Superannuation
Superannuation is important because it creates an incentive for you to accumulate savings that are intended to support your retirement lifestyle goals.
Retirement and Superannuation in Australia
Superannuation is a financial plan which people make to have funds available for them in retirement. It is government-supported and encouraged with minimum provisions compulsory for employees. An individual can withdraw funds out of a super fund when the person meets one of the conditions of release.
In simple terms, during your working life you put money into a superannuation fund to ensure you have income for when you retire. Most Australians can look forward to about 20 years of retirement. The government Age Pension is intended to provide only the necessities, therefore the more you can accumulate now, the more secure and satisfying your retirement is going to be.
The majority of working Australians by law receive superannuation. Employers must contribute 9.5% of your gross income (Superannuation Guarantee) into a super account in your name which is managed by a super fund. You must be over 18, an employee and earn over $450 a month. You may contribute to this fund also, but it is completely voluntary.
Super is entirely voluntary for the self-employed.
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Three Pillars
The proposed solution was a “three pillars” approach to retirement income:
- A safety net consisting of a means-tested Government age pension system
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Three Pillars
The proposed solution was a “three pillars” approach to retirement income:
2. Private savings generated through compulsory contributions to super
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Three Pillars
The proposed solution was a “three pillars” approach to retirement income:
3. Voluntary savings through super and other investments
History of Australian Superannuation
Before 1992, reasonably widespread superannuation arrangements had been in place for many years under industrial awards negotiated by the union movement between wage increases. In 1992, the Keating Labor government introduced a compulsory “Superannuation Guarantee” system as part of a major reform package addressing Australia’s retirement income policies. It was calculated that Australia, along with many other Western nations, would experience a major demographic shift in the coming decades, resulting in the anticipated increase in age pension payments placing an unaffordable strain on the Australian economy. The following chart shows a simplistic overview of the history of Australian superannuation.
More information via Wikipedia