Is your super fund paying you a cash reward?
Bonus cash payments are the latest feature of a growing number of superannuation funds. The highest reward is $11,250 paid by BUSSQ, a Queensland based not-for-profit industry fund for building and construction workers. So how can you qualify for one?
Bonus rewards are for superannuation fund members in their retirement phase. BUSSQ is the latest superannuation fund to give fund members an incentive for joining up for its retirement pension. From July 1, BUSSQ will pay a retirement reward of up to $11,520 to new retirement pension members who have set up an account based pension. It can be taken as a cash payment or left in the account to top up the member's balance.
Where does the money come from? Steven Hack, product and innovation manager at BUSSQ, explains that it comes from a deferred capital gains tax liability. "In the retirement phase there is no capital gains tax at all," says Hack. This reduces the tax payable on investments when they are sold.
Other funds paying retirees a bonus include Sunsuper and QSuper, which has recently become a public offer fund.
BUSSQ has crunched the numbers and to make it fair, it has given a base reward to every existing pension fund member of 0.5% of their assets under management. Then it gives up to 0.72% more to members who have been with the fund for up to five years. There is also a bigger payment for members transferring from an aggressive high growth investment option that carries more capital gains.
CEO Linda Vickers says: "Other super funds haven't rewarded existing pension members but we thought this was important on the basis of equity between members."
BUSSQ will pay a Retirement Reward even if the person is a new member to BUSSQ. "These people still create a tax surplus, so we should reward them too," says Vickers. She says no other fund currently pays a bonus to brand new members. This is the highest incentive paid by any super fund, and means that a new retirement pension account of $500,000 could get a bonus of $3600.
BUSSQ has paid $11,520 to members who have the maximum amount of $1.6 million in their account and have been in the fund for over five years.
Some retired superannuation fund members are still in the accumulation superannuation fund which pays a higher rate of tax. The reward is partly aimed at motivating members to move across into a more tax effective retirement pension fund that they are entitled to. "We have had a lot of members in the accumulation phase in retirement," says Hack. In some cases members can be 60% better off in retirement if they move to a pension. BUSSQ is also sending out information to members who are approaching retirement.
When members transfer from a super fund account to a retirement pension account it reduces the fund's future tax obligations, creating a small tax surplus that can be used to finance the payment of the retirement reward.
BUSSQ has seven financial planners who can assist members with their retirement plans, questions about the age pension, paying off the mortgage and income needs in retirement.