Defined benefits

Some employers offer defined benefit superannuation funds which guarantee you a specific amount when you retire.

Although typically defined benefit funds are not open to new members, there are a number of existing employer plans in the Mercer Super Trust that offer this style of fund to pre-existing members. 

The majority of Mercer Super Trust members are invested in an accumulation style super account. 

If you are a member of a defined benefit plan and have any questions regarding your account  please contact our Helpline on 1800 682 525.

Calculating your defined benefit

When determining how much you’ll receive when you retire (i.e. your defined benefit) your employer will use a formula which generally takes into account:

years of service to your employer, 

percentage of your salary for each year of service, known as your accrual rate, (this may vary depending on how much you choose to contribute), and

your final salary, or your final average salary over a number of years

For example, a member of a defined benefit fund who retires at age 65 may have their defined benefit calculated using a formula such as the one below:

30 (years’ service) x 1.5% (accrual rate) x $100,000 (average salary over three years before retirement) = a pension of $45,000 per year.

Please note that the formula differs between individual defined benefit funds and the above calculation is an example only. 

Your defined benefit fund and contributions

In defined benefit funds, instead of regularly contributing to your individual super account in the form of superannuation guarantee contributions, your employer will contribute on your behalf to the ‘defined benefit pool’ which services all members within the fund. 

In addition to this, some plans allow you to make additional voluntary contributions to an accumulation account, either before or after-tax. By making additional voluntary contributions to your account, this will increase your total benefit as this is paid in addition to your defined benefit. 

Contribution caps

There are different types of contributions you can make, these include ‘concessional’ (before-tax), such as employer and salary sacrifice contributions, or ‘non-concessional’ (after-tax), such as additional contributions. 

There are limits on how much you can contribute to your super, these are known as ‘contribution caps’. 

For more information on the types of contributions you can make visit our 'Understanding contribution types and taxes' page, and for more information on the contribution caps please visit our contribution caps page

Notional contributions and the concessional contribution cap

Your employer plan calculates and reports the defined benefit amount that counts towards your concessional contributions cap to the Australian Taxation Office each financial year – this is referred to as your notional contributions. 

The amount of your concessional contribution cap used up by your notional contributions each financial year will vary depending on the formula used by your plan.

Fees of a defined benefit fund

The fees of a defined benefit superannuation plan will vary between plans, dependent on what your employer has negotiated. 

Leaving a defined benefit fund

If you're considering leaving your defined benefit fund you should note that once you’ve left you typically won’t be able to re-enter and will therefore lose any benefits available to you.


Seek advice before making changes

If you are considering closing your account or making additional contributions we recommend you seek financial advice prior to doing so.

Our Helpline Advice team can provide financial advice about your super fund at no additional cost. You can make an appointment with this team by calling our Helpline on 1800 682 525 between 8am-7pm (AEST/AEDT), Monday-Friday.

Disclaimer: This content has been prepared and sent on behalf of Mercer Superannuation (Australia) Limited (‘Mercer Super’), ABN 79 004 717 533, Australian Financial Services Licence #235906, the trustee of the Mercer Super Trust ABN 19 905 422 981. Any advice contained in this content is of a general nature only, and does not take into account the personal needs and circumstances of any particular individual. Prior to acting on any information contained in this content, you need to take into account your own financial circumstances. Please consider the Product Disclosure Statement, Product Guide, Insurance Guide, and Financial Services Guide before making a decision about the product, or seek professional advice from a licensed, or appropriately authorised financial adviser if you are unsure of what action to take. 'MERCER' is a registered trademark of Mercer (Australia) Pty Ltd ABN 32 005 315 917. Copyright 2022 Mercer LLC. All rights reserved.