Surcharge News

Why the CSS Surcharge factors have increased substantially for members

The surcharge is a tax payable on employer contributions to a superannuation fund, made on your behalf.

In the case of a defined contribution or accumulation fund, the contribution that the surcharge is assessed on is straight-forward to calculate: it is simply the actual contributions paid by the employer.

In the case of a defined benefit fund, such as the PSS or CSS, the position is more complicated - the employer contribution needs to be estimated.

The procedure is that an actuary calculates the expected cost to the employer taking into account the benefits that may be payable over the tax year (such as retirement, death, disability, resignation or redundancy), the probability that those benefits will be paid and the amount of the benefits payable in each circumstance.

Recently the actuary to the PSS and CSS carried out a triennial actuarial investigation into the two Schemes. As a result of this investigation the actuary changed a number of assumptions, and in particular he:

  • allowed for general improvements in mortality;
  • updated the assumptions for number of resignations and timing of retirements;
  • updated the assumptions for the number of invalidity retirements; - increased the proportion of benefits that are assumed to remain preserved in the schemes until preservation age;
  • introduced an assumption for the number of future retrenchments; and
  • allowed for the very large number of CSS members that resign after attaining age 54 and before reaching age 55.

For this reason you might notice an increase in the level of your reported surchargeable contribution.

 

29 November, 2004