Case Study: MilitarySuper Retirement options
Retirement options
Tracey's story
Tracey is 60 years old and is a contributing member of MilitarySuper.
Tracey is an Army Communication Systems Operator and enlisted 29 years ago. Although Tracey has travelled widely with Army, she’s ready to retire and see more of the places she only passed through when she was working.
Since Tracey has reached her preservation age of 60 and is permanently retiring from the workforce, she can claim her MilitarySuper Employer benefit either as a lump sum, a pension or a combination of both. Tracey’s Member and Ancillary benefits can be claimed as a lump sum.
With three Employer benefit options to choose from, Tracey can select the option that best suits her planned retirement lifestyle.
She’s contacted her adviser because she wants to know how her benefits are calculated and what she needs to consider before deciding on a benefit option.
Tracey meets with her adviser
Tracey’s adviser explains that different parts of her MilitarySuper can be accessed under different conditions, depending on her age and work status. Since Tracey has already met a condition that allows her to claim all components, her adviser also outlines the other conditions that would apply if her circumstances were to change.
Tracey can claim her benefit if:
Employer benefit:
- To access a pension you must meet age 55 and cease eligible service with ADF.
- To access a lumpsum you must meet preservation age (60), cease eligible service with ADF and either not be gainfully employed or go through a change of employment status.
- To access a lumpsum after 65 you must cease eligible service with the ADF.
Member and Ancillary Benefit:
- To access a lumpsum as cash you must meet preservation age (60), cease eligible service with ADF and either not be gainfully employed or go through a change of employment status
- To access a lumpsum after 65 you must cease eligible service with the ADF If Tracey decides to exit from the ADF and not claim her MilitarySuper it will become preserved and grow with investment returns and CPI. See: Preserving your super
If she waits until age 65, Tracey must choose a benefit option within 3 months of turning 65. After that time, she’ll only be able to take her benefit as a lump sum.
Tracey is definite about her decision to fully retire—she has things to do and places to be! Her adviser will work out Tracey’s Employer benefit amount and how it will be applied to each benefit option.

“I’ve worked out what I want to do when I retire. Now all I need to do is work out the money!” —Tracey |
This section contains:
Employer benefit calculation
Tracey’s Employer benefit can be taken as a lump sum and is also used in the calculation of pension amounts.
It’s calculated by multiplying Tracey’s Final Average Salary* (FAS) of $127,000 by her Employer Benefit Multiple (EBM) of 6.77.
This gives Tracey an Employer benefit of $859,790 ($127,000 x 6.77).
*FAS is the average of the member’s super salary over the last three years. Super salary is the member’s annual rate of pay plus certain recognised allowances.
Employer Benefit Multiple (EBM)
While contributing to MilitarySuper, Tracey’s EBM grows with her total years of service.
Tracey has completed 29 years of service. This means:
Her EBM is 6.77 (1.26 + 2.99 + 2.52). |
Benefit options
As the member and ancillary benefit is only payable as a lump sum that can be taken as cash or as a rollover*, Tracey can choose how her employer benefit is paid. Tracey can take her Employer benefit as a lump sum, a pension or a combination of both.
*subject to cashing restrictions
-
Lump sum
Tracey could take her entire Employer benefit as a lump sum. Since no income stream is provided with this option, Tracey would need to structure her finances to ensure she has financial security for the rest of her life.
As well as the lump sums provided by her Member and Ancillary benefits, this option would give Tracey access to a significant amount of money on retirement.
-
Pension
The pension is calculated by dividing Tracey’s entire Employer benefit by a pension conversion factor (PCF) of 11 (the PCF for age 60). See the PCF table.
This gives Tracey an annual pension of $78,162.73 ($859,790/11), as well as a lump sum made up of her Member and Ancillary benefits.
Her pension will be automatically adjusted twice yearly in line with upward movements in the consumer price index (CPI) for the six months ending 30 June and 31 December each year.
This option would provide Tracey with a regular income stream for the rest of her life, supported by immediate access to the cash provided by her Member and Ancillary benefit lump sums.
Pension conversion factor (PCF)
Age PCF Age PCF 45 14.0 56 11.8 46 13.8 57 11.6 47 13.6 58 11.4 48 13.4 59 11.2 49 13.2 60 11.0 50 13.0 61 10.8 51 12.8 62 10.6 52 12.6 63 10.4 53 12.4 64 10.2 54 12.2 65 10.0 55 12.0 -
Combination of lump sum and pension
Tracey could convert at least 50% of her Employer benefit to a pension (calculated as set out above), with the balance taken as a lump sum.
This option would provide Tracey with a regular income stream for the rest of her life, supported by immediate access to the cash provided by the balance of her Employer benefit and her Member and Ancillary benefit lump sums.
Understanding the tax implications of choosing a pension and/or lump sum is important for Tracey’s continued financial wellbeing as she heads into retirement.
Tax considerations
Understanding the tax implications of choosing a pension and/or lump sum is important for Tracey’s continued financial wellbeing as she heads into retirement.
-
Taxed and untaxed sources
The tax payable on pension and lump sum benefits will depend on whether the benefit is sourced from contributions paid to MilitarySuper and earnings on those contributions (taxed source) or from other sources (untaxed source).
For more information about the tax treatment of each contribution type, see the MilitarySuper PDS Booklet - Tax and your MilitarySuper.
-
Treatment of pensions
Tracey’s pension will be subject to normal pay as you go (PAYG) tax deductions, in the same way her salary was subject to fortnightly tax deductions. However, she may be eligible to receive tax concessions or offsets.
MilitarySuper is required to deduct tax from her benefit at the highest marginal rate if Tracey has not claimed the tax–free threshold and/or any other relevant taxation offsets.
For more information about the effect of tax on MilitarySuper benefits, see the MilitarySuper PDS Booklet - Tax and your MilitarySuper, Tax and your MilitarySuper pension factsheet and Tax on super benefits - ATO.
Retirement resolution for Tracey
After meeting with her adviser, Tracey understands how her Employer benefit is calculated and how the benefit amount is applied to the 3 benefit options. She can consider each option in light of her retirement plans.
✓ She has the flexibility to tailor her choice to best maintain her retirement goals.
✓ She knows exactly how much she will receive and how her pension will be adjusted to reflect her tax circumstances.
✓ She can have an income stream for life along with a substantial amount of cash on retirement giving her financial security and stability to carry out her retirement plans.
Documents and resources
Product Disclosure Statement
This document provides important information about the features, benefits, risk and cost of investing your super in the Commonwealth Superannuation Scheme. It includes references to the Investment options and risk, Fees and other costs, Tax and your CSS super and Death and invalidity benefits booklets which form part of the Product Disclosure Statement.
Download PDF, 409KBRejoining the Australian Defence Force (ADF Super/DFRDB/MilitarySuper)
This factsheet is for former members of DFRDB or MilitarySuper who have transitioned out of the ADF, and have returned, or are considering returning to permanent service or as a reservist rendering continuous full-time service.
Download PDF, 542KBTax and your MilitarySuper
This document outlines how tax can impact a MilitarySuper account. It forms part of the MilitarySuper Product Disclosure statement.
Download PDF, 327KBTax and your MilitarySuper pension
This factsheet outlines how your MilitarySuper pension is taxed.
Download PDF, 327KBGovernment resources
You may also like...
We’re here to support you
See how we do things and why we’re here for you and our members.
Learn more Read the article: We’re here to support youForms and documents
Download the common benefit application forms.
Find out more Read the article: Forms and documentsMilitarySuper (MSBS)
MilitarySuper was established on 1 October 1991, and closed to new members on 30 June 2016.
Find out more Read the article: MilitarySuper (MSBS)