What Is The Australian Superannuation System?
Many countries around the world have retirement saving schemes for its people that are regulated by government authorities, get government incentives and taxation benefits to save for retirement life. In Australia this system is called superannuation.
The Australian superannuation system is a tax effective means of putting aside money during your working life for use in retirement.
A superannuation fund is a retirement saving fund to which a person, an employer, sometimes the government contributes during the person’s working life and it provides benefits to employees after retirement.
A superannuation fund is a vehicle that holds investments in it. It’s not an investment asset in itself. In this structure assets are held for its members for retirement.
Contributions are made in the superannuation by individuals and their employers. Then these contributions are invested by the superfund. Assets are accumulated in this structure from which an individual can expect to withdraw funds when they retire. The sole purpose of this vehicle is to provide retirement benefits to its members.
The Australian Superannuation system first started around 1850. At this time some organizations started paying private pensions to its employees and others have to rely on personal savings to fund their retirement.
For those who have no personal savings, they had to pass strict tests for age pension. In the beginning there was not much change in the way superannuation operated.
Despite considerable tax incentives provided by the government there were still concerns that some individuals did not receive superannuation at all.
A series of government inquiries into these issues in the 1960s, 1970s and 1980s set the scene for superannuation in Australia to change.
Traditionally, many Australians have depended on the age pension alone to pay for their living costs in retirement life. The Government retirement incomes policy objectives are as below:
- to encourage people who are able to save for retirement life to do so, particularly through superannuation system
- to ensure that an adequate public safety net is provided in the form of an age pension for individuals who are unable to support themselves in their retirement life and without enough savings for their retirement
- to ensure that the system is financially sustainable and in fact delivers an increase in national savings
The Government believes that these objectives can be met with the following three features of its retirement income system:
- voluntary superannuation and other personal savings
- compulsory superannuation savings through superannuation Guarantee contributions (SGC) by employer during working life
- a means of age pension and associated social security arrangements