Superannuation Explained

Short for superannuation, super is a concessionally taxed trust structure that provides all Australians the ability to save for their retirement. Since 1992, Superannuation Guarantee (SG) payments have been mandatory for employers to pay on behalf of their staff, with the current SG rate 10% of an employee’s earnings. In simple terms, superannuation is the mandated portion of your salary put aside and saved over your working career in preparation to support your financial needs when you retire.

Today there are many different superannuation providers and combined there is over $3.4 trillion in superannuation assets in Australia. The most recognised funds are Industry, Retail and Self-Managed Funds (SMSF).

Industry Funds are run by employer associations and/or unions whereby members funds are pooled together and invested. The investment management of members funds are often outsourced to private fund managers who manage the money on behalf of the Industry Funds.

Retail Funds are run by financial institutions for individuals who prefer more control and choice on how their funds are invested but don’t want the responsibilities or trustee obligations that come with having a SMSF. Depending on the super provider, they will be able to select investment options from a range of private fund managers.

Self-Managed Funds (SMF) allow a small number of individuals (limited to 6) to form their own fund, which is then regulated by the Australian Taxation Office. Generally, the Trustees (OR Trustee Directors) of the fund are the fund members and the members are all trustees (or Trustee Directors).

All members of an SMSF are responsible for the fund’s decisions and for complying with the law.

It’s important to remember that regardless of where you have your superannuation fund, it remains your money and you are in control of how it is invested.  Depending on the super fund provider those options will vary and can be limited to only a handful in some funds and up to 100s of options with others.