How does super work? Your questions answered.
Superannuation | 2/09/2020 |
8 min read
Not sure about super and how it all works? We can help. We've compiled a Q&A featuring some of the most common questions from our members.
Have a look, and start building a brighter future.
Why do I need super?
Super is designed to provide you with an income in retirement. In other words, you’re saving for the future. The end goal being enough money to support yourself once you’re no longer working.
Super isn’t the only way to support yourself in retirement. The government provides an age pension for people who qualify. This is currently $24,551 per annum for a single person, which works out to be about $472 per week. For most people that’s only enough to pay for the basics.
The good news is your super and the age pension can work together. So even a modest super balance can help top up your age pension to provide you with a more comfortable lifestyle.
Where does the money in my super come from?
Good question. There’s this thing called a ‘Super Guarantee’, or SG for short. It’s a law that says employers need to pay 9.5% of a person’s salary into their super annually.
So, if you’re applying for a job, and the position description says the salary package is $70,000 p.a. + super, that means you’ll receive $6,650 in super every year (9.5% of $70,000).
There’s all kinds of additional fine-print around the super guarantee, including the number of hours you need to work every week to qualify, etc. You can find those details here.
Can I choose where that money is invested?
Yes. If you don’t nominate an investment choice your super will be invested in a default investment option. This is usually a low-cost, balanced portfolio. In Equip’s case we have a MySuper default option.
But there are all kinds of investment options you can choose from. Equip offer six diversified options, from Conservative to Growth Plus. Each of these options has a different mix of investment risk and potential returns. For example, our Balanced Growth options has returned over 8% per annum over the last ten years – which is a Top 10 result.
You can also invest in one of our sector-specific options, like Overseas Shares, Australian Shares or Property. Or you can mix and match the above to find a combination that works for you.
Changing your investment options is easy, just login to your account and update your preferences.
Make sure that whatever options you choose is aligned with your long-term strategic goals. If you’re not sure and want to find out more about whether your investment strategy is right for you, you can always speak to one of our financial planners.
How do I check on my super and how it’s doing?
You can check on the progress of your super at any time by logging into your account. You’ll be able to see your balance, check recent contributions, and see how much you’ve earned in investment returns.
Once a year we’ll send you an annual statement that breaks down your super contributions, fees, and returns. These statements are usually distributed in August and September.
Super and life insurance
Does my super include insurance?
Yes. One of the underrated benefits of superannuation is that it usually includes a form of life insurance.
When you join Equip, you may automatically receive a certain level of cover – no health checks required. We also make it easy to increase your cover to suit your needs.
The types of cover available through Equip are:
- Death – Death insurance is the industry term for life insurance. We really should just call it life insurance, but that’s a conversation for another time. It provides a lump sum benefit to help ensure your dependents are looked after if you die.
- Total and Permanent Disablement (TPD) – Provides a lump sum benefit to help you cover your financial commitments if you become totally and permanently disabled.
- Salary Continuance – Provides you an income if you cannot work due to total or partial disability for up to 2 years. This is an optional, additional type of cover.
In other words, insurance is available through your super and the premiums are deducted from your super account. For most people, this is considerably cheaper than life insurance via third party insurance firms.
Not sure if you’re covered? Login to your account and check your insurance details.
Investment returns and fees
What is a good return on my super?
There’s no simple answer to this one. It will vary from person to person. But Equip has been recognised for delivering Top Ten investment returns for our members by independent research agency SuperRatings. Over the last ten year our Balanced Growth option averaged over 8% per annum – a top ten result in Australia.
That’s important because even a small difference in investment returns can make a big impact over the long term. According to one report, having your super in one of the worst performing super funds can mean $200,000 less when you retire. So it really does pay to choose a super fund that delivers solid investment results over the long term.
Why am I charged fees on my super?
All super funds charge fees. These fees pay for the administration and investment of your super. Currently, Equip charges $482 in fees annually on a balance of $50,000 .
Our fees compare favourably to the most other super funds. Below you’ll find average fees for both retail funds and the broader sector vs Equip. The results speak for themsleves
Equip annual fees:
Source: Chant West Super Fund (MySuper) Fee Survey March 2020
* Actively-invested MySuper product
Building a nest egg for retirement
How much will I have when I retire?
We can’t provide you with an exact number, but we can certainly help with some projections.
If you log into your Equip account you’ll be provided with a projection based on your current age and balance. This projection is based on very general numbers around income and investment strategy, so we’d recommend you adjust the sliders for a more accurate projection. At the very least you should make sure your income, investment strategy, and desired retirement income are accurate.
You can also try our retirement calculator. You’ll need to manually enter your details, but it’s a quick and easy way to get a rough estimate, and look at ways to boost that number.
Is there anything I can do to boost my super balance?
Definitely. Here are few quick options.
You can learn more about those options and how to boost your super here.
What if I’m a freelancer or self-employed?
We appreciate that super can be the last thing on most people’s mind. Especially if you’re freelance, working for yourself, and/or dealing with all the other paperwork that entails. But it’s important to have a super strategy in place.
Not contributing to your super when you’re younger can seriously impact your long-term balance, and your retirement options.
If you’re self-employed it’s worth talking to your accountant or a financial planner to better understand your options.
Everything else you should know
What is an industry fund? And is Equip one?
Originally, an industry fund meant a super fund set up to provide a retirement income for people within a specific industry, e.g. manufacturing. These days the term refers to a not-for-profit member focused fund - like Equip.
The alternative is a retail fund, which is generally owned by a bank, and has external shareholders.
So yes, we’re an industry fund.
Does Equip have a sustainability policy?
Yes we do. At Equip we believe in Responsible Investment. While our objective is to maximise the retirement income of our members, we recognise that Environmental, Social and Governance (ESG) issues are factors which may influence whether this objective is met.
You can read more about the specifics here.
How does early access work?
We have a whole section of the website dedicated to our COVID-19 response plan and what we’re doing to help members, including early release of super. You can find it here.
This information is provided for general information only. It does not take into account your personal objectives, financial situation or needs and should therefore not be taken as personal advice. You should consider whether it is appropriate for you before acting on it and, if necessary, you should seek professional financial advice. Togethr Trustees Pty Ltd ABN 64 006 964 049, AFSL 246383 ("Togethr") is the trustee of the Equipsuper Superannuation Fund ABN 33 813 823 017 ("Equip" or "The Fund"). Past performance is not an indication of future performance.
Togethr Financial Planning Pty Ltd (“TFP”) (ABN 84 124 491 078, AFSL 455010), trading as Equip Financial Planning, is licensed to provide financial planning services to retail and wholesale clients. TFP is owned by Togethr Holdings Pty Ltd (ABN 11 604 515 791). You can obtain the TFP Financial Services Guide and/or Privacy Statement by contacting our Helpline on 1800 682 626. This is general information only and does not take into account your personal objectives, financial situation or needs and therefore should not be taken as personal advice.