So what exactly is Super?

Wednesday, March 31st 2004, 12:14PM

Government and Industry people like to talk about a ‘tripod’ of Superannuation.

The first leg of the tripod is the State Pension.

We all receive this pension at age 65, at least for now. But with an ageing population and the higher costs of maintaining it, the age of eligibility may soon rise, or the level of benefits may fall, despite the Government creating a pre-funding pool to sustain it.

And even at current levels, for most of us it won’t be enough. It’s designed to be a subsistence payment, not a means to sustain the lifestyle we’re used to.

That’s why it’s so important for everyone to take ownership of their future and plan for their retirement by starting to save for it. The longer people save for, the more they’ll have in retirement.

And that’s where business and personal super schemes, which form the other two legs of the tripod, come into play.

The Technical Bit

A registered superannuation scheme is so-called because it has been registered under the Superannuation Schemes Act 1989. The Act provides rules about how a scheme can be run.

Superannuation scheme earnings are taxed at a flat 33% tax rate. The taxation occurs within the scheme, so that means that when a retirement benefit is paid, there’s no further tax to pay.

Contributions are either paid from after tax income (taxed at a person’s marginal rate), or individuals can sacrifice part of their salary and have it paid into a workplace scheme. Salary sacrificed in this way is taxed at a maximum rate of 33%, which can be a significant saving if your marginal tax rate is 39%.

Previously, if a person’s marginal rate was less than 33%, the earnings within the fund may have been overtaxed, relative to their other income. However, recent changes to legislation mean that pre-tax contributions can now be taxed at that person’s marginal rate.

Workplace Super

For employees:

If an employer has a workplace super scheme it is usually in an employee’s best interests to JOIN IT!!! Chances are the employer will be putting in money on the employee’s behalf, either directly or by paying fees.

For employers:

For anyone running a business and thinking of offering their staff a super scheme, then GO FOR IT!!! Workplace super is an excellent way to encourage the savings habit – the money ‘sticks’ because it goes in direct without the staff member being tempted to spend it. Add in the kudos gained from being a good employer, and we think that most employers will be pleased at taking the super step.

Personal Super

If people can’t join a workplace super scheme, a personal super product is a great way to save for the future. It provides access to a wide range of investment funds managed by professionals and can help turn small regular savings into a tidy sum over time.

What Should People Look For in a Super Scheme?

- The flexibility to contribute what they want, when they want;
- The ability to talk to someone who knows the game, and can put their money where it will have the best chance of gaining the best returns;
- Investment choices to suit changing market climates; and
- A provider with financial strength, and a proven, long-term track record in the savings and investments marketplace.

In AXA Terms

For AXA, super isn’t just about long-term savings, it’s about lifestyle. It’s about having money when you want it, both now and later on. We want to help people have their cake and eat it too. Super is one of the ways we can help New Zealanders make it happen.

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