Benefits of superannuation

13 benefits of superannuation

Let's take a look at the top 13 benefits of superannuation.

1. Super will help fund your retirement

The main benefit of superannuation is that it will help fund your retirement when you're no longer working and earning an income.

According to the latest retirement standard, you'd need a super balance of $595,000 (or $690,000 for a couple) to live a comfortable retirement. Without compulsory superannuation to rely on, you'd need to try to save and invest enough yourself throughout your working life which would be very difficult to achieve for most people.

2. Super is paid by your employer, not by you

Although you pick your own super fund, you're not actually responsible for adding money to it (unless you're self employed). For most workers, your employer is legally required to pay you super on top of your annual earnings. This is great, as it means it's not coming out of your pocket and not something you need to manage yourself.

With your employer looking after this process, you may not even notice the money being sent to super but it'll be gradually growing in the background ready for you when you leave the workforce.

If you're self-employed, you'll be responsible for your own super. You're not legally required to pay yourself super, but it's a very good idea to do so.

3. Super provides a tax-free income stream

You'll pay tax on your super contributions when they're added to your fund throughout your working life. This will be at the reduced super tax rate of around 15%, which for most people is much lower than their income tax rate.

Once you retire and are ready to access your super, it's usually available as a tax-free income stream or lump sum. This is a great benefit of the super system and provides an incentive to add more money to super before you retire.

4. Super benefits from compound growth

Super benefits from compound growth, which means you earn investment returns on your investment returns (and repeat). When money is added by your employer, it's used within your super fund towards more investments in your name.

Those investments deliver investment returns (both capital growth and income like dividends), which are also reinvested to generate even more returns. This process is repeated over your working life (which could be 50+ years!) to help your balance grow.

5. Your super fund makes investment decisions, so you don't have to

Your super fund is in your name, but you don't need to stress about making any of the investment decisions. Your super fund employs experienced investment managers to continually monitor the markets and make investment decisions that will benefit your balance over the long term.

If you do want more control over how your super is invested you can design your own portfolio using your fund's single asset class investment options.

6. Super offers tax discounts while you're still working

As well as providing a tax-free income stream in retirement, super offers tax discounts while you're still working. You're able to make up to $27,500 worth of super contributions per year which are tax deductible to you. There are called concessional contributions, and you can make these yourself from your post-tax income or by setting up a salary sacrifice arrangement with your employer from your pre-tax income.

7. Super offers automatic, cheap insurance cover

Most super funds offer automatic insurance cover for death and total and permanent disability (TPD), and some also offer income protection. The benefit of opting into insurance cover within your super is that you don't need to do any health or medical checks for a basic level of cover.

It's also often cheaper than taking out an insurance policy outside of your super; however, it may provide less cover.

8. Super allows you to own a diversified investment portfolio

Your super fund has access to some asset classes that you wouldn't be able to access as a regular investor. Investing in a large range of different asset classes including shares, property, bonds and infrastructure would be difficult for many people if it weren't for super.

9. You can make extra super contributions if you want to

While you're legally entitled to receive super payments from your employer, you also have the freedom to add more money into your fund if you want to. Adding more money into your fund not only offers some great tax benefits, but the more you add to your fund while you're still working the bigger your balance will be at retirement.

As mentioned earlier, you can add $27,500 worth of concessional contributions to your fund each year. However, you're also able to add an additional $110,000 worth of non-concessional contributions per year too. You can't claim a tax deduction for these, but it's still a good opportunity to invest more for your retirement if you'd like to.

10. Super offers a tax discount on investment earnings

The investment earnings your fund makes are usually taxed at the superannuation rate of 15% within your fund. If you were to invest in the same thing outside of super, you'd need to pay tax on any investment earnings (such as dividends) at your typical income tax rate. This could be 32%, 37% or even as high as 45% if you're a high-income earner.

Expert insight

"Superannuation is simply a bucket for your investments funding your retirement. But unlike property or shares where you're taxed at your marginal tax rate, any growth in your super is only taxed at 15%. If the lowest marginal tax rate is 30%, then this means your superannuation is already enjoying a 15% headstart compared to any investments outside of super. 15% of performance boost? Yes please! "

Pascale Helyar-Moray OAM

Founder of Grow My Money and author of Rich Woman, Poor Woman.

11. You can add extra to your super while saving for a home

The super system allows you to take advantage of the tax discounts for contributions while you're saving for your first property. The First Home Super Saver Scheme allows you to contribute up to $50,000 to your super and get a tax discount on this money, then later withdraw any associated investment returns to use for a home deposit.

12. Your super comes with you from job to job

Thanks to the introduction of super stapling, your super fund will come with you as you change jobs throughout your life. This means you don't need to worry about extra paperwork and finding a new fund when you start a new job – your existing super fund will simply move with you. It also prevents people from having multiple super funds open in their name without realising it.

13. Your super fund can give you free advice

Your super fund may allow you to chat to someone about your super investment options, the insurance cover or tax implications of contributions if you want some advice. A lot of the large super funds offer this free advice to members as a benefit of being with the fund, which could save you hundreds of dollars in financial advice fees.

Finder survey: What is the main reason Australians of different ages chose their super fund?

What are the disadvantages of super?

There are some things to consider regarding your superannuation.

Some funds are worse than others

Super funds all charge different fees and achieve different returns. If you happen to get stuck with a poor-performing super fund early on in life, this could mean you retire with much less. The best thing you can do is compare funds and make sure you're not stuck with a poor-performing one. The sooner you do this the better.

Lack of investment control

While this is also seen as a benefit as it means less work for you, some people might not like the idea that their retirement savings are in someone else's hands. If you're wanting more control over how your super is invested, you can choose your own super investment option or even build your own portfolio using the single asset class options.

You can't access the money until you retire

Once the money has been added to your super, you can't get it back out until you retire. This includes the extra contributions you make yourself (unless you're using the First Home Super Saver Scheme). Super is designed to fund your retirement, so there are very few situations where you can access it early.

Before making any additional top-ups to your super, make sure you won't need that money in the short term for things like paying off debt or building an emergency savings fund.

How to get the most out of your super

Your super is designed to benefit from compound growth over many years and help fund your retirement later on. The fund you're with now will determine how much money you have later.

To make sure your retirement balance is as healthy as it can be, it's important to be in a top-performing super fund with low fees as early in your working life as possible. Once you've chosen a new fund, it's easy to switch funds in just a few steps.

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Name	Last 1 year performance (p.a.)	Last 3 year performance (p.a.)	Last 5 year performance (p.a.)	Last 10 year performance (p.a.)	Fees on $50k balance (p.a.)
Virgin Money Super Indexed Overseas Shares Indexed investmentHigher risk	Last 1 year performance (p.a.) +29.11%	Last 3 year performance (p.a.) +11.73%	Last 5 year performance (p.a.) +13.36%	Last 10 year performance (p.a.) N/A	Fees on $50k balance (p.a.) $385	Go to siteMore Info Compare
Australian Retirement Trust - International Shares Index (unhedged) Finder Award Industry fundIndexed investmentHigher risk	Last 1 year performance (p.a.) +26.07%	Last 3 year performance (p.a.) +10.34%	Last 5 year performance (p.a.) +12.28%	Last 10 year performance (p.a.) +11.92%	Fees on $50k balance (p.a.) $192	Go to siteMore Info Compare
Virgin Money Super - LifeStage Tracker Lifestage	Last 1 year performance (p.a.) +15.61%	Last 3 year performance (p.a.) +6.76%	Last 5 year performance (p.a.) +8.11%	Last 10 year performance (p.a.) N/A	Fees on $50k balance (p.a.) $363	Go to siteMore Info Compare
Vanguard MySuper - Lifecycle Age 47 and under Lifestage	Last 1 year performance (p.a.) +16.44%	Last 3 year performance (p.a.) N/A	Last 5 year performance (p.a.) N/A	Last 10 year performance (p.a.) N/A	Fees on $50k balance (p.a.) $280	Go to siteMore Info Compare
Hostplus Indexed Balanced Industry fund	Last 1 year performance (p.a.) +14.22%	Last 3 year performance (p.a.) +6.59%	Last 5 year performance (p.a.) +7.63%	Last 10 year performance (p.a.) +7.75%	Fees on $50k balance (p.a.) $135	Go to siteMore Info Compare
Vanguard Super SaveSmart - International Shares Higher risk	Last 1 year performance (p.a.) +28.23%	Last 3 year performance (p.a.) N/A	Last 5 year performance (p.a.) N/A	Last 10 year performance (p.a.) N/A	Fees on $50k balance (p.a.) $280	Go to siteMore Info Compare
Hostplus - International Shares - Indexed Industry fundHigher risk	Last 1 year performance (p.a.) +28.59%	Last 3 year performance (p.a.) +11.35%	Last 5 year performance (p.a.) +12.97%	Last 10 year performance (p.a.) N/A	Fees on $50k balance (p.a.) $155	Go to siteMore Info Compare
Aware Super - Balanced Socially Conscious Finder Award Industry fundEthical	Last 1 year performance (p.a.) +14.68%	Last 3 year performance (p.a.) +6.36%	Last 5 year performance (p.a.) +8.14%	Last 10 year performance (p.a.) +7.94%	Fees on $50k balance (p.a.) $322	Go to siteMore Info Compare
Superhero Super - International Shares Higher risk	Last 1 year performance (p.a.) +27.19%	Last 3 year performance (p.a.) +10.68%	Last 5 year performance (p.a.) +12.78%	Last 10 year performance (p.a.) +11.68%	Fees on $50k balance (p.a.) $382	Go to siteMore Info Compare
Australian Retirement Trust - Conservative Industry fund	Last 1 year performance (p.a.) +6.68%	Last 3 year performance (p.a.) +3.5%	Last 5 year performance (p.a.) +3.96%	Last 10 year performance (p.a.) +4.87%	Fees on $50k balance (p.a.) $457	Go to siteMore Info Compare
Hostplus Balanced Industry fund	Last 1 year performance (p.a.) +10.32%	Last 3 year performance (p.a.) +5.27%	Last 5 year performance (p.a.) +7.22%	Last 10 year performance (p.a.) +8.36%	Fees on $50k balance (p.a.) $625	Go to siteMore Info Compare
Australian Retirement Trust - Balanced Industry fund	Last 1 year performance (p.a.) +11.89%	Last 3 year performance (p.a.) +6.32%	Last 5 year performance (p.a.) +7.62%	Last 10 year performance (p.a.) +8.31%	Fees on $50k balance (p.a.) $477	Go to siteMore Info Compare
Aware Super Future Saver - MySuper Lifecycle Manage Age 56 Industry fundLifestage	Last 1 year performance (p.a.) +13.8%	Last 3 year performance (p.a.) +5.71%	Last 5 year performance (p.a.) +8.12%	Last 10 year performance (p.a.) +8.72%	Fees on $50k balance (p.a.) $452	Go to siteMore Info Compare
Vanguard Super SaveSmart - International Shares (Hedged) Higher risk	Last 1 year performance (p.a.) +18.92%	Last 3 year performance (p.a.) N/A	Last 5 year performance (p.a.) N/A	Last 10 year performance (p.a.) N/A	Fees on $50k balance (p.a.) $280	Go to siteMore Info Compare
Aware Super Future Saver - MySuper Lifecycle Manage Age 57 Industry fundLifestage	Last 1 year performance (p.a.) +13.44%	Last 3 year performance (p.a.) +5.58%	Last 5 year performance (p.a.) +7.84%	Last 10 year performance (p.a.) +8.45%	Fees on $50k balance (p.a.) $442	Go to siteMore Info Compare
Aware Super Future Saver - MySuper Lifecycle Manage Age 58 Industry fundLifestage	Last 1 year performance (p.a.) +13.08%	Last 3 year performance (p.a.) +5.45%	Last 5 year performance (p.a.) +7.56%	Last 10 year performance (p.a.) +8.19%	Fees on $50k balance (p.a.) $437	Go to siteMore Info Compare

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How we picked these

The information in this table is based on data provided by SuperRatings Pty Limited ABN 95 100 192 283, a Corporate Authorised Representative (CAR No.1309956) of Lonsec Research Pty Ltd ABN 11 151 658 561, Australian Financial Services Licence No. 421445. In limited instances, where data is not available from SuperRatings for a product, the data is provided directly by the superannuation fund.

*Past performance data and fee data is for the period ending December 2024

Frequently Asked Questions

• Is it better to have money in the bank or superannuation?

  This depends on your personal situation, financial goals and risk appetite. Superannuation generally offers better long-term growth due to compounding and tax benefits, while money in the bank offers liquidity and security. The best option depends on your financial goals and time frame.

• How much super do I need for $50,000 a year in retirement?

  To generate an income of $50,000 a year in retirement, you generally need a superannuation balance of around $1 million to last you roughly 20 years of retirement.

• How much super should I have at 40?

  This depends on your retirement goals. By age 40, you should aim to have superannuation savings of around $100,000 to $200,000 or more. The more you save at a younger age, the longer term you have ahead for your super balance to grow and the more funds you'll have in retirement.

• How does superannuation benefit the economy?

  Superannuation benefits the economy by providing a large pool of capital that can be invested in various sectors, driving economic growth. It also reduces the financial burden on the government by supporting retirees.

• Is it better to invest in property or superannuation?

  Both property and superannuation have their advantages. Property offers potential capital growth and rental income with negative gearing tax benefits, while superannuation provides tax benefits and long-term growth. The best option depends on your financial goals and risk tolerance.

Written by

Alison Banney

Editorial Manager, Money

Alison is an editor at Finder and a personal finance journalist with over 10 years of experience, having contributed to major financial institutions and publications such as Westpac, Money Magazine, and Yahoo Finance. She is frequently quoted in media outlets like SmartCompany and SBS, offering expert insights on superannuation and money management. Alison holds a Bachelor of Communications in Public Relations and Journalism from the University of Newcastle, and has earned three ASIC RG146 certifications in superannuation, securities and managed investments and general financial advice, ensuring her expertise is fully aligned with ASIC standards. See full bio

Alison's expertise

Alison has written 638 Finder guides across topics including:

• Superannuation
• Savings accounts, bank accounts and term deposits
• Budgeting and money-saving hacks
• Managing the cost of living