Super fundamentals

Welcome and thank you for taking the time to join our Super basics – saving for your future presentation.

If you consider that your super maybe come one of the largest assets you'll ever have, paying closer attention to it sooner rather than later could make a real difference down the track. If you've ever had questions about super, we're going to break it down into simple terms so you can feel confident you're across what you need to know.

My name is Jaclyn Livingstone. I'm an Education Manager at AustralianSuper, and part of my job is to help you better understand how super works.

This presentation may include general financial advice, which doesn't take into account your personal objectives, financial situation or needs. Before making a decision, consider if the information is right for you and read the relevant Product Disclosure Statement and Target Market Determination on the AustralianSuper website.

Today, we'll be covering a number of things such as: what is super, when you can access it, how super works, ways to take control of your super, and where to go for help and advice.

Super is money set aside and invested while you’re working, to live off when you retire. If you're eligible, your employer will pay a percentage of your before-tax income into your nominated super account under what's known as the Superannuation Guarantee, or SG for short.

The SG rate is a percentage of your before-tax income. It's scheduled to gradually increase and reach 12% by the 1st of July 2025. If you're employed and over 18, you're generally eligible for SG contributions regardless of whether you're a full time, part time or casual employee, including if you're a temporary resident. If you are under 18, you must work more than 30 hours per week to be entitled to SG contributions.

Separate to SG contributions, you may choose to contribute to super yourself if you're self-employed or want to add to what your employer already puts in.

When you’re putting away money for your future, it’s natural to want to know when you can access it. Generally, you can access your super when you reach your preservation age, which will be between 55 and 60, depending on when you were born, and retire. Check out the table to see what your preservation age is.

If you've reached your preservation age but aren't ready to retire permanently, you may be able to access a portion of your super through something known as a transition to retirement income account. You can access all of your super when you turn 65 too, even if you haven't left the workforce.

There are also certain situations where you may be able to access some or all of your super early. This is strictly limited to special circumstances. Eligible first home buyers may withdraw a certain amount in voluntary super contributions to put toward a deposit under the First Home Super Saver Scheme.

Other instances include when you may be experiencing severe financial hardship, or under compassionate grounds, where you don't have capacity to meet certain expenses. This may include medical expenses, funeral costs, or mortgage repayments if you're at risk of losing your home. If you are diagnosed with a terminal illness or are permanently incapacitated, you may also be able to claim some or all of your super.

Likewise, if you're a temporary resident who earns super who earns super while working and living in Australia, you may apply to have super paid out as a Departing Australia Superannuation Payment, after you leave. For more information regarding rules and eligibility, visit australiansuper.com/AccessSuper

We've looked at what super is and when you can access it. Let's now unpack how it works and some other things you'll want to be across.

Your super is a bit like a bank account in that it’s a way to put money away for your future. Money goes in through employer contributions, if you're eligible. It also goes in through any extra contributions you might decide to add, in addition to investment returns, your super fund may generate for you.

Some money also comes out to cover fees, premiums for any insurance you might have, and tax, and it may drop due to market volatility. It may sound a little complicated, but let's break it down so it makes a bit more sense.

Contributing into super may be a tax-effective way to save for your future, as people typically pay less on super than they do on any employment income they receive.

There are two types of contributions you can make, which include before-tax contributions, also known as concessional contributions. And there are after-tax contributions, also known as non-concessional contributions.

Let's take a look at these in a bit more detail. Before-tax contributions include what employers are required to make under the Superannuation Guarantee. These are probably the most well known.

Salary sacrifice contributions are additional contributions you can get your employer to make directly into your super fund out of your before-tax income, if you choose to. Then there are tax-deductible contributions. These are voluntary contributions you can make, such as when you transfer funds from your bank account into your super, that you can then claim a tax deduction for, when you do your tax return. The maximum amount you can contribute in before-tax contributions is currently $27,500 per year.

Separate to that, there are after-tax contributions, which generally include voluntary contributions you make after tax. The limit on these is $110,000 per year. In certain circumstances, you may be able to contribute more than the annual limits, under what's known as the carry forward rule and the bring forward rule. For more information on these rules, visit our website, or you can register for one of our webinars on contributions.

We've spoken about contributions as a way to increase your super. Now let's look at the investment returns your super fund may generate for you. Super funds typically invest in a range of assets with the goal of growing member balances over time. Compound interest plays a big role in this.

Put simply, compound interest is the investment returns generated on both the money you've saved and the interest you earn. Here's an example of what $20 a week could do to your super balance over the period of a decade when compound interest is involved. As you can see, adding to your super in your twenties could make a big difference to your final super balance later on. The earlier you get the ball rolling, the longer your money will have to accumulate compound returns and grow.

Before adding to your super, weigh up your financial circumstances, contribution caps that may apply, and any potential tax issues.  

We've looked at how super works and what factors may help your super balance to grow. Now let's take a look at how AustralianSuper invests members’ money. The money put into your super is invested by your super fund with the aim of generating returns to help your retirement savings grow over time.

As a part of this, choosing the right investment option for you is important as it could affect how much your super savings grow and how long they might last. The investment option you choose will come down to a few things, such as how hands on you want to be, how long you plan to invest for, and how comfortable you are with investment risk.

For instance, some people may choose to take on more risk with the potential for higher returns in their younger years, but then change to more conservative options with lower returns as they get older and closer to retirement. A good place to start in making the right decision for you is to read the AustralianSuper Investment Guide, which is available ataustraliansuper.com/InvestmentGuide

This guide lists your investment options with AustralianSuper in more detail. Alternatively, you can speak toa phone based financial adviser who can look at your situation and provide advice on the most appropriate investment option for you.

When you join AustralianSuper, unless you choose otherwise, your money is invested in the Balanced option, which is our default investment option. The Balanced option invests in a wide range of assets, including shares, private equity, infrastructure, property, fixed interest, credit and cash.

If you are in the default option, you can see here what we invest in each asset class and what ranges we stick to, keeping in mind asset allocation may change from time to time depending on market conditions. It's also important to know if you do want to take a more hands on approach, other investment options are available, which you can check out on our website.

We spoke before about market volatility and how this can impact your super balance. We also spoke about the power of compound interest, and this graph reflects that while markets may go up and down, they typically recover over the long term. A look back over history can be reassuring. It shows that significant share market downturns and recessions aren't uncommon. You can see here that over the last 20 years, the performance of the Balanced option, which is our default investment option, has weathered the storms of the Global Financial Crisis and the COVID 19 downturn to provide strong long-term returns.

In this example, a balance of $100,000 increased to more than $450,000 over two decades, despite market ups and downs, reiterating that super is a long-term investment.

Moving onto fees, super funds generally deduct these from member account balances. We'll unpack how this is done, but a quick pointer is that you shouldn't be charged exit fees for moving all or part of your super to a different fund as these fees were banned in 2019.

There are different types of fees at AustralianSuper. The investment fee helps cover the transaction costs of managing your investments. It’s charged as a percentage of your balance and can vary depending on your choice of investment option. Transaction costs are incurred when buying and selling underlying investments for certain investment options.

The administration fee covers the general costs of managing your account. It covers things like the Contact Centre and maintenance of the mobile app. It's charged as a combination of a fixed fee and a percentage of your account balance up to a certain limit. Additional fees and costs for things like insurance, if you have it, may apply. For a full run down, check out australiansuper.com/fees

Having multiple super accounts, which around a quarter of Australians do, might mean that you're paying more fees than you have to. This could mean less money for you when you reach retirement. For this reason, you may want to consider whether consolidating accounts into one is appropriate for you.

It could create advantages, such as fewer sets of fees and less paperwork. However, it's important to do your research first and make sure you're not at risk of losing any features and benefits, like insurance, which may be attached to the account you're considering closing. You'll also want to make sure you have adequate features and benefits in the account you're thinking about consolidating into.

Paying for insurance out of your super has come up a few times in this presentation. Some people may not realise this, but one of the benefits of having insurance cover inside super is it may be cheaper. At AustralianSuper, we use our size and scale to negotiate lower insurance costs. It is important, however, to look into whether you have the right type and the right amount of cover if it's something you have currently, or are considering getting in the future.

There are three common types of insurance cover included in super. The first is death cover, which can help ease financial stress by paying a lump sum to your beneficiaries if you pass away. The second is Total and Permanent Disablement cover, or TPD for short, which can provide a lump sum payment if you are totally and permanently disabled and can no longer work. The third is Income Protection, which can help if you became ill or injured, at or outside of work, and can't temporarily work.

It can provide monthly payments to help you get by while you're not earning your regular salary. AustralianSuper provides most members with a basic level of insurance cover with their super account, noting some age and eligibility conditions apply. You can access more details on insurance, including when cover starts, by visiting our Insurance through your super page at australiansuper.com/insurance

You can also get an estimate of your insurance needs by using the insurance calculator on our website. This is a great way to estimate how much cover you should potentially have, and how much your cover might cost.

Whether insurance is something you want or not, another important consideration is who your super will go to in the event you pass away. This is important because if you don't nominate a beneficiary, your super fund may decide who receives your super money. This is regardless of what you have done in your will, if you do have one. You’ll have the option to make a binding or a non-binding nomination.

Binding nominations typically expire after three years unless you renew them, while non-binding nominations mean your super fund will consider who you've put down, but ultimately have the final say. If you don't nominate anyone, your super fund will pay your death benefit to your estate or use its discretion to determine which eligible beneficiaries the money should go to.

Eligible super beneficiaries can include: your current spouse or partner - whether you’re in a same-sex or defacto relationship; your child, of any age; someone who's in an interdependent relationship with you; anyone financially dependent on you when you pass away; your estate or legal personal representative. There may be tax implications depending on who you nominate. To find out more visit  australiansuper.com/beneficiaries

We also run a regular webinar on Estate planning and your super, which you can register for via our website.

We’ve covered a number of things today to help you understand the basics of super.  We’ve looked at what super is, when you can access it, and how it works. It's also important you take action, because our actions, coupled with yours, may be able to improve the life you live in retirement.

Some things you might consider include: contributing a bit more to your super, if you’re in a position to; checking your investment options; reviewing any insurance cover you might have; and nominating your beneficiaries.

You could also get a sense of how your super is tracking by using our super projection calculator. To work out how much super you could have at retirement and how long it could last, visit australiansuper.com/ProjectionCalculator

If you're looking for help and advice, you can visit our website, which has a range of tools and calculators. Qualified financial advisers can also provide members with advice on simple matters at no additional cost, over the phone. This might include advice on making an investment choice, contributing to super, and the insurance options available in your AustralianSuper account. A small fee does apply to advice regarding retirement more broadly, and transition to retirement strategies. For members who may have more complex things to discuss or would prefer to meet with an adviser in person, AustralianSuper also offers access to financial planners in AustralianSuper offices around the country, which does involve a cost.

If you're interested in learning more about super, we offer a range of webinars at different times throughout the year, so you can tune in from the comfort of your own home, or wherever you have internet access. To find out more or to check out other videos, visit australiansuper.com/webinars

Thank you for taking the time to join our Super basics - saving for your future presentation. We wish you all the best on your financial journey.