What is superannuation?
Superannuation is a form of savings where money is set aside by you and/or your employer and invested for your retirement. It is generally an ideal way to invest money for your retirement. Many funds also pay benefits if you die, or if an illness or accident makes you unable to work.
Your retirement savings grow because money is paid in regularly and invested at a concessional rate of tax. Tax concessions and other government benefits currently make superannuation one of the best long-term investments.
Contributions paid into a complying superannuation fund are typically invested in a range of assets, such as property and shares.
The key features of superannuation are:
* Your employer must contribute 9% of your earnings base to your fund
* Money from your superannuation account can usually be taken out only at retirement, and
* It is generally taxed at a lower rate compared to other forms of investment.
Get a copy of the Australian Securities and Investments Commission's free booklet Super Choices to help you understand and make decisions about your superannuation.
What types of superannuation funds are there?
There are four basic types of superannuation fund:
* Corporate funds, which are open to people working for a particular employer or corporation (including public sector funds)
* Industry funds, which are open to people in a particular industry or under a particular industrial award (some industry funds are open to anyone)
* Retail funds run by financial institutions, which are open to the public, and
* Self managed superannuation funds, which are open to up to four people.
Superannuation funds are set up under a trust deed. Trustees run the fund and, by law, they must act honestly and prudently, and make decisions in the best interests of all members.
What is a retirement savings account?
A retirement savings account is a superannuation account offered by a bank, building society, credit union or a life insurance company. Retirement savings accounts differ from other superannuation funds because they don't have a trust structure and are run like a bank account.
Who regulates superannuation funds?
Three government agencies regulate and enforce legal standards to protect you and your benefits:
* The Australian Securities and Investments Commission regulates what funds tell you and how they abide by company law
* The Australian Prudential Regulation Authority regulates how funds operate (except self managed superannuation funds) so that they can meet their obligations to you, and
* The Tax Office regulates self managed funds, employer contributions (the superannuation guarantee), co-contributions and superannuation tax rules.
These government agencies cannot guarantee your fund's capital or investment earnings.
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