Understanding Superannuation Jargon
Here in Australia, I find superannuation arrangements as privileges. This is because employees, like me, are encouraged to save and keep funds for retirement. I find this very helpful and beneficial and so I gladly obliged and started saving for my SMSF fund.
But doing this was not so easy. The process might be simple but there are so many technical terms that I got confused and it even brought me into a different understanding of how it works, and how I can actually access my account in the future, or in case I need it for emergency purposes. So if you are new to this arrangement and you are getting a little confused, I will be very glad to help you in some ways.
SMSF use lots of technical jargon. Here, I will do my best to translate them into layman’s terms.
Contribution – This refers to the employee’s payment to his SMSF fund. Employees are encouraged to make continuous contributions into their accounts in order to increase their savings and expect a higher amount during their retirement. Not missing a contribution is important so employees can experience the full benefits once the fund is released.
Salary sacrifice – this is the part of the arrangement where employees practice to cut a percentage of their salaries and save it in their SMSF fund. By doing these, employees are able to save a percentage from their salaries and put it into their SMSF accounts before deducting their income taxes.
Member protection – in this part of the agreement, employees are asked to contribute only the amount that is equivalent to their account interests. This works conveniently for employees who have lower earning interests since they are also allowed to apply for SMSF without the paying for the charges required by a super fund account.
Voluntary contributions – aside from the cuts made by employees for their salaries, they are also encouraged to make voluntary contributions. This way, employees are able to add more funds to their SMSFs. This process is being encouraged so that we can enjoy more benefits than the usual by the time our funds are released.
Early access– SMSFs were intentionally developed for retirement purposes. His investments are protected and governed by the administration which provides strict rules and implementations. But in case the employee undergoes urgent circumstances such as financial hardship or emergencies, an early access can be granted and he can be given the right to use his funds.
Preserved benefit – there are choices, but this is what I prefer. This category states that I will be able to receive my benefit when I reach my retirement age of 55. I think this option is better because I will feel more stable and I will get all the financial support I need during my retirement, and I will be able to enjoy my life without worrying about my financial needs at all.
Restricted non-preserved benefits – this is one of SMSFs categories where employees will be given access to their accounts depending on the conditions provided by the government upon the date of its release.
Unrestricted non-preserved benefits – these benefits can be accessed by employees anytime upon their request. These benefits are easier to access unlike preserved benefits.
SMSFs are obligations from all employees here in Australia, which are very much helpful and beneficial especially during retirement. People can actually enjoy the benefits of SMSF just by following the minimum provisions set by the government.
About the Author: Grace is a free lance writer who is always on the look out to save money, and enjoys sharing her knowledge. She has Esuperfund.com to thank for helping her manage her super fund. When she isn’t writing, she enjoyes spending time with friends and family.