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What is Superannuation?

Document
Last amended 
8 January 2015
Purpose of superannuation

The primary purpose of a superannuation scheme is to provide its beneficiaries with financial resources and other benefits during their retirement. Other benefits in some schemes include death benefits for surviving dependants and disability benefits. The Australian superannuation system is intended to fund higher standards of retirement living than continuing reliance on income support pensions as the primary source of retirement income. Most Australians in the workforce are now covered by superannuation schemes with membership and contributions that are either:

  • compulsory under superannuation law or industrial awards,
  • voluntary, both for the employer and employee, or
  • a combination of both.
How superannuation operates

To provide eventual retirement benefits, both employer-sponsored and personal superannuation schemes:

The fund's trustee is responsible for implementing an appropriate investment strategy to protect the interests of beneficiaries while increasing the value of the fund's assets.

How superannuation benefits are paid

Depending on the type of fund, benefits paid on retirement or earlier departure from the fund consist of:

  • a lump sum,
  • a pension, or
  • a combination of both.

 

Income support pension is:

 

 

The superannuation law includes:

  • the Superannuation Industry (Supervision) Act 1993; and
  • the Superannuation Industry (Supervision) Regulations 1994.

An employee is someone who is:

  •       under a contract OF service to an employer, and
  •       a salary or wage earner, and
  •       subject to PAYE tax deductions.

The accumulation phase is the period during a person's working life in which superannuation contributions are paid into a superannuation fund, with the aim of maximising the sum available for retirement through investment and tax concessions.

The draw down phase is the period, after retirement from the workforce, when a person receives regular payments of superannuation benefits from their superannuation fund or an income stream product.