Watch the following video which explains super investment funds:
Financial planners recommend building wealth by investing in a variety of assets including a super investment fund. Also known as superannuation in Australia, this type of investment requires a regular contribution into a fund that is solely intended to pay out retirement benefits for its members.
Who can join a super fund?
- Employees: Anyone can participate in a super investment. Those who are employed typically join a super fund into which their employer pays compulsory contributions on their behalf.
- Self-employed: If you’re self-employed, you can choose to join and contribute to a fund. To encourage those who are self-employed to secure their retirement, the law provides tax incentives such as the allowance of full tax deductions for contributions made into the super fund until age 75.
- Currently unemployed: If you’re not currently working or have never been employed, you can still join and contribute to a fund up to age 65 or your spouse can contribute for you.
Amount of contribution
- Compulsory contribution: If you’re employed, your employer is required to pay a minimum of 9% of your ‘ordinary time earning’ into your super account each quarter. As this is a minimum amount, your employer may pay extra money into the fund but tax concessions may not apply to very high contributions.
- Voluntary contribution: If you’re self-employed or not employed, you decide how much to pay in and you can continue to pay contributions until you reach age 75.
Types of super funds
- Corporate funds: These are for the employees of a business or corporation although former employees or relatives of an employee may be allowed to join.
- Public sector funds: These are open to Commonwealth and State government employees.
- Industry funds: Anyone can join this fund but it is usually composed of those working in a particular industry when their employer signs up with the fund.
- Retail funds: These funds are operated by financial institutions and are open to everyone.
- Self-managed super funds: These are privately established funds that are open only to qualified members of not more than 5 people.
A super investment operates as a trust fund and is run by trustees who are bound by law to make investment decisions and use the funds in the best interests of all members. Government agencies such as the Australian Securities and Investments Commission (ASIC), the Australian Prudential Regulation Authority (APRA) and the Australian Tax Office (ATO) see to it that a fund complies with legal standards, as added protection for its members.
