Hi, I am 53 and would like to know what the difference between a pension fund and a superannuation fund?

Hi Gavin,

With superannuation, there can be 2 separate phases, accumulation phase (which would be what your referring to as a superannuation fund) and a pension phase. But, it is all superannuation monies.

When superannuation is in accumulation phase, you can make contributions to that (within the limits of the caps and providing you are eligible to contribute) and can make lump sum withdrawals once you've met a condition of release. Earnings within superannuation in accumulation phase is 15% and capital gains get a 33% discount (commonly referred to as being a tax rate of 10% on capital gains but in actual fact, the tax rate on capital gains is 15%, but only 2/3rds of the gain is assessed)

When superannuation is in pension phase, it must pay pension payments of at least the minimum pension amount as determined by your age and the balance as at 1 July (or at commencement if it started during the financial year), earnings within a pension are tax free (as long as it isn't a transition to retirement pension) and you can't add money to an existing pension, although if you are eligible to still make contributions to superannuation, you can do that and start a new pension and combine it together into a new pension.

I hope that makes sense and helps.

Cheers

Glenn

Hi Gavin,

Superannuation is the overarching system. Within the superannuation system you can have what's called an accumulation account - this is typically when you are working & saving money up via the superannuation system.

The other type of account is a pension account. This is were you have reached a particular age and you qualify to begin to draw down on your accumulated balance.

There are different rates of tax payable on accumulation Vs pension accounts.

Hope this helps.

James

so, we have a range of terms which can mean several different things:
pension fund
superannuation fund
accumulation fund
TTR fund (TTR means transition to retirement)
the list goes on.........

and many people including advisors and accountants use them interchangeably, and not always correctly.

so.....if you have questions about super......which means if you have a pulse and you are over the age of 25......then you MUST get advice from someone who actually knows what they are talking about.

some people will say "see a financial planner" they have the qualifications.....but I have seen some extremely poor advisors giving people very poor advice.

some people will say "see an accountant. They have the knowledge".......but I have seen some very poor excuses for bean counters out there too.....providing very poor advice as well.

so who do you talk to????? not your industry fund, thats for sure. They provide a low cost super service. I have never seen anyone get decent advice about retirement options from their industry fund. Sorry to tread on any toes there, but it is simply not the job of an industry fund to give "bespoke" advice......and hence they cannot give you advice specifically tailored to your needs.....

The perfect setup for most people is twofold:
1: an accountant who understands enough about super and financial planning to ensure they dont give you stupid advice that negatively impacts your super
2: a financial planner who understands enough about tax to ensure they dont give you stupid advice that negatively impacts your tax

If the two can work together then you have got yourself a very useful resource that will give you the best possible opportunity to build a nest egg and get the most out of your retirement. They dont necessarily have to come out of the same office, but sometimes they do. But they DO need to communicate with you and each other.

cheers

bc