Superannuation in Australia facts for kids
In Australia, superannuation, or just "super", is compulsory for all people who have worked and reside in Australia. The balance of a person's superannuation account, or for many people, accounts, is then used to provide an income stream when retiring. Federal law dictates minimum amounts that employers must contribute to the super accounts of their employees, on top of standard wages or salaries.
The Australian Government outlines a set percentage of employees income that should be paid into a super account. Since July 2002, this rate has increased from 9 per cent to 9.5 per cent in July 2020, and will stop increasing at 12 per cent in July 2027. Employees are also encouraged to supplement compulsory superannuation contributions with voluntary contributions, including diverting their wages or salary income into superannuation contributions under so-called salary sacrifice arrangements.
An avoidable issue with Australia’s superannuation system is employees failing to consolidate multiple accounts, thus being charged multiple account fees. Of Australia’s 15 million superannuation fund members, 40% have multiple accounts, which collectively costs them $2.6 billion in additional fees each year. The federal budget estimates put the number of unnecessary duplicate accounts at 10 million. Plans are in place to facilitate consolidation of these accounts. An individual can withdraw funds out of a superannuation fund when the person meets one of the conditions of release, such as retirement, terminal medical condition, or permanent incapacity, contained in Schedule 1 of the Superannuation Industry (Supervision) Regulations 1994. As of July 1, 2018, members have also been able to withdraw voluntary contributions made as part of the First Home Super Saver Scheme (FHSS). As of 30 June 2018[update], Australians have AU$2.7 trillion in superannuation assets, making Australia the 4th largest holder of pension fund assets in the world. As of 30 June 2019[update], the balance is AU$2.9 trillion.
