What is superannuation?
Superannuation is a corporate pension program in Australia for the benefit of a company’s employees. It is a compulsory system that requires an employer to put a certain percentage of their income into a fund to meet their financial requirements in retirement.
Superannuation is invested in various assets to help build an employee’s account and provide the best retirement outcome possible.
How does superannuation work?
Your employer is required to contribute to a superannuation account in your name, which is then handled by a superannuation fund.
As an employee, you can also contribute more to your superannuation account so that you have more money to live on when you retire. If you are self-employed, you have the option of allocating a portion of your earnings to superannuation.
Throughout your working life, your superannuation’s contributions and investments build up to help it grow even more.
What are the benefits of superannuation?
Here are some benefits if your superannuation is in the right fund, making sure it’s for your working life and in retirement.
Insurance at a reduced cost
Since superannuation funds can negotiate collective reductions on insurance rates, these savings are generally passed on to members. Insurance that is not covered by a superannuation fund is typically more expensive.
Automatic no-exam insurance coverage
Most superannuation funds give new members immediate death and total and permanent disability insurance through their super.
This may be far more cost-effective than taking out regular insurance, particularly if you’re older or have specific health problems that are typically prohibited.
Binding beneficiary nomination
Next to family homes, superannuation is considered the largest asset of most Australians. However, to ensure that it goes to the right person, superannuation allows you to nominate a binding beneficiary in the case of death.
Protection against bankruptcy
Another benefit of having a super is that the funds are regulated and therefore will not be affected in the case of bankruptcy. This includes any amount you take out of your super after the bankruptcy is filed.
Tax-free income upon retirement
There are certain conditions that allow you to enjoy tax-free benefits as a member of superannuation. If you’re aged 60 and above withdrawing your super as a super income stream, the payments are free of tax.
It is also possible to make lump sum withdrawals without having to pay tax.
Free member advice
Large superannuation funds provide free counsel to existing members. This is a major bonus since, while looking for great guidance online, it’s usually hard to get advice that suits your situation.
A trained financial adviser can assist in guaranteeing that your superannuation grows and that you are on track for the retirement you seek.
Access to big assets
Since superannuation is one large investment portfolio in which your money is pooled with the retirement savings of other members, your options for investment are wider.
With so much purchasing power, super funds may be invested in private assets like airports or even highways. This can provide you with a one-of-a-kind opportunity to participate in investments that aren’t publicly available.