Start with the basics
- Definition - Super is a type of long term savings for retirement. 9.5% of your pay is transferred into your super account. This is directed into a pool with other members' money and invested by professional investment managers.
- Access - You can usually only access super after a certain age, when you retire. The current rules say those born after 1 July 1964 can start accessing their super at age 60. This can be as a lump sum, regular income stream, or both.
- Contributions - You can also top up your super with your own money. This is known as making contributions.
- Super is invested - Once money is paid into your teenager's super fund, they start earning investment returns on it. The super fund is in charge of investing members' money.
- Employer - In most cases, your employer is obligated to pay 9.5% of your salary into your super fund account on top of your pay (if you earn more than $450 per month). This is the Superannuation Guarantee. If you're under 18, typically you're eligible for employer contributions if you work more than 30 hours a week as well as earning more than $450 per month. Your teen can see how much super they’re paid by checking their pay slip.
- Personal - You can make extra contributions yourself. You can get your employer to pay some of your pre-tax or after-tax pay into your super fund, or you can transfer money into your fund yourself. As a parent you can also help your teen get a head start by transferring money into their account.
- Government - If your teen pays their own money into super, the government might match this amount to a limit. This is known as a government co-contribution and it's designed to encourage people to put away more money for retirement.
Types of super funds
- Retail - Retail funds are open to anyone, they offer numerous investment options, and they're usually run by investment companies or banks.
- Industry - Industry funds might be open to anyone or only people in an industry. They tend to have fewer investment options and are not for profit.
- Public sector - These funds are usually for government employees only.
- Corporate - Corporate funds are usually for employees of a specific company.
- Self-managed super fund - You can establish and maintain your own fund with a self-managed super fund.
Understanding the jargon
- Accumulation funds - Most Aussies have their super in an accumulation fund. Your benefits largely depend on what you contribute.
- Defined benefits funds - Less common than accumulation funds, defined benefit funds look at contributions as well as things like your years of service and your retirement salary when deciding on benefits.
- MySuper account - This is the common default account type in many super funds. This type of account typically offers lower fees, basic features, simple investment options, and automatic life insurance. It's available only on accumulation funds.
- Preservation age - This is the age you can start accessing your super.
- Salary sacrifice - This is where you agree with your employer to pay some of your pre-tax pay into your super fund.
- Investment strategy - You can choose to have your super invested in categories like balanced, growth, or conservative, which reflect different risk levels and growth potentials.