What is super?
It’s one of the most tax-effective ways to save for your retirement, it’s compulsory and it’s your money. And knowing what super is and how it works can help you save for a great life after work.
Helping you save for your retirement
The more super you save, the more money you will have to live a great life after work. Here are the basic building blocks of super.
Each employer you work for must pay money, known as super contributions, into your super account on top of your salary and wages. Generally, if you’re over 18 years and get paid $450 or more (before tax) in a month, you’re entitled to receive super.1
At the moment, your employer must pay 10% of your ordinary time earnings into super, but this rate is set to increase to 12% by 20252 . It’s to make sure future Australian employees will have enough super to live on when they retire.
Choice of super fund
You can choose which super fund gets your employer’s super contributions. What’s more, you can add to your super by making your own contributions, by salary sacrificing from your before-tax income or by making contributions from your after-tax income.
Investing your super
Your super fund, like the Russell Investments Master Trust, invests your super either in a default investment strategy or one you have chosen yourself.
Access to super
Generally, you can access your super only when you retire, but some circumstances such as severe financial hardship or ill health could mean getting early access.
In for the long term
Above all, think about the long-term nature of super — your entire working life. That’s why taking an interest in your super is worth the time and making informed decisions about growing and managing it is worth the effort.
Five reasons why you should care about your super
1. Your super, your money
It can be easy to forget that super is your money, but ultimately, you have more control over it than you think.
You have a say as to where you choose to invest it (super is money you earned that gets invested on your behalf). You also need to decide how to invest your super, which can make a big difference to the value of your super savings in years to come.Personalised investing
2. The way super is taxed
That’s right. If you get paid a dollar, depending on your marginal tax rate, by the time it lands in your wallet, it could be worth as little as $0.55 cents. However, if it goes directly into your super, it’s worth $0.85 cents!
That’s because money going into your super is normally taxed at 15% instead of your marginal tax rate, which can be between 19% and 45%3. Super is a smart way to save, wouldn't you agree?Grow your super
3. Compound interest
Thanks to the power of compound interest, every extra dollar you contribute will be reinvested again and again, growing your savings faster. If you make a post-tax contribution of $10,000 into your super account, compound interest means you could have $17,908.484 in 10 years’ time. That’s a nice holiday once you finish working.Contribute more
4. For a great life after work
Retirement can last a long time and for many, the Age Pension may not be enough. With its tax concessions, benefits of compound interest and access to investment markets, paying attention to your super is a great way to ensure you live a great life after work.
Your super will essentially pay you an income once you leave the work force, so use the super system to your advantage.Plan your retirement
5. To find lost super
$17.5 billion. That's how much the Australian Taxation Office says there is in lost and unclaimed super waiting to be found5. Maybe some of it belongs to you.
Super can get lost if you change jobs, move house or change your name, and forget to update your details with your super fund.
It’s really easy to track it down and combine it with your other super savings.Combine your super
Super woman: Close the gender gap and take control of your super
There are a number of factors that affect women’s security in retirement6, such as:
- broken working patterns
- the gender pay gap
- increasing casualisation of the workforce
- longevity risk
- structural issues in the super system
- adequacy of super overall
- domestic violence
- practical issues with family law and super splitting.
You might see some of these impacting your own life. And as your super provider, we can help you—through the right mix of tools, choices, tips, education and advice.
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1 Exceptions apply. For more information, visit https://www.ato.gov.au/individuals/super/getting-your-super-started/employees/
2 Super guarantee percentage, Australian Taxation Office, 18 December 2020. Available at https://www.ato.gov.au/rates/key-superannuation-rates-and-thresholds/?anchor=Superguaranteepercentage
3 Contribution limits apply. Read our Contribution Limits Fact Sheet for more information.
4 Assuming 6% p.a. net of tax and fee return. The value in ‘today’s dollars’ i.e. discounting for inflation at a rate of 2.5% p.a. is $13,990.07.
5 Media release: Check now for your share of $17.5b in lost super, Australian Taxation Office, 11 October 2018.
6 Women’s economic security in retirement, The Association of Superannuation Funds of Australia, Available at https://www.superannuation.asn.au/ArticleDocuments/359/1805-Women_Security_Retirement.pdf.aspx?Embed=Y