Glossary

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Accrued Benefit Multiple

One of the two factors which define your PSS benefit.  It is generally determined by how many years you contribute and your rate of contribution. 

Active

An active manager has a benchmark to operate against; but the manager sets out to beat the benchmark. This is done by buying shares in different proportions from their benchmark weight. For example, again if Newscorp is 10% of the index by value, an active manager might hold 13% Newscorp in the portfolio if the manager expects Newscorp to outperform. If Newscorp is expected to underperform, then the manager might hold only 7%. So the manager actively moves away from benchmark weight in companies where the manager has conviction that the shares will either outperform or underperform.

Active management

An investment management style that aims for returns above a set benchmark, identifying mis-priced securities, which the investor trades to make a profit.

Alternative Investments

Non-traditional assets, that is, assets outside the traditional asset classes of shares, fixed interest and property. They include infrastructure assets, buy-out funds and venture capital.

ARIA

The Trustee of the PSS.

We provide superannuation services and products to Australian Government employees and employers through three Schemes – the Commonwealth Superannuation Scheme (CSS), the Public Sector Superannuation Scheme (PSS) and the PSS Accumulation Plan (PSSap).

Asset Classes

An asset class is a group of financial assets that have similar investment characteristics (such as Australian shares or Australian property).

Benchmark

Scheme managers and investors use various indexes or other market measurements as 'benchmarks 'to judge the performance and risk of a portfolio in comparison with other investments.

Cash Investment Option

An investment option which provides preserved benefit members the opportunity to have more surety of earnings for their taxed accumulation components, in exchange for the likely higher but more volatile earnings delivered by a balanced fund (the current PSS Default Fund).

Ceasing PSS membership

When you elect to cease PSS membership, one of the following two options will apply to you:

• If you are eligible to be a member of the PSSap you will automatically join the PSSap or
• If you are not eligible to be a member of the PSSap you can elect to join a superannuation fund of your choice provided your employer agrees to make superannuation contributions on your behalf into that superannuation fund.

It is very important that you discuss with your employer your intention to cease PSS membership and the options available to you to join another superannuation scheme. Your PSS membership will not cease until you have become a member of another superannuation scheme. It is not sufficient that you elect to cease PSS membership; you must also become a member of another superannuation scheme for the cessation of your PSS membership to take effect.

Concessional contributions

Previously known as deductible contributions. These are contributions made from before-tax income.

Concurrent membership

If you have joined the PSS with one Commonwealth employer, and then join again with another Commonwealth employer.

Contributions

You have the flexibility to choose a contribution rate of between 2% and 10% of your salary (as a whole percentage). Or you can choose not to contribute at all. We understand that your financial needs can vary and the PSS allows you to change your contribution rate at any time.

CPI-indexed pension

A pension which is indexed half yearly in line with the consumer price index.

Debt

Investing in 'debt' includes buying government bonds, fixed interest or cash investments. Debt generally offers less risk but also lower returns than shares or property.

Defined benefit fund

A superannuation fund in which the benefits paid to the member are defined in advance of the member's retirement. The benefit is usually expressed as a proportion of the member's Final Average Salary (FAS). In the PSS, benefits are defined in terms of salary and the rate of contribution paid by the member.
In this style of fund, it is generally the employer rather than the member that carries the investment risk.
Most funds in Australia are accumulation or defined contribution - style funds, whereby a set contribution is paid into the fund and accumulates with investment earnings. Generally, the member carries the risk of investment performance.

Earnings Rate

This is what the PSS Fund earns on its investments, less fees and taxes. Fund earnings are applied to member’s accounts on a regular basis. Fund earnings may be positive or negative.

Eligible child

In relation to a person who has died, means a child (including an adopted child, an ex-nuptial child a stepchild or a ward of either the member or his/her spouse, or any other person whom the Board determines is to be treated as a child of the deceased) of the person or of a spouse of the deceased person.

Eligible spouse

He or she is a person of the opposite sex who had been living as husband or wife (including de facto) for a continuous period of at least three years.

Employer-financed component

A defined amount financed by your employer. This is the balance required to make up your total benefit after your member and productivity components have been included.

Final Average Salary (FAS)

The average of your annual superannuation salaries on your three birthdays before leaving the Scheme, used as the base to calculate your retirement benefit. If you work part-time, your equivalent full-time salary is used to calculate your FAS.

Financial planning

Financial planning is the process of meeting your life goals through the proper management of your finances. Your life goals could include buying a home, saving for your children's education, managing debt or planning for retirement.

Financial planners use a six-step process that helps you take a 'big picture' look at where you are and where you want to be financially. Using this process they help you work out what you need to do now and in the future to reach your goals.

The six steps of the financial planning process are:

1. Gathering your financial data - such as details on your income, debt level, commitments, etc.
2. Identifying your goals.
3. Identifying any financial issues - or deficiencies between where you are now financially and where you want to be.
4. Preparing your financial plan - which will identify recommended investments and will address your attitude to risk.
5. Implementing your financial plan.
6. Reviewing and revising your plan - to ensure it stays up-to-date and relevant to the economic climate and your changing lifestyle.

Copyright: FPA 2002

Full Benefits membership

As a 'full benefits' member, you are entitled to the maximum levels of invalidity and death cover available under the PSS, as well as the maximum allowable retirement and pension benefits, depending on your level of contributions, length of service and salary at the time you exit the Scheme. See also Limited benefits membership.

Fully Indexed

All PSS pensions are automatically adjusted twice each year in accordance with upwards percentage changes in the Consumer Price Index (CPI).

Invalidity benefits

An invalidity retirement pension is payable if the Trustees agree to your retirement because you suffer a permanent medical condition which is likely to stop you from working again. If you are totally and permanently incapacitated to the extent that you are unlikely to work again in any occupation for which you are reasonably qualified by education, training or experience (or could become so after retraining), you may be retired on invalidity grounds and become entitled to payment of invalidity benefits.

Partial invalidity benefits: A partial invalidity benefit is a form of income maintenance, paid as a pension when your salary is reduced because a permanent medical condition causes you to be downgraded or to work reduced hours. It is also payable if you retired on medical grounds and then returned to work in a position lower than the one you held when you were first retired on medical grounds.

Involuntary retirement

Retrenchment or redundancy, when your employment is compulsorily terminated by your employer, or when you accept an offer of retrenchment or a redundancy package, or when your employment is terminated on inefficiency grounds, as a result of having lost essential qualifications or, in restricted cases, on the termination of contracts.

Limited benefits membership

If a medical assessment suggests you may take excessive sick leave during the first three years of membership, you may be classified as a 'limited benefits' member. This means that benefits payable on invalidity or death in the first three years of membership are reduced.
You will be classified as a Limited Benefits member if you don't complete your CMAPS form within 14 days of joining the Scheme. See also Full Benefits membership.

Marital relationship

Broadly speaking 'marital relationship', at a particular time, means a permanent and bona fide domestic relationship between a PSS member or pensioner and another person, of the opposite sex, where:

• they had been living as husband or wife continuously for at least three years immediately before that time; or
• they had been living as husband or wife continuously for less than three years immediately before that time and, in the opinion of the Trustees, they ordinarily lived as husband or wife on a permanent and bona fide domestic basis having regard to any relevant evidence, including whether:
• the person was wholly or substantially dependent on that other person;
• they were legally married to each other;
• they had a child who was born of their relationship or who was adopted by them during the period of the relationship;
• they jointly owned a home which was their usual residence; and
• any other evidence the Trustees consider relevant.

Where a marital relationship commenced after the pensioner's 60th birthday and had lasted less than 5 years at the time of death of the pensioner, a spouse's application form should still be completed and sent to us as it is possible that a benefit may still become payable as an act of grace.

Maximum Benefit Limit

The maximum potential lump sum benefit allowed under the PSS rules based on the now abolished Reasonable Benefit Limits that applied to all superannuation schemes throughout Australia on 1 July 1990. Once you reach this limit, you must stop contributing to the PSS. Changes to MBLs effective from 1 January 2008 were announced in the 2007 Budget.

Member component

An amount equal to all personal contributions made by a member plus Fund earnings.

Member statement

To help you keep a record of your contributions, as at 30 June each year we calculate your accrued contributions, fund earnings and potential benefits. You can also access your Member Statement from this website.

Minimum retiring age

The minimum retirement age applicable to a person with respect to terms and conditions of employment.

Non-concessional contributions

Previously known as undeducted contributions. These are personal contributions made after June 1983 from after-tax salary.

Passive

A passive manager is required to track the performance of the relevant index as closely as possible. For example, our passive Australian equities manager, CFS, tracks the performance of the S&P/ASX300 ex Listed Property Trusts (that is the Funds benchmark for Australian equities). CFS does this by buying shares for our portfolio in the same proportion as they occur in the index. For example, if Newscorp is 10% of the index by value then our CFS portfolio will contain 10% Newscorp by value.

Passive management

Aims to equal the overall annual change in an index e.g. the Dow Jones Index.

Pension

A pension payable under the Scheme's rules.

Period of membership

The period starting on a person's first day of membership and ending on his or her last day of membership.

Post-June 1990 productivity

Fortnightly contributions paid by a member’s employer after June 1990. This is payable from a taxed source.

Post-June 1994 invalidity component

Paid as a result of total and permanent incapacity and in consequence of termination of employment.

Pre-assessment payments

Partial income maintenance from the time any sick leave expires until an assessment is made of whether you are, to be retired on invalidity grounds.

Pre-July 1983 component

The amount of a member’s super which relates to eligible service before 1 July 1983.

Pre-July 1990 productivity

Productivity contributions paid by a member’s employer for the period of prior to July 1990. This is payable from an untaxed source.

Preservation age

The minimum age at which you can take a cash lump sum without any restriction.   

Productivity component

An employer-contributed amount, which is dependent on a member's salary, paid fortnightly, to which fund earnings are applied and forms part of any benefit payable from the PSS. The productivity component is paid from a taxed source.

Property

Investors may buy property, such as office buildings, directly or through a property trust. Returns come from rent, property development and market increase in property values. Over the long-term, property investments have a lower risk and return than shares.

PSS Default Fund

The current PSS Fund which we are now referring to as the 'default' Fund to differentiate it from the Cash Option introduced in December 2004. Unless members elect to transfer their funded accumulation components into the Cash Option they will remain in the PSS default Fund.

Reasonable Benefit Limits (RBL)

Under the Better Superannuation legislation, Reasonable Benefit Limits (RBL) were abolished on 1 July 2007. Even though RBLs no longer apply to contributions made after 1 July 2007, the PSS is still required to maintain RBL information.

Regular employee

A person who is a permanent full-time employee, a permanent part-time employee or a temporary full-time employee for at least three months. A temporary part-time employee who is employed for at least three months and has access to sick and recreation leave is also a regular member.

Retrenchment or redundancy

See Involuntary Retirement.

Rollover or transfer of funds.

In superannuation terms, this is the transfer of superannuation lump sum payments, into a superannuation fund, approved deposit fund or deferred annuity in order to avoid the requirement to pay lump sum tax (if the rollover is not accessed until the minimum retirement age).

Rules

The rules for the administration of the PSS are set out in the Trust Deed.

Shares (or Equities)

Shares represent part-ownership of a company. They can deliver a profit through share price increases and dividends. Shares may provide greater long-term returns than other investments, though they do have greater short-term fluctuations.

 SIS

Superannuation Industries (Supervision) Regulations. The governing federal legislation covering superannuation and the superannuation industry. SIS provides the legislative basis of the Superannuation Guarantee.

SIS Upper Limit

The Superannuation Industry (Supervision) (SIS) Regulations introduced a number of changes from 1 July 1999. One of these changes relates to the amount of the lump sum that you can access before reaching preservation age.

The SIS upper limit is the amount you could have taken as a lump sum had you received an involuntarily retirement (retrenchment) on 30 June 1999.

Any lump sum benefit we pay you before you reach preservation age cannot exceed your SIS upper limit. If you preserve your benefit in the PSS and claim your benefit before reaching your preservation age, your lump sum cannot exceed your SIS Upper Limit. You will need to pay any balance that exceeds your SIS Upper Limit into a rollover fund.

Super Co-contributions

An additional super contribution paid by the Australian Government to low income earners who make after-tax contributions.

Superannuation Guarantee (SG)

A policy introduced in July 1992 which provided that all employers are required to contribute a prescribed level of contributions on behalf of their employees to a complying superannuation fund.
The PSS Scheme exceeds the SG prescribed minimum.

Superannuation Contributions Surcharge

A tax on certain superannuation contributions, specifically regarding higher income earners, which was introduced from 20 August 1996 and abolished from July 2005. Surcharge debts for the period are recorded on member accounts and, if not paid during membership, must be paid when a benefit is claimed.

Superannuation Lump Sum

Previously known as an Eligible Termination Payment. A Superannuation Lump Sum Payment consists of several components each with their own particular tax treatment.

Superannuation salary

Contributions are based on a percentage rate of your 'superannuation salary', which is your basic salary plus any recognised allowances. Additional payments such as overtime, accommodation or travel are not counted as 'superannuation salary'.

Ten Year Rule

One of the two limits on the amount of PSS benefit you can accrue. Irrespective of your actual contribution rates, your employer's maximum share of your PSS benefit is calculated as if you had contributed at 5% for 10 years and at 10% for the balance of your membership.
If your contribution rates exceed this average, an adjustment is made to the normal Benefit Multiple calculation.

Taxable component

This includes concessional contributions made since 1 July 1983. It can contain taxed and untaxed amounts.

Taxed component

Consists of post-June 1990 productivity member contributions, Super Co-contributions and transfers from other super funds. These component were previously referred to as ‘funded’.

Tax offset

A reduction in tax liability. Often a tax offset is described as a percentage, for example, an offset of 10% to a pension. It is different from a tax deduction, which reduces your taxable income.

Terminal illness

A member will be taken to be terminally ill if it is certified by two medical practitioners (at least one of these a specialist) that they are suffering from an illness which in the normal course would result in death within a period of 12 months. The new rules became effective on 12 September 2007.

Top Marginal Tax Rate (MTR)

The highest income tax rate. For 2007/08 the top MTR is 45%.

Totally and permanently incapacitated

If a member suffers from a physical or mental condition that will result in them being unlikely ever to work permanently again in a job for which he or she is reasonably qualified by education, training or experience or could be so qualified after retraining.

Transfer value

An Superannuation Lump Sum Payment from a superannuation scheme on termination of employment other than on the grounds of invalidity.

Trust Deed

The deed established by the Superannuation Act 1990.

Trustee

A person who holds office as a Trustee of the Board of Trustees and includes the Chairperson

Unallocated Earnings

Previously unallocated earnings related to the notional fund earnings applied to a member’s account from 30 June 2003 to 30 June 2007. From 1 July 2007, ARIA will allocate fund earnings in a way that reflects actual investment performance. Allocated earnings may be positive or negative

Untaxed component

Consists of your employer component and any pre-July 1990 productivity contributions. This component was previously referred to as ‘unfunded’.