Understanding Superannuation

Across Australia when you start your first job or even when you’re switching careers one of the first things your employer will talk to you about is your superannuation. But what exactly is superannuation, and more importantly, why should you need to think about it? In this piece, we will explain everything you need to know to help you get the most out of your superannuation.

What is Superannuation?

Superannuation, which is commonly known and called "super," is a way to save money for your retirement. It’s a system set up by the Australian government, where your employer is required to contribute a percentage of your salary into a super fund. In other countries, like the United Kingdom they have a similar government set up called pensions and in New Zealand they have a scheme called KiwiSaver.

How does Superannuation work?

Every time you get paid, a certain amount of your salary goes into your super fund. Australia has a compulsory fund called the Superannuation Guarantee (SG). The SG is funded by a compulsory employer contribution of wages and salaries. As of 1st July 2024, this percentage is rising to 11.5%. This money is invested by your super fund in things like shares, property, and other investments. Over time, your superannuation grows, thanks to these investments and any additional contributions you wish to make yourself.

Why is Superannuation important, regardless of your age?

Now, you might be reading this and thinking that your retirement is years away. This could be true, but the earlier you start thinking about your superannuation, the better off you’ll be in the long run. We’ve made a list of reasons why thinking seriously about your super fund can be super beneficial:

Growing Interest: Superannuation benefits from compound interest, which essentially means your money earns money over time. By starting this process early, you give your savings more time to grow.

Tax Benefits: Superannuation contributions are usually taxed at a lower rate compared to your normal income. Again, this can save you money you would otherwise be taxed on.

Future Peace of Mind: Knowing you’re building a strong financial plan for your retirement can give you real peace of mind. With a high amount of money in your super you will be able to enjoy your later years, even though they seem very far away, without stressing about money.

What Are The Types of Super Funds?

There are different types of super funds for you to be able to choose from, including industry funds (like retail or public sector funds) and self-managed super funds (where you manage your own investments). It’s important to research and choose a fund that suits your needs and risk tolerance.

Many super funds offer a simple and affordable option called a MySuper product. Your employer usually picks this for you, but you can choose something else if you prefer. With MySuper accounts, you usually get to pick between a 'single diversified' or 'lifecycle' investment plan.

Even if you've already chosen how your super is invested, you can change to a MySuper product if you want. Super funds also give you different ways to invest your super, like pre-mixed options that include shares and property.

These investment choices are known as 'choice' super products. Instead of going with the default MySuper option, you decide where your super money goes.

How Do I Access My Super?

Generally, you can’t access your superannuation until you reach a certain age (usually between 55 and 60, depending on your circumstances). This limitation is put in place to ensure the money is there for you when you retire. There are some limited circumstances where you might be able to access it earlier, such as severe financial issues or specific medical conditions.

Stay Informed

It’s best to keep track of your superannuation regularly. You should receive statements from your super fund showing how your investments are performing and what fees you’re paying. If you change jobs, it is important to make sure to update your super details, so your contributions continue without an issue.

Summary

Superannuation is key for your financial future. By understanding how it works and taking an interest in your superannuation early on, you’re setting yourself up for a more comfortable retirement. So, embrace the forward planning for your super- it can be one of the best ways to save money now as well as ensuring a comfortable future.

Here at the GLOSS Vault, we have made it our mission to help as many people like you across Australia and New Zealand feel in control of your money and ensure you’re getting the most out of it. To find out more about us and what we do click here. If you’d like to see our app in action for yourself head here!