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Superannuation overview: get up to speed on how to set up and manage your super

Superannuation is a form of long-term saving and investing to provide you with a pension or lump sum of money when you retire. Your superannuation builds up over the years that your employer contributes to your superannuation fund.

Usually, the rules of your fund allow you to contribute as well, although some people put their own contributions into a separate fund.

If you are self-employed, you may choose your own superannuation fund. You will not receive any employer contributions, but you will receive tax concessions. Most of the issues covered here involve employees, but many of them will also be relevant if you are self-employed.

The superannuation fund is set up as a trust fund or a retirement savings account. Your fund invests your money and reinvests investment earnings to increase the benefit that you receive. Your benefit also grows because the fund gets tax concessions provided it meets Government standards. The combination of savings and investment earnings could make your superannuation account worth a lot of money when you retire, perhaps even more than the value of a home.

All superannuation contributions made from 1 July 1999 must, with a few strict exceptions, be preserved in the superannuation system until you permanently retire from the workforce and reach the minimum age set by law. The minimum age is:

Date of Birth Minimum Age for Getting Superannuation Benefits

  • After June 1964: 60
  • July 1963 to June 1964: 59
  • July 1962 to June 1963: 58
  • July 1961 to June 1962: 57
  • July 1960 to June 1961: 56
  • Before July 1960: 55

This restriction does not stop you from changing your fund.

Are there any other benefits?

Most funds pay a benefit to your dependants when you die. Many superannuation funds may also offer insurance in case you have to give up working because of illness or disability. Some funds may offer other benefits and features. E.g. payments if you are retrenched or made redundant.

How safe is your Superannuation?

Most Australian superannuation funds are prudently managed and they provide the benefits promised, plus receive good returns from their investments. There are laws and government agencies that control and supervise superannuation funds. The aim is to ensure that your benefits are properly protected and that any fraud is detected and any damage reduced.

The law does not guarantee your funds investment earnings, however. These earnings can rise and fall depending on market conditions and investment decisions by your fund managers. The higher the return your fund seeks, the greater the risk it takes of possible loss. On the other hand, low risk investments (like money in a bank deposit) may produce low returns that may not make up for rises in the cost of living. Your superannuation trustee and their professional investment managers are paid to ensure the balance between risk and return is right.

Should you have Superannuation?

Nearly every employed person must have superannuation. There are very few exceptions. If you need to get the rules, these are available from the ATO on their Superannuation Help Line. The number is 131020.

What are you entitled to?

Your employer must pay a contribution on your behalf to a superannuation fund. A superannuation fund must operate according to Australian superannuation laws. If you are employed, you have to be entitled to superannuation since at least 1 July 1992. The amount your employer must contribute is currently 9% of the value of your wages or salary, excluding overtime. These contributions are called superannuation guaranteed contributions.

What do you do if your employer is not paying?

Occasionally employers have failed to pay their workers' superannuation contributions into a fund. You can check with your fund to see that you are on their books as a member and that your contributions are reaching them. Payments must be made no later than 28 days after the BAS reporting period, quarterly or monthly. You can tell the ATO if you suspect your employer is not making superannuation guaranteed contributions. You can do this by calling 131020.

Do you have any control over your Superannuation?

Your decisions affect how much money you have in retirement. Depending on your workplace, you may have control over:

  • Which superannuation fund you join
  • Which investment strategy you want for your money in the fund
  • Whether to change to another fund
  • Whether to put all of your superannuation from previous employers into one fund
  • Whether to make any extra contributions to the fund of your choice

Remember, except in very limited circumstances (such as personal hardship) you cannot get your money out before you retire. Many investment decisions are also made by the trustee of your superannuation fund, usually with help from professional advisers and investment managers. Your trustees will send you a statement at least once a year, plus an annual fund report.

Why do I need Superannuation?

Everyone needs superannuation. The Government has implied that in the future retirees will receive a much lower pension than those of their parents. This means that in the future there will be less and less available from the Government towards your retirement, so it is critical that everyone save for his or her own future.

Superannuation is probably the best way to save for retirement, as it encourages people to save using the incentives that have been provided by the Government, such as tax treatment etc.

More and more we have come to realise that we need to provide for our own retirement and this is the attitude and thinking that must be made clear to everyone at an early age. Even though the superannuation guaranteed contributions are in place, it is more than possible that these will not meet most people's retirement lifestyle expectations. Because superannuation is well established as a tax effective way to provide financial security, it stands to reason that the earlier one starts, the better.

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