It’s often said that a little knowledge is a dangerous thing, but when it comes to superannuation, you can never know too much.
Superannuation is often seen as complex, especially when terms, phases and acronyms that you’ve never heard before, or simply don’t understand are used. To encourage you to take a more active approach in managing and understanding your retirement savings, our A–Z of Super will help you decipher the code.
Accumulation fund – a superannuation fund that accepts both employer and personal contributions.
Adjusted taxable income – income test measure used by the ATO to determine your tax liability.
Age Pension – a social security benefit paid by the Federal Government via Centrelink.
Allocated pension – also known as an account-based pension. A retirement income product that allows you to make a lump sum investment, usually from superannuation, to provide a drawn-down annual pension of between four and 14 per cent, depending on your age.
Annuity – a periodic payment made to a person in return for a lump sum investment.
APRA – Australian Prudential Regulation Authority
ASFA – Association of Superannuation Funds of Australia
AFSL – Australian Financial Services Licence
ASIC – Australian Securities and Investment Commission
ASX – Australian Stock Exchange
Assessable income – income earned before allowable deductions.
Assets – possessions, savings or property.
Asset test – applied to Age Pension claims as a method of testing your eligibility.
ATO – Australian Tax Office
Binding death benefit nomination – a legally binding nomination made by a trustee or member of a superannuation fund as to who receives their benefit upon their death.
Centrelink – the agency of the Australian Government that manages social security payments and allowances.
Commutation – process of converting a pension into a lump sum.
Complying funds – superannuation funds that comply with operating standards and are therefore eligible to receive concessional taxation treatment.
Compound interest – interest that is accrued on an investment, which, in turn, is reinvested to earn more interest.
Concessional contribution – superannuation contributions you make to which the concessional tax rate (15 per cent) is applied.
Concessional contribution cap – the limit to the amount of concessional contributions that you can make.
Contribution tax – tax levied on contributions to superannuation funds.
Defined Benefit Fund – in contrast to an accumulation fund, a formula is used to calculate the retirement benefit based on average salary and year of membership in the fund, so your income is defined and not dependent upon market fluctuations.
Equity – value of an asset after any debt owed on it is deducted.
Equity release – accessing capital that has accrued on an asset, such as property, whereby you receive a lump sum or regular payment. You remain the legal owner and the debt is paid when the property is sold.
Financial advisor – a person authorised (by operating under an ASIC licence) to give financial advice.
Financial plan – a plan created, usually with the help of a financial adviser, to help you achieve your financial goals.
Franking credit – a tax credit that shareholders receive on share dividends on which an Australian company has already paid tax.
Gearing – investing borrowed money.
Income stream – an investment that provides a regular payment.
Income test – one of two tests that is applied to Age Pension claims as a method of assessing your eligibility.
Industry super fund – originally a fund open only to members who are employed in a specific industry. However, most funds now allow anyone to join. These funds are ‘not-for-profit’ so all profits are put back into the fund to benefit all members.
Non-concessional contribution – contributions to a super fund made by an individual where no concessional tax rate has been applied.
Offset – a tax deduction that reduces the amount of tax paid.
Preservation age – the age, determined by your year of birth, at which you can access funds from your superannuation.
Revisionary pension – a pension that is paid regularly, rather than as a lump sum, to an eligible dependant after the death of a fund member.
Salary sacrifice – pre-tax salary that is paid into a superannuation fund as additional contributions.
Self-Managed Super Fund (SMSF) – a fund that is managed by its members who are also trustees.
Superannuation Guarantee Contribution (SGC) – compulsory amount paid into a nominated or default super fund by an employer on behalf of employees.
Spouse contribution – superannuation contributions made on behalf of a spouse who earns below a certain amount.
Transition to Retirement (TTR) pension – a means to access superannuation benefits once preservation age has been reached, while still working and being able to salary sacrifice employment income as concessional contributions.
Work test – to be able to make superannuation contributions between the ages of 65 and 74, you must meet the requirements of a work test defined by the ATO.