WHAT IS SUPERANNUATION?
Superannuation is an investment which operates by putting aside
money during your working life so you have savings upon retirement.
Your money gradually builds up because once it is in a super fund,
generally it must remain in a super fund until you reach a minimum
age set by the Government and meet the rules for accessing the benefit.
Superannuation money is invested and the earnings are reinvested
in the super fund.
By law, most working Australians generally have 9% of their salary
paid by their employer into superannuation. Some employers choose
to contribute more than this amount for their employees as a form
of added remuneration.
Many employees also choose to put money into super themselves
– either from their after-tax income, or they arrange with their
employer to take home less money and have some of their salary put
pre-tax into superannuation, known as 'salary sacrifice'. Some employees
choose to contribute money into their spouse’s super fund.
Superannuation is not compulsory for self-employed people, although
many do make contributions.
WHY IS SUPER IMPORTANT?
- Australia's population is ageing: The proportion of the
population that has reached retirement age is increasing.
There are now five people of working age for every person
aged 65 and over, but by 2047 that will reduce to just 2.4.
By 2047 a quarter of Australia's population is expected
to be aged 65 and over1.
That's nearly double the current proportion. It would put
incredible pressure on Australia's tax system if all these
people were to rely solely on the age pension. That's why
the Government encourages people to save for retirement
through superannuation by offering tax concessions not available
on other forms of saving.
- We are living longer: Better nutrition and medical advances
mean we are living longer, healthier lives. Average life
expectancy for men is increasing from 79 today and forecast
to be 86 by 2047. Average life expectancy for women is also
increasing – from 83 today and forecast to be 90 by 20471.
We continue to lead active lives and expect to do a lot
in our retirement – which could last 25 years or more. The
age pension alone is unlikely to adequately fund retirement
- Inflation raises prices: Over time, the cost of goods
and services rises due to inflation. What might seem a lot
in today's dollars won't stretch so far in the years ahead.
You need to consider this when looking at your current super
balance and thinking about how much you need when you retire.
You'll probably need to save more than you expect.
WHO MANAGES SUPER?
Your super is held in a separate fund (a trust), managed
by a trustee which can be a person or company. The trustee
runs the fund and must meet legal standards designed to protect
your benefits and guard against fraud or gross mismanagement.
By law, the trustee must act honestly and prudently and make
decisions in the best interests of all fund members.
The trustee usually works with other professionals such as
investment managers and legal specialists to help operate
the fund. Even though these professionals perform roles, such
as investing the fund’s money and looking after membership
records, the trustee still retains legal responsibility for
all areas of fund operations. Trustees hold office under the
rules of each fund. If they fail in their duties, courts or
Government agencies can remove or penalise them.
Are you self-employed? From 1 July
2007, you may be eligible to claim a full tax
deduction for your super contributions. If you
meet the eligibility criteria, you could also
be entitled to a co-contribution made by the Government
on your personal after-tax contributions. For
more information on the Government’s Super Co-contribution
initiative, click here.
It’s a good idea to check with your employer
that you are registered as a member of a super fund
and that contributions are being made to your super
account. This is especially important if you are a casual
or part-time employee. Ask your employer the name of
the fund they contribute to on your behalf and when
they send your contributions.
ARE YOU ENTITLED TO SUPER?
By law, employees who are paid $450 or more before tax in
a month must generally have 9% of their salary or wages contributed
to a super fund by their employer, subject to some exemptions.
This contribution is known as the Superannuation Guarantee
For most people, the 9% is based on ‘ordinary time earnings’
which means earnings for your ordinary hours of work. Some
individuals who are independent contractors are also entitled
Employers must pay contributions into a super fund at least
every three months. They have 28 days after the end of each
quarter to make the payment. If you're not sure whether you're
entitled to employer super contributions, speak to your employer
or a licensed financial adviser.
HOW ARE SUPER FUNDS REGULATED?
The Government bodies involved in the regulation of the superannuation
- Australian Securities and Investments Commission (ASIC): ASIC
enforces and regulates company and financial services laws to
protect consumers, investors and creditors. ASIC licenses the
businesses that may give you financial advice about super or sell
you financial products. Among other things, ASIC administers the
laws that require super funds to give you the information you
need to make an informed decision. It also oversees how super
funds deal with consumer complaints.
- Australian Prudential Regulation Authority (APRA): APRA is the
prudential regulator of the Australian financial services industry.
It supervises most of the superannuation industry as well as banks,
credit unions, building societies and insurance companies. APRA’s
main task is to make sure trustees understand their obligations
to manage the benefits under their control prudently and in the
interests of members. It is also responsible for licensing of
trustees of Registrable Superannuation Entities (RSEs) and registration
- Australian Taxation Office (ATO): The ATO regulates Self-Managed
Superannuation Funds (SMSFs), which are funds with less than five
members that have been set up and managed by the members themselves.
Each member of the fund is a trustee or, if the trustee is set
up as a company, each member of the fund is a director of that
company. The ATO also oversees the tax rules applying to superannuation.
WHERE IS YOUR SUPER INVESTED?
Many Australians can choose which fund their compulsory employer
superannuation contributions are paid into. For more information
on ‘Choice of Fund’, click here.
Most super funds allow you to choose what types of investments
your money is put into, known as 'investment choice'. Some funds
allow you to choose investment strategies – such as growth or balanced.
While others allow you to choose asset classes – such as Australian
shares, international shares, fixed interest, cash or property.
Some allow you to blend a range of investment options – such as
mixing asset classes with different investment techniques that may
utilise alternative investments.
If you don’t make an investment choice, your money will be invested
in the fund's default investment option. This may not be the most
appropriate option for you. For more information about investment
choice, click here.
WHEN CAN YOU ACCESS YOUR SUPER?
Because super is specifically intended for your retirement,
the Government has restrictions on when you can access it,
known as your 'preservation age'. This age will vary depending
on when you were born.
Previously, you would’ve had to permanently retire from
the workforce to access your super. The 'Transition to Retirement'
rules means there is now some flexibility around this requirement.
Now you can have access to your super once you have reached
your 'preservation age' without having to permanently retire
from the workforce. For more information on ‘Transition to
Retirement’, click here.
There are some limited circumstances where you might be
able to get early access to your super, including severe financial
hardship, compassionate grounds, permanent incapacity or death.
For more information on early access to super, click
Your date of birth
Preservation age (minimum age you are able to access your super)
After June 1964
July 1963-June 1964
July 1962-June 1963
July 1961-June 1962
July 1960-June 1961
Before July 1960
FIVE SUPER REASONS
It’s tax effective:
To encourage Australians to save for retirement, the
Government provides tax concessions on contributions to
super and on investment earnings within super. It also
allows people aged 60 and over to take their superannuation
benefit tax free – whether they take it as a lump sum
or an income stream from a taxed source. These tax advantages
maximise your super benefit and may help your money grow
faster than it would in non-super investments. For more
information on the tax advantages of super, click
Provides the opportunity to grow:
Because super is designed to be a long-term investment,
earnings on your money are reinvested. This means you
earn interest on your interest, known as compounding.
The earlier you start to save, the greater the benefits
over time, and the more you have in retirement.
Opens access to a wide range of investments:
Because your super money is pooled with other investors,
you can access investments that would generally be reserved
for larger 'institutional' investors. You may also be
able to combine a wider variety of investment options
than would be available to you as an individual investor.
Super is a regular form of saving that's generally compulsory
and is done for you automatically. Your employer sends
your contributions directly to your super fund. And if
you've chosen to salary sacrifice to super, because you
don’t see the money, you’re not tempted to spend it. You
don’t have to do tax paperwork on super – your super fund
It usually provides some insurance cover:
Many super funds provide their members with ‘automatic
acceptance’ insurance cover. Due to their size, super
funds generally access insurance at group rates which
can mean lower premiums for members than if they purchased
the same insurance individually. There can also be other
advantages in terms of cover inclusions and not having
to answer health questions or undergo medical tests for
basic cover. Most funds also give you the option to take
out increased cover if you require. For more information
on insurance, click here.
By law, each super fund must
provide a retail investor with an information
booklet, known as a Product Disclosure Statement
(PDS). The fund’s PDS contains information
about what the fund offers and how it works,
including investment strategies and options,
risks and likely returns, fund features
and services, fees and costs, death and
disability benefits and insurance premiums.
A financial adviser will be able to help
if you want assistance choosing a fund.