Otivo

Learn with Otivo

Defined benefit fund (DBF) versus Accumulation fund

1 minute| Jun 21 2023

A defined benefit is where your retirement benefits are calculated by a predetermined formula, usually based on your average salary over specific years.

Your employer contributes to the amount needed to enable the fund to pay the benefit to you, based on agreed contribution rates and other variables such as inflation.

Accumulation funds are more common and how much you end up with at retirement depends on the money put in by you and your employer, and how it performs.

You bear the risk of your super being lower if financial markets drop. In traditional DBFs, employers bear that risk and have to top up the difference.

Share

Related reading

What to do with super at retirementWhat is Accumulation phase versus Pension phase (aka retirement phase)Superannuation tips in Australia: how to manage your super, find lost super and optimise your retirement savings