Superannuation is very important to all Australians. Encouraging each Australian to provide for their own retirement is a major focus of the Federal Government's strategy now and for the 21st Century.
During the past ten years, retired people that are dependent on the Aged Pension have generally received an income of around 30% of their pre-retirement average annual income. Would you like to live on 30% of your current income?
We will help you to plan and achieve your expectations of a certain lifestyle in retirement.
Superannuation exists to help you provide for yourself in retirement rather than relying on social security. As a result, your superannuation savings cannot be accessed until a condition of release is met, such as retirement or reaching age 65.
Advantages of investing in assets in the superannuation environment include:
- Concessional tax treatment.
- Ideal form of savings for retirement.
- Insurance benefits can be attached.
- Government co-contributions incentive.
Types of Superannuation Funds
There are many types of super funds, each is a bit different. Knowing the different types of fund will make it easier for you to choose a fund.
There are five main types of superannuation funds in Australia, these include:
- Industry superannuation funds
- Retail superannuation funds
- Corporate superannuation funds
- Public sector superannuation funds
- Self-managed superannuation funds
Industry superannuation funds
An industry fund usually caters for workers from a certain industry, such as HostPlus who is a superannuation fund for those in the hospitality industry. However many industry superannuation funds are now available to anyone.
The main features of an industry fund are:
- They usually have 5-15 investment options, which will meet most people's needs
- They are generally low to mid cost funds although some have high fees
- Some offer MySuper accounts
- They are 'not for profit' funds which means all profits are put back into the fund for the benefit of all members
Retail superannuation funds
Retail funds are usually run by banks or investment companies and are open for investment to the general public. Within retail superannuation the most popular super fund option is a master trust.
Master trusts pool accounts for investment and super have single corporate trustees and trust deeds that allow many individuals and companies to participate. They are offered to the public by fund companies and banks and operates as an investment platform. Master trusts are characterised by offering a broad range of multi-manager and single sector investment options managed by leading fund managers sourced by the superannuation trustee.
The main features are:
- Anyone can join
- They often have a large number of investment options, sometimes in the hundreds
- Most retail funds range from mid to high cost, but some are now offering a low cost or MySuper alternative
- The company that owns the fund aims to retain some profit
Employer superannuation funds or Corporate funds
Employer or Corporate superannuation options are generally only open to people working for a particular corporation, in some organisations membership is made available to ex-employees or relatives of existing employees. By law, employers must offer a default super fund option for their employees as an alternative to exercising Choice of Fund rights for those who do not wish to choose their own super fund. Corporate super funds can be set up with through retail master trusts or in some cases, employers may choose to operate their own employer-sponsored super funds.
Features of these funds include:
- Funds run by the employer or an industry fund will return all profits to members. Corporate funds run by retail companies will retain some profits.
- If it is managed by a retail or industry fund it may offer a wide range of investment options
- They are generally low to mid cost funds for large employers but may be high cost for small employers
Public sector superannuation funds
A public sector superannuation fund is only available to public sector employees (i.e. government employees) and, in some cases, ex-public sector employees.
The main features are:
- Some employers contribute more than the 9.25% minimum
- A modest range of investment choices that will meet most people's needs
- They generally have very low fees and some offer MySuper accounts
- Profits are put back into the fund for the benefit of all members
SMSF – Self Managed Superannuation Funds
Self managed super funds are also known as DIY super funds. They can have up to four members and are generally established by an individual or a family from their own superannuation savings. Members of the fund must also be trustees, unless a corporate trustee is appointed, and are responsible for the all investment and compliance decisions of the fund, including administration, trusteeship and taxation
When you run your own SMSF you must:
- Carry out the role of trustee or director, which imposes important legal duties on you
- Use the money only to provide retirement benefits
- Set and follow an investment strategy that ensures the fund is likely to meet your retirement needs
- Keep comprehensive records and arrange an annual audit by an approved SMSF auditor
If you decide to set up an SMSF you are personally liable for all the decisions made by the fund even if you get help from a professional or another member makes the decision.
If you're running an SMSF you will typically need:
- A large amount of money in the fund to make set up and yearly running costs worthwhile
- To budget for ongoing expenses such as professional accounting, tax, audit, legal and financial advice
- Plenty of time to manage the fund
- Financial experience and skills so you are more likely to make sound investment decisions
- Separate life insurance including income protection and total and permanent disability cover
In addition to the above mention superannuation structures the government has introduced "My Super".
Many super funds offer a new type of account called MySuper. MySuper will eventually replace existing default accounts offered by super funds. A default super account is one chosen by your employer if you don't choose one yourself.
MySuper accounts offer:
- Lower fees (and restrictions on the type of fees you can be charged)
- Simple features so you don't pay for services you don't need
- Single or life stage investment options
MySuper will only be offered for accumulation funds and not for defined benefit funds. Retail, industry and corporate funds can all offer MySuper accounts.
It is important to keep track of your super. If you've ever changed your name, address or job, you may have lost track of some of your super. Having several super accounts could mean that fees and charges are reducing your overall super investment. The ATO provides a Super Seeker tool to help assist in finding lost super.