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% 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.

Compulsory contributions + Voluntary contributions + Earnings
- Government taxes - Fees and other costs - Insurance premiums

= Your balance

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), in cases of severe financial hardship (as defined by Government regulations) 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 (See the Pension Options Member guide for more details).

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 subsequently changed jobs or are not currently employed, 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% 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 or over 70.

For more information, visit the ATO's website at www.ato.gov.au