Learn more about what super is, how it works and why it matters.
What is super?
In simple terms, superannuation or ‘super’ for short, is money set aside from what you earn during your working life to support you once you’re retired. It’s deposited into a fund, where it’s invested by professional fund managers to earn a return and grow over time for you.
The amount of super you retire with is determined by several factors. These include how much has been made in contributions, how long it’s been invested, the type of investment option you’ve selected, the investment returns your money has earned and the amount you’ve paid in fees.
Many people think of their super as an investment that takes care of itself. But there are several choices you can make about your super and these choices could make a big difference to your quality of life in retirement.
What is the superannuation guarantee?
In most cases, once you’re earning more than $450 per month, your employer is required to contribute 9.5% of your before-tax income into a super fund. These payments are known as super guarantee (SG) contributions (also known as employer super contribution), and they form the foundation of your super.
You’ll need to provide your tax file number in order to prevent extra tax being taken out of your SG contributions, and to enable your super fund to accept any personal super contributions you may choose to make.
Growing your super
In addition to your SG contributions, you may want to contribute more money to your super account. These personal contributions can be made using either before-tax or after-tax money. Making personal contributions can be an effective way to save for your retirement, as in many cases they are taxed at a lower rate than your income.
But be aware there are limits to the amount you can contribute depending on your age and circumstances, and that you usually can’t access your super money until after you’ve retired and have reached your preservation age.
Types of super funds
There are several different types of super funds available, including:
- Retail funds, which are typically owned and run by financial services companies and are open to anyone to join.
- Industry funds, which are typically affiliated with a specific industry. Some are open to anyone, while others are only open to employees in that industry.
- Corporate funds, which are typically arranged by a company for its employees. Some are operated by the employer (under a board of trustees), while others outsource their operation to a retail or industry fund.
- Public-sector funds, which are typically for employees of federal and state government departments.
- Self-managed super funds (SMSFs), which are private superannuation funds for up to four members which they manage themselves.
In most cases you can choose which fund you’d like your super to be invested with.
Choosing a super fund
Most employees can choose their own super fund - to find out if this applies to you check with your employer. If you’re eligible to choose your own super fund, your employer will give you a standard choice form when you start working for them.
You’ll typically have a choice between your employer’s default fund or one you select, which could be a fund you joined with a previous employer or an SMSF. If you don’t choose a fund, your SG contributions will be paid into your employer’s default fund.
You can also request a standard choice form from your employer and change super funds during the course of your employment, although you can only request your employer change your fund once a year.
There are a few things to consider when making a choice. These include the fees charged, investment options, insurance cover available and its cost, and the fund’s investment performance.
Many super funds offer a simple and cost-effective super account called MySuper, which offers low fees, simple features and a simple, default investment option.
If you haven't chosen your super fund in the past and you have just gone with the fund your employer selected, your super will have been automatically transferred into a MySuper account.
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