to consider. Remember, only you can decide what you really want from your retirement... so start planning now.