3 good reasons why you need to know about super
There's a lot of talk about super these days, but what makes it so important? Why do you need to know about it? Here are 3 good reasons.
- After your home, your super is likely to be the most valuable investment you'll ever make. It deserves your attention, because it's your financial future that's at stake.
- The Government pension won't be enough. It's intended as a safety net, not as a means to live comfortably in retirement. If you qualify for a full or part pension that's a start, but you'll need more.
- For most people, saving through super may be the best and safest option. Super is well regulated, and there are tax advantages that can help your savings grow faster.
That's the background. Now here are some of the basics you'll need to know.
There's compulsory super for workers
If you're aged 18 to 69, employed and earn more than $450 in a month then your employer is required to make contributions on your behalf to comply with the Superannuation Guarantee.
Payments are due every quarter and the contribution rate is currently 9% of your basic earnings.
In many cases you will be able to choose the fund to which those contributions are made. There's more information about choice of fund here.
Personal contributions are voluntary
Regardless of whether an employer is contributing for you, you should think about making personal contributions. You can do that at any age up to 74.
Putting more into super means that your savings grow faster. That can mean you having a better standard of living when you retire - or perhaps retiring earlier than you might otherwise.
You don't have to be working to contribute. The only rule is if you're over 65, in which case you can only contribute if you've worked at least 40 hours in a period of not more than 30 consecutive days during that financial year.
Government contributions may be a bonus
A great incentive to save more in your super is that, if you do, the Government may add some money too. That's called the co-contributions scheme.
If you qualify, for every $1 you put into your super account the Government will put in $1.50, up to a maximum of $1,500. So for $1,000 of your own money, you could have $2,500 working for you towards your retirement.
To be eligible you need to be under 71 and earning no more than $58,980 a year (including fringe benefits). You must be employed in some capacity, even if only part-time or casual, but your employer doesn't necessarily have to be contributing for you.
If you earn more than $28,980, the maximum co-contribution is scaled back at the rate of 5¢ in the dollar. So, for example, if you're earning $40,980 a year the maximum the Government will put in is $900 (if you contribute $600 or more).
Spouses can contribute, too
Even if you're not able to contribute yourself, your spouse may be able to do so on your behalf. Depending on your income, they may also be able to claim a tax rebate of up to $540.
Access to your super savings
The Government places some conditions on when you can access your benefits.
Generally you can't receive your benefits until you retire after age 60 (earlier if you were born before 1 July 1964) or you reach age 65. There are other circumstances in which your benefits may be paid out and these are explained in detail in the Product Disclosure Statement which you can download here.
Choosing a good fund is important
- Choosing a good fund is important if you're going to get the most out of your super. So what do we mean by a good fund?
- Firstly, it should be run by an organisation you can trust. That means it should be properly approved and licensed.
- A good fund will offer a range of investment options that you can choose from. It should also be able to demonstrate a track record of competitive investment returns, preferably over 5 years or longer.
- It's fees should be reasonable. That's because even if 2 funds produce the same investment returns, the one with the lower fees will have your super growing faster.
- The fund should offer adequate insurance protection, if that's important to you.
- Finally, the fund should provide you with easy access to information, education and other services that you value.
- On all these measures, Asset Super is a good fund. You'll find more about it as you explore this website. And if there's anything you can't find, you can contact us.
NOTE: Before changing funds you should consider the impact on any insurance cover you may have and any termination fees that may apply.
