What is a superannuation fund?
Your superannuation fund is like the piggy bank you had as a kid – somewhere you put money until one day you opened it and found a treasure trove. The difference with super is that you can’t open it until you retire.
With superannuation, you can:
· Grow your savings for your retirement.
· Receive regular contributions from your employer(s).
· Make voluntary contributions.
· Receive certain tax benefits on voluntary contributions.
· Have more than one account.
To support a comfortable lifestyle, a couple will need a minimum lump sum of $640,000 (or $545,000 for a single person) at retirement. This can include a combination of your:
· Superannuation.
· Savings.
· Investments.
· Pension.
How does superannuation work?
Under the compulsory Superannuation Guarantee laws, your employer is obliged to contribute 9.5% of your base salary into a super fund on your behalf. For example, if you earn $80,000 from a single employer, you’re entitled to receive $7,600 in super contributions each year.
You can also deposit your own money at any time to boost your savings.
Funding retirement for everyone
It’s common for employers to have a preferred superannuation fund, but you can generally choose your own if you prefer. Certain conditions affect eligibility to choose, such as being under an award arrangement. If you’re unsure, check with your employer.
The main types of superannuation funds include:
· Industry: Originally established for the benefit of people working in specific industries such as healthcare or construction, these funds are now mostly open to everyone.
· Retail: These funds are run by financial institutions or insurance companies and are publicly available.
· Corporate: These are established and managed by the employer or corporation, solely for the benefit of their staff.
· Public sector: Designed for people working in the public sector, such as for the commonwealth, state and territory governments, these funds often carry specific benefits.
· Self-managed super (SMSFs): SMSFs work like other super funds, except that, as the name suggests, the trustee is responsible for management, making investment decisions and ensuring compliance. They are favoured by individuals who prefer greater control and flexibility over their super – and have the time and knowledge to do so.
It pays to compare
Not all super funds are equal, so take time to research before you choose the one for you. Here are some features to look out for:
· Fees: Preferably, the fewer fees the better.
· Investment options: It’s important your super is being invested in a way that suits your needs and the degree of risk you’re comfortable with.
· Performance: Look for a fund that has a reputation for being solid and reliable over years.
· Service: Can you easily access your fund details? How easy is it to make ‘top up’ payments? Is advice available?
· Insurance: How much does it cost, and what are the benefits?
When you switch jobs, you might end up with money in several super funds, with your savings being eaten away by multiple sets of fees and insurance policies.
If so, consider consolidating them into a single fund. Do your research, compare funds and consult a financial adviser to find the best solution for you.
Compare self managed funds today