Super is money put aside by your employer over your working life for you to live on when you retire from work.

While retirement may be a few years – or decades – away, the way super works means the earlier you start paying attention to it, the better off you’ll be when you retire.

A healthy super account could be the difference between living out your retirement dreams, or a modest retirement on the age pension.

The basics of super

What's the point of super?

The purpose of super is to provide Australians with an income in retirement to substitute or supplement the Age Pension.

The compulsory super system was launched in 1992 as one of the three key components of Australia’s retirement income system:

  • A means-tested age pension
  • Compulsory superannuation savings; and
  • Voluntary private savings, both inside and outside the super system

Rather than Australians relying solely on the age pension, the aim is to have the three pillars work together to help people live out a comfortable retirement.

How much does your employer have to contribute to your super?

The amount that employers must contribute to an employee’s super is dictated by the Superannuation Guarantee (SG), which is currently set at 10% of an employee’s ordinary time earnings.

The SG is scheduled to increase by 0.5% each subsequent financial year until it reaches 12% in July 2025.

However, various employers may be required to contribute a different amount under specific Awards or workplace agreements, or because of a type of super account that an employee may have.

For example, if you are a member of a defined benefit division of Qantas Super, the amount that your employer is required to contribute to your super account is calculated differently.

What are the different types of super accounts?

There are two main types of fund or account ‘designs’: accumulation and defined benefit. The way your super benefit is calculated depends on which type you have.

Defined benefit

Defined benefit funds are less common – most types of these funds are being phased out and are closed to new members. Defined benefit funds work by calculating a member’s benefit based on a formula. This formula usually includes factors such as the member’s salary and period of employment.

Some funds, called ‘hybrids’, are a combination of defined benefit and accumulation accounts. For example, some members in a defined benefit division of Qantas Super may have accumulation accounts linked to their defined benefit component.

Qantas Super Divisions 1, 2, 3, 4 and 15 are defined benefit funds.

Accumulation funds

Accumulation funds are the most common. They work a bit like a bank account: your balance is determined by the contributions made to it, the fees and costs deducted from it, and the investment returns received. Investment returns can be positive or negative.

Qantas Super Divisions 3A, 5, 6, 7, 10, and Gateway are accumulation funds.

How does super grow?

For the majority of Australians with accumulation funds, super grows through two main things: contributions and investment earnings.

Contributions include the Superannuation Guarantee contributions from your employer, plus any voluntary contributions you may make, and co-contributions you may be eligible for from the government. Any rollovers you make will also help your balance grow.

Investment earnings, meanwhile, are the returns that your money earns from being invested. Depending on the market’s performance, these earnings may be positive or negative.

One of the benefits of super is that your money earns compound interest, or interest on interest. For example, if you invest $1,000 and earn $100 in interest, you’ll then begin to earn interest on your new total of $1,100.

Any fees and charges are deducted from your account balance automatically, so you don’t have to worry about getting any bills.

Watch this short video to learn more about how super grows:

How is super invested?

With $2.7 trillion* in super, it’s now the second largest part of Australia’s financial system. So where does that money actually sit?

Well, it’s invested in a range of different assets by your super fund, on your behalf. The types of assets it’s invested in are similar to those you can invest in outside super, such as shares, property, and cash.

But while your fund invests your super for you, you can still play an active role in how your super grows through something called investment choice.

Investment choice means you can pick which investment option – or combination of options – you want us to invest your money in on your behalf. Each option is generally composed of a certain type of asset, or a particular mix of assets. Each option carries with it a different level of risk and potential for reward.

The types of assets your super is invested in depends on the option you choose. These assets can be broadly categorised as either growth or defensive assets.

Defensive assets

Defensive assets, such as cash and fixed interest, carry lower risk but offer lower returns. The trade-off is that these types of investments generally hold steady, providing a greater sense of security for investors who may be uncomfortable with risk, or less time left in the market.

Growth assets

Growth assets include property and shares. In general, these types of assets have the potential to generate higher returns over the long term – but they carry a higher degree of risk, because the value of your investment can fluctuate over the short term.

What are you investing?

You can choose which investment options apply to your:

  • Current account balance

You can specify how much of your current account balance to invest in each option by dollar amounts, or by whole percentages.

  • Future contributions

Your future contributions include contributions from your employer, and any roll-ins, regular or one-off contributions you may make. You can specify how much to invest in each option by whole percentages.

Watch this short video to learn more about how different investment options are designed:

*As of 30 March 2020, ASFA

Using your super

How can you access your super?

Superannuation law restricts your access to super until you satisfy what’s called a condition of release.

This could be when you:

Your preservation age depends on when you were born:

How much super do you need to retire?

The amount that you will need to retire all depends on your own personal needs and circumstances – in particular, the kind of lifestyle that you want to enjoy in retirement.

The Association of Superannuation Funds of Australia’s (ASFA) Retirement Standard estimates that, to live a comfortable lifestyle, a couple will require $640,000 in savings at retirement, while a single person will require $545,000.

ASFA defines a ‘comfortable’ retirement as one that “enables an older, healthy retiree to be involved in a broad range of leisure and recreational activities”.

A comfortable retirement will also enable this retiree to have a good standard of living by allowing them to buy things like good clothes, a reasonable car, private health insurance, and household goods.

A ‘modest’ retirement, meanwhile, which has a greater reliance on the Age Pension, will require super savings of $70,000 at retirement.

You can check whether your balance is on track to help you live out your dreams with the retirement outlook calculator on your account. You can adjust the types of contributions you make, and how much you contribute, to see the different effects on your balance at retirement.

You can access the calculator by logging in.

Insurance in super

Most super funds offer members insurance cover built into their super. As a result, more than 70 per cent of Australians that have life insurance hold it through their super account*.

One of the benefits of having insurance through your super is that your insurance is part of a policy that covers a large group of members – this means the cost is generally lower than if you took out the cover as an individual.

Your premiums are also automatically deducted from your super account, so you don’t have to worry about using cash to pay for cover or missing a bill.

As a member of Qantas Super, you may be eligible to receive three types of cover:

  • Income protection: can provide you with a monthly income if you become ill or injured and are temporarily unable to work. For some defined benefit members, this cover is known as disability cover or ‘total but temporary disablement’.
  • Total and permanent disablement (TPD) cover: can provide you with a lump sum payout to help out if you become totally and permanently disabled and can no longer work.
  • Death cover: can provide your dependants with a lump sum payout if you pass away. This is also known as life insurance or “life cover”. If you are diagnosed with a terminal condition, you may be able to receive an advance payment of your death benefit as a terminal illness benefit.

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If you want to learn more or need help with making a decision about your super, you can get simple advice over the phone or face to face. It’s included as a part of your membership so there’s no extra cost.