BEGINNERS GUIDE TO SUPERANNUATION

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BEGINNERS GUIDE TO SUPERANNUATION

Superannuation is basically a long-term savings and investment account that’s designed to ensure you’re going to have money stored away for your retirement. As you go through your working life, your employers will generally be required to pay Super Guarantee into your super fund. Your superannuation will eventually become one of your greatest assets

How It Works

When you first get a job, you’ll notice on your pay slip that an amount is being set aside and invested into your superannuation. Generally, your employer has to pay 9.5 % of your salary into a nominated super fund. It’s called the Super Garantee and it will gradually increase to a rate of 12% by 1 July 2025.

Over the course of your working life, these contributions and their investment returns add up and, by the time you retire, the theory is that you should have enough money to live a comfortable retirement – however you might need to contribute a bit more moolah yourself if you want to have enough to support your post-retirement lifestyle.

Insurance

Many super funds also offer some kinds of insurance, such as life insurance (payment to loved ones when you pass away) and total and permanent disability insurance (cover if you permanently can’t return to work due to injury or sickness). One of the benefits of getting insurance through your super provider is that the premiums (the payments you make to have the insurance) are deducted from your super balance rather than your take home pay.

Investing

Super funds invest your money in order to grow your balance and generally offer a variety of underlying investment funds that you can choose from to invest your super savings – suss out the options with your super provider.

Taxation

One of the advantages of investing in super for many people is that investment earnings are taxed at a maximum of 15%. This can mean more of your money goes towards your retirement than if you were to invest in something else, or to simply put it in the bank.
Further, any taxable contributions such as the ones your employer makes for you or contributions you claim a personal tax deduction for are also taxed at 15% regardless of what your actual marginal rate of tax may be.

Choosing a Super Fund

When it comes to choosing a super fund, in most cases you can either nominate your own fund or let your employer choose for you (read up on how to choose a super fund here. If you don’t choose your own super fund, your employer is generally required to put you into a MySuper account which is generally a low cost super fund which automatically invests your money and provides some insurance cover.

Often the sensible option is to do some research, consider what benefits different super funds offer such as insurance or investment choices as well as fees and charges and choose the fund that works for you.

Whatever your reasoning, it’s best to intentionally choose a super fund rather than hoping the one your employer has chosen will do. By the time you retire, it could make a world of difference to your savings.

Bonus Contributions from the Government

For lower income earners, the Government may give you a helping hand with your super.
If you make personal super contributions from your after-tax money, the government may make a co-contribution of up to $500 to your super account, you can find out more here.
If you earn less than $37,000 a year, the government may provide you with a low income super tax offset which effective refunds the contributions tax your super fund is required to deduct from contributions your employer males on your behalf.

Can I Just Have My Super Now Because Yolo?

Nah, it’s almost impossible to access your super fund before you retire. It’s only really possible in times of extreme financial hardship, or you are permanently unable to work, although it’s pretty rare that people dip into their super. This makes sense because the whole point of super is that it is there for when you retire.

In most cases, people can fully access their super when they turn 65 (even if they haven’t retired yet) or have reached the “preservation age” and have permanently retired. For those of us born post 1964, the preservation age is 60.

Check out choosing a super fund for more specific advice on finding the best one.

Information correct as at 14/08/2017 - This information is intended to be general in nature only, and has been prepared without taking into account of your objectives, financial situation or needs. Because of this you should, before acting on this information, consider its appropriateness, having regard to your objectives, financial situation and needs. When in doubt always seek professional guidance.
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