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:
- receive contributions during the accumulation phase,
- manage the invested contributions, and
- distribute benefits to beneficiaries during the draw down phase.
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.