What Is a Superannuation Trust?

A superannuation trust is a type of retirement fund. Employers deposit funds into designated superannuation accounts that invest in stocks, treasuries, or real estate on behalf of their employees. The amount paid is usually based on a percentage of an employee’s salary. Employees themselves may also be allowed to contribute to a superannuation trust.

Trusts are one of several types of superannuations. In a superannuation trust, the designated superannuation account receiving funds is the trustee. The managers of the funds in this account have a legal duty to use the money to benefit the employees or members. A contract between an individual and the manager of a superannuation fund is known as a trust deed.

One attractive aspect of the superannuation trust is the tax benefits. Funds contributed to a superannuation service may be taxed, but they can also count as contributor tax write-offs on an individual’s income taxes. The income and gains in value made over the years are taxed at lower rates than other investment vehicles. Furthermore, once the beneficiary reaches the age of retirement, any money taken out of the fund is untaxed.

Most countries utilize the superannuation trust as a national retirement fund. Consequently, employer contribution is compulsory if employees make above a certain amount each year. To ensure that employers are not overly burdened, there is typically a cap on how much a company must contribute on behalf of an employee. Governments employing a superannuation trust may also co-contribute funds on behalf of low-income earners or those who are self-employed.

Eligible funds must satisfy superannuation regulations established by government entities. Most funds are managed by financial professionals jointly hired by employers and workers' unions to ensure that the interests of both sides are represented. Both the employer and union appoint members to a board of trustees in order to make decisions about investments and fund benefits. A superannuation trust formed in this manner may be known as an “industry-fund” because only employees of a particular company or members of a certain worker’s guild are covered. Funds like this are usually for non-profit organizations and have lower administration fees.

Employers can satisfy the superannuation trust requirement in other ways as well. A company can set up a particular investment fund exclusively for its employees and administer it with its own personnel. Alternatively, companies can outsource the job to a superannuation service through plans known as “company schemes.” The only drawback to this form of superannuation trust is the fact that a company will pay higher administrative fees.