Super and retirement savings accounts
A brief explanation of super
Superannuation is a form of savings where money is set aside by you and/or your employer and invested for your retirement. It is generally an ideal way to invest for retirement. Many super funds also pay benefits if you die, or if an illness or accident makes you unable to work.
Your retirement savings grow because money is paid in regularly and it is invested at a reduced rate of tax. Tax concessions and other government benefits currently make superannuation one of the best long-term investments.
Contributions paid into a 'complying' superannuation fund are typically invested in a range of assets, such as property and shares.
The key features of superannuation:
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Your employer must contribute 9% of your base ordinary time earnings to your fund.
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Usually, money from your super account can only be taken out at retirement.
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It is generally taxed at a lower rate compared to other forms of investment.
The four basic types of super funds:
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Corporate funds. These are open to people working for a particular employer or corporation (including in the public sector).
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Industry funds. These are open to people in a particular industry or under a particular industrial award (some are open to anyone).
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Retail funds run by financial institutions. These are open to the public.
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Self-managed super funds. These are open to up to four people.
Superannuation funds are set up under a 'trust deed'. Trustees run the fund and, by law, they must act honestly and prudently, and make decisions in the best interests of all members.
Retirement savings accounts
A retirement savings account is a superannuation account offered by a bank, building society, credit union or life insurance company. It differs from other superannuation funds because it doesn't have a trust structure and it's run like a bank account.
Regulating superannuation funds
Three government agencies regulate and enforce legal standards to protect you and your benefits:
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The Australian Securities and Investments Commission regulates what funds tell you and how they abide by company law.
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The Australian Prudential Regulation Authority regulates how funds operate (except self-managed superannuation funds) so that they can meet their obligations to you.
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The Australian Tax Office (ATO) regulates self-managed super funds, employer contributions (the Superannuation Guarantee), co-contributions and superannuation tax rules.
These government agencies cannot guarantee your fund's capital or investment earnings.