Super Simple: Everything You Need To Know About Superannuation

23 July 2018

The overall concept of superannuation is easy enough to understand – it’s a savings system. Beyond that, however, things start to get a little more complicated. The complex jargon and rules (that are constantly changing) easily become confusing, which is why a lot of Australians put off thinking about super as long as possible.

But that’s a mistake.

Because of superannuation, Australia has one of the best retirement systems in the world (according to a Mercer survey on pension systems), so the sooner you start investing in your financial future the better. That’s why we’re here to cut through the jargon and explain the superannuation system in a super simplified way.

What is superannuation?

Super is the money used to support yourself when you retire; it’s a long term savings plan.

It works like this: The money is put into a pot (aka the super fund) with other Australians and invested by professionals. Investments are made in a number of different industries – some popular ones include real estate, art and technology.

Your share of the returns from those investments then goes back into your account and that’s how the money accumulates over time.

Why do you need superannuation?

Few can have a comfortable retirement without the help of superannuation. In order to enjoy those golden years, it’s important to start putting money into your fund now.

Who makes the payments?

Your employer! The company you work for is obligated under the Superannuation Guarantee laws to contribute at a rate of 9.5 per cent of your ordinary time earnings (which does not include overtime). Ordinary earnings consist of the following:

• Salary.
• Over-award payments.
• Certain bonuses.
• Allowances.
• Some paid leave.

Whether you work casual, part time, full time or are a temporary resident, your employer must pay the contribution. Unless directed otherwise, employers will put their contribution into a ‘default fund’, so don’t worry if you haven’t said anything about where you want that money to go.

For those who are self-employed, you’ll have to contribute to superannuation on your own. However, this gives you access to tax deductions that usually get better money back than bank savings accounts.

Additionally, if you have some spare cash and want to save it for your financial future, you can add this as a voluntary contribution.

What do you do with superannuation?

You can choose to have a little or a lot of involvement with your superannuation. There are several different funds to choose from, but here are the main options:

• Employer/corporate/staff funds: This is what your employer puts money into if you don’t say otherwise. It’s one of the more hands-free options.
• Personal funds: You choose a provider who will invest on your behalf – this gives you more say over the investments, but still doesn’t require much work from your end.
• Self-managed super funds (SMSF): SMSF gives you (and up to three other fund members) complete control, however, that means it typically requires a bit more time and energy.

When can you access superannuation?

You’re only allowed to access your superannuation when you turn 65 or retire. To review your super savings, use your Tax File Number (TFN) on your myGov account.

Why should you only have one super?

More super funds means more money for retirement (and more fun), right? Not always. In fact, you might be hurting your chances to save as multiple accounts often come with extra fees that could cost you thousands over time.

If you’ve had a couple of jobs in the past, don’t forget that those were contributing to your super. You can check the details of those accounts (or any that you may have forgotten about) by logging on to your myGov account. If you do have multiple accounts, you can combine them into one ‘preferred’ account with just a couple of clicks. This is called ‘consolidating’.

Do you still need more information on your super? Head into your local BOQ branch and chat to our friendly team. We’ll keep things simple so you can start investing in your financial future today.

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