Simply put, superannuation is the money set aside for your retirement. Your employer directly pays a certain amount of money into your superannuation account. This is separate from your salary. By Australian law, your employer is required to contribute a certain percentage of your ordinary time earnings (OTE) into your superannuation account.
You will be able to access and use the money in your super account once you turn 65 (even if you haven’t retired yet) or if you reach what is called the ‘preservation age’ when you retire.
Your preservation age is the age in which you can access your superannuation fund once you have retired or at least started transitioning to the retirement income stream. The preservation age depends on when you were born. Take note, however, that your preservation age is different from your pension age.
Superannuation is often the average Australian worker’s biggest asset, which is why it is important to research thoroughly and decide which superannuation account to choose. It ensures financial security and benefits in the long term.
The Construction and Building Unions Superannuation (CBUS) is a superannuation fund that was originally created for people in building, construction and allied industry sectors.
If you’re a CBUS customer, you can choose to invest with a risk level that would best suit your situation.
Another option would be to make a ‘salary sacrifice’ for your super. This means that you can arrange for your employer to redirect a portion of your pre-tax salary into your super account. It is an extra payment above and beyond what is usually required.
Different types of superannuation funds
A typical superannuation fund will have a range of investment options, depending on your financial position, risk profile and where you are in your life cycle. Life insurance might also be offered on an opt-out basis.
The different types of super fund include:
- Retail funds. Retails funds are generally run by banks and investment companies. Retails funds offer a variety of investment options and are usually accumulation funds. Although most retail funds are mid- or high-cost, there are some retail funds that are low-cost.
- Industry funds. Like retail funds, industry funds are open for anyone, although some could have restrictions to only employees of a particular industry. Their investment options are sometimes more limited, but they are usually low- to mid-cost. Generally, industry funds are non-profit funds so that all members can enjoy full benefits.
- Public sector funds. Public sector funds are created for employees of federal and state government departments. Long-term members may be in a defined-benefits fund, while newer members are in an accumulation fund. Profits are also put back so the members can enjoy the benefits.
- Corporate funds. A corporate fund is managed by an employer and they will usually return all profits to their members. However, some industry or retail funds might choose to retain some profits. It also has defined benefits for members, although some corporate funds might just have accumulation funds.
- Self-managed superannuation funds. Self-managed super funds (SMSFs) may be a good option for people who have a substantial super balance and a good working knowledge of financial matters. SMSFs can have up to four trustees.
- Eligible rollover funds. The eligible rollover fund (EFR) is an account for lost or inactive members that have low balances. The EFR serves as a holding account for these cases and may even help you consolidate your ERF with your active super fund (if applicable).
Can I access my superannuation funds before retirement?
Yes, it is theoretically possible, but there are only very few ways to do so, such as severe financial hardships/emergencies, particular medical conditions, a permanent disability or a life-threatening illness.
You may also receive your super if you are a temporary resident who is about to leave Australia permanently.
What are my super options?
For super withdrawal options, you have the option of receiving the money in your superannuation fund as an income stream, a lump sum, or a combination of the two.
Under the super income stream, you must pay a minimum annual fee in order to receive regular payments from your super fund over a specified amount of time.
Under the super lump sum stream, you may withdraw some of all of your super. However, once you do this, the money you withdraw will no longer be considered superannuation.