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How Does Super Work?

There’s a lot of jargon used when speaking about super in Australia. So we’ve broken down the complexity to explain what you need to know and how to make super work harder for you.

What is Superannuation?

Superannuation is one way Australians can save money for their retirement.

Your employer should pay 9.5% of your salary into a super fund, through the Superannuation Guarantee (SG). You can also top up your super by making your own contributions, and where you are eligible the Government may add to it through co-contributions and the low income super contribution.

The money deposited into your superannuation account is then invested, and the growth reinvested, to help the balance grow. The idea is that, when you retire and no longer receive an income, you can access your superannuation, rather than relying solely on the Age Pension, to support your lifestyle.

Since super lowers the Government’s future Pension costs, tax incentives may apply to your SG and other contributions.

Needless to say, many rules and regulations apply. We’ve provided information on many of those in this section.

How it benefits you

 

Superannuation is one way to save for retirement. The savings in your super account generally cannot be accessed until your reach retirement age, helping you transition from earning a regular wage into retirement.

The savings in your super account grow over time thanks to contributions from your employers. Currently, employers are required to deposit 9.5% of your base wage into a superannuation fund of your choosing. This is called the Superannuation Guarantee (SG) Contribution.

You can also add your own contributions, or take advantage of Government co-contributions (if you’re eligible).

The savings in your super account should also grow through investment performance. Your super provider will invest money on your behalf, with the aim of giving you the largest possible balance at retirement.

Insurance products can also be bundled into your superannuation. Purchasing insurance in this way means you pay from a lower tax environment.

 

How Super Works in Australia

At the heart of the Government’s superannuation scheme is an intention to create an environment in which people can put money aside to provide a better income in retirement.

The purpose of superannuation has been a hot topic. Find out more about Virgin Money’s perspective. For some more background on the history of superannuation, check out the Virgin Money Blog

How Super Works for You

Several key components make superannuation work for you. Contributions, Roll-overs, Investment Strategy and Performance help your super grow for retirement.

Fees for managing your account come directly out of your super balance, and small differences in the fees charged could have a big impact on your super balance at retirement.

Additionally, some insurance products can be purchased through your superannuation fund rather than directly with insurers, so consider this when choosing your super fund.

Finally, different super providers offer different levels of customer service and account access. Find out more about managing your super.

Are You Eligible for Super?

PAYG

 

Most people who work in Australia are entitled to have their super paid by their employer. This means your employer has to pay a minimum of 9.5% of your salary into your super fund if:

  • you’re over 18 and you’re paid more than $450 (before tax) in a calendar month
  • you’re under 18 and are paid a minimum of $450 (before tax) in a calendar month and work 30 or more hours a week

It doesn’t matter if you’re working full time, part time or casually – if you meet these requirements, you should receive SG contributions from your employer.

 

Sole Trader or Self Employer

 

If you're a sole trader or in a partnership, you don't have to make Super Guarantee (SG) contributions for yourself. While it’s not compulsory, you can choose to make personal super contributions as a way of saving for your retirement.

There are also great Government benefits to help you save for your retirement. Find out more here.

 

What Your Employer Does

Your employer is required to pay your SG contributions to a super fund (most of the time, your choice of fund) at least four times a year, by the quarterly due dates. They have to use ordinary time (OT) earnings to determine the amount of your contribution.

All employers must have a nominated default superannuation fund available for their employees. Default funds can change between employers, so it’s important for you to have a look at your employer’s default fund to make sure it suits you.

At the time you start a new job, your employer will give you the option to either select their default fund or the fund of your choice. To choose a superannuation fund, you simply complete a Standard Choice Form, which is issued by the ATO.

Your employer is required to give you a Standard Choice Form:

  • Within 28 days of beginning a new job
  • Within 28 days of your employer becoming aware that the super fund currently receiving your SG contributions has become ineligible to receive them
  • Within 28 days of your employer switching their default fund if your SG contributions are currently being paid into this fund

What Your Super Fund Does

Once your superannuation fund receives your contributions (either from your employer or your voluntary contributions), it invests this money into a default strategy (like the Virgin Money Super Lifestage Tracker®) or the investment options you’ve chosen yourself.

How you invest your money is your choice. Most super funds provide a number of options including a range of asset classes that offer different rates of risk and growth. You can choose how you'd like your money invested, if you want to. To find out more about investing choices, see our investment options page.

You can also transfer your money to a different investment option within your fund, or to another super fund at any time. But take note of any fees when doing this.

See below for more information on how your money is invested.

Your Role

You can decide to have your regular SG contributions paid into your employer’s nominated default super fund or choose your own fund. You can also choose or change funds at any time - but your employer is only obliged to act on your choice once a year.

It’s all about finding the right super fund to meet your retirement goals. Even if you don’t know what they are today, that’s okay, it’s about getting the most out of your investment for your future.

And remember it’s your money. Be sure to keep an eye on your superannuation payments and balance to ensure your money is working as hard as it can for your retirement.

Even if your super fund isn’t linked to your everyday banking, lots of super funds (including Virgin Money Super) provide great online account management tools. We’re not suggesting you log in every day. But it’s good to jump into your account once every three months to make sure your employer is making your SG contributions, and to assess the performance of your investments. It only takes a few minutes.

Remember, if you’re changing jobs, a lot of things in your life are probably changing – and this is probably a good time to take a closer look at your super and the benefits it offers.

 
 

Important stuff

The information above is intended as a guide only. If you are unsure about who you need to make contributions for we suggest you contact the ATO.

As an employer, it's important you fully understand your superannuation obligations as failure to meet these minimum requirements could mean financial penalties from the Government.

QuickSuper is a registered trademark and a product owned and operated by Westpac Banking Corporation ABN 33 007 457 141. Westpac’s terms and conditions applicable to the QuickSuper service are available after your eligibility for the free clearing house service is assessed by Virgin Money Super.

This information is of a general nature only and does not take into account your personal financial situation, needs or objectives. As we don't know your financial needs we can’t advise if Virgin Money Super will suit you. Please consider the Product Disclosure Statement, Product Guide, Insurance Guide and Financial Services Guide before making a decision about the product. For further information about the insurance options refer to the Insurance Guide.

The Superannuation Fees described on the Fees page apply from 12 December 2016. Here you'll find the official Superannuation Industry (Supervision) Act 1993 ('SIS Act') definition for each fee type.

While there are no contribution, withdrawal or switching fees, a buy/sell spread applies at a fund level when purchasing and selling units. Other fees and costs may apply such as insurance fees. These are retained by the fund and are not paid to Virgin Money or the Trustee. All fees are inclusive of Goods and Services Tax (GST) and net of Reduced Input Tax Credits (RITC).

Before you rollover or consolidate your superannuation, you should check to see if insurance or other benefits will be impacted or lost. Some funds may also charge withdrawal or exit fees.

It is very important to note that superannuation is generally a long term investment. Past investment performance is not a reliable indicator of future performance and should never be the sole factor considered when selecting a fund. It is very important to note that superannuation is a generally long term investment and that past performance is not indicative of future performance.

Prepared by Virgin Money Financial Services Pty Ltd ABN 51 113 285 395 AFSL 286869. Virgin Money Super is a plan in the Mercer Super Trust ABN 19 905 422 981. Virgin Money Super is issued by Mercer Superannuation (Australia) Limited (MSAL) ABN 79 004 717 533 AFSL 235906 as trustee of the Mercer Super Trust. For more information about Virgin Money Super, please refer to the PDS which is available free of charge on our website or by calling the Customer Care team on 1300 652 770.

Source: https://www.ato.gov.au/About-ATO/Research-and-statistics/In-detail/Super-statistics/Super-accounts-data/Super-accounts-data-overview/

SuperRatings award reflects a funds' value for money, and is awarded based on a rating system of investment, fees and service. SuperRatings does not issue, sell, guarantee or underwrite this product. Go to www.superratings.com.au for details of its ratings criteria.

The amount shown is an estimate only of the Indirect Cost Ratio (ICR) generally expected to apply to these investments for 2016-2017 Financial Year.

Virgin Money Super’s fund returns shown above are net earnings and are calculated after the deduction of applicable taxes and costs. The results are current as at 31 January 2017. These results are provided by Virgin Money Super Asset consultants. It is very important to note that past performance is not indicative of future performance.

The median results are provided by SuperRatings and are current as at 30 June 2016 as a benchmark only. Virgin Money Super has not verified its accuracy so we can’t guarantee that it is correct, and accept no liability for inaccuracies, errors or omissions.

Eligibility crtieria and fees apply. Aged 15-64 Death and Total and Permanent Disablity cover. Automatic Insurance cover is subject to Exclusions including Pre-Existing Medical Condition exclusion. This means that, you won’t be covered for any illness, injury, condition or related symptom that you were aware of or should have been aware of, or had a medical consultation for, were planning to have a medical consultation for, or should have had a medical consultation for in the two years prior to cover commencement. See the Virgin Money Super Insurance Guide for more information.

Automatic Death & TPD cover for Australian residents aged 15-64 with our default insurance offering. Conditions and Exclusions (such as pre-existing medical conditions) apply. See the Virgin Money Super Insurance Guide for more information.

The case studies shown are hypothetical and are not meant to illustrate the circumstances of any particular individual. All claims will be assessed in accordance with the policy terms. In the event of any inconsistency with other material, the insurance policy terms will prevail.
For further information regarding Virgin Money Super’s insurance cover, including terms, conditions and eligibility, please refer to the Insurance Guide which forms part of the Product Disclosure Statement (PDS). The PDS is also available free of charge by contacting Customer Services on 1300 652 770.
This information is of a general nature and has been prepared without taking account of your personal needs, financial circumstances or objectives. Before acting on this information, you should consider the appropriateness of the information, having regard to your needs, financial circumstances and objectives. You should read the relevant Product Disclosure Statement available by calling 1300 652 770 and consider if this product is right for you before making a decision to acquire or continue to hold the product.