Superannuation (also known as ‘super’) is a compulsory savings scheme. It puts aside some of your income so you can have a nest egg waiting for you when you retire.

Different super funds offer different investment options to help you grow your retirement savings. There are also extra features, benefits, fees and charges to consider. It's important to compare different super options to make sure you choose a fund that best suits your financial situation.

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Learn more about superannuation

What's new in superannuation in January 2021?

2020 was a challenging year for superannuation funds, with the global pandemic wreaking an unexpected havoc on the Australian economy and budgets of millions of Aussies.

The Early Release Super Scheme was implemented to help struggling Aussies gain access to much-needed funds off the back of growing unemployment rates and economic uncertainty. Since April, APRA found that $35.8 billion in super had been withdrawn under the scheme, with $7,645 the average payment across both rounds.

However, RateCity warned Australians to consider alternatives before taking money out of their super or enact a plan to put the money back in when they can. This is because the long-term impacts with withdrawing super can be detrimental to your overall retirement balance. ASIC reported that the average 30-year-old who takes out $10,000 today will have an estimated $21,516 less in retirement.

New research from Rainmaker Information’s 2020 Superannuation Benchmarking Report released in January indicated that there is an “underperformance challenge” needing to be tackled within the superannuation industry. The research found that super funds continue to “struggle to match asset class indexes” across several major asset classes.

This new research is the perfect reminder to consider your super fund’s performance carefully. As we move into 2021, January is the perfect time to consider performing a financial health check on your finances – including your superannuation.

Updated by Alex Ritchie on January 8, 2021

How does superannuation work?

Your employer is responsible for paying your superannuation.

Your annual superannuation must be at least 9.5 per cent of your ordinary time earnings. For example, if you earn $100,000 (before tax), your employer must pay you at least $9,500 in super per financial year. This is known as the ‘superannuation guarantee’ or SG. Employers must make SG contributions into your super account at least once every three months. 

You qualify for the superannuation guarantee if you are over the age of 18, earn $450 or more before income tax each calendar month, or work 30 hours or more a week. 

This applies to full-time and part-time employees, and some casual employees. It also includes temporary residents to Australia. 

The super guarantee contribution rate is scheduled to increase every year, starting from mid-2021. Each year, the SG rate should increase by 0.5 percent, until superannuation guarantee contributions reach 12 per cent in mid-2025. However, these increases to the super guarantee rate could be delayed, depending on Australia's economic situation. 

You may choose to pay extra money into your super fund, on top of what your employer is required to pay. This could include one-time payments, or a regular salary sacrifice arrangement with your employer. Some of these extra super contributions may be tax deductible - check with the Australian Taxation Office (ATO) for more details.

Many super funds invest your super contributions into an investment portfolio. This may help grow your wealth faster than you’d likely earn in interest simply by depositing this money in a savings account or term deposit. Different investment strategies may mean different returns on your investments.

Once you reach a certain age, you can start accessing money from your super fund as an income stream. This can help pay for your retirement lifestyle, reducing your reliance on the age pension.

Which superannuation fund should you choose?

Put simply, you should choose whatever superannuation fund you believe is the best.

Each person will have their own definition of ‘best’, depending on their preferences. For example, you may want to look for:

  • The fund that has delivered the highest net returns over the past five years
  • The fund that has earned the highest approval ratings on online review sites
  • The fund that has the most appealing investment options

Those are just examples – you might have your own definition of what constitutes the best super fund.

The key is to do your research, compare your options and then choose the super fund you believe is the best.

What are the benefits of superannuation?

There are two main benefits of superannuation:

  • You build a nest egg for retirement
  • You save and invest in a tax-effective structure (super is taxed at only 15 per cent)

What are the disadvantages of superannuation?

The main disadvantage of superannuation is that it is compulsory. So instead of getting access to your money today (in the form of a higher take-home salary), it gets locked away – potentially for decades.

What can you use superannuation for?

Superannuation is meant to fund your retirement. Apart from a few exceptions, you can only access your superannuation:

  • If you’re permanently retired and you reach your ‘preservation age’, which is between 55 and 60, depending on when you were born.
  • If you’re still working and you turn 65.

However, you may be able to access your superannuation early in some special circumstances, such as:

  • If you’ve suffered permanent or temporary incapacity
  • If you’ve received commonwealth benefits for 26 continuous weeks but still can’t meet your immediate living expenses
  • If you’re seriously ill and need to pay for medical treatment
  • If you have a terminal condition and are likely to die within two years

What types of superannuation are available?

There are six types of superannuation funds:

 Fund Description Availability
Retail super funds Run by for-profit institutions such as banks and financial services companies Everyone
Industry super funds Run by not-for-profit institutions Some industry funds restrict membership to certain industries 
Public sector super funds Created for federal and state government departments Public servants
Corporate super funds Run by companies Employees of those companies
Eligible rollover super funds Special holding accounts; can’t receive contributions from employers For lost members or inactive members with low balances
Self-managed super funds SMSFs are for Australians who want to manage their own investments Everyone

Most super funds are accumulation funds. When you retire, the fund will pay you whatever superannuation you saved up during your working life.

Some corporate or public sector super funds are defined-benefit funds, though most are closed to new members. When you retire as an eligible employee, you’ll receive payment based on a formula. For example, you might receive ongoing retirement income calculated as a percentage of your final salary. You might instead receive a lump sum calculated on the number of years you spent with your employer.

How do you compare superannuation?

Australians have access to hundreds of superannuation funds and tens of thousands of investment options. It’s important to do your research to find the best super fund and best investment option for you. Choosing the wrong super fund or investment option can be costly.

There are five main ways to compare superannuation funds:

1. Fees

You may prefer to pay lower fees than higher fees when it comes to your superannuation. However, a fund with higher fees might still offer better value than one with lower fees.

These fees may include:

  • Administration fees
  • Investment fees
  • Advice fees
  • Switching fees
  • Buy-sell spread fees
  • Activity-based fees
  • Indirect costs
  • Insurance premiums

2. Investment options

You may want to research the different investment options being offered with different super funds. You want to make sure you’re comfortable with:

  • The amount of risk you would be taking
  • The asset classes you would be investing in
  • How much of your super that would be going to each asset class

3. Investment performance

You may also want to research how each fund's investment options have been performing, such as by looking at their net returns (i.e. after fees). Moneysmart suggests comparing the performance of different funds over the last five years.

4. Insurance options

Super funds commonly offer three different types of insurance:

  • Life insurance
  • Total and permanent disability insurance
  • Income protection insurance

If you’re interested in a super fund with insurance, consider investigating the premiums and conditions.

5. Customer service

You may also want to learn more about what sort of customer service you might receive from different super funds. This might involve comparing the promises made by funds in their marketing with the feedback left on online review sites.

How do you find the best superannuation fund?

The best superannuation fund is the one you believe will offer you the best value. Each person will have their own definition of ‘best’, depending on what they prefer.

For example, you may want to look for:

  • The fund that has delivered the highest net returns over the past five years
  • The fund that has earned the highest approval ratings on online review sites
  • The fund that has the most appealing investment options

Those are just examples – you might have your own definition of what makes for the best super fund.

What is the cheapest superannuation fund?

Identifying the cheapest superannuation fund in Australia is difficult, for two reasons.

First, there are many different types of fees. The same super fund might charge different fees to different members, depending on each member’s balance, activity, investment preferences and insurance preferences. The fees might also differ from person to person. So an apples-for-apples comparison may not always be possible.

Second, there are many different super funds, which may change their fees at any time. Even if you could make an apples-for-apples comparison to find the cheapest super fund, the cheapest fund might change regularly.

How can you apply for superannuation?

Once you’ve chosen what you believe is the best super fund for your situation, contact the fund or visit their website for more information. Joining a super fund is usually a straightforward task.

You apply for superannuation by filling out a standard choice form. You will need to provide:

  • Personal details
  • Information about your preferred super fund

Your employer will also need to fill out part of the form.

How much does superannuation cost?

You don’t have to pay money to join a superannuation fund. However, the fund will charge you fees to manage your money, which will be taken out of your super balance.

How can RateCity help you save on superannuation?

You can use RateCity to compare superannuation funds and superannuation products, including:

  • Investment performance
  • Fees
  • Features
  • SuperRatings awards

You can then use that information to choose what you believe is the best superannuation fund for your situation.

Using RateCity's tables, you can quickly compare the rates of return for various super funds over the past five years, as well as fees, features and benefits. Remembers that a super fund's past return rates do not guarantee that you'll enjoy similar rates of return in the future.

Superannuation companies

Frequently asked questions

What is a superannuation fund?

A superannuation fund is an institution that is legally allowed to hold and invest your superannuation. There are more than 200 different superannuation funds in Australia. They come in five different types:

  • Retail funds
  • Industry funds
  • Public sector funds
  • Corporate funds
  • Self-managed super funds

Retail funds are usually run by banks or investment companies.

Industry funds were originally designed for workers from a particular industry, but are now open to anyone.

Public sector funds were originally designed for people working for federal or state government departments. Most are still reserved for government employees.

Corporate funds are arranged by employers for their employees.

Self-managed super funds are private superannuation funds that allow people to directly invest their money.

How do you set up superannuation?

Before you set up a superannuation account, you’ll need to check if you’re allowed to choose your own fund. Most Australians can, but this option doesn’t apply to some workers who are covered by industrial agreements or who are members of defined benefits funds.

Assuming you are able to choose your own fund, the next step should be research, because there are more than 200 different superannuation funds in Australia.

Once you’ve decided on your preferred superannuation fund, head to that provider’s website, where you should be able to fill in an online application or download the appropriate forms. You’ll need your tax file number (assuming you don’t want to be charged a higher tax rate), your contact details and your employer’s details (if you’re employed).

How do I combine several superannuation accounts into one account?

The process used to consolidate several superannuation accounts into one is the same process used to change superannuation funds. This can be done through your MyGov account or by filling out a rollover form and sending it to your chosen fund.

How do you open a superannuation account?

Opening a superannuation account is simple. When you start a job, your employer will give you what’s called a ‘superannuation standard choice form’. Here’s what you need to complete the form:

  • The name of your preferred superannuation fund
  • The fund’s address
  • The fund’s Australian business number (ABN)
  • The fund’s superannuation product identification number (SPIN)
  • The fund’s phone number
  • A letter from the fund trustee confirming that the fund is a complying fund; or written evidence from the fund stating it will accept contributions from your new employer; or details about how your employer can make contributions to the fund

You might want to provide your tax file number as well – while it’s not a legal obligation, it will ensure your contributions will be taxed at the (lower) superannuation rate.

What are ethical investment superannuation funds?

Ethical investment funds limit themselves to making ‘ethical’ investments (which each fund defines according to its own principles). For example, ethical funds might avoid investing in companies or industries that are linked to human suffering or environmental damage.

How long after divorce can you claim superannuation?

You or your partner could be forced to surrender part of your superannuation if you divorce, just like with other assets.

You can file a claim for division of property – including superannuation – as soon as you divorce. However, the claim has to be filed within one year of the divorce.

Your superannuation could be affected even if you’re in a de facto relationship – that is, living together as a couple without being officially married.

In that case, the claim has to be filed within two years of the date of separation.

Either way, the first thing to consider is whether you’re a member of a standard, APRA-regulated superannuation fund or if you’re a member of a self-managed superannuation fund (SMSF), because different rules apply.

Standard superannuation funds

If your relationship breaks down, your superannuation savings might be divided by court order or by agreement.

The rules of the superannuation fund will dictate whether this transfer happens immediately, or in the future when the person who has to make the transfer is allowed to access the rest of their superannuation (i.e. at or near retirement).

Click here for more information.

SMSFs

If your relationship breaks down, you must continue to observe the trust deed of your SMSF.

So if you and your partner are both members of the same SMSF, neither party is allowed to use the fund to inflict ‘punishment’ – such as by excluding the other party from the decision-making process or refusing their request to roll their money into another superannuation fund.

This no-punishment rule applies even if the two parties are involved in legal proceedings.

Click here for more information.

Financial consequences

Superannuation funds often charge a fee for splitting accounts after a relationship breakdown.

Splitting superannuation can also impact the size of your total super balance and how your super is taxed.

Click here for more information.

What happens to my insurance cover if I change superannuation funds?

Some superannuation funds will allow you to transfer your insurance cover, without interruption, if you switch. However, others won’t. So it’s important you check before changing funds.

How do you create a superannuation account?

Before you create a superannuation account, you’ll need to check if you’re allowed to choose your own fund. Most Australians can, but this option doesn’t apply to some workers who are covered by industrial agreements or who are members of defined benefits funds.

Assuming you are able to choose your own fund, the next step should be research, because there are more than 200 different superannuation funds in Australia.

Once you’ve decided on your preferred superannuation fund, head to that provider’s website, where you should be able to fill in an online application or download the appropriate forms. You’ll need your tax file number (assuming you don’t want to be charged a higher tax rate), your contact details and your employer’s details (if you’re employed).

What compliance obligations does an SMSF have?

SMSFs must maintain comprehensive records and submit to annual audits.

How do you find lost superannuation funds?

Lost superannuation refers to savings in an account that you’ve forgotten about. This can happen if you’ve opened several different accounts over the years while moving from job to job.

You can use your MyGov account to see details of all your superannuation accounts, including any you might have forgotten. Alternatively, you can fill in a ‘Searching for lost super’ form and send it to the Australian Taxation Office, which will then search on your behalf.

What happens if my employer falls behind on my superannuation payments?

The Australian Taxation Office will investigate if your employer falls behind on your superannuation payments or doesn’t pay at all. You can report your employer with this online tool.

What is the difference between accumulation and defined benefit funds?

A majority of Australians are in accumulation funds. These funds grow according to the amount of money invested and the return on that money.

A minority of Australians are in defined benefit funds – many of which are now closed to new members. These funds give payouts according to specific rules, such as how long the worker has been with their employer and their final salary before they retired.

How does the age pension work?

Most Australians who are of retirement age can qualify for the age pension. However, depending on the size of your assets and post-retirement income, you might be entitled to only a reduced pension. In some instances, you might not be entitled to any pension payments.

When can I access my superannuation?

You can withdraw your superannuation when you meet the ‘conditions of release’. The conditions of release say you can claim your super when you reach:

  • Age 65
  • Your ‘preservation age’ and retire
  • Your preservation age and begin a ‘transition to retirement’ while still working

The preservation age – which is different to the pension age – is based on date of birth. Here are the six different categories:

Date of birth Preservation age
Before 1 July 1960 55
1 July 1960 – 30 June 1961 56
1 July 1961 – 30 June 1962 57
1 July 1962 – 30 June 1963 58
1 July 1963 – 30 June 1964 59
From 1 July 1964 60

A transition to retirement allows you to continue working while accessing up to 10 per cent of the money in your superannuation account at the start of each financial year.

There are also seven special circumstances under which you can claim your superannuation:

  • Compassionate grounds
  • Severe financial hardship
  • Temporary incapacity
  • Permanent incapacity
  • Superannuation inheritance
  • Superannuation balance under $200
  • Temporary resident departing Australia

 

What are reportable employer superannuation contributions?

Reportable employer superannuation contributions are special contributions that an employer makes on top of the regular compulsory contributions. One example would be contributions made as part of a salary sacrifice arrangement.

What are government co-contributions?

A government co-contribution is a bonus payment from the federal government into your superannuation account – but it comes with conditions. First, the government will only make a co-contribution if you make a personal contribution. Second, the government will only contribute a maximum of $500. Third, the government will only make co-contributions for people on low and medium incomes. The Australian Taxation Office will calculation whether you’re entitled to a government co-contribution when you lodge your tax return. The size of any co-contribution depends on the size of your personal contribution and income.

How do you pay superannuation?

Superannuation is paid by employers to employees. Employers are required to pay superannuation to all their staff if the staff are:

  • Over 18 and earn more than $450 before tax in a calendar month
  • Under 18, work more than 30 hours per week and earn more than $450 before tax in a calendar month

This applies even if the staff are casual employees, part-time employees, contractors (provided the contract is mainly for their labour) or temporary residents.

Currently, the superannuation rate is currently 9.5 per cent of an employee’s ordinary time earnings. This is scheduled to rise to 10.0 per cent in 2021-22, 10.5 per cent in 2022-23, 11.0 per cent in 2023-24, 11.5 per cent in 2024-25 and 12.0 per cent in 2025-26.

Employers must pay superannuation at least four times per year. The due dates are 28 January, 28 April, 28 July and 28 October.

How much is superannuation?

Superannuation is currently 9.5 per cent – which means that your employer must pay you superannuation equivalent to 9.5 per cent of your salary.

The ‘superannuation guarantee’, as it is known, has been at 9.5 per cent since the 2014-15 financial year. It is scheduled to rise to 10.0 per cent in 2021-22, 10.5 per cent in 2022-23, 11.0 per cent in 2023-24, 11.5 per cent in 2024-25 and 12.0 per cent in 2025-26.

What happens if my employer goes out of business while still owing me superannuation?

If your employer collapses, a trustee or administrator or liquidator will be appointed to manage the company. That trustee/administrator/liquidator will be required to pay your superannuation out of company funds.

If the company doesn’t have enough funds, in some cases company directors will be required to pay your superannuation. If the directors still don’t pay, the Australian Securities & Investment Commission (ASIC) might take legal action on your behalf. However, ASIC might decline to take legal action or might be unsuccessful.

So there might be some circumstances when you don’t receive all the superannuation you’re owed.

How does superannuation affect the age pension?

Most Australians who are of retirement age can qualify for the age pension. However, depending on the size of your assets and post-retirement income, you might be entitled to only a reduced pension. In some instances, you might not be entitled to any pension payments.