Super Definitions

The “A” to “Z” of super

Allocated pension
A type of retirement income arrangement under which an individual invests a lump sum and then draws down a regular pension to a value that takes account of expected cash flow needs and life expectancy. Income ceases when all capital has been used up.
Accumulation fund
Also called a defined contribution fund. It is a fund in which the benefit a member receives is the total of their contributions plus or minus investment returns, less fees and tax.
Adjusted taxable income
Adjusted taxable income is a special term to test an individual’s eligibility, based on income, for certain Government benefits, such as Family Tax Benefit, and Commonwealth Seniors Health Card.
All Ordinaries Index
An index of companies listed on the Australian Stock Exchange (ASX), which is used as a benchmark to measure the performance of the Australian sharemarket. Other indices commonly used are the S&P/ASX 200 Index and the S&P/ASX 300 Index. See also S&P/ASX 200 Index and S&P/ ASX 300 Index.
Allocated pension
A type of retirement income arrangement under which an individual invests a lump sum and then draws down a regular pension to a value that takes account of expected cash flow needs and life expectancy. Income ceases when all capital has been used up. Also known as an account-based pension.
Annuity
An arrangement where payments are made to a person at regular intervals in return for the investment of a lump sum. See also: pension; allocated pension; deferred annuity.
Assets under management
Investment managers and superannuation funds both look after ‘assets under management’. It refers to the assets in all classes that are managed.
ATO
The Australian Taxation Office.
Auatralian Prudential Regulation Authority (APRA)
The Federal Government body responsible for the regulation and monitoring of the insurance and superannuation industries.
Australian Securities and Investments Commission (ASIC)
The Federal Government body responsible for administering and enforcing the Corporations Act and laws to protect consumers in the areas of superannuation, investments, insurance and banking.
Award
An agreement between employers and employees – usually in a particular industry – that has been ratified by Fair Work Australia. The award will set out salary levels and other terms and conditions of employment.
Award superannuation
Superannuation entitlements that are determined by a Federal or State industrial award. In some cases these entitlements may provide entitlements to employees, which are above the minimum Superannuation Guarantee requirement of 9% of salary.

Bear market
A market in which prices decline sharply in light of widespread pessimism about economic conditions. The opposite of a bull market, and generally shorter in duration.
Benchmark
The performance measure an investment portfolio compares itself to. This may be the returns of a market index or a more specific target.
Beneficiary
The person (or persons) a member has nominated to receive their superannuation benefits in the event of the member’s death. The person must be either a related dependant or a financial dependant or the member’s legal personal representative. It is important to note that My Super will consider a member’s preferred beneficiary but will take into account all relevant circumstances at the time. This means it may not pay a member’s benefit strictly in accordance with the information the member has provided. Also see binding death benefit nomination.
Binding death benefit nomination
A legally binding nomination that directs the Trustee how to pay a member’s benefit in the event if their death, as long as the nomination is valid and in force at the date of death.
Brokerage
A fee charged by a broker for the execution of a transaction, such as buying or selling shares; usually expressed as a percentage of the total value of the transaction.
Bull market
A market in which prices rise in light of widespread optimism about economic conditions.

Capital gains tax
A tax on the increase in the capital value of investments, payable when the capital gain is realised (that is, when the investment is sold).
Cash
Money in hand or in the bank, or an investment made in short-term money markets (for example, bank bills, treasury notes).
Co-contribution
If you earn less than $46,920 within the financial-year 2012/13 and you make contributions to your super from your after-tax pay, the Government will chip in up to $500 into your super account. This Government payment is called a co-contribution. Some eligibility rules apply.
Complying annuity
An annuity that meets certain requirements set by the government and qualifies the holder for certain tax concessions.
Complying fund
A regulated superannuation fund that complies with the operational standards specified in the SIS regulations. Unless a fund meets the SIS regulations, they will not be able to accept Superannuation Guarantee contributions.
Concessional contributions
Superannuation contributions for which a tax deduction can be claimed. Concessional contributions include employer Superannuation Guarantee (SG) contributions, additional employer contributions, salary sacrifice and contributions made by the self-employed for which they claim a tax deduction.
Consumer Price Index (CPI)
The Consumer Price Index (CPI) is an index used to measure the prices of a select group of goods and services that typify those bought by ordinary Australian households. This index is used to measure inflation.
Contribution
A contribution is money deposited into a superannuation account by either an employer or a member and does not refer to rollover or transfer amounts.
Contribution fee
A fee charged by some funds on contributions paid to a member’s account. My Super does not charge this fee.
Contribution tax
When being paid into a fund, some super contributions are taxed and others are not, depending largely on whether a tax deduction can be claimed.
Corporate actions
An action taken by a publicly listed company relating to its securities. Examples of corporate actions include mergers, rights issues, bonus issues, changes of name or code, or capital returns.
Corporate superannuation fund
A fund that is set up by a company to provide superannuation for its employees.

Death insurance (death cover)
An insurance arrangement whereby the member’s beneficiaries and/or dependants receive an insured amount in the event of the member’s death. Many funds offer a range of choices as to the level of cover, often expressed as the amount of cover per unit of insurance. It is common for the amount of cover per unit to decline as a member’s age increases, as a result of the increased risk of death as a person ages. Insurance premiums are usually deducted from the member’s account.
Deductible contributions
A deductible contribution is money paid to your super account where you or your employer are able to claim a tax deduction. There are limits to how much can be contributed in any one tax year (also known as concessional contributions).
Default fund
A superannuation fund into which contributions are to be paid by an employer, in the absence of a choice being made by the employee.
Dependant
Under the SIS Act, the term ‘dependant’ generally means one or more of the following people; The spouse of the member (including a de facto spouse); Any child of the member – including any step child, any child recognised by the member as an adopted child and any child of the member born after the member’s death; Any person who the Trustee considers to have been wholly or partially financially dependent on the member at the time of a member’s death; Any person who the Trustee considers to have been in an ‘interdependency relationship’ with the member at the time of the member’s death.
Diversification
Spreading of investments among different asset classes, securities and locations in order to control and minimise risk.
Dividend yield
The return on share investment, calculated by dividing the dividend rate (in cents per share) by the current share price and expressed as a percentage.

Eligible employee
An eligible employee is anyone who receives payment in the form of salary or wages in return for their labour or services.
Eligible rollover fund (ERF)
A holding account, like AUSfund, designed to receive the super benefits of lost members and those with low account balances that are no longer receiving contributions.
Eligible termination payment (ETP)
Any lump sum payment from a superannuation fund, an employer on termination of employment, or a rollover fund, such as an approved deposit fund (ADF) paid prior to 1/7/2007. If the recipient is under age 65, the ETP can be paid into a superannuation fund, an ADF or a deferred annuity, which may defer and/or minimise tax liability. The expression is no longer used for superannuation payments.
Employer contributions
Australia law requires employers to contribute a minimum level of money into an employee’s super account. The minimum level is 9% of an employee’s salary (ordinary time earnings). Higher percentages may be made if specified by an Employment Agreement or Award.
Exchange Traded Fund
An Exchange Traded Fund (ETF) is a managed fund that tracks a market or sector index and is traded on a securities exchange like shares.
Expected rate of return
The weighted average of all possible returns on an asset or portfolio. The weights represent the probabilities that the outcomes will occur.

Federal awards
Federal awards set out minimum wages and conditions of employment for specified employees and cover the key terms and conditions of employment established by Fair Work Australia.
Financial hardship
If you are experiencing financial hardship and you have been in receipt of a Commonwealth Income Support Payment for a minimum of a continuous period of 26 weeks (six months) you can request an early release of up to $10,000 of your super. Further eligibility criteria apply.
Franked dividends
Franked dividends are dividends made to shareholders on which the company has already paid tax.
Franking credit
Tax credits that are passed on to shareholders who have received franked dividends in relation to their shareholdings. Also called an imputation credit.
Fringe benefits tax (FBT)
Fringe benefits tax (FBT) is a tax payable by employers who provide fringe benefits to their employees or to associates of their employees.

Gross domestic product (GDP)
A measurement (in dollars) of the goods produced and services provided within an economy over a 12-month period. It excludes income earned outside the country.
Growth
Refers to the returns from investments that exceed inflation.
Growth assets
A general term for assets such as shares and property that have the potential to provide higher long-term returns than conservative assets.

Imputation credit
Tax credits that are passed on to shareholders who have received franked dividends in relation to their shareholdings. Also called a franking credit.
Income assets
Assets that generate a large part of their returns from regular income and have limited potential for capital gains (for example, fixed interest and cash).
Income Protection insurance
Insurance cover where you may be eligible to receive a regular income if you become temporarily disabled and are not able to work for a time through injury or illness.
Index
An index measures the changes in value of a market or sectors of a market. For example, the ASX/S&P Accumulation Index measures the change in the overall value of shares listed on the Australian Stock Exchange. Every country’s stock exchange has indicies that measure the price of listed companies.
Index fund
An index fund aims to closely follow the investment performance of a selected market index.
Industrial shares
Often referred to as ‘industrials’, they are shares of companies that produce or sell goods or services, as distinct from resource or mining companies. Industrials make up about two-thirds of the Australian share market.
Investment management fee
The fee covering costs associated with the investment of members’ assets, which includes investment managers’ fees, consultants’ fees, custodian fees and My Super’s internal overheads such as investment staff costs. The fee is charged as a percentage of the funds invested, and is deducted from investment returns before crediting rates are credited to members’ accounts.

Lump sum
A benefit payable as a single cash payment or as several part payments rather than gradually drawing-down as a pension or annuity.

Managed fund
A fund that pools the money invested by many investors to buy a portfolio of assets.
Management expense ratio (MER)
The expenses of an investment option in a superannuation fund (for example, management, investment, trusteeship) as a proportion of the investment option’s net asset value.
Margin lending
A program through lending institutions that allows you to borrow money for the purposes of investing it. The amount of credit loaned is based on the amount of assets owned by the borrower, which are used as security on the loan.
Marginal tax rate
The rate of tax a person will pay on their income. Marginal tax rates vary according to income levels.

Non-preserved amount
Unrestricted non-preserved amounts can be withdrawn at any time and are not subject to preservation rules. Restricted non-preserved amounts become unrestricted non-preserved amounts on cessation of employment.

Ordinary time earnings (OTE)
The before-tax earnings based on an employee’s ordinary hours of work, generally excluding overtime, it is used as the basis for calculating employer contributions for Superannuation Guarantee purposes.

Participating employer
An employer who has registered with My Super to make superannuation contributions on behalf of their employees.
Passive style management
An investment management style where the manager seeks to achieve performance equal to the market or index returns. No judgements are made about future market movements, unlike active investment management.
Pay as you go (PAYG)
A taxation system for wage and salary earners under which income-tax is deducted in instalments from periodic payments such as salary, wages or pensions.
Payroll tax
Tax an employer withholds based on the wage or salary of the employee.
Pension
A regular periodic payment, either by the Government (social security) or as a superannuation benefit.
Personal contributions
Contributions made by you to your super account from your after-tax take-home pay.
Personal superannuation
If you are self-employed or have a rollover amount to invest, you can join My Super’s Personal Plan. It is open to almost anyone who doesn’t have a contributing employer.
Portability
Portability rules allow you to transfer your super from one fund to another.
Post-30 June 1983 component
The portion of your benefit that relates to employment service after 30 June 1983 and forms part of the taxable component if you take a superannuation benefit before age 60.
Pre-1 July 1983 component of a superannuation benefit
The portion of your benefit that relates to employment service before July 1983. This portion is tax-free.
Pre-disability income
The monthly value of income received by an insured member from all their regular occupations averaged over the 12-months immediately prior to becoming disabled.
Preservation
The legal requirement that certain superannuation benefits must be held in a superannuation or rollover fund until the member retires after reaching their preservation age. Only in very limited circumstances, including total and permanent disablement and severe financial hardship, can preserved amounts be released before the member reaches this age. All superannuation contributions made after 30 June 1999, including personal and investment earnings are considered preserved.
Preservation age
The minimum age at which you can access your super, provided you have permanently retired from the workforce. The preservation age is gradually increasing from 55 years. For those born before 1 July 1960, the preservation age is 55, increasing on a sliding scale to a maximum of 60 for those born after 30 June 1964.
Preserved benefits
All contributions made on your behalf into your super account, on or after 1 July 1999, are called preserved benefits. Generally, you can’t access this money from your super fund until you retire permanently from the workforce on or after preservation age, which is 55 for those born before 1 July 1960.
Product Disclosure Statement
An information booklet that you receive when you join a fund, which sets out the key features of that fund.
Public offer fund
A super fund that anyone can join.

Regulated superannuation fund
A superannuation fund that falls under the regulation of the SIS legislation. A fund becomes a regulated superannuation fund when it elects to be regulated with the My Prudential Regulation Authority. The fund must have a Trustee which is either a constitutional corporation, or if the Trustees are individuals, the sole or primary purpose of the fund is the provision of age pensions to its members.
Restricted non-preserved benefits
If you had an arrangement with an employer to contribute after-tax super for you before 1 July 1999, you may have benefits which are classified as non-preserved.
Retirement savings account (RSA)
A type of super account, generally offered by banks, that is designed for people who only have very small super contributions or who work infrequently. RSAs are required to be capital guaranteed, and are therefore likely to provide much lower returns to members than superannuation funds. RSAs are not subject to the same reporting and accountability requirements as superannuation funds, and are not required to provide members with details of their costs. Few RSAs provide insurance cover.
Rollover
The transfer of a super fund benefit to another super fund.

Standard & Poor’s ASX 300 Index (S&P/ASX 300 Index)
The S&P/ASX 300 Index measures movement of the 300 largest stocks on the Australian share market. This lets you get a broad idea of how the market is performing as a whole.
Salary
Salary or wages is generally any periodical payment made to a person in return for work or services.
Salary sacrifice
Within super, salary sacrifice is an arrangement between you and your employer where you choose to give up part of your before-tax salary and add it directly into your super account.
Self-managed super fund (SMSF)
A private super fund you can manage yourself. SMSFs are regulated by the Australian Taxation Office and can have one to four members. All members must be trustees to ensure they are fully involved in the decision-making of the fund.
Shares
Parts of companies which may be owned by investors (known as shareholders), giving them certain rights such as the right to participate in profits through dividends and voting rights.
SIS legislation
See Superannuation Industry (Supervision) Act 1993.
Social security assessment tests
Tests used by Centrelink to check eligibility for the age pension.
Standard Choice Form
The form issued by the ATO that you need to complete and give to your employer in order to choose the superannuation fund that you want your employer to pays your superannuation guarantee payments into.
Superannuation Complaints Tribunal (SCT)
A tribunal established by the Federal Government to deal with complaints about decisions of superannuation fund trustees. The SCT requires complaints to be fully addressed through a fund’s internal dispute resolution procedure before considering a complaint.
Superannuation Concessional Rate
A Federal Government tax (15%) that is applied to before-tax superannuation contributions.
Superannuation fund
A fund regulated under legislation for the investment of retirement savings.
Superannuation Guarantee (SG)
Employer contributions are usually called Superannuation Guarantee (SG) contributions. Currently the minimum level of SG contributions is the equivalent of 9% of ordinary time earnings. If you are aged 18 years or over but under 70 years and earn more than $450 gross per month, your employer must pay SG contributions into your superannuation fund. This money is not taken out of your wage or salary; it is paid in addition to your wage or salary. An annual contribution limit applies.
Superannuation Guarantee Charge
A penalty payable by an employer if the minimum SG contribution for any employee is not paid on time.
Superannuation Surcharge
The superannuation surcharge has been abolished which means that no future assessments for this tax will be entered by the Australian Tax Office. However, some members may still have a surcharge liability in respect to contributions made for the financial years up to and including the 2004/2005 year of income.
Switching fee
A fee that a fund may charge when you change investment options.

Tax File Number (TFN)
A unique number issued to individuals and organisations by the Australian Taxation Office to increase the efficiency in administering tax and other Commonwealth Government systems such as income support payments.
Total and permanent disablement (TPD)
The definition of TPD may vary slightly, but generally it requires that, for payment of an insurance benefit, the trustee of a fund must be satisfied that the member is unlikely to be able to work in any occupation to which they may be suited by reason of their training, education or experience. It is a frequent misunderstanding of members that they would be covered if they are unable to return to the position they held before they became disabled, but the test is normally much stricter than this. Some funds do provide different forms of disablement insurance cover, such as temporary disablement cover.
Total Disablement
When referring to My Super insurance, total disablement means: an insured member is totally disabled if, because of sickness or injury, he or she is: unable to perform at least one income producing duty of his or her own occupation; under the regular care of, and following the advice of, a medical practitioner; and not working in any occupation, whether or not for reward.
Transition to retirement
The period in which a person prepares to leave the workforce (full-time) and move into retirement.
Trust deed
A legal document that sets out the rules governing the operation of a superannuation fund. Members are entitled to view a copy of their fund’s trust deed, although they may be charged a fee to be sent a copy.
Trustee/s
The persons or corporate body that has legal responsibility for the running of a fund in accordance with the requirements laid out in the trust deed. The trustee has a duty to act in good faith and in the best interests of members, and is governed by the Australian Securities & Investments Commission (ASIC) and Australian Prudential Regulation Authority (APRA).

Unfranked dividends
Dividends paid by companies that are (a) not subject to Australian tax; or (b) paid by Australian companies, but before the introduction of dividend imputation (see above) in 1986. Recipients of unfranked dividends are subject to tax at their normal marginal rate.
Unrestricted non-preserved benefits
Any unrestricted non-preserved amounts – usually after tax contributions made before 1 July 1999 – can be withdrawn at anytime.

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 member’s 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. Almost all superannuation funds now provide for full vesting for all their members.
Volatility
The degree of fluctuations in an investment, for example share prices, exchange rates or interest rates. Volatility is one measure of risk.
Voluntary contributions (known as Non-concessional contributions from 1 July 2007)
Personal contributions made by a member to his or her account. These are additional to any employer contributions. An annual contributions limit applies. See ‘Employee contributions’ for more details.
Voluntary contributions (known as Non-concessional contributions from 1 July 2007)
Personal contributions made by a member to his or her account. These are additional to any employer contributions. An annual contributions limit applies. See ‘Employee contributions’ for more details.

Waiting period
When referring to My Super insurance, waiting period means: the period of days you are totally disabled and that must elapse before your Income Protection benefit becomes payable. The waiting period commences on the day a medical practitioner examines you.
Withholding tax
The tax payable on payments, such as dividends, interest and debt repayments, sent to foreign entities.

Yield
The return of an investment, expressed as a percentage. Can also refer to the profit that an investment is likely to return.

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