Money stuff: Superannuation

By Shriya Narula

As Australian women we are eligible for one of the most fulfilling economic benefits available to workers in the developed world. Superannuation (super). Superannuation is and will always be one of Australia’s greatest economic achievements. In short, unlike other developed nations, we have an inbuilt system that prepares us for our retirement throughout our professional working lives.

Unfortunately, it is widely known that women retire with less than half the total superannuation balance of their male colleagues. Not only is this an issue of equality, but also one of longevity– women tend to live longer than men, meaning that a healthy superannuation account is critical to strong economic and wellbeing outcomes for women. We can attribute the gap in superannuation to a few factors, including the gender pay gap and the fact that women may take career breaks for child rearing meaning that less superannuation is accumulated overall. However, if women are empowered at all stages of their career to monitor and manage their accounts, hopefully we can turn these statistics around.

Here’s a condensed rundown of how super works:

  1. Your employer is obligated by law to set aside superannuation contributions for you in addition to your normal salary/wage.
  2. The aim is that (over time) the amount set aside and paid to your super fund will accumulate and earn income when invested by your super fund.
  3. Your super fund is responsible for ensuring that the amount you have in your account grows and develops over time by investing in a range of strategies including shares, property, bonds and cash.
  4. Upon retirement, you will be able to access and use the reserve of money that has been nicely plodding away during your working years.

You also have the right to salary sacrifice or make your own voluntary contributions to your fund at any stage, however these amounts are typically reserved to amounts less than $25,000 (before tax).

Who is eligible?

Most workers don’t realise that they are in fact eligible to receive superannuation. Don’t make the mistake of thinking that just because you’re a casual worker, your employer is not required to make contributions to your fund.

Employers have to pay superannuation to their employees if they satisfy the following conditions:

  • employees are 18 years old or over, and are paid $450 or more (before tax) in a calendar month; or
  • employees are under 18 years old, being paid $450 or more (before tax) in a calendar month and work more than 30 hours in a week.

It does not matter whether an employee is classified as casual, part time or permanent. It also does not matter if the employee is not an Australian citizen, even a temporary resident on a gap year is eligible for super. Employers also have to pay super for their external contractors, on the condition that the contractor has been hired for the main purpose of their individual labour. Further, just because a contractor has an Australian business number (ABN) does not preclude them from being eligible for super. The ATO can offer further context and they can be contacted on the hotline number below if you need further confirmation of your superannuation status. The ATO can also assist with claiming unpaid super from an employer if they assess your case to be genuine.

Ph: 13 28 65

Do you have multiple accounts? You can track it down via the ATO

Over the course of your working life (probably throughout countless casual jobs or contract work, as most women tend to engage in) you may have accumulated a number of superannuation accounts. This typically occurs because your employer enrols you in their choice of superfund unless you nominate your own.

There are a few important considerations here:

  • You are charged for fees and any related insurance policies on each and every account you hold, therefore you could be paying for a duplicate of insurance policies and administrative fees; and
  • It’s important to keep track of all of your super accounts, it’s not worth leaving amounts here and there, only later to learn that you have lost entire balances because the amount has been completely absorbed by admin fees.

Tracking down your lost super is important, remember it’s your money and your legal entitlement as an Australian worker. Even if it’s a few $100 here and there, think long term, if that money is invested it could make a difference to your retirement reserves.

Check out this page from the ATO for more information: https://www.ato.gov.au/individuals/super/keeping-track-of-your-super/

The ATO can also assist you in locating any super funds you may have membership with, or alternatively you can authorise one of your existing funds to act on your behalf and consolidate your accounts.

Investment options

Once your money is in your super account, don’t make the mistake of thinking that’s the end of the matter. You have the right (at all times) to determine how and where your money is invested. Typically upon joining a fund or if you don’t elect otherwise, you will be enrolled in your super fund’s automatic or medium risk investment strategy. There is nothing wrong with this and you can be enrolled in the default option without any significant material loss.

However, if you’re interested in higher returns or perhaps a more conservative approach to investing, you do have the option to tailor the investment strategy to your needs. You can either call your super fund, or most funds offer you the opportunity to adjust your preferences online. Most super funds will also allow you to apportion your super account to different strategies. For example, you may want to have 30% of your funds invested in cash, 30% in high risk international shares, 30% in low risk government bonds, and 10% in medium risk Australian shares. It’s always your choice, however what you choose as your investment strategy will depend on your age, your risk appetite and the current economic climate. It’s a good idea to always run your thinking by a professional financial planner, or an investment consultant.

Insurance

The majority of super funds offer attached insurance policies for their members. Typically the insurance policies covered by superannuation funds include: total permanent disability, income protection and life insurance. You are not obligated to take up insurance if you don’t wish to, but if you choose to have a policy through your super fund, the policy premium will be deducted from your account. Choosing what insurance is right for you will depend on your age, needs and circumstances. For example, total permanent disability and death insurance may be essential for you if you have dependents. Chat to your super fund or seek some professional advice to work out your insurance options. The insurance attached to your super account is usually offered at a cheaper rate than a general market policy, so it could be beneficial to work out what is appropriate for you. 

Any information provided in this article is not intended to form a recommendation or opinion on a financial product or service.

Shriya Narula is a corporate and banking lawyer by trade, but her real passion is writing in the area of financial literacy for women. Shriya believes that one of the keys to female empowerment and independence is basic economic and financial education. Shriya seeks to empower and educate women of all ages in their finances, savings and spending habits. Shriya’s blog is ‘findamentals’ and her articles cover a wide range of topics including superannuation, credit cards, health insurance, interest rates and savings. https://findamentals.wordpress.com/