A handy guide to superannuation

Superannuation will help fund the life you’re longing for in retirement, so spending some time learning the ins and outs can make all the difference. Here, James Gyton, Executive Manager of Wealth Member Services at Suncorp Group, shares insights into how to get the most out of your super.

Any comments provided in this article is factual information only and it does not contain any advice. It is up to date as at 14 November 2019. You should consider your individual needs, objectives and financial situation and read the relevant product disclosure statement before making a decision about whether to acquire or vary an interest in a financial product and consult an appropriate adviser if you need tax, legal or financial advice. We do not accept legal responsibility for any loss incurred as a result of reliance upon any information – please make your own enquiries.

What’s your preservation age?

A person’s ‘preservation age’ is the minimum age where they’re able to withdraw their superannuation benefits under Australian legislation. It is calculated based on a person’s date of birth, so if you were born:

  • Before 1 July 1960, your preservation age is 55.
  • Between 1 July 1960 and 30 June 1961, your preservation age is 56.
  • Between 1 July 1961 and 30 June 1962, your preservation age is 57.
  • Between 1 July 1962 and 30 June 1963, your preservation age is 58.
  • Between 1 July 1963 and 30 June 1964, your preservation age is 59.
  • On or after 1 July 1964, your preservation age is 60.

There are other grounds for accessing your superannuation, including through permanent retirement and by reaching 65 years of age. Taxes may differ depending on your age and circumstances. As Gyton explains, “One thing people don’t appreciate is that even if they have met their preservation age and want to access their super but haven’t turned 60 yet, they will generally still have to pay tax on the amounts they receive.”

While those over the age of 60 won’t pay tax on the amount withdrawn, Gyton says a key benefit is that superannuation is concessionally taxed. “You get to keep more of the income you earn on an investment in super than what you potentially would on investments outside of super,” he explains. “The less tax you pay in the early years of your retirement, the longer your retirement savings are likely to last.”

Accessing your super

When receiving superannuation, a person generally has three options; to take it as a lump sum, through a super income stream, or a combination of both. If a person’s fund allows it, when taking a superannuation lump sum, they can opt for a single withdrawal or partial amounts. Cashing in super as a lump sum can generally have tax and Centrelink implications, and if a mistake is made, a person may not be able to re-deposit the money.

A super income stream involves regular pension payments funded from superannuation savings. This means a person will continue to receive a regular income, which many people find much easier than having to look after a large sum of money themselves.

There is a minimum amount that must be withdrawn each year from a super income stream, which starts from 4 per cent of a superannuation  balance per annum for someone under 65. Gyton says there’s also a cap on the value of superannuation that can be used to commence super income streams during a person’s lifetime, which is currently set at $1.6 million.

“While that might seem like a huge amount of money, superannuation balances are steadily growing and there’s an ability for people to contribute amounts from things like the sale proceeds of their small business or their family home into their super pre-retirement without falling foul of the normal caps on contributions,” he explains. “This limit is something that will progressively impact more retirees over time.”

Alternatively, a person can choose to cash in some of their super and convert the rest to a pension. This helps provide to say, give flexibility to fund a holiday or home renovation while still receiving a regular income.Pensions and other benefits

Stretching your super further

For most people superannuation will likely be a primary source of income once they stop working, so ensuring there is enough money to fund the future is vital. Gyton explains we have a ‘three pillars’ retirement system in Australia, which includes the Government Age Pension, superannuation savings, and voluntary savings. “Not everyone can depend on all three pillars in retirement, but it’s important to maximise the benefits that can be accessed from each one to help fund a person’s retirement lifestyle,” he says. “For those who like to do their own research, there’s a lot of information available online from the government agencies, especially the Department of Social Services and the Australian Taxation Office about eligibility for the Age Pension and the tax treatment of super and other investments.”

Gyton’s final word of advice is to enlist a qualified financial adviser who can help you set out your goals to achieve your ideal retirement. “Receiving quality financial advice in the lead up to retirement could result in some fairly significant long-term savings for a retiree, so it’s well worth considering,” he says.

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Australian Pensioners Insurance Agency Pty Limited ABN 14 099 650 996 (an authorised representative of AAI Limited ABN 48 005 297 807 (AAI)) and AAI are a part of the Suncorp Group. Apia and AAI do not issue any superannuation products.

The information is intended to be of general nature only. Subject to any rights you may have under any law, we do not accept any legal responsibility for any loss or damage, including loss of business or profits or any other indirect loss, incurred as a result of reliance upon the information. Please make your own enquiries.