Some employers may operate ‘defined benefit’ funds, although very few of these types of funds are now made available to new members. Historically many public sector and corporate super funds were offered on a defined benefit basis.
The final benefit of a defined benefit fund is determined based on a formula that incorporates your final salary, years of service and a multiple defined by the fund. This means that you know with certainty in advance the benefit amount you’ll receive at retirement.
It is the employer’s responsibility to ensure that there is sufficient money available to pay the final benefit, so they bear any investment risk.
With a defined benefit fund, members may be able to elect to take either a lump sum or a pension in retirement or a combination.
These funds are different to the more common accumulation funds.