What is superannuation?
Superannuation in Australia is a long-term savings plan that provides income when one retires. For many Australians, super will be their main form of retirement income. The money is accumulated from contributions made into super fund by the employer and the employee. Sometimes, government adds to it through co-contributions and the low income super contribution.
How does it work?
Superannuation is basically a framework for holding investment assets. It’s not an investment in itself but offers a range of investment options including cash, property, shares and fixed interest. When one puts money into super fund and chooses investment options, one actually buys units in these funds (if the super fund is unitized). The number of units received depends on the daily unit price. This price will vary daily according to changes in the market.
What types of super funds are there?
There are different types of superannuation funds. Some of them are:
- Employer/corporate/staff funds - established by an employer for the benefit of their staff.
- Personal funds - one personally joins as an individual through a super provider. There are many available and most will offer a wide range of investment choices and other features.
- Industry funds - these were originally set up for people working in a particular industry, e.g. builders or health care workers. Many are now available to the public.
- Self-managed super funds (also called ‘do it yourself’ funds) – these can have up to four members and are generally used by people with larger amounts in super or by family groups.
Can the money be withdrawn?
Usually, one is restricted from accessing the super money until one reaches the preservation age or retirement age. This age is based on the date of birth and ranges between 55 and 60 years. In very specific circumstances one may be able to access super funds on compassionate grounds, however these situations are limited.