Changing from full-time to part-time - PSS

PSF1004/12Changing fromfull-time to part-timeWho should read this?PSS members who are considering reducing theirworking hours from full-time to part-time. Itmay also provide some useful information toexisting part-time PSS members.What is in this fact sheet?> > What you should know up front> > Why would I consider changing topart-time employment?> > How does this affect my super?> > What options do I have?> > What do I need to do?> > Where can I get more information?What you should knowup frontIt is important that you read the disclaimerat the end of this fact sheet. Before makingany decisions, please read the PSS productdisclosure statement and consider seekingadvice from a licensed professional such as afinancial planner, accountant or solicitor.Why would I considerchanging to part-timeemployment?There are many reasons why you might changeto part-time employment. Some commonreasons include wanting to spend more timewith your family (especially raising children),phasing your retirement, or for health reasons.There is a misconception that the PSS acts as abarrier to working part-time or phasing yourretirement. This is generally not the case. If youare thinking about reducing your hours, talk toyour employer about the possibility of workingpart-time in your organisation.This fact sheet will give you an understanding ofthe effect of part-time work on your PSS super.Going part-time because of ill-healthIf you have to reduce your working hoursbecause of a medical condition that is unrelatedto compensation payments, you may be entitledto a partial invalidity pension. You can get moreinformation about partial invalidity pensionsfrom your employer.Your Government Super at WorkAny financial product advice in this document is general advice only and has been prepared without taking account of your personal objectives, financial situation or needs.Before acting on any such general advice, you should consider the appropriateness of the advice, having regard to your own objectives, financial situation or needs. You may wishto consult a licensed financial advisor. You should obtain a copy of the PSS Product Disclosure Statement and consider its contents before making any decision regarding your super.Commonwealth Superannuation Corporation (CSC) ABN: 48 882 817 243 AFSL: 238069RSEL: L0001397 Trustee of the Public Sector Superannuation Scheme (PSS) ABN: 74 172 177 893 RSE: R10045951 of 3

If you reduced your hours because of a medicalcondition and a partial invalidity pension wasgranted, your benefit accrual would continueat the full-time rate despite the fact that yourcontributions would be at the part-time rate.How does this affectmy super?The effect on your contributionsIf you become a part-time employee there isno effect on your fortnightly contribution rateuntil your next birthday. At that time, we workout your contribution rate similarly to if youwere contributing on a full-time basis. However,your contributions would be reduced pro-rataaccording to the number of hours you areapproved to work on your birthday.The following table shows the differentbenefit multiples that apply to different ratesof contribution.Contribution rateAnnual accrual rate0% .11 x FAS (or 11% of FAS)2 % .15 x FAS (or 15% of FAS)3% .17 x FAS (or 17% of FAS)4 % .19 x FAS (or 19% of FAS)5% .21 x FAS (or 21% of FAS)6 % .23 x FAS (or 23% of FAS)7% .25 x FAS (or 25% of FAS)8 % .27 x FAS (or 27% of FAS)9 % .29 x FAS (or 29% of FAS)10 % .31 x FAS (or 31% of FAS)ExampleMaria, a full-time employee is receiving asalary for superannuation purposes of$45,361. She is paying 7% of this incontributions to the PSS. Her contributionrate is worked out as follows:$45,361 ÷ 26 × 7% = $122.13 per fortnightMaria becomes a part-time employee andworks 50 of her normal 73.5 full-time hoursfor the position. Her contributions are workedout as follows:Step 1: Work out the full-time contribution$45,361 ÷ 26 × 7% = $122.13 per fortnightStep 2: Pro-rata the contribution accordingto the approved part-time hours$122.13 x 50 ÷ 73.5 = $83.08 per fortnightThe effect on my benefitThe PSS is a defined benefit scheme and benefitsare based on a number of factors, including yourlength of membership, your salary and your rateof contribution.To work out your benefit, you must first work outyour Final Average Salary (FAS). This is generallythe average of your salaries on each of the threebirthdays before you leave the PSS. The salariesused are always the full-time equivalent andyour FAS will not be reduced if you were to gopart-time.So, in Maria’s case, as a full-time employee, if sheelected to pay contributions at a rate of 7% overa 12-month period, her benefit multiple for ayear would be 0.25 of her final average salary.Going part-time does not affect any benefitmultiple that you accrued while a full-timecontributor. It may affect any future multipleaccrual though.Benefit accrual for permanent part-timeemployeesIf you were to go part-time, your ongoingmultiple accrual from your next birthday wouldbe reduced pro-rata according to the approvedhours worked on your next birthday. Thereduction does not apply to the multiple youhad already accrued before your next birthday.The following formula would be used tocalculate your part-time multiple accrual:Benefit multiple xpart-time hoursfull-time hoursTherefore, if Maria’s part-time hours (asapproved at her last birthday) were 50 hoursa fortnight, and her full-time hours for thatposition were 73.5 hours per fortnight, the yearlymultiple accrual would be:0.25 × 50 ÷ 73.5 = 0.17PSF 24 / February 2005Then, you multiply your FAS by your benefitmultiple. Your benefit multiple accruesaccording to your rate of contribution. Yourbenefit multiple actually grows each fortnightwith each contribution you make.2 of 3Your Government Super at Work2 of 3

Calculation of benefit multipleThe following examples show the effect thatworking part-time has on the accrual of yourbenefit multiple. Maria retires after 30 years’membership. Her FAS is $45,361.In Example 1, Maria worked full-time for thelength of her membership. During this periodshe contributed 5% for 10 years, 6% for 15 yearsand 7% for five years.In Example 2, Maria worked full-time for 25years, contributing at rates of 5% for 10 years and6% for 15 years. She also worked part-time (50hours per fortnight) for five years, during whichtime she paid 7% in contributions.Maria’s lump sum benefit would be worked outas follows:Example 110 years × 0.21 (see table above) = 2.1015 years × 0.23 (see table above) = 3.455 years × 0.25 (see table above) = 1.25Total Benefit Multiple = 6.806.80 × $45,361 (FAS) = $308,455Example 210 years × 0.21 = 2.1015 years × 0.23 = 3.455 years (part-time) × 0.17 = 0.85Total Benefit Multiple = 6.406.40 × $45,361 (FAS) = $290,310Does going part-time affect invalidityand death benefits?In the PSS, you generally have automaticinvalidity and death cover. In some situations,you can also purchase additional death andinvalidity cover.Your automatic cover consists of your currentbenefit accrual plus a prospective element that iscalculated as if you had continued to contributeuntil your 60th birthday. Going part-timemay reduce the prospective element of yourdeath and invalidity benefit in addition to thereduction in your ongoing accrual.What options do I have?As a part-time employee, you can elect tochange your contribution rate in the same wayas you can when you are a full-time employee.However, you cannot elect to continue payingfull-time contributions.If you are reducing your hours due to healthreasons, you may be entitled to a partialinvalidity pension. You will need to talk toyour personnel section to discuss this option.What do I need to do?If you would like to reduce the hours that youare working, contact your employer for moreinformation.If you do go part-time, there is nothing youwould need to do in relation to your PSS super.Your employer will provide details of yourpart-time hours and we will automaticallyreduce your contributions from your nextbirthday provided that you are still workingpart-time.As contributions would remain at the full-timerate until your next birthday, you may wishto reduce your rate of contributions to giveyou a little more take home pay. Rememberthough, that any reduction in the rate of yourcontributions affects the amount of multiplethat you are accruing.Where can I get moreinformation?The PSS website also has the i-Estimator. Thei-Estimator is a handy online tool that enablesyou to estimate your future super benefits. Youwill need to have your Access Number* to usethe i-Estimator.*To get an Access Number, call us on1300 000 377 and we can provide one overthe phone.EMAIL members@pss.gov.auPHONE 1300 000 377FAX 02 6272 9613MAILWEBPSSGPO Box 2252Canberra City ACT 2601www.pss.gov.auemailphonettypostmembers@pss.gov.auwebwww.pss.gov.au1300 000 377overseas callers+61 2 6272 9622(02) 6272 9827fax(02) 6272 9613PSSGPO Box 2252Canberra City ACT 26013 of 3