Superannuation

BigFuture
presents:
The BIG guide to:
Superannuation
BigFuture’s guide to
Understanding Superannuation
and
Tract Learning - Taxes Module
The Basics
© BigFuture 2014
Why Should I Care
About Super?
Because it’s your money and no one cares as much
about your financial future as you do!
The choices you make now in terms of which superannuation fund
you invest with, what specific investment options you invest in
within that superannuation fund, what voluntary contributions you
make, at what age you will retire, will all have a large impact on your
superannuation balance at the point of retirement
.
This is important because the value of your superannuation savings
at the point when you retire will substantially drive the income
you can draw from your superannuation assets, and therefore the
quality of life and range of choices you have during your retirement
years. These issues are more important than ever because as life
expectancy increases, so too does the length of time for which you
will need to fund your retirement.
© BigFuture 2014
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What is
Superannuation?
The Short Version:
The superannuation system is a long term, tax advantaged, savings
arrangement which operates primarily to provide assets and income
for consumption during retirement.
For The Geeks:
Superannuation savings are usually made through trust funds,
and if these funds meet prescribed Government standards, they
are eligible for tax concessions.
Other tax benefits are also available for superannuation
contributors/recipients. Superannuation is a key element in the
Australian Federal Government’s long term objective of moving
retired
Australians off dependence on the age pension and increasing
the level of national savings.1
© BigFuture 2014
Where did it come from?
Some History:
The superannuation system as we know it today took shape in 1992
to provide assets and income for individuals in retirement.
The Federal Government at that time, recognised the massive
savings shortfall, and the age pension liabilities that would beset the
Federal Budget, as the Baby Boomers retired.
To temper this risk, the then Prime Minister, Paul Keating persuaded
parliament to pass laws introducing the superannuation system, and
central to this is the superannuation guarantee.
© BigFuture 2014
The Nuts and Bolts
of Superannuation
Australia has
a Three Pillar
retirement
system as
described
here:
The superannuation system is largely a “defined contribution” system.
This essentially means that upon retirement, an individual is entitled
to the value of his/her contributions, plus investment earnings, less
fees, expenses and taxes. Note that there are still a small number of
“defined benefits” arrangements in place, however these are generally
winding down. The superannuation system is now dominated by “defined
contribution” arrangements.
Whilst individuals cannot withdraw assets from their superannuation
accounts prior to retirement, they do have a lot of flexibility around other
types of decisions. For example, individuals can direct these contributions
into either the default superannuation fund used by their employer, or
they can choose a different superannuation fund that is available to the
public, or they can set up their own self managed superannuation fund.
Not only do members have a choice as to what superannuation fund to
invest with, they also can choose what specific investment option(s) to
invest in within that superannuation fund.
© BigFuture 2014
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How Big is
Superannuation
As of June 2013, there was of the A$1.6 trillion2 in the superannuation
system. This is forecast to grow to approximately A$7.6 trillion by 2033.
These are very large pools of capital in Australian terms.
Related Graph!
© BigFuture 2014
What Types of Super
Are There?
There are primarily five different types of superannuation funds:
• Corporate Funds: Established for the employees of a specific
corporate employer.
• Industry Funds: Generally established for the individuals who work
in a specific industry.
• Government Funds: Established for the employees of specific
areas of government.
• Retail Funds: These superannuation funds are generally open to
the public.
• Self Managed Superannuation Funds (SMSF): These are
established by small groups of individuals, typically for the benefit
of those individuals (maximum of 4).
© BigFuture 2014
Want to manage your Super
Better?
Visit us at:
bigfuture.com.au
Sources:
1 Source: ASFA Dictionary of Superannuation http://www.
superannuation.asn.au/Dictionary.aspx?TermID=0
2 Source: “The APRA Annual Superannuation Bulletin”, APRA, June
2013 (revised 5 February 2014)
3 Source: “Dynamics of the Australian Superannuation
System.”, Deloitte Actuaries & Consultants, 2013
Further Reading:
Wikipedia http://en.wikipedia.org/wiki/Superannuation_in_Australia
Australian Prudential Regulation Authority http://www.apra.gov.au/Super/
Pages/default.aspx
Super Guru http://www.superguru.com.au
© BigFuture 2014

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