So, what is Superannuation and how does it work?

You might think of super as just a percentage of your salary that you can’t access. In the short term, this can seem frustrating! It is your money – and you can’t access it. But it’s important to remember that it’s just being invested on your behalf until you retire.

Superannuation is a way to save for your retirement. The intent is to support you to have sufficient income in retirement so that you can live comfortably once you stop working and earning an income. The money invested via superannuation comes from contributions made into your super fund by your employer and, ideally, topped up by your own money. In addition to that, sometimes the government will add to it through co-contributions or the low income super contribution.

How it works

Your employer must pay 9.5% of your salary into a super fund. This is called the Super Guarantee and it's the law. Legislation has already been passed to increase the Super Guarantee to 12% by 1 July 2025.

Over the course of your working life, these contributions accumulate. Because they cannot be accessed, they should benefit from compound interest.

What happens to your Super funds?

Money in your super fund account is invested by your super fund. Most super funds offer a variety of investment options.

For example, if you choose a market-linked investment, the value of your super will move up and down with market movements. Or you might select a stable option with lower expected returns but fewer ups and downs.

At any time, you can choose how you'd like your money invested. You can also transfer your money to a different investment option within the fund, or transfer to another super fund.

What happens when you retire?

If you retire and have reached your preservation age set by the government (i.e. 55 to 60 depending on your age), you can withdraw your super. There are three ways you can get your super:

  • As a lump sum
  • As a retirement income stream (e.g. a monthly payment)
  • A combination of both

If you choose to take your super as a retirement income stream, the money that you're not accessing continues to work for you and earn interest.

Understanding how super works can bring great benefits whether you are just starting out, are close to retirement or have already retired.

Your financial adviser can assist with getting you financially ready for retirement. To find out whether you have appropriate superannuation structures in place, why not schedule a meeting with Gerry or Clae now?


Information current as at 10 September 2015 - This information is of a general nature only and has been prepared without taking into account your particular financial needs, circumstances and objectives. While every effort has been made to ensure the accuracy of the information, it is not guaranteed. You should obtain professional advice before acting on the information contained in this publication. You should read the Product Disclosure Statement (PDS) before making a decision about a product.