Australia has an aging population, who are healthier and living longer in retirement. The Federal government fearing the ‘superannuation savings gap’ (the difference between the amount needed to live comfortably in retirement and the actual amount saved for retirement) legislated for compulsory superannuation savings.

On 1 July 1992. the Superannuation Guarantee Assessment Act come into force. Under the Act, employers are required to pay a level of superannuation savings into a complying superannuation fund for each employee. This amount is known as the “Superannuation Guarantee Levy” (“SGL”). The level of compulsory savings is currently set at 9% of your earnings base.

Generally all employees (full time, part time or casual) are covered by the SGL, except where:

• paid less than $450 (before tax) within any calendar month
• under 18 years of age and work no more than 30 hours per week
• over 70 years of age
• paid to do work of a domestic or private nature for 30 hours or less a week
• a non-resident employee paid for work done outside Australia
• a certain type of foreign executive, or
• temporarily working in Australia for an overseas employer and are covered by a bilateral superannuation agreement.
  (SGL covers workers engaged under a contract that is wholly or principally for their labour. Even if the person quotes an Australian Business Number (ABN), the person may be an employee for superannuation guarantee purposes)

The Australian Taxation Office (ATO) is responsible for the SGL, and this is managed on a self-assessment basis. The ATO has compliance powers including the power to audit employers and view wage records and other documents. Currently the SGL payment must be made quarterly by 28th October, 28th January, 28th April and 28th July. The employer must assess the SGL amount and lodge an SGL return, together with a cheque for any shortfall by the due dates.

All employees should review the annual members statement received from their superannuation fund to ensure that the correct level of SGL is being placed in their chosen fund or savings account.

CHOICE OF FUNDS

The majority of Australians are now eligible for Super Choice. Super Choice is the Federal government initiative to give you more control, and more responsibility over how your superannuation savings are invested and managed. Under Super Choice you can choose the fund your 9% compulsory superannuation savings are invested into. If you do not choose, your superannuation contributions will be paid into the fund chosen by your employer. While you can choose a fund at anytime, your employer has to accept only one choice from you in a 12-month period. (although some employers may allow you to change funds more frequently)

Generally where you are eligible your employer will provide you with a standard choice form. This form sets out your options for selecting a superannuation fund and some guidance for comparing funds. The form has two parts; Part A which is completed by your employer, and Part B you complete where you choose to exercise your right to select the fund your superannuation savings are invested into.

• Your employer must have completed Part A of the form, which will tell you:
• the fund into which your superannuation guarantee contributions will be paid if you don’t choose a fund, and
  where your employer has previously changed funds - the fund into which your superannuation guarantee contributions were previously paid.

When you receive your Standard Choice form, you have 2 options:

• if you are satisfied with the superannuation fund selected by your employer, do nothing
• if you wish to select the fund where your superannuation savings are invested, complete part B of the form and return it to your employer.

Once you have nominated your fund, your employer should pay your 9% superannuation guarantee contributions which fall due after two months of receiving the nomination into your chosen fund.

COMPARING SUPERANNUATION FUNDS

The Australian Government site www.superchoice.gov.au recommends the following advice when comparing superannuation funds.

First of all, is there a strong reason why you might choose one particular superannuation fund over another. For example, check if your employer will pay more money into one fund than another. Or, you might be a member of a particularly generous superannuation fund that gives you benefits you can’t get anywhere else. If this is not the case and you are thinking about choosing your own fund, compare the following features of the funds you’re considering.

Insurance can cover you in case you die, become unable to work, or need money during an illness. If you are considering changing funds and want insurance, make sure you will be covered in the new fund.

Some funds may not offer insurance, or you may have to pass a medical examination or undergo a waiting period before they will cover you. There may also be restrictions for age, dangerous jobs, part-time or casual work, and maternity leave. Some funds make some insurance cover compulsory. Some allow you to opt out and not be charged, while others allow you to opt in.

Decide how much insurance you want and compare the costs. These can vary significantly between different superannuation funds.
Remember that your superannuation fund's insurance benefits may cost you less than insurance you could buy yourself.
 
Investment options. Some funds let you select where your superannuation will be invested. Some options offer higher returns, but with a higher risk that investments may go down as well as up. Other options offer greater security but with lower expected returns. Select the level of risk and return you are comfortable with.

Fund services include helplines or websites for fund members, regular member statements and many other features. Decide which services are important to you and check whether they’re offered at a reasonable price.

Fees and costs you must pay. Keep your fees and costs down, otherwise you may have a lot less money to retire on. For example, your final return could be reduced by up to 20% over 30 years if your total fees and costs are 2% rather than 1% (for example from $100,000 to $80,000).

When you compare fees, make sure you're comparing funds with similar benefits and investment strategies.

From 1 July 2005, funds must show all significant fees in a special table and give a worked example of the fees in dollars in their Product Disclosure Statement. You can also use the Australian Securities and Investments Commission's superannuation calculator to compare the effect of fees.

To compare funds, read the Product Disclosure Statement for each fund you are considering. Contact each fund and ask them to send you a copy.

Alternatively, you can also request information from your fund about its main features and investment performance.
You can also use the worksheet in the Australian Securities and Investments Commission’s booklet Super Choices when comparing funds.

Investment performance. Remember, no-one can reliably pick which fund will perform best. It's far more reliable to pick a fund with the right investment strategy and low fees, and take the ups and downs of investment performance in your stride.

If you are comparing performance, take a long-term view – no less than five years. Remember, there is no guarantee that a fund that has performed well in the past will continue to do so.

Also make sure you understand how a fund describes its performance, for example, is it after tax with all fees and costs taken into account?

Visit the Australian Securities and Investments Commission’s consumer website, FIDO for more information about judging investment performance”

For more information please refer to the Australian Government site www.superchoice.gov.au or call 13 10 20.

 
Please ensure you read fully the Product Disclosure Statement (PDS) of any pension, superannuation or investment product you are considering of investing in.

YourShare recommend anyone who has questions or is confused about superannuation, savings or investment to seek professional advice and contact a reputable fee for service advisor. If you would like to speak with an associated Fee-for-Service Advisor please click this link. Using a financial advisor is about paying a professional advisor to help you with your superannuation, investment and savings goals. Its not about seeing an advisor once, paying an upfront fee then also paying them for the next 10 years for no additional service. Its your money make it work for you, not someone else.

For more information on managed funds please also refer to Fido, the consumer website of the Australian Securities and Investment Commissions (ASIC), under Superannuation.

Disclaimer
The information in this document reflects YourShare Financial Services Pty Ltd ('YourShare') understanding of existing legislation, proposed legislation, rulings etc as at the date of issue. In some cases the information has been provided to us by third parties. While it is believed the information is accurate and reliable, this is not guaranteed in any way. The information is not, nor is it intended to be, comprehensive or a substitute for professional advice on specific circumstances. The information given in this document is of a general nature and has not taken into account the investment objectives, financial situation or particular needs of any particular person. Before making an investment decision a prospective investor needs to consider, with or without the assistance of a professional adviser whether the advice is appropriate in the light of their particular investment needs, objectives and financial circumstances.