Superannuation is paid by your employer straight into your super fund. It is called the Super Guarantee and the rate for the financial year ending June 30, 2022 is 10 per cent of ordinary time earnings. It is legislated to rise by half a percentage point each financial year until reaching 12 per cent by the middle of 2025.
You’ve been putting aside money for it your whole working life – but what is super, and when can you access it?Credit:Kathleen Adele
The money invested in super is lightly taxed, which helps to grow retirement savings.
How does super work for you?
The purpose of super is to provide income in retirement that substitutes or supplements the federal government’s age pension.
There are many super providers and there can be considerable differences in how they invest members’ money and how those investments perform.
Fees charged can also vary between funds, so keeping an eye on what you are paying is important because it has a big bearing on how much you will save for retirement.
Where does the money go?
Money held in a super fund is invested in a range of assets by the fund’s money managers. Most funds give members an option of choosing their preferred investment mix, based on their individual risk tolerance.
Generally, the amount of risk you are prepared to accept correlates with how close you are to retirement.
The younger you are, the more time you have to overcome the ups and downs of investing. Conversely, as you are nearing retirement, you would likely be more interested in keeping the retirement savings you have built up.
Total super assets were $3.4 trillion as of September 2021. About 28 per cent was invested in international shares, about 23 per cent in Australian shares, and smaller percentages allocated to assets such as cash, fixed interest, property, infrastructure and other assets.
How do you choose a super fund?
There are publicly available returns provided by private sector research houses and the government has a website, where returns of funds can be compared.
What are the best superannuation funds?
The best funds are those that produce the highest returns without taking undue risks with the money, after all fees and costs are deducted, over the long term – at least 7 years. It is not all about returns, there is also life insurance to consider, for those who need it. Some funds will have cheaper insurance than others with fewer exclusions.
How much super should I have? Best super calculators?
The Australian Securities and Investments Commission has a calculator on its MoneySmart website where variables, such as assumed rate of return and level of fees, can be changed. It will estimate how much income in retirement you are likely to have.
How do you consolidate your super?
Go the Australian government website my.gov.au, log in or create an account link your myGov account to the Australian Taxation Office. Then select “Super” and then “Manage”, then “Transfer super”. This option will only appear if you have more than one super account.
You can also transfer your balance to a new super fund by contacting the new fund directly or using the ATO rollover form.
Why should you voluntarily contribute to your super? How often should you do it, and what are the benefits?
Voluntary contributions are those made in addition to the compulsory Super Guarantee contributions paid by your employer. Voluntary contributions are a great way to accelerate retirement savings.
How much you can contribute is subject to certain caps and their frequency would align with your pay cycle. Whether you make voluntary contributions depends on individual circumstances.
Someone in their 50s, where retirement is not far off, and those who are more highly paid, are more likely to make voluntary contributions.
How and when can you access super?
There are strict rules for accessing retirement savings. For most people, the money can only be accessed once they retire; though there are some other limited conditions for early release. These include financial hardship. Other reasons can be a terminal illness, or you may need surgery and are unable to pay for the procedure without access to super.
- Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.
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