Guide To Investments And Super Funds In Australia

Super funds can be huge investments if individuals do proper research and keep up-to-date with changes. Seeking professional guidance is helpful but ensuring that they are registered is also crucial. Are you curious about super funds and the prospects they can bring along? Planning to have a chat with a financial advisor Perth? Read on to learn about the basics first.

What are superannuation funds?

A superannuation fund is a type of retirement benefit that an employee enjoys. An employer contributes 15 percent of the employee’s income to the fund. Australia mandates the need to hold super funds. Although it is a retirement fund, a person can also take out the balance when declared terminally ill or permanently incapacitated. An employee is not required to contribute to his super fund, but they may if they want. A functional super fund account has to be registered with the Australian Securities and Investments Commission.

What are the types of superannuation funds?

Superfunds can have a defined benefit plan or a defined contribution plan. A defined benefit fund is one in which the benefit is fixed depending on:

  • Employer and employee contribution
  • Average salary before retirement
  • Working years in a particular industry

Accumulation funds are not fixed and depend on the contributing amount and investment returns on the fund. Most types of super funds are accumulation funds. The superfunds are further classified into five categories:

Industry Funds – These funds were previously offered to only specific industry workers. Now, they are available to everyone. These funds are thus, also known as public offer funds. Industry funds transfer profits to the members. Industries themselves do not earn any profits from the same.

Corporate Funds – Company employers set up these funds for the working staff. These funds offer membership only for former or current employees.

Self-Managed Funds – Just like the name suggests, it is a fund that is managed by individual selves. Such a fund allows up to 4 members who are responsible for any decision–making.

Retail Funds – Investment companies or banks generally set up these funds. They provide for a range of investment options and insurance proposals. They may also enable super account viewing.

Public-Sector Funds – These funds are only available to government employees. The investment options in a public-sector fund are comparatively lower than a retail fund. Although, public-sector funds might facilitate low super fee and low-cost insurance.

What are the benefits of a self-managed super fund account?

SMSF allows for a wide range of investment options. SMSF holders can invest in both direct and indirect properties. Small businessmen can purchase commercial properties through SMSF.
It allows flexibility as members can make changes according to their requirements. These members are the trustees, and so they have the control of decision-making.

It leads to more responsibility on the part of the member. They will be aware and updated on changes.
SMSF is a cost-effective alternative to other superannuation funds The option of using it with three other family members allows for more investment opportunities on properties that an individual singlehandedly cannot invest on.

Is having a superfund insurance beneficial?

Let’s look at the main types of insurance covers that are available within a superfund:
Term Life/ Death Insurance – This cover provides for a certain amount of money to nominate family members or beneficiaries in the case of your untimely demise.

Total and Permanent Disability (TPD) – This cover pays you a benefit to cover living costs or debts if you are subjected to a permanent disability that keeps you from working ever again.
Income Security – This provides you with a certain amount if you are unable to work for a temporary period due to any injury or illness.

To avail benefits from an insurance cover, you need to have a proper estimate of the amount you require to cover costs or pay any debts. In case of doubts, consulting a professional may be recommended. Suppose you are a Perth resident seeking assistance regarding super funds; talking to a SMSF accountant Perth can be increasingly helpful.

What are the super fund investment options, and which is likely to suit me best?

Let’s dive into the three main super fund investment options to understand better what suits an individual best.

Growth – This includes 85% in property or shares and 15% in fixed interest. The other alternative is 100% in property or shares for enhanced growth. This option aims to achieve higher returns. This also means higher risks.

Balanced – This includes 70% in property or shares and 30% in fixed interest. The other alternative is 50% in property and shares for average growth. This option aims to achieve reasonable returns. This implies relatively minor losses.

Conservative – This includes 30% in property or shares and 70% in fixed interest. The other alternative is 50% in property and shares for average growth. This option aims to achieve lower risks. This also means low returns over a prolonged period.

Choosing the right option needs to take the following factor into account:

  • The individual’s age
  • The level of risk they are willing to take
  • The age at which they will have access to the fund

Individuals often have different approaches while looking at an investment plan. No one method is deemed to be correct. In case of persistent queries, consult a relevant agent to get detailed guidance and choose the best option.

Is working abroad going to affect my Superfund account?

Working abroad on a permanent Australian visa? There are no risks to your super fund account. The rules applicable are similar even when working abroad. You can keep on contributing and increase your balance.

Can I combine multiple super fund accounts?

It has been stated that combined super accounts incur lower fees when compared to multiple individual super accounts. It also helps to reduce paperwork and consequently reduce the time and effort involved. Managing one consolidated account is a lot easier. It is practical to combine funds and keep track due to busy schedules and work-life.

If you are in your early twenties, keeping updates and maintaining a superfund account can be highly beneficial. It is recommended to consult professionals like Palladium Financial Group for a better understanding and decision-making.

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