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How does super work?

28 April 2021
Super is a financial term that you’ve probably heard before.

We see it on our payslips, receive emails from our super funds and have no doubt seen an ad or two urging you to ‘reclaim your lost super’.

But what exactly is super, and how does it actually work?

Superannuation is essentially an investment in your future.

How does it work?

Your employer contributes to your super account on your behalf, and thanks to the magical powers of compounding, your fund can grow to a sizable amount that you can access upon retirement.

Understanding your super and how it’s invested is important as it will make a big difference to your lifestyle once you are no longer receiving a regular income.

Let’s look at some key factors to consider when thinking about your super.

How your super grows

Super contributions are compulsory for all employers in Australia.

In fact, they must currently pay a minimum of 11% of your annual salary into your super.

You can also make voluntary contributions (which can come with some handy tax benefits).

The money in your super account is then invested on your behalf in a variety of ways depending on your super fund and the investment option you selected.

This can include a mixture of property, shares and cash, and can be growth orientated (aiming for higher returns), balanced or more conservative.

This means that the super contributions will grow annually, thanks to both compounding and investing, hopefully leaving you with a solid nest egg upon retirement.

Choosing your super fund

When we start a new job, many of us join their default super fund, which means we have often done little to no research on which fund we stick with and if they are the best choice for us.

So, the first step is to do a bit of research.

There are five main types of super funds: retail, industry, public, corporate and self-managed super funds (SMSF).

There’s no one size fits all approach to which type is best for you and your goals, but some things to consider include fees, performance, insurance and investment options.

Creating a pros and cons list can be a great starting point.

Consolidating your super

Unfortunately, there are quite a few of us with multiple super accounts floating around, which means paying double (or triple!) your annual fees.

Once you’ve selected the fund you would like to go with, the next step is closing the accounts you no longer wish to use, so that all your money is in one place.

You can find more info on the steps to follow here.

Choosing your investment option

The growth of your super is in part dependent on how it is invested by your super fund. And it’s important to understand that every fund is different.

Most super funds provide you with options to control how you would like your super invested, based upon your own personal goals and risk profile.

With our Bendigo SmartStart Super® for example, you can take control and pick your own investment mix from the investment options available, or you can sit back and use our default option Bendigo MySuper.

The Bendigo MySuper option is tailored to your age group, and changes with you from high growth investments when you’re younger, to more conservative investments as you get closer to retirement.

Make sure you check your super fund to find out how your money is being invested and if it aligns with your financial goals and values.

It all adds up

It’s easy to forget about super, especially when its locked away until retirement.

But super is one of the most important investments you’ll make towards your future, so it’s important to understand where your money is going, what fees you’re paying and how your super is growing.

And the sooner you get on top of this, the better.

Taking the time to do this today is something that your future self will most definitely thank you for.

Any advice provided in this article is of a general nature only and does not take into account your personal needs, objectives and financial circumstances. You should consider whether it is appropriate for your situation. Please read the applicable product disclosure statement(s) on our website before making an investment decision.

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Bendigo and Adelaide Bank Limited, ABN 11 068 049 178 AFSL / Australian Credit Licence 237879. Any advice provided on this website is of a general nature only and does not take into account your personal needs, objectives and financial circumstances. You should consider whether it is appropriate for your situation. Please read the applicable Disclosure Documents before acquiring any product described on this website. Please also review our Financial Services Guide (FSG) before accessing information on this website. Information on this page can change without notice to you.

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