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Some basic knowledge of Australian pensions

 
[Welfare]     06 Apr 2018
A pension is a long-term savings and investment account in which savings you save for future retirement are stored at work. Throughout your career, your employer will have to pay a pension deposit for you on this pension account, (Super Guarantee). After many years, your pension will become a great fortune.

A pension is a long-term savings and investment account in which savings you save for future retirement are stored at work. Throughout your career, your employer will have to pay a pension deposit for you on this pension account, (Super Guarantee). After many years, your pension will become a great fortune.


The mode of operation of the pension system

When you enter the workplace, you will notice that a sum of money on the payroll is saved as a pension. Typically, your employer will have to deposit 9.5% of your salary in a designated pension fund account. The employer's deposit for you is called a "pension deposit" and will gradually rise to 12% by July 1, 2025.

These pension savings and the resulting investment gains will accumulate over your entire working life and, by the time you retire, you will theoretically have enough money to live a comfortable retirement life. If you want to have more money to enjoy your life after retirement, you may need to pay a little more in your personal name to your pension account.


insurance

Many pension funds can also include insurance, such as life insurance (after the death of the insured, Family members or designated beneficiaries will receive compensation) and full and permanent disability insurance (insurance coverage for persons permanently incapacitated for labour as a result of injury or illness). One of the benefits of buying insurance through your pension management company is that your premium (the amount you pay for it) is deducted from your pension account, not from your after-tax income.


invest

The pension fund invests your money, so that your pension account savings will generate income; Typically, pension managers have a variety of related investment funds to choose from, and you can choose one or more of your own investment funds to invest your pension savings. Work with your pension management company to see which investment funds are right for you.


tax revenue

For many, one of the advantages of saving money into a pension is that it pays a maximum tax rate of 15% on its investment income. This means that your money will grow faster than investing in other places or simply depositing banks and saving more for your retirement.

In addition, any taxable money deposited into a pension account, such as an employer's pension for you or your personal pension for tax relief, is taxed at a rate of only 15%, regardless of your actual marginal tax rate.


How to choose pension fund

On how to choose a pension fund, most of the time, you can designate your own pension fund, or let your employer choose for you. If you don't choose a pension fund of your own, your employer will pay for your pension in your MySuper account. My Super pension fund usually costs less, automatically invests in your pension, and puts some insurance on you.

In general, it would be wise to look at different pension funds before making a decision. See what benefits different pension funds can bring to you, such as insurance, investment options, fees and fees, and choose one that best suits you.

"whatever judgment you make, it's best to choose a pension fund instead of a default pension fund chosen by your employer. Because by the time of retirement, the amount of savings generated by default pension funds and self-chosen pension funds will really be very different. "


Goverment Supplementary Pension

For lower-income groups, the goverment has also extended a helping hand, subsidising pensions. If you deposit your after-tax income into your pension account in the form of a personal pension account, the goverment may put up to A $500 in pension benefits into your pension account.

If you earn less than $37000 a year, goverment will provide you with a low-income pension tax compensation that will effectively refund the tax deducted from your pension fund when your employer contributes to your pension.


There is only one time in my life. Can I take out my pension now?

No, it's almost impossible for you to withdraw your pension until you retire. Only when the economy is extremely difficult or permanently incapacitated will it be possible to withdraw the pension. Even so, few people use their pensions. It is also reasonable to do so, after all, the existence of pension is for retirement after life.

In most cases, people who have reached the age of 65 (even if they have not yet retired), or who have reached the legal minimum age for pensioners and have retired permanently, are free to take advantage of the pension. For those born after 1964, the legal minimum age for pensioners is 60.


Statement: this article is only for general reference, and does not take into account your specific financial objectives, financial situation and financial needs. Therefore, you should consider the applicability of this article before taking action in the light of your own financial objectives, financial situation and financial needs. If you have any questions, please seek professional advice.

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