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A superannuation fund is an investment meant for retirement savings. It is subject to a special tax structure in which an investor is penalized for withdrawals which are not properly timed or within the guidelines of the fund. There are also limitations on the amount of money that can earn tax benefits while invested in a superannuation fund.
The capital for a superannuation fund is typically deducted from an employee’s pay over the course of several years. It is often a monthly deductible. The term superannuation can describe the funds as they are collected or the pension when it is eventually distributed.
Funds invested in a superannuation fund are either non-concessional or concessional contributions. Non-concessional funds do not receive special tax consideration. These funds are typically personal investments. Concessional contributions get special consideration, such as a tax break. This is common for investors who own their own businesses or who work for companies which invest on their behalf.
Concessional superannuation fund contributions are typically tax-deductible up to a certain amount. Any funds that are contributed after the cap is reached will be taxed more heavily. Non-concessional contributions have a larger cap. The investment restrictions on a superannuation fund depend upon the nature of the contribution and the age of the investor.
Workers who are over the retirement age tend to have more restrictions. This includes both the cap for making contributions and eligibility for investing funds at all. Unemployed workers can usually make contributions when they are under retirement age. Once they pass that age, if they are unemployed, investors must usually take a worker test in order to be able to continue to add to the fund.
There are several different kinds of superannuation fund. The self-managed superannuation funds (SMSFs) are typically used by investors who have sufficient experience so that they can maximize their earnings. A common fund type is managed by employers on behalf of their employees. Some industries create and manage larger funds by pooling resources with other companies in the field. Other kinds of superannuation funds include those run by governments for their employees and master trusts, which are typically run by financial institutions.
While there are many factors to consider when selecting a superannuation fund, in general the most successful funds are the largest. These funds can often be cost effective because so many of the expenses associated with their management can be spread out among their members. This can reduce management fees and increase the return on investment.