If you just got your first job in Australia you are probably wondering what is a superannuation fund. Your future employer might have mentioned it when you were negotiating your salary, or they asked you if you would like to transfer your funds or keep your existing one? Confusing right? Don’t worry, in this article we will clear up what is a superannuation fund.
What is a superannuation fund?
‘Super’ is a mandatory private pension scheme paid by income earning residents of Australia.
The minimum contribution is 9.5%, however you may choose to increase this.
When you negotiate your salary make sure to clarify if the agreed annual amount is inclusive or exclusive of super.
Which fund to choose?
Most employers would have an existing super scheme you can join, however there are several providers competing, and you have the choice to pick or to move your funds at any time.
Over the years your accumulated savings are invested. You can choose to go with your provider’s default package or pick from the options they offer.
What types of super funds are out there?
A found specifically offered for employers. You may get better rates from a specific provider through your company’s corporate scheme than just going directly to the super fund.
Non-profit super funds originally set up for individual industries, however now they are available for anyone to join. They operate for the benefit of members.
Public commercial companies who operate for the benefit of shareholders.
Self Managed Super Funds (SMSFs)
Super funds that allow members to trade their funds on the stock exchange themselves. You need to go through a compliance training to become a trustee and make sure that you are prepared to do the admin work required. Find out more about SMSF’s here.
How to choose a superannuation fund
When you choose your super fund you need to compare the following features:
|Feature||What to look for|
|Fees and costs||The lower the better|
|Investment options||You need to make sure the options suit your personal needs and risk tolerance.|
|Benefits||Some employers pay higher contribution if you choose to go with their appointed super fund.|
|Performance||Check the last few years performance, and choose a provider which have shown great results consistently.|
|Insurance||Many super funds offer a beneficial life insurance as part of the package.|
Read more about how to choose a super fund here.
How to transfer foreign pension?
You may be allowed to bring over your accumulated pension from a foreign country, however not all providers offer this, and you may be required to pay tax on it. For those who are arriving from the UK some super funds are registered as a Qualifying Recognised Overseas Pension Scheme by HRMC, that will make the transfer easier.
What happens when you leave Australia?
If you choose to leave Australia you can cash out your super fund, however you will be required to pay a staggering 65% tax on it.
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