CSS AND PSS CHANGES
Recently changes have been made to the CSS and PSS schemes to allow members to cease making
member contributions and to allow PSS members to exercise choice of superannuation fund.
Option to cease member contributions
CSS and PSS members can now choose not to make member contributions.
Where a CSS member ceases to make member contributions to the CSS the employer component
(the indexed pension) will continue to accrue normally. There will be no reduction to the indexed
pension on age retirement. The only detrimental effect of ceasing member contributions is that the
accrual of the CSS lump sum and non-indexed pension will not be as high on retirement as there will
be no further member contributions being received by the CSS superannuation fund to fund that
component of the CSS benefit.
There will also be an affect on CSS deferred benefit pensions. CSS deferred benefit pensions are
based on the amount of accumulated basic member contributions held in the CSS superannuation
fund at the time the pension commences. CSS deferred pensions are paid following an election to
preserve in the CSS. Typically this applies to 54/11 cases and on involuntary retirement where the
CSS member preserves for at least one day in the CSS before claiming the deferred pension.
Where PSS defined benefit members cease making member contributions they will accrue a PSS
defined benefit at an annual rate of only 11% of final average salary. This is a reduction in the
annual rate of accrual of twice the percentage of salary previously being paid as member
contributions. For example, PSS benefits accrue at an annual rate of 21% of final average salary
where the PSS member is contributing member contributions at 5% of salary. By choosing not to
make member contributions to the PSS the PSS accrual will not include the member contribution
component or the matching employer contribution component. The result is that the annual accrual
reduces from 21% of final average salary to 11% of final average salary (21% less 5% member
contributions plus 5% matching employer contributions).
Careful consideration needs to be given before deciding to cease member contributions especially
where this will result in a reduction in the employer component of the CSS or PSS retirement
benefit. Consultation with professional financial advice is strongly recommended.
Choice of superannuation fund for PSS defined benefit members
PSS defined benefit members can now choose to leave the PSS defined benefit plan and join another
If a PSS member decides to leave the PSS, in the first instance they must join the PSS accumulation
plan (ap). On becoming a member of the PSSap the member is free to choose to join an alternative
superannuation fund at any time.
Benefit entitlements of PSS defined benefit members leaving the PSS for another superannuation
fund have their PSS benefits preserved in the PSS. Once the PSS member has left the PSS defined
benefit plan for another superannuation fund the member can never return as a contributing member
of the PSS defined benefit plan.
The PSSap does not pay indexed pensions. On joining the PSSap the member’s employer is
required to contribute employer contributions of 15.4% of salary in to the PSSap superannuation
fund. However, if the employee decides to join a superannuation fund other than the PSSap the
employer is only obliged to pay employer contributions of 9% of salary into the chosen
PSS members need to carefully consider their options if they are considering leaving the PSS
defined benefit plan. The unfunded employer component of a PSS preserved benefit only accrues
with increases in the Consumer Price Index (CPI). This will erode their PSS preserved benefit
entitlement between leaving the PSS defined benefit plan and their retirement.
The above information is believed to be correct at the time of preparation (July 2008). However anyone proposing to
reply on this information to make financial decisions should consult qualified financial advice to confirm this.