The Federal Government of Australia introduced superannuation to be a compulsory way for the workers to save for retirement. Specific rules can determine whether you can access your superannuation. If you can save more superannuation before, it may make a difference in your lifestyle, especially when you stop working.
The funds may be added by the employer contribution and various other traditional growth vehicles, and then these funds are reserved in the superannuation fund. This monetary fund type can be used to pay out the employee pension benefits when the participating employees become eligible.
What is Superannuation?
Superannuation, also known as ‘Super’ is the money set aside when you are working so that you can have money for retirement. This money is put into the fund, and then it is invested by a trustee on your behalf, which can help you earn returns and thus grow your savings.
There are various factors on which the amount of super you will end up with depends when you retire. These include the amount made in contributions, the type of investment option that has been selected, how long it has been invested, the investment returns that this money has earned, & the amount paid in fees.
Is superannuation compulsory?
Different statistics show that Australia is among the leading countries in the world that have an aging population. The Australian Government was concerned regarding the age pension payments that could be overwhelming to the country’s economy in the coming future if no step was taken.
Superannuation was made compulsory by the Australian Government in 1992 to ensure that every Australian who is working has saved for retirement. There are three ways through which this policy aimed to address the retirement-income challenge.
- The employer contribution is mandatory to the super funds.
- Contributing more to the super funds and other investment types.
- A government-sponsored age pension.
Benefits of Superannuation
Though the super system can be a great way to save for retirement, it can also give valuable but little benefits to the super fund members. The following benefits can help you improve your financial situation.
You can slash the income tax bill
Super offers you a straightforward way to reduce the income tax amount you have to pay each year. You can swap the income tax rate that you would typically spend on some of the earnings by setting up a salary sacrifice arrangement with the employer.
You can get insurance
The majority of large super funds offer death and permanent disability insurance cover to the new members automatically, without undergoing a medical examination. This can indeed be a great way to get insurance protection.
You can make sure your money goes where you want it
Nowadays, we can see the increasingly common disgruntled family members that challenge the super death benefit payments. When binding death benefit nomination (BDBN) is used for the super account, then the super death benefit can indeed go to the beneficiaries when the member dies.
You don’t have to pay more tax on the investment returns
Super funds can no doubt be a tax-effective wrapper around one’s investment. One can have valuable tax savings with this concessional tax treatment, especially when earning a higher income.
Types of super funds
There are various types of super funds in the market. It is up to you to choose which fund you want your super to be invested with; therefore, you have to do your research and look for the fund that can offer you the features and investment options you need.
Retail super funds
Usually, these are open to anyone to join, while these are owned and run by financial service companies.
Industry super funds
These are tied mostly to a specific industry. Some might be open to everyone, whereas others can be open only to the industry employees.
Corporate super funds
A company arranges these super funds for the employees. The employer operates some under a board of trustees, and others may outsource the operation to retail or the industry fund.
Public sector super funds
The public sector super funds are open only to the employees of the federal and state government departments.
Self-managed super funds
The members manage the private superannuation funds, and the number can be from one to four.
Top-performing super funds in 2021
Here are some of the best performing super funds in 2021 which have gained popularity and are returning enhanced returns on investments.
It is a very competitive superannuation fund intended for those Australian working professionals who want to put their nest egg towards a safe and ethical investment. You can also enjoy some premium features such as income protection and life insurance if you choose to invest in Australian ethics. On top of that, it is the most potent option as one can get returns as high as 23.60% per fiscal year.
Mine super is actually a public offer industry fund. It comes with a wide variety of investment options. Almost 56% of its total assets are invested in default strategies or my super strategies. It is currently estimated at $11.3 billion and will continue to soar higher in the upcoming future. It is the best option to invest in right now, as it has won multiple awards for innovative measures in the superannuation industry.
Australian Super is embarking on a journey that no other investment company has in the past. Its investment options are balanced, and its one-year return is almost 20.4%. Additionally, the super fund has the tendency to grow more than 9.7% for ten years.
It is an Australian industry super fund solely focused on travel and tourism, sports, hospitality and other related recreational events. Anyone can join it. It is another balanced investment option with a one-year return percentage of 20.4% and annual growth of 9.7% for ten years.
Cbus is not your average balanced fund. It is the top choice for many people because it is robustly growing and gives maximum returns to those who are investing their money in it. It has an average growth of 19.3% for one year and carries the potency to grow at the rate of 9.6% per annum for ten years. Many investors have marked the fund safe to invest in, as it gives enhanced returns.
If you aren’t aware of Uni super, the chances are that you have to rethink your investment options. Uni super is all about balanced growth and maximum returns. Results have shown that the one-year investment option can give you a 17.5% return. Still, if you are making plans on investing for ten years, the average growth per annum on your investments will be 9.6%, and that is more than you can even imagine. It is super safe and open for everyone.
Sun Super is a retirement plan that can really change your lifestyle in the future. It is a super balanced fund intended to make sure that you are saving enough money for your future from the first day. The past five year returns on average have shown promise as the super of people have grown up to 9.30% per annum. Additionally, by investing in sun super, you might be eligible to get a retirement bonus of up to $4800.
Aware Super is a future-oriented investment option that meets all of your needs after retirement. It is a low-cost investment plan that can give you options beyond your imagination. You can also earn Velocity points on every contribution that you make. The Aware Super investment plan has the potential to yield positive results as high as 13.64% per annum.
Vic Super investment option is what everyone should be investing in, as it provides health insurance and has no exit fees. It also assists with all of your financial plans and comes with the lowest administration fees. The past five-year returns soared as high as 10.87%, while the estimated returns for this year are being calculated as 21.85%.
Legal Super has the potential to go as high as 19.95% this year, but it comes with administration fees and investment fees. But this doesn’t stop you from investing in this plan, as it offers health insurance as well as 0% exit fees.
What if I have to return back to my native country?
According to the new legislation, if the international students have spent more than 12 months in Australia and have already contributed to the super funds, they will be allowed immediate access to their accumulated superannuation funds. Additionally, if a student is leaving the country permanently or his visa is getting expired. Still, the government will allow him full access to the super funds.
Are there any insurance plans under cover of superannuation plans?
Usually, super funds offer three main kinds of life insurance to their members, but these services come with added costs. These life insurance plans are as under:
Life cover: Life cover is also referred to as death cover. It usually pays a handsome amount in the form of a lump sum or income stream to your kind in case you die or in case of a terminal illness.
TPD: TPD insurance is known to pay benefits in case you become seriously disabled and aren’t in the position to work again.
Income Protection Cover: It refers to salary continuance cover. Under this cover, you are given regular income for a specified period of time when you can’t work due to any temporary illness or disability.
Many people underestimate the amount of superannuation that may be required because it can be challenging to know how much they may need to live the life that they want in retirement. Even if retirement may be a long way off, one can start preparation by taking steps to build superannuation. Some of the superannuation can even be used to purchase the first home, and several ways can contribute extra money into the super that can be tax-effective. Therefore, one must be familiar with the contribution limits and the possible implications of each.