Superannuation, in many ways, is our vehicle leading to a decent post-retirement life. We have this fleeting vision of life, so we often tend to disbelieve in the distant future; but surprisingly, it arrives one day. We actually grow old and retire, and it is then that Superannuation fund comes to our rescue; if we have paid some emphasis on it during the course of our working lives that is. Let us first define superannuation and explain the importance of Super fund.
Government-backed financial scheme
Superannuation, a financial scheme backed by the government, asks employers to contribute 9.25% of an employee’s salary into a retirement fund. Any employee, over 18 years of age and earning in excess of $450 a month, is eligible for employer contributions. In fact, from the 1st of July, this contribution has been raised to 9.5% (amidst protests from employer groups citing pre-election promise of the Federal government). By 2018, this figure will come up to 12%.
‘Super’ answers to the high life expectancy of Australians
Australians are on the better side of the global life expectancy chart. This means that men and women (the female gender, in fact, has a higher life expectancy) will need to live out something like 15-20 years of post-retirement life. Where will the money for it come from? Yes, there are pension schemes but when have they sufficed anyway? It is here that the Super fund will help, and this is why you are eligible to make voluntary contributions above the stipulated 9.5% made by your employer.
It is worth noting that even those who are under 18 years of age but are working in excess of 30 hours a week are quite eligible for Super contributions.
Classification of Superannuation
Super may include, but is certainly not limited to, Industry fund, Retail fund, Corporate fund, and SMSF. Since the global financial crisis, the last one in particular has seen an avalanche of lobbyists. SMSF gives far greater flexibility in terms of your investments and gives you control over where and just how much you want to invest.
How have you diversified your investments in order to boost your retirement nest egg?
