Compare Super

Compare Super

Compare super is currently working on a solution that will allow you to evaluate your superanuation performance.

Compare super is currently working on a solution that will allow you to evaluate your superanuation performance.

What is Superannuation?

Superannuation or simply, super is money that you put aside over your working life, to help you sail smoothly through your retirement life. To ensure that your money grows till the time you retire, your super fund invests it further into shares, property, term deposits and other investment options, along with offering you insurance options. 

Who will pay for my super?

If you are employed, your employer has to compulsorily make a minimum level of contribution into your super; an amount which is known as the Super Guarantee (SG). You are entitled to this guaranteed amount into your super account if you fall into either of the following two categories:

1.  If you are over the age of 18 and are paid $450 or more before tax in a calendar month.

2. If you are under 18 or are classified as a private/domestic worker, are paid $450 or more before tax in a calendar month and you work for more than 30 hours a week.

Note that you may be entitled to super if you’re a contractor or a temporary resident, working in Australia.

From 1 July 2014, the Super Guarantee has been set at 9.5% of the ordinary time earnings (OTE) of any employee up to a limit known as the maximum super contribution base (MSCB). If you earn above that amount in a particular quarter, your employer does not have to make super contributions for the part of your earnings over and above the MSCB. The MSCB for the financial year 2020-21 is $57,090 per quarter, which equals a maximum SG contribution of $5,423.55 per quarter.

From July 2021, the Australian Government has legislated that the super payments will be increased incrementally each year till they finally reach 12% in the year 2025.  Although the SG rate is set to increase to 10% from 1 July 2021, in the wake of the COVID-19 crisis, it is possible that this increase might be delayed.

But what comprises ordinary time earnings, you may ask. Simply put, ordinary time earnings are what you earn for your ordinary hours of work. It includes components like commissions, bonuses, allowances, and paid leave but does not include overtime payments.

If you are employed contractually, the super guarantee is to be calculated on the labor component of your contract, if possible. Otherwise, it would be calculated on the total pay.

If you are a self-employed individual, you don't have to compulsorily make contributions towards super for yourself, but it is recommended that you do save up systematically for your retirement, by way of making super contributions.

You may also be eligible for contributions towards your super from the Australian government if you are a low or middle income earner.

Always remember, the more you save, the more financially safe you are after your retirement. Hence, over and above the employer superannuation contribution, it is advisable to make additional contributions voluntarily to your super balance.

How do I choose my Superfund?

Most people are able to choose the super fund that they want their contributions to be paid into. You can either go ahead with your employer’s fund or choose the super fund that is suitable. The best super fund for you may differ based on your financial situation and future requirements. A variety of factors like the past performance, fees and charges, insurance offered, investment options, risks, and investment returns must be considered before making a decision about your superfund.

If you don't choose your own super fund, your employer will put your super into a default super account in their fund. This is known as a MySuper Account.

Broadly there are two types of Superfund- 

- Accumulation fund where your money will grow or 'accumulate' over time.

The value of the super depends on super contributions made by you and your employers put in and on the investment return generated by the fund.

- Defined benefit fund where the money you the retirement benefit is not based solely on the contribution and investment return.

It may reflect other factors such as, final average salary, years of service, etc. Many of these are corporate or public sector funds, most closed to new members.

What are the five categories of Super Funds?

There are five potential Australian super fund options, if you are eligible to choose your superfund but not every option is available to everyone.

1. Retail super funds

Retail funds are usually run by Australian banks, investment firms and insurance companies. Anyone can join the retail superannuation funds. The company that owns the funds will keep profits for its shareholders. A large range of investment options are provided and clients are charged in exchange for the financial advice provided.

Banks in Australia like Commonwealth Bank, NAB, Westpac and investment companies like Virgin Money, MLC all offer retail super funds.

2. Industry funds 

These funds are generally designed for people who work in a particular industry, but some of the bigger industry funds will allow anyone to join. It is a not-for-profit type of fund, wherein profits are put back into the fund. Popular examples include AustralianSuper and HostPlus.

3. Public sector funds

These funds are generally only open to government employees.  They generally have limited investment options and lower fees. Many long-term members have defined benefits, while newer members are usually in an accumulation fund.

4. Corporate/Employer funds

These funds are usually only available to employees working for a specific employer.  Some large companies operate a corporate fund under a board of trustees that they have appointed. Other corporate funds are operated by a retail or industry fund, but are only available to that company's employees.

5. Self-Managed Super Funds 

These are funds where you are responsible for the insurance and investment decisions among various financial products. You can set up your own private super fund and manage it yourself, but only under strict rules regulated by the Australian Taxation Office (ATO). An SMSF can have a minimum of one and a maximum of four members, and each member acts as a trustee.

 

What are the key points to consider while making my Superfund choice?

Past Performance: The investment performance of the super funds you are considering should be assessed over a period of at least 5 years. That said, it is important to keep in mind that past performance alone is not a reliable indicator of future performance.

Fees: All superfunds attract a fee from their client. It may be as a flat-dollar amount or as a percentage and in some cases, both. In either case, low fees is always preferable. The charges you have to bear may include administration fees, investment fees, transactions' fees, fees for switching etc. The frequency at which it is charged should also be a comparison factor. Lower fees can help you safeguard your super account balance.

Insurance: Your superfund will typically offer three types of insurance-

1. Life insurance/death cover- provided to your beneficiaries in case of your death or if you have terminal illness.

2. TPD (Total and permanent disability) insurance- provided to you if you are disabled and unlikely to join the workforce

3. Income protection insurance/ salary continuance cover- provided as a regular income for a specified period, in the case that you are unable to work because of a temporary illness/disability.

Super funds offer a default insurance and hence, while choosing a superfund remember to keep in mind the insurance premium, the available cover and the amount of cover.

Investment options : Most superfunds offer a range of investment options for you to choose from. Choosing superannuation investment options that align with your financial goals, risk-appetite, age etc. can make a big difference to the funds available to you at the time of withdrawal of your super.

There may be different options available based on the investment strategy employed and would typically include the following:

A growth option will aim for higher average returns but it could mean losses, if markets aren't performing well. Typically 85% is invested in shares and property.

A balanced option will aim for reasonable returns with reduced risk of loss as compared to the growth option. Typically 70% is invested in shares and property and 30% in fixed interest and cash.

A conservative option will generate lower returns as it aims to lower market risks. 30% is invested into shares and property. Rest of it is put into fixed interest and cash.

A cash option will aim at stable returns with the lowest risk. 100% is invested in  Australian deposit-taking institutions- banks, credit unions etc. 

Super funds may offer different allocations hence, it is important to go through the Product Disclosure Statement (PDS) of each fund while making a decision.

MySuper fund will typically put your money in a standard mix of investments. These funds usually have a balanced or growth approach.

Website ratings: Another way to choose between the superannuation products available for you to choose from, is by way of websites offering various comparison tools. For example- ChantWest is an independent superannuation and pension research body that provides valuable data for individuals, financial advisors and organizations. Their fund ratings are known as AppleCheck, based on a research and experience based methodology for assessing various funds. Other examples of such websites include SuperRatings, RateCity, Canstar etc.

Do note that these website ratings alone should not be considered a factor in choosing between funds. Past performance, fees and charges, investment options and insurance of each fund must be considered along with these ratings.

 

Depending on your age, needs, future financial goals, etc., you should take a sound decision about the category of fund to choose and within that, the investment options that best suit you. 

What is Superannuation?

Superannuation or simply, super is money that you put aside over your working life, to help you sail smoothly through your retirement life. To ensure that your money grows till the time you retire, your super fund invests it further into shares, property, term deposits and other investment options, along with offering you insurance options. 

Who will pay for my super?

If you are employed, your employer has to compulsorily make a minimum level of contribution into your super; an amount which is known as the Super Guarantee (SG). You are entitled to this guaranteed amount into your super account if you fall into either of the following two categories:

1.  If you are over the age of 18 and are paid $450 or more before tax in a calendar month.

2. If you are under 18 or are classified as a private/domestic worker, are paid $450 or more before tax in a calendar month and you work for more than 30 hours a week.

Note that you may be entitled to super if you’re a contractor or a temporary resident, working in Australia.

From 1 July 2014, the Super Guarantee has been set at 9.5% of the ordinary time earnings (OTE) of any employee up to a limit known as the maximum super contribution base (MSCB). If you earn above that amount in a particular quarter, your employer does not have to make super contributions for the part of your earnings over and above the MSCB. The MSCB for the financial year 2020-21 is $57,090 per quarter, which equals a maximum SG contribution of $5,423.55 per quarter.

From July 2021, the Australian Government has legislated that the super payments will be increased incrementally each year till they finally reach 12% in the year 2025.  Although the SG rate is set to increase to 10% from 1 July 2021, in the wake of the COVID-19 crisis, it is possible that this increase might be delayed.

But what comprises ordinary time earnings, you may ask. Simply put, ordinary time earnings are what you earn for your ordinary hours of work. It includes components like commissions, bonuses, allowances, and paid leave but does not include overtime payments.

If you are employed contractually, the super guarantee is to be calculated on the labor component of your contract, if possible. Otherwise, it would be calculated on the total pay.

If you are a self-employed individual, you don't have to compulsorily make contributions towards super for yourself, but it is recommended that you do save up systematically for your retirement, by way of making super contributions.

You may also be eligible for contributions towards your super from the Australian government if you are a low or middle income earner.

Always remember, the more you save, the more financially safe you are after your retirement. Hence, over and above the employer superannuation contribution, it is advisable to make additional contributions voluntarily to your super balance.

How do I choose my Superfund?

Most people are able to choose the super fund that they want their contributions to be paid into. You can either go ahead with your employer’s fund or choose the super fund that is suitable. The best super fund for you may differ based on your financial situation and future requirements. A variety of factors like the past performance, fees and charges, insurance offered, investment options, risks, and investment returns must be considered before making a decision about your superfund.

If you don't choose your own super fund, your employer will put your super into a default super account in their fund. This is known as a MySuper Account.

Broadly there are two types of Superfund- 

- Accumulation fund where your money will grow or 'accumulate' over time.

The value of the super depends on super contributions made by you and your employers put in and on the investment return generated by the fund.

- Defined benefit fund where the money you the retirement benefit is not based solely on the contribution and investment return.

It may reflect other factors such as, final average salary, years of service, etc. Many of these are corporate or public sector funds, most closed to new members.

What are the five categories of Super Funds?

There are five potential Australian super fund options, if you are eligible to choose your superfund but not every option is available to everyone.

1. Retail super funds

Retail funds are usually run by Australian banks, investment firms and insurance companies. Anyone can join the retail superannuation funds. The company that owns the funds will keep profits for its shareholders. A large range of investment options are provided and clients are charged in exchange for the financial advice provided.

Banks in Australia like Commonwealth Bank, NAB, Westpac and investment companies like Virgin Money, MLC all offer retail super funds.

2. Industry funds 

These funds are generally designed for people who work in a particular industry, but some of the bigger industry funds will allow anyone to join. It is a not-for-profit type of fund, wherein profits are put back into the fund. Popular examples include AustralianSuper and HostPlus.

3. Public sector funds

These funds are generally only open to government employees.  They generally have limited investment options and lower fees. Many long-term members have defined benefits, while newer members are usually in an accumulation fund.

4. Corporate/Employer funds

These funds are usually only available to employees working for a specific employer.  Some large companies operate a corporate fund under a board of trustees that they have appointed. Other corporate funds are operated by a retail or industry fund, but are only available to that company's employees.

5. Self-Managed Super Funds 

These are funds where you are responsible for the insurance and investment decisions among various financial products. You can set up your own private super fund and manage it yourself, but only under strict rules regulated by the Australian Taxation Office (ATO). An SMSF can have a minimum of one and a maximum of four members, and each member acts as a trustee.

 

What are the key points to consider while making my Superfund choice?

Past Performance: The investment performance of the super funds you are considering should be assessed over a period of at least 5 years. That said, it is important to keep in mind that past performance alone is not a reliable indicator of future performance.

Fees: All superfunds attract a fee from their client. It may be as a flat-dollar amount or as a percentage and in some cases, both. In either case, low fees is always preferable. The charges you have to bear may include administration fees, investment fees, transactions' fees, fees for switching etc. The frequency at which it is charged should also be a comparison factor. Lower fees can help you safeguard your super account balance.

Insurance: Your superfund will typically offer three types of insurance-

1. Life insurance/death cover- provided to your beneficiaries in case of your death or if you have terminal illness.

2. TPD (Total and permanent disability) insurance- provided to you if you are disabled and unlikely to join the workforce

3. Income protection insurance/ salary continuance cover- provided as a regular income for a specified period, in the case that you are unable to work because of a temporary illness/disability.

Super funds offer a default insurance and hence, while choosing a superfund remember to keep in mind the insurance premium, the available cover and the amount of cover.

Investment options : Most superfunds offer a range of investment options for you to choose from. Choosing superannuation investment options that align with your financial goals, risk-appetite, age etc. can make a big difference to the funds available to you at the time of withdrawal of your super.

There may be different options available based on the investment strategy employed and would typically include the following:

A growth option will aim for higher average returns but it could mean losses, if markets aren't performing well. Typically 85% is invested in shares and property.

A balanced option will aim for reasonable returns with reduced risk of loss as compared to the growth option. Typically 70% is invested in shares and property and 30% in fixed interest and cash.

A conservative option will generate lower returns as it aims to lower market risks. 30% is invested into shares and property. Rest of it is put into fixed interest and cash.

A cash option will aim at stable returns with the lowest risk. 100% is invested in  Australian deposit-taking institutions- banks, credit unions etc. 

Super funds may offer different allocations hence, it is important to go through the Product Disclosure Statement (PDS) of each fund while making a decision.

MySuper fund will typically put your money in a standard mix of investments. These funds usually have a balanced or growth approach.

Website ratings: Another way to choose between the superannuation products available for you to choose from, is by way of websites offering various comparison tools. For example- ChantWest is an independent superannuation and pension research body that provides valuable data for individuals, financial advisors and organizations. Their fund ratings are known as AppleCheck, based on a research and experience based methodology for assessing various funds. Other examples of such websites include SuperRatings, RateCity, Canstar etc.

Do note that these website ratings alone should not be considered a factor in choosing between funds. Past performance, fees and charges, investment options and insurance of each fund must be considered along with these ratings.

 

Depending on your age, needs, future financial goals, etc., you should take a sound decision about the category of fund to choose and within that, the investment options that best suit you. 

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