What is Superannuation?
Superannuation is enforced savings for your retirement. Super has been around for over 100 years first surfacing its head in the mid 1800’s when it was included as part of some employee benefits. This scheme wasn’t passed into law as compulsory as we know it today until 1992. Superannuation is an investment account which you can’t touch until retirement age (as a general rule), designed by the government to force employers to pay money to employees for retirement planning. It helps everyday people to accumulate funds for their retirement in a tax-friendly environment and also reduces the burden of pension payments on the government.
A common misconception that I’ve heard is people assume that once they have a superannuation fund then all their money is paid into that particular fund unless they choose to open a new fund themselves. The truth is, unless you provide the current details of your superannuation to a new employer (many people don’t even know where their own superannuation is held) they will open up a brand new fund for you as part of your induction. The likelihood is that if you’ve had multiple jobs and haven’t really paid attention to your superannuation before then you’ll probably have multiple funds in your name. The problem with having more than one fund is that each different account charges you fees and contains insurance that you might not need, eroding your superannuation for retirement without you even knowing. Further to that, if there is only a small amount left in the fund it will be transferred to the ATO until you claim it back. Remember, superannuation is actually your hard earned money so if you think you might have lost superannuation please set up a MyGov account (or speak with your current superannuation provider as they normally provide the service) and have a look.
There are so many different superannuation funds that exist now, and they are all different. You might have seen a lot of Ads on TV for industry super funds compared with retail funds which is a really simplistic comparison between two very different markets. The truth is, each fund is different and has it’s own strengths and weaknesses so it’s important to investigate which fund is the best for you.
A great site for you to quickly compare different superannuation options for yourself is Chant West. If you’d like to get into the nuts and bolts of your superannuation each fund will have a product disclosure statement which will contain each and every detail pertaining to the fund giving you an overview on exactly what you’re paying, what services you’ll be provided and the investment choices that you can make. Depending on your balance, your investment desires and what stage of life your in can dictate which is the best fund for you. If you’re not sure about where your retirement funds should be it’s always best to speak with a professional.
Who has Superannuation?
Everybody and Anybody over the age of 18 (You can get superannuation earlier but you need to work more than 30 hours per week) that has had a job pretty much has superannuation. Your employer must pay 9.5% on top of your salary to superannuation on your behalf unless you earn less than $450 per calendar month. It can be a little different for business owners or self-employed contractors because they don’t need to have a superannuation fund. There’s no legislation to say you must contribute to your own superannuation account but I’ll expand on why you should consider it in another post in the future.
Should I Worry About Superannuation Yet?
Retirement always seems such a long way off. First you’ve just entered the work force in your 20’s and your career hasn’t even started yet, who is thinking about retirement? Next thing you know and you’re 30, working over-time to feed the family and pay the bills. Before you know it you’ve rolled on through your 40’s and just finished funding the kids’ education needs or paid for their first car and left scratching your head as to how you got to 50 years old. The reality is the earlier to begin thinking about your superannuation the better your retirement is going to look. It’s not about taking away your attention from living life now, but just making sure you are doing the little things now that will make a huge difference in the future, mainly due to compounding interest. It’s a complicated term which deserves a post of its own but put simply the idea is the longer the funds are in your account and earning a return each year, the better you are in the long run. If you want a deeper understanding of the concept check out this article by Investopedia.
If you would like to know more about your superannuation please feel free to contact me and I’ll help you as best I can.
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