Superannuation is a key pillar of Australian life, built up over the years through compulsory salary deductions and designed to support you in retirement.

But how familiar are you with the rules of super? Do you know how much you’ll need for retirement? Should you be contributing more to your super? And how can you do this?

We look at ten key points about super and why it’s a great investment.

1. The smart way to save for retirement

The Australian population is ageing, with the proportion of people aged 65 and over projected to rise to 22% by 2049, compared to 13% today1. We’re also living longer, which means the Government age pension could come under pressure if people rely on it alone to fund their retirement. Super is a good way to save for retirement because investment earnings in the fund are generally taxed at a maximum rate of 15%, which could be a lot lower than the marginal tax rate of up to 46.5%2 you pay on earnings from other investments. The Government also offers tax concessions on your contributions.

2. Funding your future lifestyle

The amount of super you need depends on the standard of living you’re expecting in retirement. On top of your basic living expenses, you need to consider factors such as whether you want to travel and continue hobbies. MLC has an online super calculator mlc.com.au/SuperannuationCalculator, which can help you work out how much money you’ll need to cover your living expenses each year in retirement.

3. Why consolidate super?

Generally speaking, the more super funds you have the more fees and charges you could face, so it makes sense to roll your super into one fund. You can do this by contacting the fund you’d like to continue with and telling them you want to consolidate your super. Be aware there may be charges to do this, and you may lose insurance benefits attached to the funds you’re rolling over.

4. Use your super when you really need it

To access your super, you’ll need to meet a ‘condition of release’. One of these conditions is that you reach your ‘preservation age’ and permanently retire. You can work out your preservation age using the following table:

Date of birth	Preservation age
Before 1 July 1960	55
1 July 1960 – 30 June 1961	56
1 July 1961 – 30 June 1962	57
1 July 1962 – 30 June 1963	58
1 July 1963 – 30 June 1964	59
From 1 July 1964	60

For a full list of conditions of release and the criteria you need to fulfil, visitato.gov.au/super

5. Your employer can help build your super

If you make an arrangement with your employer, they can make extra contributions into your super fund from your pre-tax salary. This allows you to reduce your taxable income and the contributions are generally taxed at a maximum rate of 15%, not your marginal rate. Be aware there is a cap3 on the amount of salary sacrifice and certain other super contributions you can make each year (dependent on age) and if you exceed the cap you will pay a penalty tax.

6. Make your own contributions

You can make contributions from your after-tax salary or savings. These contributions are not taxed, as long as you don’t exceed a cap4. Also, if you earn up to $61,920 pa and meet certain other criteria, the Government may match your personal after-tax contributions up to certain amounts. Visit ato.gov.au/super for more information.

7. How do I find ‘lost’ super?

The Australian Taxation Office’s SuperSeeker service is free and allows you to search for all the super you’ve accumulated over the years. All you need is your tax file number.

8. The added benefits of super funds

Most super funds offer insurance, such as life and total and permanent disability cover. By taking these out in a super fund, you could benefit from a range of upfront tax concessions that could make the premiums more affordable than insuring outside super.

9. Boost your super as you approach retirement

A popular strategy is to make salary sacrifice contributions into your super fund and invest some of your existing super in a Transition to Retirement Pension (TRP). The upshot of this strategy is you’ll pay less tax and the income payments from the TRP can replace the money you invest in super. As a result, you can increase your retirement savings while maintaining your current lifestyle.

10. Leaving super to loved ones

Your super can be paid to certain dependants or your estate. Most super funds allow you to nominate who you would like to receive your benefit (including any insurance) in the event of your death. For more information and advice on super please contact us.

¹ Federal Treasurer, the Hon. Wayne Swan MP, at the launch of the Australian Institute for Population Ageing Research. 18 September 2009.

² Includes a Medicare levy of 1.5%.

³ The cap that applies to salary sacrifice and certain other concessional super contributions is $25,000 pa or, if you’re aged 50 or over, $50,000 pa until 30 June 2012 and $25,000 pa thereafter.

⁴ The cap that applies to personal after tax super contributions and certain other amounts is $150,000 pa. But if you’re under age 65, you can contribute up to $450,000 provided your total non-concessional contributions in this financial year and the following two financial years don’t exceed $450,000.