It may seem like a lot to give up out of your weekly pay, but if you have your money in a superaccount, this can also benefit you greatly than if you put it into any other savings account. Many people assume that their superannuation simply “sits there”, but your super account actually works quite hard to bring you many bonuses that you wouldn’t ordinarily receive.
Superannuation accounts offer individuals the opportunity to invest their money into shares, stocks and other commodities, in order to maximise their money and grow their super balances, which is invested by your super fund.
Depending on what type of fund you are with, you can usually choose how you want your super fund to invest your money. You can choose from local or international investments and decide to invest in cash, property or other shares.
You can also choose how “safe” or “aggressive” you want your investments to be, as discussedbelow:
- Balanced options invest up to 70% of your money and aim to grow your funds, but keep 30% in cash and interest. This is a fairly safe option, with a little bit of risk and average returns.
- Growth options generally work to grow your money, investing 85% in property or shares. This is a good long-term option. You may be able to choose from “safe” or “aggressive”growth options, depending on how much risk you want to take.
- Conservative options are very low risk and only invest up to 30% of your money. However, returns are very low. This option is best for those close to retirement.
- Cash options ensure you benefit from capital, but do not involve risks associated with shares or property. This can be ideal for those looking to retire in the next 5 years or less.
Depending on your fund, you may also find that you are covered – to a certain extent – with income protection insurance.
Income protectionprovides you with up to 75% of your income, should you become sick or injured and unable to work. You can opt to receive payments for 6 months, 1 or 2 years, or even until the age you retire.
Here are the bonuses of taking out income protection insurance through your super fund:
- It can often be cheaper, depending on your fund.
- It can be easier to be approved (especially if you are a smoker or have a high-risk job) for the insurance.
- It is easy to manage and doesn’t require you to do anything.
- Some income insurance premiums are tax-deductable as well, but this will depend on your fund and personal situation.
However, despite how useful income protection can be, you will want to make sure that your income protection premium doesn’t eat away at your super savings. Some income protection insurance claims may also be harder to “win” through a super fund, so check with your financial advisor.
Super co-contributions can be made by any individual into their own super; this means that you can choose to pay more money from your wageinto your super account. If you are a low or middle-income earner (i.e. if your income is less than $61,920), the government rewards your contributions by matching up to $1,000 of your personal contributions. You can receive the full $1,000 if you earn below $31,920 and those on higher salaries (up to $61,920) earn benefits on a sliding scale.
You should also note that:
- All super co-contributions are tax-free to a certain limit.
- Super co-contributions are deducted from your income on your tax return, meaning that you could be taxed less or receive more tax back, depending on your income bracket.
- Co-contribution rules are changing for 2012, but have not yet been passed by the government. If they pass, the maximum government contribution amount may be reduced to $500.
Self-Managed Super Funds
A self-managed super fund (SMSF) can also bring many bonuses and benefits to an individual. It requires more work, since you have to manage your super yourself; however, you need to have strong investment strategies to benefit from the returns.
Bonuses can include:
- More flexibility in how and where you invest.
- Greater control over your portfolio.
- Lower fees than retail funds.
- Ability to invest your super into physical property.