Be MoneysmartSuperannuation - Student workbook (Module 3)

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Be Moneysmart Student Workbook (Module 3) Page 2 of 14

Table of contents

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Disclaimer....................................................................................................................................................................

Module 3: Superannuation.....................................................................................................................................

Activity 1: Saving for your retirement..........................................................................................................................

Activity 2: Comparing funds.........................................................................................................................................

Activity 3: Checking your employer contributions.......................................................................................................

Activity 4: Super co-contributions................................................................................................................................

Activity 5a: Find lost super...........................................................................................................................................

Activity 5b: Keep track of your super...........................................................................................................................

Activity 5c: Check your super statement...................................................................................................................

Activity 5d: Consolidating your super........................................................................................................................

Module completion declaration form...................................................................................................................

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Module 3: Superannuation

Module 3: SuperannuationTime: 1 hour online and 2 hours Student Workbook

Student resources required for this module:

Be Moneysmart (online resource) - Module 3 Moneysmart calculators:

o Employer contributions calculator Moneysmart content:

o Super contributions ATO website (ato.gov.au ) myGov website (my.gov.au) Copies of a superannuation fund policy and product disclosure statement (PDS), statement of employer

super contributions

TIP: Introduction to superannuation

So many Australians find out too late that they need more money for the retirement lifestyle they might want. By understanding superannuation you will have greater control over your finances. Superannuation or ‘super’ is a way to save for your retirement or when you are no longer working. The money comes from contributions made into your super fund by your employer and, ideally, is topped up by your own money. Start saving for your retirement early! The longer you have to save, the more chance your savings have to grow.

For most people super will be taxed at a lower rate than a similar investment outside of a superannuation account. If you put your own after-tax money into super, you could receive a government co-contribution, depending on how much money you earn. If you earn up to $37 000 you may also get a ‘low income super contribution’ of up to $500 from the government. You will get this payment whether or not you add extra money to your super.

You may be able to get death, disability or income protection insurance through your super at a cheaper price than if you bought it outside of super. You will need to give some thought to how you want to be living your life when you are older. Don’t be caught out like John, who wished he had thought a bit more about his future when he was young!

You will need to work out how much it will cost you to live that lifestyle. Then you need to work out how much you need to put into super now to have that amount later. You may want to talk to a qualified financial planner to assist you with planning for your future.

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Module 3: Superannuation

Activity 1: Saving for your retirement

Watch the videos at screens 2 and 3.

Your retirement income may be based on different sources of income including the age pension. Saving for the level of retirement income that meets your needs and allows you to achieve your goals is something that depends on your circumstances and that you need to plan ahead for.

In the box below, list some goals you might like to achieve when you retire. For example, John wants to go fishing more often when he is no longer working. Sally, on the other hand, wants to travel overseas when she retires. Therefore, Sally will need more income because it costs more money to travel than to go fishing.

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TIP: Comparing superannuation funds

Most people can choose which super fund they’d like their super contributions paid into. If you want to choose your super fund, tell your employer by filling in a standard choice form from the ATO or from your employer.

In some cases your employer will decide which fund your super is paid into. If you don’t (or can’t) choose your super fund, your employer will put the money into a ‘default’ super fund, a fund nominated under an industrial award or by your employer.

Fund types include industry funds and retail funds. Some people choose to manage their own super through a self-managed super fund. Super funds have different features and charge different amounts to manage your money.

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Module 3: Superannuation

Activity 2: Comparing funds

Watch the videos at screen 4.

Go to your fund’s MySuper dashboard and compare the information there to another fund’s MySuper option. Write comments in the table below.

Things to compare Your superannuation fund Other superannuation fund

Fees

What is the statement of fees for a $50 000 balance?

Investment risk

What level of risk is this MySuper option? How many years in a 20-year period can you expect a negative return?

Performance

What is the ‘return target’? Has this fund achieved the target over the long term? (See 10-year comparison graph.)

Insurance

Does this super fund offer income protection insurance and life insurance? List the details.

TIP: Employer superannuation contributions

For most employees, your employer must pay a percentage of your salary into your super fund account. This is called the super guarantee and it’s the law. The super guarantee is currently 9.5% (in 2015), gradually increasing to 12%.

You should receive the super guarantee if you are aged 18 or older and get paid $450 or more (before tax) per month. If you are under 18, you should get the super guarantee if you work more than 30 hours per week and earn over $450 per month.

It is important that you get paid what’s rightfully yours. The employer contributions are based on your ‘ordinary time earnings’. Ordinary time earnings are what employees earn from their ordinary hours of work including over-award payments, bonuses, commissions, allowances and certain paid leave.

Over the course of your working life, these contributions from your employer add up, or ‘accumulate’. Your super money is also invested by your super fund so it grows over time. When you retire, you will have money to live off.

If you are self-employed, you are not required to pay yourself superannuation. However, it is still very important to think about growing your retirement savings and super can be a great, tax-effective way to do this. For self-employed people, your super contributions may be tax deductible.

The rules regarding your super entitlements are governed by the Superannuation Industry (Supervision) Act 1993. The Fair Work and Equal Opportunity legislation in your state or territory governs other rules regarding employee entitlements.

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Module 3: Superannuation

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Module 3: Superannuation

Activity 3: Checking your employer contributions

Watch the videos at screen 4 again.

For this activity you will need to obtain a copy of your latest superannuation statement and product disclosure statement (PDS). Or alternatively, call your superannuation fund to obtain the necessary information to complete this activity.

Go to Moneysmart’s Employer contributions calculator to help you work out the following:

What percentage of your salary should your employer be paying into a super fund? Are you getting the right amount of super from your employer?

TIP: Extra super contributions

You can make extra contributions to your super fund account by:

putting some of your savings into your super account

asking your employer to deduct extra money from your pay (either before tax or after tax is taken out, depending on your income) and paying this into your super account – before-tax super contributions are called salary sacrificing to super.

Personal contributions to your superannuation fund

Salary sacrificing

Salary sacrificing is when you ask your employer to redirect a portion of your pay as a contribution to super. By ‘sacrificing’ some of your before-tax salary and putting it into your super fund, your contribution will get taxed at the special rate of 15%. If you want to sacrifice some of your salary to super, you should enter into a formal agreement with your employer. These are known as concessional contributions.

After-tax contributions

After-tax contributions are known as non-concessional contributions. This is the simplest way to add to your super fund as you simply deposit your personal money into your super account. Contributions from your after-tax income don’t get taxed when your fund receives them because you have already paid tax.

Growing your super

Putting money into your super account early and often will grow your super over the long term. Your balance grows from the investment returns your fund achieves. These returns compound over time. The longer you have to save through super, the more chance your savings have to grow. Even small extra contributions early in your working life will make a difference to your total amount of super at the end of your working life.

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Module 3: Superannuation

Activity 4: Super co-contributions

Watch the videos at screen 5.

If you put your own after-tax money into your super fund, you could receive a government co-contribution, depending on how much you earn. The amount of co-contribution reduces as your income increases. Go to Moneysmart’s Super contribution webpage for more information.

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TIP: Co-contribution to your superannuation fund

You don’t need to apply for government co-contributions – the ATO will work out your eligibility and it will be paid directly into your super account. Make sure your super fund has your tax file number (TFN) so you don’t miss out on the payment. If you are eligible, you will receive the payment whether or not you lodge a tax return. However, if you don’t lodge a tax return the process can take up to 14 months.

Co-contributions to your superannuation fund

Government

co-contributions

If you earn less than $49 488 per year (before tax) and make after-tax contributions, you are eligible to get matching contributions from the government.

If you earn less than $34 488 (before tax), the maximum co-contribution is $500 based on $0.50 from the government for every $1 you contribute. And just like that – you’ve made a 50% return on your money!

To receive the government co-contribution you will need to lodge a tax return for the year. The government will then work out how much you are entitled to. If you are eligible, the government will pay the co-contribution directly to your super fund.

Please note that the examples are current for the 2014–2015 financial year. Always check for the most up-to-date figures on the ATO website.

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Module 3: Superannuation

Activity 5a: Find lost super

Watch the videos at screen 6.

Have you kept track of all of your super? If you’ve ever changed your name, address, job, or done casual or part-time work, you may have lost track of some super. Go to myGov via the ATO website to see if you have any lost or unclaimed super: http://www.ato.gov.au/superonline

Record briefly below if you have any lost super.

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Activity 5b: Keep track of your super

Watch the videos at screen 6 again.

You can also register for myGov services (via the ATO website) to check your super accounts, find lost super, find ATO-held super, transfer your super to an alternative account, etc. This will help protect your personal information. Go to http://www.ato.gov.au/superonline

Record briefly below if you registered for myGov.

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Module 3: Superannuation

Activity 5c: Check your super statement

Watch the videos at screen 6 again.

Getting your annual super statement is a trigger to do a quick review of your super. Whether you receive your statement by post, online or in an email, don’t neglect or delete it.

For this activity you will need to obtain a copy of your latest super statement. Or alternatively, call your super fund to obtain the necessary information to complete this activity.

Take a copy of your latest super statement and check the following details. Note any changes you might wish to make below the table.

Balances Check the balance at the start and end of the year. If the balance looks wrong or you’re just not sure, contact your super fund straight away.

Employer’s payments Make sure you received your entire super from your employer.

Extra contributions Be sure any extra money you paid into your super account is included.

Fees Make sure you’re not overpaying because that can really eat away at your super over time. If you’re not happy with the fees you’re paying, consider changing super funds.

Insurance Check you are covered for the right amount of insurance through super. This may include death, disability, and income protection insurance.

Tax Ensure you are being taxed at the correct rate for contributions. For employer and salary-sacrificed contributions this is 15%.

Investments Make sure you’re keeping track of the investment options you chose and all returns are being credited to your account. Returns could be positive or negative.

TIP: Ask for an explanation

If you don’t understand the statement or think there is an error, contact your super fund. You have the right to a clear explanation.

Keep statements safe

Keep all your statements in a safe place so you can keep track of your accounts and know how to contact your fund.

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Module 3: Superannuation..........................................................................................................................................................................................

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Module 3: Superannuation

Activity 5d: Consolidating your super

Watch the videos at screen 6 again.

How many super statements did you receive this year? Do you find it hard to keep track of your super accounts? You’re not alone. Many people have this problem! Consider combining any unnecessary super accounts.

To consolidate your super, you can manage via myGov or alternatively, you can download the ATO’s Request to transfer whole balance of superannuation benefits between funds. This is also known as the ‘portability’ form.

Record briefly if you need to consolidate your super funds and how you will do this.

TIP: Benefits of combining accounts

To manage your super more easily and save costs, consider combining small accounts into a single fund. The benefits of putting several small super fund accounts into one account are to:

save costs by paying only one set of fees

reduce your paperwork

make it easier to keep track of your super.

Before you consolidate your super accounts, take a look at a copy of your super fund PDS and check:

if you have to pay any termination fees

if you will lose any insurance benefits

that the fund you are consolidating into has all the services you need

that you are choosing a fund with low fees and good returns.

Consolidating your small super fund accounts takes a little bit of effort in the short term but will reward you in the long term. Feel in control and watch your super grow!

Remember that the fund with the biggest balance may not be the best one for you. So do some research before combining accounts.

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Module completion declaration formFor students completing the Be Moneysmart unit as an elective unit within the Certificate III in Financial Services Training Package or other training qualifications, use this form to declare you have completed all activities in this Student Workbook. Once signed, arrange for this declaration to be submitted to their educator for co-signing.

Student declaration

I declare that completion of the activities in this Student Workbook is my own work.

Student name: .................................................................................................................................................................

Student signature:............................................................................................................................................................

Date:.................................................................................................................................................................................

Educator declaration

I confirm that I have observed the above student demonstrate competently, the skills associated with the elements, performance criteria, critical aspects for assessment, required skills and knowledge for this unit.

Educator name:................................................................................................................................................................

Educator signature:..........................................................................................................................................................

Date:.................................................................................................................................................................................

Comments from educator

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