A bird's eye view of super

Let's start with the most basic question. What is super?

Basically, super is the money your employer(s) contribute for you and the money you save during your working life for retirement. As it is likely to be your major source of retirement income, it’s an investment in you and your family's future.

Super is a tax effective way to invest in your future, because of the many tax benefits.

Why do I need to invest in super?

Many Australians will not have enough super to support the lifestyle they want to lead in retirement. The first AMP Superannuation Adequacy Index, Australia’s largest ever statistical analysis of Australia’s retirement readiness, found that more than 3.5 million (or 33 per cent) of workers are falling behind where they need to be in preparation for retirement. The Index recommends that retirees will need 65% of their pre-retirement salary per annum to maintain an adequate living standard in retirement.

If you’re one of these workers, there’s still time to boost your super.

What’s the Superannuation Guarantee?

By law, employers must contribute a minimum of 9% of your salary to your super. This is called the Superannuation Guarantee (SG).

If you receive only the SG over your lifetime, it’s likely that you won’t have enough to retire on. At 9% over a 40-year period, you will have yearly retirement income of about 53% of your pre-retirement income – well short of the 65% target for an adequate retirement. Unfortunately, most people will not have the benefit of 40 years of SG contributions, with interruptions while you start a family, breaks when switching between jobs and so on. So it’s important to consider making voluntary contributions to take advantage of the opportunities offered by the super system.

Another reality is that the Australian population is aging. Are you wondering why this makes investing in super important? Look at the chart and statistics below and keep in mind that the Government uses some of the income tax collected from the working population to fund the age pension.

By 2047, Australia's population will change considerably:

• The total population will increase by 38 per cent
• The proportion of people aged 65 and over will nearly double to 25 per cent of the population
• The number of people of working age (15-64) to support every person aged 65 and over will decrease from 5 people in 2007 to only 2.4 people in 2047.

Source: Treasury projections, Intergenerational Report 2007.

All indications point to fewer people in the workforce to support the age pension. Over time, this may make a difference to the age pension payments.

Given these statistics, do you know if you are contributing enough to your super today? If you're not sure, you can use the super simulator to see where you stand.

How does my super fund work?

Most simply, your super works in the following way:

1. Money enters your super account – from you, your employer, your spouse and the government co-contribution
2. This money is invested – your AMP super account gives you flexibility and choice in the way your money is invested
3. Fees, charges and taxes are deducted from your account – outgoing costs and administrative expenses
4. As you near retirement you can explore options to boost your super such as the transition to retirement strategy.