Superannuation

Introduction to superannuation

Over the years the Government has provided valuable incentives in the super system to encourage Australians to save more for their retirement.

In addition to providing security and financial independence in retirement, super is one of the most tax-effective, long-term wealth creation vehicles. Here's why:

• you can access your super benefit as a pension or lump sum tax free when you reach 60 and satisfy a condition of release
• super contributions out of your pre-tax income are taxed at a maximum of 15 per cent
• investment earnings are taxed at a maximum of 15 per cent rather than your marginal tax rate

Why is super is so important?

The combination of regular investments, tax concessions and time make superannuation a powerful long-term investment strategy. Here are some other reasons why it's so important:

• it provides you with a pension or lump sum when you retire. The more you contribute to super the better your retirement lifestyle will be
• it's compulsory for most working Australians. The current super guarantee (SG) level is nine per cent of your salary - for some industrial awards this level may be higher. If you're employed full-time, part-time or on a casual basis and earn more than $450 a month your employer must make SG contributions on your behalf (some exceptions apply)
• it's your money. Over your entire working life your superannuation can accumulate into a significant sum of money. For many Australians, super will be the largest asset they own outside of their home
• the combination of an ageing population and increased life expectancies means future governments may not be able to provide the same level of aged welfare they provide today
• the tax benefits of super can make a significant difference to the amount of money you will have when you retire compared to investing outside super

Where can I invest my super?

With super choice most Australians now have a choice of where and how they invest their super. These include:

• Industry funds - initially designed for employees in a particular industry. Many are now open to the public.
• Corporate funds - employer sponsored funds open to employees
• SMSFs - super funds set up by an individual or group of less than five.
  More on DIY super funds
• Small APRA funds - APRA-regulated super funds with fewer than five members and with APRA-approved independent trustees
• Retail or personal super funds - public offer superannuation funds available from fund managers, financial advisers and banks.
• Retirement savings accounts - capital guaranteed super funds usually offered through banks, building societies, credit unions and life insurance companies

Getting your super together

If you've had a number of jobs you might find that your super is spread over a number of different funds. Having small balances in a number of superannuation funds can make it difficult to keep track of your retirement nest egg.

If you're not sure where your super is, you can track it using the Australian Tax Office's SuperSeeker online or phone service. You will need your Tax File Number to use this service. If your super is less than $200, you may be able to access it tax-free.

Consolidating your super accounts into one fund can save fees and ensure you don't miss out on potential long-term growth. These two factors can make a significant difference to your final retirement benefit.

Find out how Vanguard can help you consolidate your super.