BENEFITS PROVIDED BY THE FUND

This section of the member guide deals with the benefits provided by the Political Office-Bearers Pension Fund for its members. The next section covers some additional benefits for Fund members that are not actually provided through the Fund or specifically dealt with in the Fund Rules – these are included in this guide because the cost of these benefits is also part of the total contributions paid by the State for member’s retirement and related benefits.

The areas covered in this section are:

  • The design of the Fund
  • The contributions payable by you and by the State
  • What benefits you will receive when your term of office ends (on retirement or resignation)
  • What benefits your dependants will receive (from the Fund) if you die in office.
benefits

ANNEXURE 1 – CALCULATION OF OPENING BALANCE FOR FUND CREDIT AS AT 1 MARCH 2016 

  1. MEMBERS PRESENT AS AT 29 FEBRUARY 2016, WHO HAD BEEN IN OFFICE FOR MORE THAN 5 YEARS ON THAT DATE, WILL HAVE THE FOLLOWING OPENING BALANCE AS AT 1 MARCH 2016:
    • A. Basic Fund Credit before additions

      This is calculated as at 29 February 2016 – see What is the Fund Credit?

      PLUS

    • B. Additional Service Benefit (or ASB)

      20% of your revalued annual pensionable salary for each year of service up until 29 February 2016, but only counting up to a maximum of 10 years of service.

      PLUS

    • C. Equalisation Amount after capping (EA)

      A notional or “deemed” employer contribution of 20% of your monthly pensionable salary as earned over your whole period of service up to 29 February 2016, plus the net investment returns earned by the Fund on the investment of these 20% contributions, but subject to the “cap” on this amount as explained in Annexure 2 to this section. 

      MINUS

    • D. Adjustment – capped members

      Members whose Equalisation Amount is “capped”, or expected to be “capped” if they serve until the 2019 Election will have the opening balance of their Fund Credit on 1 March 2016 reduced by a specified amount, to ensure that their Fund Credit if they serve up to the 2019 Election is not expected to be greater than their Fund benefits would have been if the Rules had not been changed with effect from 1 March 2016 (as they have been). 

      This amount will be calculated as follows:

      A projected ASB and Equalisation Amount (EA) as at the 2019 Election date (taken as 30 June 2019) will be calculated, allowing for future salary growth and investment returns – but also allowing for further capping in 2019. This figure (projected 2019 ASB plus projected capped 2019 EA) is then worked back (discounted) to 29 Feb 2016. This amount is then compared to (B) + (C) above. If it is less than (B) + (C), the difference is the adjustment amount (D).

      On 1 March 2016 your FUND CREDIT will be equal to the sum of A+B+C-D.

      After 1 March 2016, all members will receive everything included in the FUND CREDIT. As a reminder – this is the opening balance calculated as at 1 March 2016 (as explained above), plus further retirement-savings contributions for the period after 1 March 2016, plus the investment returns.

      There is no further accrual of the ADDITIONAL SERVICE BENEFIT or EQUALISATION AMOUNT after 29 February 2016.

      Should you exit the Fund at or before the 2019 Election, you will receive everything in your FUND CREDIT. However, to ensure that that you will NOT BE WORSE OFF before taxation, because of the new benefit design, an additional calculation will be done as follows:

      1. A calculation will be done as to what your total benefit would have been, under the “old Rules” (i.e. benefit design applying before 1 March 2016 changes), as if these still applied at your actual date of exit. This means that the calculation will allow for a further “accrual” of the ASB and the EA after 29 February 2016. (X)
      2. This will be compared to your FUND CREDIT under the “new Rules” as at your date of exit. (Y)

      If (X) is greater than (Y), the difference will be paid to you by your legislature as an extra gratuity amount. Our current understanding is that this amount will be taxed according to the retirement lump sum formula (along with the regular loss-of-office gratuity and any lump sum that you choose to take from the Fund) but this may be subject to change and the gratuity may simply be taxed as income in your hands.

      MINUS PAID BY LEGISLATURE (This amount will be taxed)

      A DETAILED EXPLANATION OF THE OLD BENEFIT DESIGN IS GIVEN IN ANNEXURE 2

    • MEMBERS PRESENT AS AT 29 FEBRUARY 2016, WHO HAD NOT BEEN IN OFFICE FOR MORE THAN 5 YEARS ON THAT DATE, WILL RECEIVE THE FOLLOWING AS AT 1 MARCH 2016:
      • A. Basic Fund Credit before additions

        This is calculated as at 29 February 2016 – see What is the Fund Credit? on page B2. 

        PLUS
      • B. Additional Service Benefit (or ASB)

        20% of your revalued annual pensionable salary for each year of service up until 29 February 2016.

        PLUS
      • C. Terminal Gratuity (TG) - if applicable

        The sum of A + B is compared to: 

        45% x your annual pensionable salary as at 29 February 2016 for each completed year of service (plus a proportion thereof for fractions of a year) = (D)

        If D is greater than the sum of A + B then the difference is the Terminal Gratuity.

      On 1 March 2016 your FUND CREDIT will be equal to the sum of A+B+C

      After 1 March 2016, all members will receive everything included in the FUND CREDIT. As a reminder – this is the opening balance calculated as at 1 March 2016 (as explained above), plus further retirement-savings contributions for the period after 1 March 2016, plus the investment returns.

      There is no further accrual of the ADDITIONAL SERVICE BENEFIT or TERMINAL GRATUITY after 29 February 2016. 

      Should you exit the Fund at or before the 2019 elections, you will receive everything in your FUND CREDIT. However, to ensure that you will NOT BE WORSE OFF before taxation, because of the new benefit design, an additional calculation will be done as follows:

      1. A calculation will be done as to what your total benefit would have been, under the “old Rules” (i.e. benefit design applying before 1 March 2016 changes), as if these still applied at your actual date of exit. This means that the calculation will allow for a further “accrual” of the ASB and the TG (if applicable) after 29 February 2016. (X)
      2. This will be compared to your FUND CREDIT under the “new Rules” as at your date of exit. (Y)

      If (X) is greater than (Y), the difference will be paid to you by your legislature as an extra gratuity amount. Our current understanding is that this amount will be taxed according to the retirement lump sum formula (along with the regular loss-of-office gratuity and any lump sum that you choose to take from the Fund).

      A DETAILED EXPLANATION OF THE OLD BENEFIT DESIGN IS GIVEN IN ANNEXURE 2 

      Important note:

      In the case of members who return to office after the 2019 elections: the same calculations will be performed as explained above.

      However, if amount (X) is greater than (Y), the difference, i.e. (X) minus (Y), will be recorded for payment to the member by the legislature as an extra gratuity amount when the member does eventually leave office (could be long after 2019). This amount will be “inflation-linked” for the period between the 2019 election date and the eventual date of payment. In our current understanding, this will be taxed according to the retirement lump sum formula if you are aged 55 and over,otherwise teh amount will be taxed as income in your hands.

      Members who took office at or before the 2014 Election, and who remain in office after the 2019 Election, will have the calculation performed under method (1) above, including the Equalisation Amount (EA) calculation.

      For members who took office after the 2014 Election, and who remain in office after the 2019 Election, the Equalisation Amount (EA) will only be taken into account in calculating the extra gratuity amount once they have served a total of more than 5 years in office.

Disclaimer

This guide includes a summary of the Rules of the Fund and the insurance policies that provide certain benefits for members and their dependents. In the event of a conflict between this guide and the Rules or the insurance policies, the Rules or the insurance policies (as the case may be) will take precedence.

The information in this guide does not constitute advice by either the Board of Trustees or its professional advisors. Members are encouraged to seek expert advice from a personal financial advisor before taking decisions regarding their benefits from the Fund.

The Fund will try to ensure that the material in this guide is up to date and accurate, but this cannot be guaranteed at all times.