We’re the first to admit that some super terminology can be confusing. Here are a few that some members find challenging, and what they actually mean.
This glossary is generic, for information regarding your benefits, go to the relevant pages for your specific fund or contact us.
A – B – C – D – E – F – G – H – I – J – K – L – M – N – O – P – Q – R – S – T – U – V – W – X – Y – Z
The ESSSuper Accumulation Plan benefits are based on contributions plus investment returns, less expenses and tax. Essentially Accumulation Plan benefits operate like a bank account, but are a vehicle that allows you to save for your retirement in a low cost tax-effective environment.
The investments that a fund holds on behalf of its members.
How an investment manager allocates investment funds to various assets within an investment portfolio.
A group of assets of a similar type such as shares, property, fixed interest and cash.
A test by Centrelink to determine your eligibility for the age pension.
Money paid from the fund upon the occurrence of a triggering event (eg. resignation, retirement).
Payment may be in the form of a fortnightly pension (depending on the fund) or a lump sum.
The hurdle that a fund measures itself against to ensure it is meeting its objectives.
Money paid from a super fund whether as a pension or lump sum.
This is where you nominate who you wish to receive your Death benefit. You may nominate one or more dependants or your estate. So long as your nomination remains valid, the Board must follow your instructions, even if circumstances have changed from the time of your nomination to the time of your death. You can only make a binding death benefit nomination for your Accumulation Plan or Income Stream account.
Wealth, whether money or property, as a collective for an individual.
Investments in short term financial assets like bank bills.
In relation to children's pensions, your children (or a child of your partner other than a child that is born more than 10 months after your death) under the age of 18, or between the ages of 18 and 25 if a full-time student.
A superannuation or rollover fund that complies with the legislation and qualifies for concessional tax rates.
Complying income stream
A pension or annuity which meets certain minimum Federal Government standards. Includes complying lifetime and fixed term-pensions together with market-linked income streams.
Benefit payments are split into a number of portions, or components, for taxation purposes.
Contributions to super from pre tax income (i.e. all employer contributions including salary sacrifice and personal deductible contributions). Prior to 30 June 2007, known as ‘deductible contributions’.
Condition of release
Requirements that need to be met in order to have your benefit paid to you. e.g. Preservation.
A Contract Officer is defined as:
• a member of the Principal Class within the meaning of the Teaching Service Act 1981,
• an executive within the meaning of section 4(1) of the Public Sector Management and Employment Act 1998, or
• any person or class of persons who is declared by the Minister for Finance to be a contract officer.
A tax on employer and salary sacrifice contributions to super.
The rate at which a fund’s investment earnings are allocated to members accounts, usually expressed as a percentage per annum.
The purchase of a percentage value of currency to offset potential losses from ownership of stock.
Contributions – Concessional
Contributions from your employer, including compulsory Superannuation Guarantee (SG) contributions and salary sacrifice contributions you choose to make by agreement with your employer.
Contributions – Non-Concessional
Contributions made from your after-tax income.
An insurance arrangement where your dependants and/or estate receive an amount in the event of your death.
Default investment option
The investment option into which all contributions made into members’ accounts are invested if an investment option is not selected.
Assets such as fixed interest and cash that generate returns mainly through regular income streams and tend to be more stable than growth assets over short periods.
This term is used in relation to a which is payable to you from a later date, such as age 55 (50 for prescribed class). Entitlement to a deferred lump sum or pension may arise as a result of your:
• electing for a portability benefit,
• becoming an exempt officer, or
• joining an approved superannuation scheme.
Defined benefit fund
A super fund where the member’s benefits are based on salary, period of membership, age and/or contribution rates during membership. Benefits in these funds do not rely on the investment performance of the fund.
Generally your spouse (including a de facto), child, or any other person who is financially dependent on you.
Means your permanent inability, prior to age 60, due to a continuing or recurring injury, disease or infirmity to perform your duties and to perform other duties for which you are suited by education, training or experience or for which you would be suited as a result of retraining.
Is someone to whom you are not married but with whom, in the Board's opinion, you were at the time of your death living as a couple on a genuine domestic basis, irrespective of gender.
Investing in a range of assets so you don’t put all your eggs in one basket.
Diversified fixed interest
Investments in both Australian and overseas fixed interest securities.
The portion of earnings that a company pays its shareholders.
The return earned on money that has been invested or loaned.
In the event of your death (after resignation and prior to your minimum retirement age), benefits of members in the New & Revised schemes will be paid to any surviving eligible dependant, including a partner and any eligible children under age 18 (or 25 if full-time students).
An eligible fund member who has ceased contributing to their defined benefit fund and therefore no longer accrues a benefit in the fund.
Exempt public sector superannuation fund
A public sector superannuation scheme that is not directly subject to the Superannuation Industry (Supervision) Act 1993 (SIS).
Your FAS is your average superannuation salary during the two years prior to your final date of service. On your final date of service, your FAS is compared to your actual salary as at 1 January 1994, and the greater of the two salaries is then used when calculating your benefit entitlement.
A financial adviser is a professional who is authorised to give investment advice and financial planning services.
Fixed Interest Securities
Primarily comprises of bonds which are issued by governments and large corporations in return for cash. The bondholder receives interest for the fixed term of the bond, which can typically range from 2 to 20 years. Generally bond prices move in the opposite direction to interest rates.
Assets such as shares and property that have high potential to grow in value over time but that may have a greater chance of falling in value over shorter periods
Managed investment portfolios which employ a range of specialised investment techniques with the aim of achieving positive returns regardless of whether markets are on the way up or on the way down.
All pensions, including deferred pensions, increase each year in line with any positive movement in the Consumer Price Index for all capital cities. The date you become entitled to a benefit will determine when your pension or deferred pension will increase.
A test by Centrelink to determine your eligibility for the age pension.
The general increase in the price of goods and services. Inflation is usually measured by changes in the Consumer Price Index (CPI).
(For taxation purposes) A relationship in which a person and the member (whether or not related) have a close personal relationship, and they live together; and one or each of them provides the other with financial support or domestic support and personal care. If the member and the person do not live together due to a physical or psychiatric disability an interdependency relationship may still exist.
The return earned on money that has been invested or loaned.
This is the cost of your insurance cover.
The Accumulation Plan, Benefit Account, Income Streams & Spouse Accounts give you a choice of where you would like your money invested. The defined benefit funds do not provide a choice of investment options. You can choose from six investment options; Shares only, High Growth, Growth, Balanced, Conservative &/or Cash. Investment options are typically made up of a different combination of growth and defensive assets.
A benefit paid as a single cash amount rather than as a regular income stream.
Employer contributions made to satisfy the superannuation guarantee charge requirements and any superannuation award obligations.
Marginal rate of tax
The rate of income tax payable on a person’s top portion of income earned.
Member Education Consultant
ESSSuper Member Education Consultants are a free ESSSuper service, available to help you over the phone or one-on-one. To make an appointment or to speak with a Member Education Consultant, Contact Us.
Minimum retirement age
Generally this is age 55. However, if you are a prescribed class member you may retire between 50 and 55 provided you have completed the required years of service within that class.
Personal contributions to superannuation from after-tax income. Prior to 30 June 2007, known as ‘un-deducted contributions’.
The part of your benefit that does not need to be preserved (see preserved benefit).
Notional employer contributions
The rate of employer contributions theoretically necessary to fund the minimum requisite benefits payable from a defined benefit fund.
Notional taxed contribution (NTC)
A separate Employer contributions account is not maintained for each member in a defined benefit scheme because your benefits do not require a separately identifiable account. An allowance for employer contributions is calculated each year instead. This is amount is known as a Notional Taxed Contribution (NTC).
NTC's are calculated using a formula provided by the Scheme's Actuary and represent an approximation of the contributions paid by your employer on your behalf. NTC's will also include contributions that you make to your defined benefit scheme on a salary sacrifice basis. Note NTC's do not include other concessional contributions (salary sacrifice or SG by another employer) to another superannuation account at ESSSuper or another superannuation fund.
Generally refers to Victorian emergency services and other Victorian public sector employers.
A partner is generally a spouse through marriage, or a domestic partner. A partner of the same gender may be eligible if you first became entitled to a benefit from 23 August 2001.
A current ESSSuper member who has left emergency services or state employment and kept their benefit in, transferred their benefit to, started contributing to, or arranged for a new employer to contribute to, the Accumulation Plan.
Pre-July 1983 component
The portion of a benefit payment that relates to fund membership or service prior to 1 July 1983.
Prescribed class member
Is a member employed in the occupations prescribed under the State Superannuation Regulations 1998. Those being:
• prescribed fire-fighter,
• custodial officer, or
• child adolescent and family welfare officer.
Present-day value lump sum
If you are entitled to a deferred lump sum or pension that is not payable until you claim your lump sum or pension on or after your minimum retirement age, you can elect to convert it into a present-day value lump sum in lieu of your deferred benefit. The lump sum will be paid out to a complying superannuation fund immediately, but at a reduced value to take into account the earlier date of payment, (preservation principles apply.) A discount factor of 4% per year prior to your minimum retirement age is applied to your converted lump sum.
Preservation refers to that part of your benefit that you must keep (i.e. preserve) in a complying superannuation fund until you satisfy a condition of release. From 1 July 1999, the following has been subject to preservation: all benefit growth from 1 July 1999 (including your employer contributions, member contributions and interest), and the amount of your benefit that was required to be preserved prior to 1 July 1999.
If you have not satisfied a condition of release under Commonwealth preservation requirements when you become eligible to receive your lump sum (only), the preserved amount of your lump sum payment must remain within ESSSuper. It will accumulate in a notional account earning interest at the Fund crediting rate until we are able to pay it to you when a condition of release is satisfied. The conditions of release include:
• attainment of age 65
• termination of employment after age 60
• permanent retirement on or after reaching your minimum preservation age.
• early release on the basis of financial hardship or compassionate grounds. Conditions for release are very strict.
The age from which you can take the ‘preserved’ (see below) part of your super. Depending on your birth date this could range from age 55 to 60. If you were born before 1 July 1960 your preservation age is 55, if you were born after 30 June 1964 your preservation age is 60.
| Before 1/7/1960
| 1/7/1960 – 30/6/1961
| 1/7/1961 – 30/6/1962
| 1/7/1962 – 30/6/1963
| 1/7/1963 – 30/6/1964
| 1/7/1964 or after
Pre 1 July 1983 amounts
The part of a superannuation benefit which relates to fund membership or service prior to 1 July 1983. This amount became a fixed component as at 30 June 2007.
The part of your benefit that must be kept in a complying superannuation fund until you satisfy a condition of release. Conditions of release include:
• death or disability;
• attainment of age 65;
• termination of employment after age 60;
• permanent retirement on or after reaching your preservation age;
• financial hardship or compassionate grounds (specific conditions apply).
Investments in property assets like office buildings, factories and shopping centres are known as direct property investments. Indirect property investment involves purchasing units in property trusts that invest in a number of different properties.
An industry method for making investment performance comparisons across a number of super funds. Quartiles divide a group of investment managers (ranked in descending order of performance) into four equal sub-groups. A manager ranked in the first quartile will have achieved results higher than 75 per cent of other managers.
An amount guaranteed to be paid on the expiration of a super pension or annuity
The termination by you of your service by resignation before reaching your minimum retirement age.
The termination of your service by retirement after reaching your minimum retirement age.
The compulsory termination of your employment or service prior to your minimum retirement age. Retrenchment must be certified in writing by your employing authority.
The termination of your service by retirement after reaching your minimum retirement age.
Reversionary spouse pension
A pension paid to a spouse on the death of a member who was receiving a superannuation pension. The rules of the associated fund must specifically provide for a spouse pension under these circumstances.
The chance that the value of your investment will move up and down as investment markets change, including the possibility for negative returns in some periods.
To transfer super from one or more super funds into your current super fund.
An amount paid to a person in return for his/her services.
Salary - contract officers
Principal Class officers have their superable salary specified in their contract of employment. Their superable salary must not exceed 82.3% of their remuneration package.
An Executive officer's superable salary must be equal to 70% of his/her remuneration package or if the superable salary immediately prior to entering into their contract is higher, the officer may elect in writing as to which of these salaries is to be used for superannuation purposes.
Other Contract officers superable salary is the salary specified from time to time in that person's contract of employment and notified in writing by the employing authority to ESSSuper.
Salary - other officers
Takes into account your basic annual salary, and some allowances. For example, salary may include a higher duties allowance that has been paid continuously for at least 12 months and shift allowance if approved by ESSSuper.
However, salary does not generally include recreation leave allowance, expense allowances, travelling allowance, overtime or other payments of a temporary or unpredictable nature. If your salary is reduced your superable salary remains at the rate before reduction unless you agree otherwise.
‘Salary sacrifice’ contributions are superannuation contributions paid from your salary before tax is deducted (i.e. pre-tax instead of after-tax). Effectively, you give up (or sacrifice) part of your salary and have your employer pay the amount into your superannuation fund.
By sacrificing part of your pre-tax salary, your taxable income is reduced with the result your personal tax for the year may also be reduced.
Service - membership
Your period of membership in a defined benefit fund is equal to your actual contributory service.
Service - part time
A period of employment where you are working less than the full-time hours prescribed for your position.
Service - recognised
Your period of membership in a defined benefit fund plus any additional period of service that has been recognised in accordance with the governing rules.
Superannuation Guarantee (SG) Contributions
The 9% super contributions required to be paid by employers into a complying super fund or RSA on behalf of employees, under the Commonwealth Superannuation Guarantee Administration Act 1992.
Also known as equities, a share represents ownership in a company. Investors generally purchase shares to earn a profit by selling them for more than was paid, and to gain income (dividends) from company earnings. They can grow significantly in value over time but also carry the risk that occasionally their value will fall below their purchase price.
SuperRatings is an independent superannuation research company. SuperRatings exists to give investors, the superannuation industry, journalists and commentators a deep understanding of how the industry is travelling and why individual funds perform as they do. They provide the tools that can help members make informed decisions about their super. They also provide in-depth analysis to help funds provide better products and services.
The surcharge was a tax imposed by the Commonwealth Government on the surchargeable contribution amount reported by us to the Australian Taxation Office (ATO) each year and was abolished from 1 July 2005. Surcharge debts (including accruing interest at 10 year Treasury Bond Rate) for years ended 30 June 2005 and prior are still payable either by member voluntary payment or benefit reduction at the point of cessation of being an active member.
A reduction in tax liability allowed in certain circumstances. Often a tax rebate is described as a percentage (e.g. a rebate of 15 per cent applying to a pension).
‘Taxed’ fund (source)
A superannuation fund that applies 15% contributions tax to employer contributions paid in.
Tax File Number
A Tax file number is an 8 or 9 digit number issued by the Australian Taxation Office (ATO) to each taxpayer (individual, company, superannuation fund, partnership or trust) to identify that taxpayer's Australian tax dealings. (Wikipedia)
Total Permanent Disablement (TPD) cover
An insurance arrangement where your dependants and/or estate receive an amount in the event of your total permanent disablement.
Transition to retirement rules
Transition to Retirement rules were amended on 1 July 2007, allowing people who have reached their preservation age, to have access to their superannuation benefits without having to retire or leave their job. These rules allows people to access their superannuation savings by drawing down certain non-commutable superannuation income streams called transition to retirement income streams.
Income streams which commenced before 1 July 2007 and that complied with the transition to retirement rules at the time are deemed to satisfy the new requirements and may continue to be paid under the former rules.
Transition to retirement strategy
A retirement strategy that makes use of government rules to work part time while drawing a low tax income stream after age 55. Over 60 this incomes becomes tax free. This strategy usually takes advantage of salary sacrifice for further tax advantages.
Generally refers to property-based companies, shares or assets that are not listed on the stock exchange for purchase or sale.
Unrestricted Non-preserved benefits
Those benefits that are not required by legislation to be retained within superannuation and can be paid in cash.
‘Untaxed’ fund (source)
A superannuation fund that has not applied 15% contributions tax to employer contributions paid in.
Any extra superannuation contributions which an individual may contribute in addition to compulsory employer or member contributions.
The extent to which share prices, bond prices, interest rates, investment returns, etc., change from their trend growth rate over time.
Requires a person aged over 65 and under age 75 to have worked at least 40 hours in a period of not more than 30 consecutive days in the financial year in order to contribute to superannuation.
The work test requires people aged 65 to 74 to have worked at least 40 hours in a period of not more than 30 consecutive days in the financial year in order to be able to contribute to super.
Also called earning rate, return on investment, return, and rate of return. It is a measurement of the rate of return achieved on an investment over a period, from distributions (interest, dividends, bonuses, etc.) plus capital growth/losses. It is usually expressed as a percentage of the value of the investment at the start of the period.