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Superannuation plans for employees

Superannuation plans for employees

Superannuation is one of the biggest costs associated with taking on staff – with the guaranteed contribution tipped to rise to 12 per cent by mid 2019. Some things to consider when choosing a fund:

 


Can your employees choose a fund?

Since 2005, most Australian employees have been free to choose the super fund that their employers’ contributions are paid into. However, employers must still provide employees with a default fund option. The Australian Taxation Office has more information about employer obligations.

New MySuper rules

When choosing a default fund, the first step should be to check that it is an approved MySuper product. Under the new rules, all default employee funds must have a set of key identifying features, including:

  • A single diversified investment strategy as standard
  • Minimal fees and restrictions on extra fees such as commissions
  • Life and disability insurance, with opt-out available.

Note that MySuper only applies to accumulation-style funds and not to defined-benefit super, where the final payout is based on factors such as salary and number of years worked for the company. Defined-benefit funds can offer excellent returns but many are now closed to new members.

Choosing a superannuation fund type

This can depend on the industry you are in. Most super funds fall into one of the following categories:

1. Industry funds: Many industry funds are open to the general public. Most offer medium-to-low fees and are ‘non profit’, in that all profits are re-invested in the fund for the benefit of members.

2. Corporate funds: These are typically run by the employer solely for the benefit of employees but the cost of running them can be prohibitive for smaller companies.

3. Retail funds: These are the high-profile, ‘for profit’ funds that are open to everyone. They can offer the widest range of investment options but the fees are often in the higher range.

4. Public sector funds: Public funds usually have low fees and good benefits but most are open only to government employees.

Please note that not all funds offer MySuper accounts.

Extra benefits

Please note that special benefits, designed to entice you into choosing a default fund provider, such as a free holiday, are prohibited by law.

However, it’s not illegal for providers to offer benefits to fund members, such as free financial advice. This may influence your decision but keep in mind that the MySuper rules were introduced to help eliminate those expensive add-ons that members are unlikely to use.

Choosing the right employee super fund probably isn’t as complicated as you think, but even small differences can add up over time, so it pays to do your homework.

Similar to other government regulations, super requirements are subject to change. Keep on top of the regulations to avoid surprises.

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