Superannuation is a way to save for your retirement. A superannuation fund uses professional investment managers to invest your money on your behalf, along with the money of other fund members. This money is held in the fund, usually without you being able to access it, until you retire (though you may be able to access some money in an emergency).
What are the different types of superannuation fund?
The main types of super fund in Australia are:
Usually run for profit by large financial institutions like banks. These funds include those operated by retail providers for the employees of a particular company.
Traditionally established for employees of a particular industry. Recently, though, many of these funds have become open to the general public through public offers.
Public sector funds
Government-owned and -operated funds, traditionally set up for public sector employees. Some have now become public-offer funds. They may be supervised by APRA (the regulatory body for most super funds) or by the state or federal government.
Less common these days, they are created by one or more employers, usually on behalf of employees of a particular company or group. Most are not open to the general public.
Includes self-managed super funds (SMSFs) and small APRA-regulated funds (SAFs) and can have a maximum of only four members. SMSFs are managed and operated by the fund members, who are also the trustees of the fund, and are regulated by the ATO instead of APRA. SAFs are similar, but have an external trustee.
What should I look for when choosing a superannuation fund?
There are hundreds of different super funds to choose from, so look for one that suits your needs. Consider factors such as:
- Fees – look for lower management fees
- Investment options – super funds offer different levels of investment risk and return. Make sure the fund has options that suit your risk comfort level
- Performance – you might want to look for a fund that has performed consistently well over a number of years, not just last year
- Insurance – is cover available and what will it cost?
- Service – does the fund offer any other useful services?
You can call the fund or check its website to find out information. It should also have a product disclosure statement (PDS) available.
How do I sign up for a superannuation fund?
When you take a job, your employer will automatically assign you to its preferred super fund unless you specify a different choice. If you change employers during your working life, you can stay with that initial fund or choose another. Just contact your fund of choice to sign up.
How does money get paid into my superannuation fund?
The three common ways of contributing to your super are:
- Contributions from your employer
- Personal contributions
- Government contributions
Contributions from your employer
Your employer must pay an amount equal to 9.5 per cent of your salary into your super fund, on top of your salary or wages. This money is invested by your super fund for you.
Personal super contributions
You can make your own contributions in addition your employer contributions by:
- Salary sacrificing – your employer can direct some of your pre-tax income into your super. This is deducted by your employer and sent to the fund with its contributions.
- Personal contributions – you can also ask your employer to make personal contributions from money you have paid tax on. Low income earners who do this may be entitled to government contributions.
- Bank transfer – you can transfer some of your savings into your super account
- Super transfer – you can transfer all or some of your super from another fund into your main super account
Depending on your income, you may be eligible for a co-contribution from the government when you contribute to your super. If you are a low income earner, you may receive up to $500 extra by making personal contributions after tax.
If you earn less than $37,000, you may be eligible for a 'low income super tax offset' from the government, of up to $500. You don't need to contribute extra money to your super to be eligible for this payment. Both of these payments will be paid into your super automatically after you have lodged your tax return.
How do I keep track of my super?
Many people change employers during their working life, and it becomes easy to lose track of your previous super. One way to keep things in order is by creating a myGov account and linking it to the ATO. By doing this you can:
- See details of all your super accounts, including any you’ve forgotten about
- Find ATO-held super – if the government, your super fund or employer can't find an account to transfer your super to, it’s held here for you
- Combine various super accounts into your preferred fund