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 - If your teen is 18 years of age or older and earns more than $450 a month, their employer is obligated to pay 9.5% of their ordinary time earnings into their chosen super fund account. This is called the Superannuation Guarantee contribution, but might also be known more generically as an employer contribution. If your teen is under 18, typically they’ll be eligible for employer contributions if they work more than 30 hours a week as well as earn more than $450 per month. Your teen can see how much super they’re paid by checking their pay slip.
- Personal – Your teen can make extra contributions to their super account. Personal contributions can be pre-tax (i.e. salary sacrifice) or after-tax via a voluntary contribution from your bank account. As a parent you can also help your teen get a head start by transferring money into their account.
- Government – If your teen makes or receives personal contributions into their super account, the government might match this amount to a prescribed 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. The value of your benefits on retirement is largely dependent on how much is contributed by you and on your behalf, and how well your investment performs.
- Defined benefits funds - Less common than accumulation funds, the value of your benefits on retirement is based on contributions, investment performance, and things like years of service with the company and/or your salary at the time of your retirement.
- MySuper account - This is the common default account type in many super funds. This type of account typically offers, basic features, simple investment options, and automatic life insurance. It's available only in 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 straight into your super fund account as a voluntary contribution.
- Investment strategy – This is how your super is invested. Generally, you can choose to have your super invested in categories like balanced, growth, or conservative, which reflect different risk levels and growth potentials.