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| A glossary of common superannuation terms
Index
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Administration fee
The fee charged by a scheme against a member's account to cover administration costs. |
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Annuity
Arrangement whereby income stream payments are made to a person at regular intervals in return for the investment of a lump sum. |
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Assets
Investments held by a scheme on behalf of its members. Among other things, these may include shares, property, cash or bonds. |
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Australian Prudential Regulation Authority (APRA)
The government agency responsible for the prudential regulation of banks, insurance companies and superannuation funds, credit unions, building societies and friendly societies. |
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Australian Securities and Investments Commission (ASIC)
The Australian Securities and Investments Commission enforces and regulates company and financial services laws to protect consumers, investors and creditors. |
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Award superannuation
Superannuation entitlements which are determined by a Federal or State industrial award. In some cases these entitlements may provide entitlements to employees which are additional to the minimum requirement of the Superannuation Guarantee. |
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Beneficiary
A person entitled to or in receipt of a benefit under a scheme, which is normally the member and his/her dependants. |
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Benefit
The amount of a member's entitlement in the scheme, or, in the event of the member's death, to which the other beneficiaries are entitled. Other than in cases of death or disablement, most benefits are only payable on termination, and may be subject to preservation. |
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Benefit payment fee
A fee charged against a member's account to cover costs of processing a benefit payment. |
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Complying scheme
A superannuation scheme that complies with the operational standards specified in the SIS (Superannuation Industry Supervision) Regulations and therefore qualifying for lower tax rates. |
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Contribution fee
A fee charged by some funds as a percentage of all contributions received. The Local Government Superannuation Scheme does not charge a contribution fee. |
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Crediting Rate
The rate of interest paid to members on their account balance, usually expressed as a percentage per annum. |
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Death Benefit
The amount payable to a member's beneficiaries &/or dependants in the event of the member's death. |
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Death Insurance (Death cover)
Insurance arrangement whereby the member's beneficiaries and/or dependants receive an insurance amount in the event of the member's death. It is common for the cost of cover to increase (or the cover itself to decrease) as a member's age increases, as a result of the increased risk of death as one ages. Member's insurance premiums are often deducted from the member's account balance. It is most important that members read the detail of their own scheme's insurance arrangements and decide what options, if any, they wish to exercise. |
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Dependant
The spouse, including a de facto spouse, child, or any other person who is dependent, either in whole or in part, on the member. |
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Earnings rate
The rate of return granted on the monies invested by the Scheme, usually expressed as a percentage per annum. |
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Insurance premiums
The sum of money paid to purchase death or disability insurance. The premium is normally deducted from the member's account, although in some cases, the employer makes payment direct for their employees' insurance premiums, and no charge is made against the member's account. |
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Investment Choice
Arrangement whereby members of a scheme are offered a choice of investment options within the scheme. The choices generally give members a range of options in terms of risk and expected return. In most cases, there is a 'default' option, which applies to those members who do not decide to make a choice, or who are not eligible to make a choice. |
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Investment Management Fee
The fees charged by an investment manager for their services. The fee is normally charged as a percentage of the funds invested, and may be performance-based. The fees are normally deducted from the scheme earnings before determination of the scheme's Crediting Rate. |
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Investment Manager
An organisation appointed by a scheme to manage the investment of part of the scheme assets. It is common for schemes to appoint a range of investment managers, who may have specialist expertise in particular areas of investment. |
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Lump Sum
A benefit payable in a single cash payment, rather than as a pension or annuity. |
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Master Fund or Trust
A fund which allows a large number of unconnected companies &/or individuals to operate through the same trust deed. Banks, life insurance companies and specialist superannuation administrators generally operate them. |
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Member Benefit Protection
If your account balance is less than $1,000, any management fees deducted from your account cannot exceed the earnings on your account balance in the financial year. This means that your account balance cannot reduce because of management fees (insurance and taxes excluded). Members are not protected if the Scheme's investment returns are less than administration costs. This means that your account balance cannot reduce because of management fees (insurance and taxes excluded). However, superannuation law does provide funds with a discretion, in times of poor or negative investment returns, to charge a protected member a nominal management fee of no more than their investment return plus $10.
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Member contributions
Contributions made by a member to his/her account. These are additional to any employer contributions. |
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Non-preserved amount
That part of a member's benefits which is not subject to preservation and is accessible by the member (subject to certain conditions). |
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Ordinary Time Earnings (OTE)
The earnings (before tax) on an employees ordinary hours of work, generally excluding overtime, which is used as the basis for calculating employer contributions for Superannuation Guarantee purposes. |
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Product Disclosure Statement (PDS)
An information booklet which members receive when they join the Scheme. This booklet sets out the key features of the Scheme. |
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Portability
The ability to take your super with you to another scheme when you change your job. |
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Preservation
The legal requirement that certain superannuation benefits must be retained in a super or rollover scheme until the member retires after reaching preservation age. Only in very limited circumstances, including death, total and permanent disablement and extreme financial hardship, can preserved amounts be released before the member reaches this age. |
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Preservation age
The age at which the member can have access to preserved benefits, provided the member has permanently retired from the workforce. The preservation age is gradually increasing from 55 years: |
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| Members Date of Birth |
Retirement Age |
| Before 1 July 1960 |
55 |
| 1 July 1960-30 June 1961 |
56 |
| 1 July 1961-30June 1962 |
57 |
| 1 July 1962-30 June 1963 |
58 |
| 1 July 1963-30 June 1964 |
59 |
| After 30 June 1964 |
60 |
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Preserved Amount
The part of a member's benefits which is subject to preservation. |
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Real Rate of Return
The amount by which the return of an investment exceeded the rate of inflation over a period. |
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Reasonable Benefit Limit (RBL)
Until 1 July 2007, the Government limited the amount of concessionally taxed superannuation an individual could accumulate. These limits were removed as part of the Government's Simple Super reforms. |
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Retirement Savings Account (RSA)
A form of superannuation account introduced by banks and life offices, designed for employees who only have very small superannuation contributions, or who work infrequently. RSA's are required to be capital guaranteed, and are therefore likely to provide much lower returns to members than other major funds. RSA's are not subject to the same reporting and accountability requirements as superannuation schemes. Few RSA's provide insurance cover. |
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Rollover
Generally means the transfer of a superannuation benefit between providers. |
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Salary Sacrifice
An agreed arrangement between an employer and employee, whereby the employee's gross salary is reduced by a certain amount, and the employer's contributions to the superannuation scheme is increased by the same amount. Note that the amount of the salary sacrifice must be in addition to the normal contributions required to be made by the employer. |
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Superannuation
A means of setting aside funds during working life for use in retirement. |
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Superannuation Complaints Tribunal (SCT)
A tribunal established by the Federal Government to deal with complaints relating to decisions made by super fund trustees. The Tribunal requires complaints to be fully addressed through the scheme's internal dispute resolution procedure before considering a complaint. |
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Superannuation Guarantee (SG)
The minimum amount which an employer is required to contribute to a complying super fund to meet their SG obligations. Employers are liable to a substantial financial penalty, called the Superannuation Guarantee Charge (SGC) if they fail to pay super for their employees. |
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Superannuation Industry (Supervision) Act (SIS Act) and Corporations Act
The legislation that governs the operation of all complying superannuation schemes. |
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Trust Deed
The legal document which sets out the rules governing the operation of a super scheme. Members are entitled to view a copy of the Trust Deed, although they may be charged a reasonable fee to be sent a copy. View Trust Deed online |
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Trustee(s)
The persons or corporate body who has legal responsibility for the running of the Scheme in accordance with the requirement of the Trust Deed. The trustee of most large schemes, is a company with an equal numbers of directors representing employees and employers. Irrespective of who appointed them, the trustees/directors owe a fiduciary duty to the beneficiaries. The Trustee of your Scheme is LGSS Pty Limited |
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Vesting
The inclusion of all or part of the employer contributions in the benefit payment to a member who leaves his or her employment before being eligible for a retirement benefit. "Full vesting" means that the member is entitled to all of the employer contributions, while "partial vesting" means that only a portion of the employer's contributions are applied to the benefit. A "vesting scale" sets out the rate at which, over the period of employment, the employer's contributions vest in the member. In general, vesting scales now apply to only a limited number of schemes, most of which have been in operation for many decades. |
