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What is superannuation?

When can I start claiming my funds?

How does superannuation work if I’m self-employed?

When it comes to retirement, questions abound. Younger people wonder if it’s too early to start thinking about their superannuation funds and older people wonder if it’s too late.

The truth is, it’s never too early to plan for your future. In fact, the sooner you start planning, the better of you’ll be. If you’ve neglected to save in the past, it’s never too late to take control and guide your future.

In this article, we’ll answer the questions we hear most often. Remember that retirement planning isn’t a one-size-fits-all proposition. Although we offer generalised answers here, you’ll get the best results by working from a personalised retirement plan that perfectly suits your goals, lifestyle and family situation.

 

What is superannuation?

Superannuation is a tax effective way to save money for retirement. Super providers pool the money of many clients and expertly invest it, increasing the value of your savings so you can retire with a comfortable nest egg. Employers make contributions to employees’ allocated super fund with each paycheque, and employees can make manual or automatic contributions as well.

 

How do I choose a super fund?

With so many funds to choose from, making decisions can be the most challenging part of investing. Your employer may recommend one for you when you start a new job, but you might like to research funds yourself by using a comparison site or reading up on your options. Some industries have preferred super providers which you can enquire about online or through your employer. For the ultimate self-directed investing experience, consider using a self managed superannuation fund (SMSF) to save for your retirement (more on SMSF’s below).

 

When can I start claiming my funds?

The laws surrounding superannuation eligibility fluctuate and evolve with changing societal trends. As a general statement you’re usually able to access your superannuation in some form (whether as a lump sum or a pension) once you reach your preservation age. The current preservation ages are outlined below:

 

Your date of birth	Age at which you can access funds (Preservation Age)
Before 1 July 1960	55
1 July 1960 - 30 June 1961	56
1 July 1961 - 30 June 1962	57
1 July 1962 - 30 June 1963	58
1 July 1963 - 30 June 1964	59
From 1 July 1964	60

 

 

How does salary sacrifice work?

Sacrifice sounds painful, but when it comes to superannuation, salary sacrifice is really just about deferring gratification until later on.

Many employees choose to set up an arrangement with their employer to forgo part of their income to help pay for benefits like cars, education fees or extra super contributions. Your super account will build up faster this way, and as a bonus, the additional contribution comes from your pre-tax salary. So you can save for retirement and reduce your overall tax burden at the same time.

 

What are the different types of super funds?

Let’s take a look at the five types of funds:

Corporate Funds

Companies like Telstra and Qantas operate funds under a board of trustees that represents the employer and employees. Smaller corporate funds may function under the umbrella of an industry super fund or sizeable retail outfit.

These funds are usually not-for-profit, although retail funds typically retain some profits. Corporate funds have low to medium costs, making them attractive options for investors.

 

Industry Funds

In the past, industry funds catered to workers in single industries, but today, most of them are open for anyone to join. They usually offer a limited array of pre-mixed investment options designed to meet the average investor’s needs. More considerable industry funds may allow members to choose their own shares, ETFs and term deposits.

Industry funds are typically lower-cost and not-for-profit (profits are reinvested into the fund for the members’ benefit).

 

Public Sector Funds

Like industry funds, public sector funds were initially created for a select group (state government employees for example), but many are now available to the broader public. They often offer a broad range of member services and lower fees, and they operate as not-for-profit funds. It’s not uncommon for some employers to contribute more than the minimum 9.5% Super Guarantee to public sector funds.

 

Retail Funds

Open to all investors, these funds are typically operated by banks and other financial institutions. With a retail fund, investors usually gain access to a wide range of investments, so you can put your money exactly where you want it. Companies that run retail funds usually retain some profit, and therefore, the costs can often be higher. Many retail funds now offer a low-cost MySuper alternatives as well.

 

Self-Managed Superannuation Funds (SMSFs)

If you love a hands-on approach to investing, an SMSF might be the best fit for you. DIY investors can run their own super fund or involve up to four members (perhaps a spouse and adult children) to be the trustees. With so much freedom comes increased responsibility; you’re accountable for all decisions made about investments and compliance. Minimum investment amounts don’t apply to SMSFs, but set up costs and annual operating expenses can be high, particularly for members with smaller balances.

 

Where Can I Turn for Help with My Super?

You turn to experts to fix your car, cut your hair and keep your teeth in tip-top condition. When you need financial advice, you can count on experts to help you with retirement planning as well.

Here at Altus, we can answer your questions and help you develop a retirement plan that brings peace of mind and security to your financial life. Superannuation is a powerful vehicle for retirement planning, and we’d love to help you achieve the progress you’re hoping for.

Reach out to us to schedule a consultation with one of our wealth advisers. We’re here to help you succeed.