How does super work?
Superannuation is a type of investment designed to help you save for your retirement. Money can be paid in by your employer, by you, your spouse and sometimes even by the Federal Government. Your super fund invests the money in your account for you.
If you are working, your employer is required to contribute at least 9.5% of your salary1 to your superannuation fund on your behalf - and that can really add up!
To pay for the cost of looking after your super, fees come out of your account. And because it's an investment, the Government also takes out some tax. But because the Government wants us to save for retirement, super is not taxed as much as other types of investments. Sometimes your super gives you insurance cover in case you die or become disabled. Payment for that insurance also comes out of your account.
So, money goes in. It changes with investment earnings (which may be positive or negative) and some comes out along the way to pay for the things we explained earlier. Then when you retire, it's there waiting for you. And that's it really. Simple.
Super can also help support you and your family if you die or become disabled before retirement, as the amount of money in your super account is generally added to any insurance you are entitled to.
Keeping it for retirement
To ensure super is used in retirement and not before, the Government has placed restrictions on when you can access your super benefits.
Super benefits are generally paid when you retire. They may also be paid in the event of your death, if you suffer total and permanent disability, if you are a temporary resident permanently leaving Australia (strict rules apply: refer to www.ato.gov.au for more details), or on compassionate grounds (as defined by Government regulations).
You may also receive your benefit before retirement if you:
- have reached your preservation age, and
- take the benefit as a non-commutable income stream.
Government regulations define you as retired if you have:
- retired permanently from work and reached your preservation age, or
- reached the age of 60 and stopped an employment arrangement after turning 60 years of age, or
- reached the age of 65.
Preservation age is the Government specified age at which you can gain access to your superannuation benefits, provided you have permanently retired from the workforce. Preservation age varies according to birth date.
1. The 9.5% contribution is calculated on Ordinary Time Earnings (OTE). Employers do not have to make contributions for certain employees, such as anyone who earns less than $450 (before tax) in a calendar month, or is under 18 and part-time employed.
Australia's population is ageing. The baby boomers are starting to retire, more people are accessing the Age Pension and most are living longer than previous generations. This will put increasing pressure on the Government to provide an income for the growing number of people who are retiring.
Life expectancy over the past 100 years has changed substantially.
How does this affect me?
It may become difficult for the Government to provide the current level of financial support to retired Australians. Even if you do receive the Age Pension it may not be enough to live on and you may need your super savings to make up the difference.
In a nutshell, this means most of us will need to fund at least part of our own retirement. That means saving while we are working. To encourage us to save via super, the Government provides incentives in the form of tax concessions. Depending on your circumstances, this means your money has the potential to grow faster in super than in a regular, fully taxable investment.
Our retirement modeller will help you understand if you are on track for your retirement and what to do about it if you're not. There are things you can do today to change the type of retirement you will have tomorrow.
A little thought and planning in the early stages of building your super can go a long way towards maximising the benefits later in life, when you need it most. There are lots of clever ways to spice up your super. Here are ten suggestions to get you started.
1. Find out how it works
You have an investment in super, so find out how it works. Aside from reading the information on this website, you could also sit in on one of our member info seminars. Your employer might also be able to arrange for us to come to your workplace.
2. Combine your super into one fund
People usually change jobs a number of times during their lifetime. This can mean different super accounts in a range of different funds, each one charging you a fee. If you've got money in more than one super fund, think about combining these accounts to give you more control over your money, less paperwork and just one set of fees to pay. If you're already a Sunsuper member you can begin the rollover process online using our rollover tool. It's quick and easy and should only take 5-10 minutes.
3. Find your lost super
It's estimated there is more than $14 billion of lost super out there. That's a lot of money and there's a chance some of it is yours. The Australian Taxation Office (ATO) and the superannuation industry have set up a system, called the Lost Members Register, to help people find their lost money.
It's easy to search for your money via SuperSeeker, the ATO's online search tool or complete our find your lost super form and we’ll periodically take a look for you
After all, if you lost a $100 note, you'd spend at least a few minutes looking for it, so why not spend time finding your lost super?
4. Don’t miss out on a Government reward
To help you save for your retirement, the Government could give you money to boost your super. Simple as that.
To qualify for a co-contribution you just need to pay money in to super yourself and meet some eligibility rules. Check out more on co-contribution or try out the Contribution calculator.
It's not often the Government will give you money, so don't miss out.
5. Pay in your own money
Besides getting a free boost from the Government if you are eligible, paying just a small amount of your own money into your super account could make a big difference to the way your investment will grow. Many Australians rely on the minimum 9.5% super payment from their employer, but it's widely accepted this isn’t be enough. If you can't afford extra now, maybe next time you get a pay rise think about putting half of it into your super. Talk to your employer to set this up if you're interested.
6. Invest for growth
With Sunsuper you can choose how to invest your money. Choose from our range of investment options to suit your particular needs and interests. You can combine a number of different options and you can even switch between options if you feel your needs change.
7. Open an account for your spouse
You could also pay money into your spouse's super account. And, if they earn less than $13,800 per year (assessable income and reportable fringe benefits), you might even be eligible for a tax offset of up to $540 on your payment, another generous payment from the Government just for saving some money! Call 13 11 84 and ask us about making a spouse contribution and see if you can do your partner a favour and get something for yourself at the same time.
8. Get super while you work
If you have reached your preservation age, you can choose to receive some or all of your super benefits as an income stream from a pension, even though you are still working. At Sunsuper, we call this our Workforce Pension. To find out more about how you can ease yourself into retirement download our Transition to retirement - Super while you work fact sheet (390KB).
9. Find out if you’re on track
It's important to make sure you're on track and heading toward a good retirement. Getting started can be difficult however, so we’ve created SunTracker with lots of helpful tips, practical ideas and suggestions to get you on the road to a super retirement. Download the SunTracker brochure now.
10. Get a financial plan
If you really want to know where you are going and how to get there, speak to a Sunsuper financial planner. They can help you with all aspects of your finances - not just your super - to ensure you're making the most of your money.