Superannuation explained simply

Every person working in Australia will encounter superannuation at some stage, and it’s kind of a big deal. This post explains superannuation simply, without the jargon, so you can quickly understand the rules and make the most out of this important investment.

The basics
Superannuation (‘super’ for short) is money set aside by your employer to provide for your retirement. In other parts of the world it is known as a pension or retirement scheme. Super contributions begin when you start working and start earning a wage. Your employer is required by law to put 9.5% of your regular wage (some employers choose to contribute more) into a super account. This contribution is additional to your take home pay. You can also add extra money into your super account, but speak to your chosen super fund about the ins and outs of this.

About super funds
Your super money goes into an account held by your chosen super fund, which is a company that invests your money into things such as shares, property, managed funds or alternative assets. Their primary aim is to invest your money well, so you can have more savings in retirement. They may also offer different types of insurance such as death and disablement and income protection. When you open an account with a super fund, generally you will be able to choose different investment options, including how aggressively or conservatively you wish to invest your money.

Choosing a super fund
There are about 500 super funds operating in Australia that you can choose from, covering different occupations, sectors and industries. Most financial experts will agree that when looking for a good super fund two important things you need to look out for are low fees and high returns. But with so many different options to choose from, how do you find the right one? Canstar, Australia’s biggest financial comparison site, released a list of seven 5-Star super accounts for outstanding value in 2018:

  • AustralianSuper – Balanced
  • CareSuper Employee Plan – Balanced
  • Energy Super – Balanced
  • Statewide Super Personal – Balanced
  • HOSTPLUS Personal Super Plan – Balanced
  • Sunsuper for Life Super Savings – Lifecycle Balanced Pool
  • VicSuper FutureSaver Personal – Growth (MySuper)

Changing super accounts
Many people will automatically join the super fund that was provided for by their employer instead of shopping around, which can often leave them short-changed in the long term. The good news is that you can change super funds at any time and the process is relatively easy, pain free and your new super fund will be more than happy to help move your funds over to them.

Accessing your super money
To ensure your super is there for you in retirement, the government places restrictions on when and how you can access your super. Generally, you need to wait until you retire, which more most people is at 60 to 65 years old, but some exceptions exist with strict eligibility criteria, for example:

  • Compassionate grounds
  • Severe financial hardship
  • Terminal medical condition
  • Temporary or permanent incapacity

Temporary residents leaving Australia 
According to the ATO, if you’re a temporary resident working in Australia, your employer has to pay super for you if you’re eligible. When you leave Australia, you can claim your super as a Departing Australia Superannuation Payment (DASP) if you meet certain requirements which include:

  • you were accumulated super while working in Australia on a temporary resident visa issued under the Migration Act 1958 (excluding Subclasses 405 and 410)
  • your visa has ceased, expired or been cancelled
  • you have left Australia
  • you are not a citizen of Australia or New Zealand, or permanent resident of Australia.

The video provided by the ATO below shows how you can claim DASP:

Source: Australian Tax Office

The information provided in this post is general in nature and does not take into account your personal circumstances, financial needs or objectives. Before acting on any information, you should consider the appropriateness of it and  seek independent financial advice.

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