The impact of Fund earnings on your PSS benefit differs depending on your membership type – contributing, preserved benefit or associate.
If you are a contributing member
The defined part of your benefit is unaffected by earnings. However, amounts transferred into the PSS and any government co-contributions are affected by earnings of the Default Fund, which can be positive or negative.
None of your benefit including these amounts can be switched.
The level of earnings from the Default Fund can affect the tax you must pay when you claim your final PSS benefit. For example, these earnings may affect the amount of tax deducted from your fortnightly pension payments if you choose a lifetime CPI-indexed pension.
This is because the level of earnings changes how the three components of your PSS benefit work: the employer-financed, productivity and member components. Positive earnings increase the taxed member and productivity components and decrease the untaxed employer-financed component. In this case, the component of your final benefit already taxed increases, meaning positive earnings can have the effect of decreasing how much tax you may pay after you leave the PSS.
Learn more about how super is taxed and tax on PSS benefits.
If you are a preserved benefit member
Fund earnings have a more direct impact on your benefit. The accumulation components of your benefit will be affected by earnings, which can be either negative or positive in line with the investment performance of your chosen option – the Default Fund or Cash Investment Option.
The accumulation components are your member contributions (the member component), the post 1 July 1990 productivity component and any other amounts that are from a taxed source in your account, such as transfers paid into the PSS and government co-contributions.
The employer-financed component of your benefit, as determined at the time your benefit is preserved, moves in line with the Consumer Price Index (CPI). This is a cost of living index, measuring the rate of inflation in the prices of goods and services.
If you are an associate member
Fund earnings also have a more direct impact on your benefit. The accumulation components of your benefit will be affected by earnings, which can be either negative or positive in line with the investment performance of your chosen option – the Default Fund or Cash Investment Option.
The value of the taxed component of your benefit (determined when you became an associate member) isn’t affected by earnings. Its value is adjusted by the long-term Treasury bond rate (treasury bonds are medium to long-term debt securities issued by the government).