More About Superannuations by Ardi.Tilompo


									                          More About Superannuations

Superannuation is a form of self managed super fund and is a very smart way to invest
money and to provide for older age. The idea behind a superannuation is to invest a pot of
money in order to gain interest, normally with the intention of saving for retirement.
Anyone can submit to a superannuation be they employers, employees or self employed,
and here they will submit the money in a series of payments over an agreed timescale in
much the same way that you might submit money to a pension scheme in monthly or
annual payments.

The superannuation then works by holding that money in trust for the members of the
group. It will then invest that money in order to increase the assets and thereby be able to
provide for the members should they decide to withdraw their share - normally in the
case of retirement or injury or sometimes financial struggles.

Superannuations are classed as a form of self managed super funds. This means that they
are taxed at a lower rate than other forms of investment, but in order to be classed as self
managed super funds they must meet a number of criteria. For instance a self managed
super fund will have less than five members, each trustee of the fund will be a fund
member (and vice versa), the members of the fund must not work together unless related,
the trustees must not be remunerated for being trustees.

As the phrase 'self managed' might suggest, in a self managed super fund it is the job of
the trustees to manage their own investments and to decide where they want their money
to be spent. This is very different from how a bank works when you invest money there
and it has a lot of useful advantages.

For instance, in the case of a bank, the bank is at the end of the day a business that is
trying to make money. This then means that they will invest your money, and that they
will then give you a percentage of the interest they make. However that interest you
receive is always going to be less than the amount of money they made from investing it,
as that's how they pay their salaries. On the other hand, if you are part of a self managed
super fund, then your group will keep all the interest bar expenses meaning that it will
grow quicker assuming you make the right decisions and earn you more profit.

Because you get to choose the investments this also means that you can direct your self
managed super funds as you see fit and this way ensure that you support causes you agree
with and that you think will be successful.

Of course you can do this with your own money without any need for the superannuation.
However the downside of this is that with less capital to begin with you are able to make
smaller investments which will understandably have lower returns. By using
superannuation you are pooling together to maximize your resources.

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