Understanding military superannuation in Australia

ADF Super is the common or shortened name for the new military superannuation arrangement launched by the Australian government in 2016. Its full name is the ADF Superannuation and Death and Invalidity Cover Arrangement. All ADF personnel who joined after 1 July 2016 were automatically signed up.  

While ADF Super became the default super fund for all members of Australia’s Permanent Forces and Reservists on continuous full-time service (CFTS), there was also the option to choose your own fund. If you choose your own super fund, it would need to comply with ADF requirements. And if you’re an ADF member who works part-time, you wouldn’t be required to make super contributions but could set up salary-sacrifice contributions. 

If you joined the ADF before the switch to ADF Super, you could still choose to move your military superannuation to this fund if you’re currently a Military Super member. This offer to switch super arrangements includes Reservists. However, DFRDB members - whether permanent or Reservists on CFTS - are not eligible to become ADF Super members. 

In terms of contributions, Military Super mandated a minimum 5 per cent contribution from members and DFRDB mandated a 5.5 per cent contribution. No such mandatory contribution is expected from ADF Super members. ADF Super members receive an employer contribution worth 16.4 per cent of their pay. In comparison, the employer contribution for Military Super and DFRDB members depends on how long you’ve served and your salary when you retire from the ADF. 

Like other superannuation, the longer you serve, the more the funds in your super will grow due to the regular contributions. You can help support this growth by setting up a salary-sacrifice arrangement where you’re making pre-tax contributions. 

Salary sacrifice is where your employer deducts money from your salary before paying you and contributes it to your super on your behalf. With previous military superannuation schemes, there was a requirement to make individual contributions. 

This is not the case with ADF Super. However, you or your spouse could make voluntary contributions to your ADF Super fund from one of your salaries after-tax. Before deciding to make personal contributions, you should check whether there is a maximum amount you can contribute either before tax or after tax.

Another way you grow your super balance is by choosing a suitable investment option based on your willingness to take risks. For ADF Super, the default investment option is the MySuper Balanced plan, which is categorised as a medium-to-high risk option.

However, you could choose one of the other options depending on your own level of risk. The investment options available with ADF Super are: 

• Cash, which involves very low risk
• Income focused, considered a low-to-medium risk
• Aggressive, which carries a high risk

Depending on your choice of investment options, your money will be invested in varying combinations of cash, fixed interest, equities, property, foreign currency hedging, etc. Since you’ll likely have years to manage your military superannuation, you can choose to change your investment option at different stages of your working life. This means you may select a riskier option earlier in your career and a lower risk option as you’re getting close to retiring from the ADF.