Superannuation is an investment vehicle that you can use to help you save for your retirement, and the Government has introduced a number of tax incentives to encourage you to do so. The sole purpose of having a superannuation fund must be to provide benefit to members upon retirement and benefits to dependents if a member should die.
The amount of superannuation that you accumulate in your lifetime of working will significantly affect the standard of living you enjoy when you retire and no longer have income from work. By law, all employers must contribute 9% of your wages to your nominated superannuation fund. There are four types of superannuation funds: public sector funds; retail super funds; industry super funds and self managed super funds.
Public sector superannuation funds have been set up specifically for public servants who work for the federal or state governments of Australia. You are generally not eligible to be a member unless you work for the government.
Retail superannuation funds have been setup specifically by Australia’s leading financial institutions such as banks and life insurance companies. Retail superannuation funds usually provide a wide range of investment options to their members depending on their personal investment preferences. Retail superannuation funds will charge you management and administration fees depending on the size of your investment, and they are run for profit.
Industry superannuation funds have been setup for employees of specific industries, and they are run purely for the profit of their members. Their management and administration fees are usually lower than those of the retails superannuation funds and they have a policy not to pay commissions to financial advisers.
The fourth type of superannuation funds are self managed super funds which are setup by individuals who want to manage their own investments. This particular kind of superannuation fund places a lot of responsibility on the trustees to abide by the strict rules and regulations they are governed by. Subsequently, the compliance costs can be relatively high when the balance of the fund is small. Self managed superannuation funds are a complex area, and you will usually need a balance of at least $200,000 to make the compliance costs comparable to the industry or retail funds.
Superannuation is a complex area, but one that needs to be given due attention by those with balances in their account. Your employer is legally obliged to contribute throughout your working life, so it is in your best interest to ensure that the superannuation arrangements that you have in place will serve you well in your retirement.