What is Superannuation?
Superannuation (also known as ‘super’) is a tax-effective means of saving for retirement by putting aside and investing money during your working life.
An employer and / or employee usually make superannuation contributions into a superannuation fund that is regulated by legislation. As of 1 July 2014, the minimum contribution level is 9.25% of your salary. This contribution is known as the ‘Superannuation Guarantee (SG)’.
Superannuation savings are pooled together and invested in different sectors (e.g. property, cash, fixed interest, equities, etc.) Depending on your superannuation fund you may be able to determine your exposure to each of these sectors.
What kind of superannuation advice do you offer?
We offer the two main types of superannuation advice that is most asked for by clients. These include:
- Superannuation strategy advice only – where we do not review your existing super fund; or
- Superannuation strategy & fund advice – where we do a full review of your existing fund’s performance, fees & features, and suggest appropriate superannuation strategies.
Why is having a superannuation fund important?
We are now living longer than ever before, which means that our superannuation savings also has to last longer to fund our retirement lifestyle. Superannuation can:
- help provide you with a financially comfortable and secure retirement
- allow you to take advantage of favourable tax treatment of superannuation contributions and benefits
- allow you to take advantage of life insurance offered through your superannuation fund.
What types of superannuation funds are available?
There are 6 main types of superannuation funds:
- Industry Fund
- Employer Fund
- Government Fund
- Retail/Public Offer Fund
- Self Managed Super Fund
- Defined benefit fund
How much super should you save for retirement?
Working out how much you will need to fund your retirement may not be easy but generally, you should allow for at least 60% of your pre-retirement income for each year of retirement. If you want to improve your standard of living in retirement, you’ll possibly need more.
Remember that when you’ve retired you may save money on work-related costs, but basic living expenses will be the same, and you may even choose to spend more on your leisure activities and interests. Longer term, be aware of rising health and medical costs, as well as the impact of inflation on your savings.
How do I ensure that I will have enough super to retire on?
Start saving today! Even a few dollars a week can make a big difference to the sum of money available to you when you retire. Basically, the sooner you start saving, the more time your money has to grow. When you invest regularly, no matter how little you put away, you’ll enjoy the effects of compounding. Compounding happens when income earned on your savings is re-invested, so you earn money on your initial capital as well as on any income you have already earned.
Who can invest in super?
You – Subject to certain contribution caps, anyone under 65 can invest in their own superannuation. Contributions can be made with:
- After tax income – voluntary contributions
- Pre-tax income – typically this involves a salary sacrifice arrangement with your employer, whereby you direct some of your pre-tax income into super.
Your employer – Employers are generally obliged to pay a percentage of an employee’s salary to superannuation, and may contribute more if they wish, up to certain maximums.
Your spouse – If you are under age 70, you can make contributions on behalf of your spouse, up to certain maximums.
What is a superannuation benefit payment?
A superannuation benefit payment is a lump sum payment from a superannuation fund. If you are over age 60, your superannuation benefit payment is tax-free. If you are under age 60, your superannuation benefit payment will comprise of two different components – a tax-free component and a taxable component.
When can you get your superannuation?
You generally cannot receive benefits from your superannuation fund until you retire and reach what the law calls your ‘preservation age’.
Date of Birth Preservation age
After June 1964 60
July 1963 – June 1964 59
July 1962 – June 1963 58
July 1961 – June 1962 57
July 1960 – June 1961 56
Before July 1960 55
The law does allow people to get their superannuation earlier in some circumstances. These include cases where a person suffers permanent incapacity for work, in some cases of severe financial hardship, or on ‘compassionate grounds’. You can find out more from your superannuation fund.
Can you get your superannuation and continue to work?
Yes, but only if you have reached your preservation age. Your fund can let you draw on your superannuation without having to retire permanently from the workforce. This means you could continue working part-time and use part of your superannuation to supplement your income, instead of leaving the workforce altogether.
If you choose to keep working, you will have to receive your superannuation as a particular type of pension. These pensions, known as ‘complying’ pensions and ‘allocated’ pensions, will generally not be ‘commutable’. Broadly speaking, this means you won’t be able to stop the pension and cash it out as a lump sum.
However, if you select a ‘non-commutable’ allocated pension, you will be allowed to take a lump sum once you retire or reach age 65. Or you can stop the pension and put your benefits back into your superannuation fund, for example if you decide to go back to full-time work.
How do I find lost super?
Often people lose track of their superannuation funds, especially when frequently changing jobs. If you have lost track of your superannuation from a previous employer, we can help you find it.