Are superannuation structures safe investments?
Investment advisers and financial planners often deal with the question –
Why would you invest in superannuation when it so often performs badly?
The key to the answer to the question is the fact that superannuation is not an investment product of itself. It is an investment structure – one that is very effective for wealth accumulation. One of the key advantages of superannuation as an investment structure is the longevity of the investment term. This allows for recovery from those inevitable periods of poor performance.
Superannuation structures, as a wealth management tool, tick a lot of boxes including the following –
- Contributions can be made tax effectively;
- Earnings on investments made by the superannuation fund are taxed concessionally;
- With ‘conditions of release’ constraints, the investment will be long-term for the majority of superannuation account holders;
- A wide range of account types,
- each with a broad range of acceptable investment asset classes available,
- ensuring that the right account is available for each ‘member’; and
- Seamless transition from accumulation phase to pension phase minimises tax consequences of the transition. Such a transition provides the only tax-free pension structure available.
What Superannuation structures (types of Super funds) are there?
The various superannuation structures under which an investment plan for retirement can accumulate, include:-
- Personal (public offer) superannuation account
- Employee (public offer/ industry) superannuation account
- Corporate superannuation account; and
- Self-managed superannuation account.
Personal superannuation accounts
Personal Super account are convenient for members who are –
- mobile in their careers;
- self-employed; or
- want ultimate flexibility, transparency and a tax effective insurance offering.
Employees under an employer group and who have left the originating employer are able to benefit from this account type. A personal superannuation account is –
- held in the name of an individual and
- with advice,
- invested strategically
- to meet the wealth accumulation goals and ambitions of the holder (and their family).
Employee super accounts
Advice on employee superannuation accounts is available through an employer and will normally relate to their (default) super fund. Employees should look for their employer’s default fund to provide that in the event they leave the employer’s service, their account can automatically convert to a personal superannuation account – and retain many of the existing benefits established under the employer group (particularly any insurance protection benefits).
Corporate superannuation accounts
Corporate super accounts have become less popular over time. Public offer funds and industry funds have become more cost effective for employers to manage their obligations under the superannuation guarantee legislation. More often than not now, employers opt to engage a public offer fund to operate an employer group account. To the extent that they are provided, members should study and understand the benefits offered in the scheme.
Self-managed superannuation fund accounts
Self-managed super funds are useful in a range of circumstances, predominately –
- by accumulators who have significant funds under superannuation,
- likely to be continuing to make significant contributions into the future, and
- who will take an active role in the ongoing management of the account and its investment portfolio.
These structures incur significant trustee responsibilities. They bear additional administrative costs. Proponents testify to rewards being worthwhile when all the circumstances are appropriate.
Are there different types of superannuation contributions?
Concessional or a Non-Concessional Contributions are able to be made to all superannuation accounts. There are rules to be observed and limits on how much benefit individuals can take in this regard.
Investment of funds contributed (and accumulated through earnings) can –
- take into account the financial needs, goals and objectives of the member, and
- the investor risk aversion profile,
accepting that ‘one size doesn’t fit all’ and the default investment determination may not be the most appropriate in individual circumstances.
Where should I go to for advice on superannuation matters?
Our experienced Financial Planners are available to consult in relation to your superannuation strategy. To optimise the value of your nest egg as you accumulate wealth for retirement, make an appointment with one of the Continuum Financial Planners Pty Ltd team –
- phone our office (on 07-34213456), or
- at your convenience, use the linked Make A Booking facility.
