Career breaks and super

Career-breaks-header

Travel, starting a family, escaping the daily grind: life is full of unexpected opportunities that don’t necessarily have to set back your super savings.

With so much already going on, one thing that can fall off the radar is super. It’s normal—so we’ve done some of the hard work for you.

Accumulation 1, Accumulation 2 and Personal Account members

Your super balance reflects the amount of contributions you or your employer make, the performance of your chosen investment option(s) and the fees and taxes you pay.

During career breaks (e.g. unpaid leave or a reduced workload), we map the impact on your super by factoring in a period of no or reduced contributions.

An example: Rania

Rania started work with a UniSuper employer on 1 January 2018. She was aged 30 with a salary of $70,000 and transferred her super balance of $30,000 from her previous super fund into her UniSuper account.

In this example, we’ve used the following assumptions:

  • Rania’s employer contributes 9.5% of her salary1 into her account for the entire period, and she doesn’t make any additional voluntary contributions.
  • Each year, an investment return of 5% p.a.2 is applied to Rania’s account.
  • Her salary increases by 3% p.a., even when she works part-time and takes unpaid leave.

These calculations don’t take into account any employer paid parental leave or government benefits including the low income superannuation tax offset she may be eligible for.

Scenario 1: No career break

If Rania worked full time for 10 years as an Accumulation 1 member, her balance at age 40 is estimated to be $129,000.



Scenario 2: One-year career break

If Rania had a year off at age 33 and returned to full-time work, then her benefit at age 40 is estimated to be $121,000.



Scenario 3: One-year career break then return to work two days per week for a year

If Rania had a year off at 33 and returned to part-time work of two days per week for a year before returning to full-time work, then her benefit at 40 is estimated to be $116,000.



Scenario 4: One-year career break then return to work three days per week for four years

If Rania had a year off at 33 and returned to part-time work of three days per week for four years before returning to full-time work, then her benefit at 40 is estimated to be $108,000.

Defined Benefit Division members

If you’re in the DBD, your lump sum benefit when resigning or retiring is calculated using the following formula:3

Five year salary times benefit service times lump sum factor times average service fraction times average contribution factor

This formula is for a member who joined the DBD on or after 1 January 2015. See the explanation for formula factors.

Taking unpaid leave or working part-time impacts the average service fraction (ASF) part of the formula.

If you retired for other reasons like disablement, terminal medical condition or death, the formula used to calculate your benefit would differ. 


AN EXAMPLE: Lena

Lena started work with a UniSuper employer on 1 Jan 2018, aged 35. When she turns 45 on 1 January 2028, her five-year benefit salary is $85,000 and she’s made standard member contributions throughout her UniSuper membership.



Scenario 1: No career break

If Lena was employed full-time for 10 years as a DBD member, her defined benefit would be $161,500.

3% of her salary also goes to her accumulation component, along with any additional contributions and super she’s transferred from other super funds. This is added to the balance of her defined benefit component to calculate her total benefit.



Scenario 2: One-year career break

If Lena had a year off at 37 and then returned to full-time work, her benefit at 45 would be $145,350.

Her accumulation component would also grow more slowly due to reduced contributions.



Scenario 3: One year career break then return to work two days per week for a year

If Lena had a year off at 37 and returned to part-time work of two days per week for a year before returning to full-time work, her benefit at 45 would be $135,660.

Her accumulation component would also grow more slowly due to reduced contributions.



Scenario 4: One year career break then return to work three days per week for four years

If Lena had a year off at 37 and returned to part-time work of three days per week for four years before returning to full-time work, her benefit at 45 would be $119,510.

Her accumulation component would also grow more slowly due to reduced contributions.

These examples don’t take into account any employer paid parental leave or government benefits she might be eligible for. Nor do they take into account the value of her accumulation component.

What can you do to lessen the impact?

Work out how much time you can take off

While many assume that just because the law is the law, one year is a good time to take off. However, everyone’s circumstances are different, and one size doesn’t always fit all. Take a good look at your financial situation, discuss your options with your employer, and work out how long you can take off before deciding to do so.

Share with your spouse

Periods of unpaid leave can be a financial strain, particularly if you’re juggling other financial commitments. However, if you have a partner who can, contribution splitting is a way for them to transfer before-tax super contributions to your super account.

In some circumstances, a spouse who contributes to their partner’s super account may be eligible to claim a spouse tax offset (up to $540 for the 2018-19 financial year).

Pay yourself forward…

...by salary sacrificing to super from your pre-tax pay while you're still working full-time. This can boost your balance, helping make up for when your super contributions are lower and can reduce the tax you pay. Log in to your account to check how you’re tracking against the contributions caps.

Check your investment strategy

How you choose to invest your super now can affect your final balance later. Get to know our range of options and some of the things to consider when choosing how to invest your super.

Working for yourself?

If you’re setting up your own venture, don’t forget about your super.

There might be tax deductions that you could claim on the amount you contribute, but check with a tax specialist or find out more from the ATO website.

Get some help

A financial adviser can help you develop a financial plan to support you through a career break. UniSuper Advice’s team of financial advisers operates Australia-wide.

Important information

Currently legislation provides for the rate of superannuation guarantee contributions (SG) to increase from 9.5% to 10% on 1 July 2021, and to increase by 0.5% each year thereafter until it reaches 12% on 1 July 2025. For simplicity of calculation, we’ve assumed a rate of 9.5% throughout. This will cause an underestimation if the rate of SG increases as provided under current law.

Actual returns may vary significantly from year to year and could be negative in some years, particularly for those options with greater exposure to growth assets, such as shares and property. Investment returns depend on the investment options you have chosen and returns are not guaranteed. The investment returns are gross of default insurance and administration charges, indexed by inflation of 2% p.a. Actual insurance and administration charges may be higher or lower.

3 Please note that this formula changed on 1 January 2015. If you were a DBD member before 1 January 2015, part of your benefit would be calculated using the old formula and part of your benefit would be calculated using the new formula.