From the time you get your first job, you’ll hear a lot of talk about your superannuation fund – more commonly referred to as ‘super’.
When you’re younger, it likely seems unfair that some of your hard earned pay doesn’t make it into your bank account each month. But we’re here to tell you that there’s a good reason for this. A very good reason.
Here’s your guide to super.
What is superannuation?
Your superannuation is the money that is put aside by your employer each month over your working life. This will be the monetary fund you’ll have access to (and be able to live off) once you’ve retired.
This means that… Your super is very important. The more you save while you work, the more you’ll have for your retirement (when you’re no longer working).
Who manages my regular super contributions?
In most cases, these payments are managed by your employer and the contributions are made in addition to your salary and wages. (Although it’s important to note that some salary amounts specified in your employee contract might be inclusive of superannuation – make sure you ask all the right questions so you know exactly where all your hard-earned cash is going, every month).
How much super should I be saving?
There are certain laws around how much super your employer needs to be paying. This is called the ‘super guarantee’ (SG) and although the amount your employer needs to pay changes from time to time, there is always a set minimum.
It’s also worth noting that low-income and middle-income earners may be eligible for certain additional super contributions from the government.
Visit the ATO’s website to learn more.
How do I choose a super fund?
When you become eligible to start earning super, your employer will ask you to elect the fund that your super contributions will be paid into. This is known as a ‘stapled super fund’ – it means that it stays connected to you even as you change jobs, and all your super contributions are paid into this same fund.
If you choose not to have a stapled super fund, your employer will have a default super fund that they will make the payments into. But never fear, you’ll still be able to access these payments when you retire.
When deciding which super fund to use, you’ll want to consider factors like performance, fees, insurance and investment options. An easy way to do this is to use the government’s comparison tool, which allows you to compare different super funds to make sure you’re picking the right one for you.
When can I access my super?
After spending so many years saving, you’ll probably be wondering when you actually get to access your super. Generally, there are three scenarios that make you eligible to access it:
Scenario 1: Preservation age and retirement
Your preservation age is the youngest age you can be to start receiving your super and it depends on when you were born. For anyone born after 1st July 1964, your preservation age is 60. Once you reach your preservation age, you’ll be eligible to receive your super as soon as you choose to retire.
Scenario 2: Transitioning to retirement income stream
Once you reach your preservation age, there is also the option to transition to receiving a retirement income stream while still working. This means you might reduce the hours you work but still receive the same income, with some of that income coming from your super fund.
Scenario 3: Turning 65
Even if you haven’t retired, you’re eligible to access your super once you turn 65. This has no impact on your ability to continue working. If you choose to withdraw your super at this time but also continue working, you’ll also still have super contributions made for the remainder of your working life.
How do I access my super?
Once you are eligible to access your super, the next step will be to choose how you want to receive it. You can choose to receive it as a lump sum, which means the entirety of your super fun will be distributed to your bank account at the same time. Another option is to receive it as a retirement income stream, so a designated amount will be distributed to your account each month. As discussed in scenario 2, this is an option for both those who are still working and those who aren’t.
I need to access my super but am not eligible according to what you’ve mentioned.
You are able to access your super on a few very rare instances. For example, on compassionate grounds, in the case of severe financial hardship, or terminal medical conditions.
You also may be able to access your super early if you are a temporary resident exiting Australia, or if you’re experiencing temporary or permanent incapacity.
These are all special circumstances though, and are assessed on an individual basis.
So, it’s safe to say: Your super is important. Make sure you do your research before choosing a super fund, and then regularly check-in to ensure your contributions are being made. Super exists to help you set up a stable financial future for yourself – so it’s essential to be responsible.
Learn more about superannuation in Australia here.