Increasing your Super with additional contributions
For many Fijians, the direct deduction from their wages for their retirement savings with the Fiji National Provident Fund is their only and main source of savings.
As workers, we contribute (effective 1 April 2020) 5% of our wages and our employer also contributes 5%.
However, the law (FNPF Act) allows us to contribute more than the mandated 5% and a lot of our members are now taking advantage of this opportunity.
FNPF launched the Additional Contribution product in January 2015 and its purpose is to encourage compulsory members to boost their retirement savings.
Since then, a total of 5,378 compulsory members have contributed an extra $8.1 million to their savings, all in a bid to help them achieve their pre-retirement and retirement goals.
That really is the objective of this product - to help members achieve the type of retirement that would enable them to live comfortably and in dignity.
Members need to set up a retirement plan and see how best they can achieve it with their current financial resources.
Setting up goals for retirement will help you identify an amount to retire with and also how much to set aside to reach your ultimate target.
To do that, members can simply sign up by completing the necessary form OR visit their nearest FNPF office for a one-on-one session with our team so that they are provided with adequate information that would help them make the right decisions.
And the sooner the members sign up, the better it is for them.
This week, we discuss common queries pertaining to Additional Contributions and share some information that’s pertinent to this product.
This product helps compulsory members increase their retirement savings by contributing more than the current mandated contribution of 5%.
Why should I sign up for this product?
The most effective way of saving money is to deduct from source (wages). Additional contributions will boost your retirement savings by adding more to your mandated contributions. It will assist you with securing the type of retirement you are planning.
Additional contributions are managed in the same way as mandatory contributions and it also earns interest and is tax free.
Shown on the right is a hypothetical scenario that will help members realize the benefit of additional contributions.
The projection is developed based on the following assumptions:
• Starting salary: $20,000 before tax. Assume it will grow at 3% each year afterwards.
Average annual crediting rate: 5.5% p.a.
• Average annual inflation rate: 3% p.a.
• No withdrawals either for partial or housing during membership. Retirement age 55
Additional contribution of $50 per month will continue until age 55
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What is Additional Contributions?
*The projected balance is presented in today’s value. For instance, the projected balance of $175,000 at age 55 means that, under scenario 1, there is a reasonable chance that your FNPF balance would grow to $175,000 at today’s value when you turn 55 under the assumed economic environment. Without additional contributions, the total balance would be $149,000 which is more than a year’s salary in additional retirement savings.
What are the benefits of additional contributions?
Apart from boosting your balance, you
Total FNPF balance at the date of signing up for Additional contribution
Projected balance at Age 55 without
How much can I commit on top of my mandatory contributions?
Under the current COVID context, you can contribute up to 20% of your pre-tax salary till 31 December 2021.
The maximum amount of contributions allowed for compulsory members is 30% of your pre-tax salary, that is, 5% each from you and your employer and a maximum of 20% for your additional contribution. with Additional contribution
will have the option of either pumping up your preserved account or you can put your extra savings into your general account, depending on your need. For e.g. if you plan to use your general account to buy a home or conduct major renovations, you can commit your total additional contribution to your general account so that you can grow your balance to enable you to make that worthwhile investment.
Or if you choose to invest in your children’s education and want to begin saving for that university of choice, you can contribute more to your general account and be prepared for when your children enter tertiary life.
Which sub-account does the additional amount go to?
You can choose which account the additional amount is paid to by indicating the portion for the General Account and the portion for your Preserved Account.
How do I apply?
You must complete the EMPLOYEE ADDITIONAL CONTRIBUTION form and get your employer to sign off on your commitment level, in line with Section 47(5) of the Employment Relation Promulgation 2007. FNPF will then assess your application to ensure that your deductions are legally compliant.
What happens if I want to change my additional contribution amount?
You can do this after 3 months of signing up. For e.g. if you signed up in January 2020 to increase your contribution by 2%, you can only change that amount in April 2020 (3 months from January 2020).
Can I opt out of additional contributions if I am unable to manage my financial commitments?
You can revoke your additional contribution 3 months after the date you signed up.
How are my additional contributions paid?
It is paid with your mandated contributions on the last day of each month
Why are additional contributions only for compulsory members?
Compulsory members have a legislated contribution rate. Additional contributions are introduced to help compulsory member adjust their contributions over their working life in order to achieve a reasonabl targeted retirement life. This is not an issue with voluntary members, because they have more flexibility in the amount they can contribute to achieve the same target.
Voluntary members are not limited by the mandatory rates that are applied to compulsory members.
I had signed up for additional contributions before the COVID-19 pandemic, but my hours have been reduced and I can no longer meet that commitment. Can I opt out?
Yes you can, provided it has been 3 month since you signed up.
Can I apply for additional contributions even though my wage rate/working hours has been reduce due to COVID-19?
You can do that if you know you have the financial capability to add on to your mandated contributions. You must ensure that you are not financially burdened or stressed by your decisions.
What options, apart from this product, are available for members who want to boost their retirement savings?
Members can repay early or partial withdrawals they had accessed through the years. It is a great way to boost your saving as the amount you repay goes right back to your FNPF account. You will earn the annual interest on these funds and it is tax free.