Crankys Nest Egg

Superannuation

What is Superannuation?

Superannuation is a wonderfully boring way to save for your retirement.

While superannuation (or just plain ‘super’ to its friends) has been around for well over a century, things only started heating up when a guy called Paul Keating (the one who described John Howard as a “little desiccated coconut”) introduced something called the superannuation guarantee in 1992. This meant that employers were required by law to make contributions to their employees’ superannuation accounts. The rate is currently 9.5% of an employee’s wage or salary.

On top of the employer contributions, employees are encouraged to make extra ‘personal contributions’. These contributions receive tax benefits (up to certain limits) making them an attractive proposition for the employee.

Of course it’s not all sunshine and rainbows. Once the money is in the super fund you can’t touch it until you are at least 55 (it’s called the preservation age and varies depending on when you were born).

Comparing Superannuation Funds

There are a lot of options when it comes to your choice of super fund. Here are some things to consider.

Cost

There can be a great deal of difference between the fees charged by super funds. It pays to shop around to see what features you get and at what cost.

Investment Options

Some funds give you numerous choices when it comes to how your money is invested. It may be as simple as broad mixes like growth, balanced or conservative. Or it may be as detailed as allocating percentages to particular asset classes or even specific investment managers.

Insurance

Super funds allow you to buy insurance through the fund.

• Income protection,
• Total and permanent disability, and
• Death cover

It’s worth comparing the cost of the premium and the type of cover you get with other funds and even with options outside of super.

Investment Performance

There are a number of websites which allow you to compare the historic performance of various super funds. Just be aware that past performance is not necessarily a good indicator of future peformance.

DIY Super?

While most of us are content to let the professionals manage our super for us, there are others who like to take matters into their own hands. This is where a SMSF comes into the picture.

A Self Managed Super Fund (or SMSF) gives you more control over how your superannuation is invested. In a typical industry or retail fund, you would normally choose from a preset mix of investments then leave the nitty gritty to the manager of the fund. However, with a SMSF you will be managing all of this yourself. It can be a lot of work and is definitely not for everyone.

Where to from here?

The ASIC MoneySmart website is probably the best impartial resource for learning about superannuation.