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What is a superannuation guarantee?


Laine Gordon

By Laine Gordon

3 min read

Saving for retirement might seem daunting, but the earlier you get started, the better.

An important element of growing your nest egg is the superannuation guarantee. Make sure you understand it so you're set up for retirement in the best way possible.

What is superannuation?

First things first – let's track back to superannuation itself.

As an employee, you'll elect a super fund. Your employer makes contributions directly into this fund, and you can make regular and one-off payments, too. 

There is a range of funds available, including self-managed super funds (SMSFs), which have more autonomy and require you to complete all the necessary record-keeping.

Tell me about the superannuation guarantee

The more you save now, the greater the amount you'll have in the future.

Unless you're covered by a specific state award, your employer will be obliged to contribute a percentage of your salary into your fund. This is just one way you can ensure you have a healthy nest egg when retirement rolls around. 

This percentage is known as the superannuation guarantee (SG). At the time of writing, the SG was 9.5 percent, but it rises incrementally over the years. By 2025, the superannuation guarantee will be 12 percent. 

How will it help me?

As Australia's population ages, individuals will be spending a longer period of time in retirement.

Accordingly, having sufficient cash assets is essential. Those planning for retirement – whether in three years or three decades – may also toy with the idea of investing in other long-term growth assests, such as shares or even property which they can rent out.

The superannuation guarantee ensures all Australians have a minimum amount of money to prop them up during their golden years. What's important to remember is SG doesn't have to stand alone. Those who are savvy about saving for their future could regularly make co-contributions or one-off payments to their super funds, in order to boost their nest egg.

How much does my employer have to contribute?

As a legislated scheme, your employer is required to abide by the stipulated SG percentage. The governing federal legislation is the Superannuation Guarantee (Administration) Act 1992.

However, the particular percentage can change, depending on your circumstances. For instance, in some cases, an award may require a higher amount. Furthermore, some employment agreements will specify a higher amount than the legislated figure. 

For this reason, it's essential to check awards and agreements to know how much your employer will be paying.

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