What is superannuation, and how does it work?
Super can be confusing. Here’s a quick walk -through on how it works.
For many Australians, or people working in Australia for the first time, superannuation can be confusing despite it being so important for our retirement. Here at Slate, everything we do is about making the complex simple – so read on as we explain to you the basics of superannuation.
Why does super exist?
First and foremost, superannuation is a trust or a tax structure the government has set up to help you save enough money for a comfortable standard of living in retirement. And the way they do this is to mandate that, subject to your eligibility, your employer must make superannuation contributions on your behalf – use the decision tool by ATO if you’re unsure whether you’re eligible. Most employers will make super guarantee contributions quarterly, but contributions can be more frequent depending on the employer. The best way to keep track of the contribution being made by your employer is to download the Slate app, and we’ll notify you every time a payment is received into your Slate account.
What happens to my super once it’s paid by my employer?
When your superannuation is paid by your employer, it goes into your super account where it is taxed at a concessional tax rate that’s usually lower than most peoples’ personal income tax rate. The money is then invested in various investments with the aim of growing your retirement savings. For Slate Super, we invest some money into Australian shares, some into international shares, some into property, cash, fixed interest, bonds…there’s a variety of investments. This is called diversification, or a way of reducing investment risks by spreading the eggs into different baskets.
If you’re interested in finding out more about Slate Super’s investment mix, click here to read Section 5 of the PDS – How we invest your money.
Why does my super account balance change from time to time?
Sometimes when you open up your Slate app to check your balance, it might be different to what it was yesterday. Why is this?
Superannuation is what we called ‘market-linked’, because it’s invested in assets that go up and down in value based on market movements. During economic downturns, it’s normal to feel a bit anxious or uncertain about your investment. But if you don’t plan to retire in the next 20-30 years, you’re unlikely to feel any major impact in the long-term and there will be time to make up for any losses.
When can I get access to my super?
In general terms, you can access your super when you turn 65 or reach your preservation age and retire. There are some limited circumstances where you can access your super early, such as severe financial hardship, if you depart Australia as a temporary resident, or under the COVID-19 early release scheme, to name a few.
Remember, superannuation is designed to be a long-term investment. Choosing to access your super early should be an informed and cautious decision that takes into account your personal and financial circumstances.
Have more questions?
If you’d like to learn more about super or have any questions about your Slate account, contact our Member Advocacy team and they’ll be more than happy to have a chat.