Superannuation is an ingrained and absolutely essential feature of working life in Australia. While other nations may refer to the concept of putting earnings away for retirement in different terms and have various different schemes in place, the idea of saving money for your future is one that is key to employment anywhere in the world.


Anyone and everyone working in Australia should be mindful of the need to contribute to their superannuation funds, even though it can certainly seem like a minefield, with many options and perhaps confusing jargon, to negotiate.


How it works


In theory, superannuation is a beautifully simple thing. You pay money into an account with a superannuation provider, which accrues interest over time. When you eventually retire, you are able to access this money as either a lump sum received or perhaps as regular payments.


Most Australians enjoy a situation where their employer automatically pays their superannuation contributions into the fund of the individual’s choice, as deducted from their salary. This is a simple, efficient and reliable way of paying superannuation.


However many Australians are self-employed, contractors, freelance or in other professions that demand setting up their own super fund. Here, you can choose a fund that suits your needs best, and top it up as and when with however much money they wish. This offers flexibility and control.


Whatever superannuation situation you are in, it is vital to remember that the money in that account cannot be accessed without meeting certain rules or criteria, and it is generally regarded as a good idea not to touch your super until you genuinely need it. It must also be remembered that rules and laws on super are subject to change at any time.


Why do we need superannuation?


Superannuation has become even more important in recent years, with the realisation that life expectancy among young people is longer than ever before. Indeed, those born in Australia today might expect to live to 100. With the average retirement age currently 65, that’s a lot of years to pay for.


Thankfully, an age pension provided by the state is likely to help us all out to a degree. But that may not sometimes be enough, for various reasons. Superannuation plugs a gap between that pension and any private savings we may have. Super allows us to enjoy retirement more and take away any worries about supporting ourselves or our families. Lots of us agree – there is well over a trillion dollars currently invested in superannuation in Australia.


Choosing superannuation funds


Selecting which superannuation company to go with is an important decision for everyone. What you require from your super differs from person to person. Returns on super can vary from account to account, this taking an informed decision based on as much information as possible is very important.


When you start a new job, you must provide your employer with a super fund into which they can pay your contributions – something they are legally required to do. This must be done within 28 days, if not, payments will be made to the fund set up as the employer’s default option.


Choosing a super fund can be a tricky business. Things to take into account include the fees and other costs involved, the range of investment options, eligibility rules, ease of access and importantly, the investment returns of previous years. MLC superannuation is a popular choice of provider due to their experience and expertise in the superannuation industry.


Voluntary contributions and government co-contributions


Your super can be boosted by making voluntary contributions alongside your employer’s contributions. This can be the odd lump sum or regular payments.


Government co-contributions is where the government will match your own payments up to a maximum figure of $1000 a year, providing you earn less than $61,920 per annum.



Mike, aka The Dividend Guy, authors The Dividend Guy Blog since 2010 and manages portfolios at Dividend Stocks Rock. He is a passionate investor.