Financial planning should be taken seriously because it is essential to one’s financial health. In this view, individuals should focus on understanding it and developing strategies that are critical to investing for future spending. In my opinion, it should be seen as a way of achieving financial security as well as an input to the general happiness and peace of mind. In fact, financial planning is critical, and its management is dependent on the approaches a person uses. However, guidance is essential to understand what one requires, and the time needed. Information regarding how to invest for future is also vital for the reason that with the right knowledge, tools, and timelines, the choice of strategy becomes easier. In this essay, I am going to provide an evaluation of the Australian superannuation system and give reasons it is a useful scheme for financial planning.
Superannuation refers to funds that are invested in the productive functioning life of a person with the objective of returning an income stream upon retirement. Notably, the Australian superannuation system has generated the fourth largest fund pools in international management. The system is based on three pillars, which include age pension, superannuation guarantee, and personal superannuation. After the introduction of Superannuation Guarantee Charge Act, all employees were required to contribute. Besides, the charges imposed on them could only be reduced if the employer contributed a particular amount of an individual’s ordinary time earnings. Notably, companies are expected to give at least 9.5% each quarter of employees’ average length income.
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"Speech: Financial Planning: Superannuation System in Australia".
The Australian superannuation scheme has three stages, which include contributions, accumulation, and benefits. Contributions entail cash that is paid into a pension for the members of staff. Employers can contribute on behalf of employees and staff can pay for themselves. Additionally, people under 65 years with or without employment, spouse, or the government are eligible for contributions. The second stage, which is accumulation, refers to the balance that is invested and taxed at a concessional rate of 15% on income as well as 10% capital that is long term funded. On the other hand, benefits are expected to meet a minimum of one condition of the release under supervision Act 1993. Pay is made in a lump sum, and earnings on pension assets are taxed at 0%.
Superannuation system is guided by several Acts, which form the basis on which it operates. For example, the Income Tax Assessment Act 1997 offers tax incentives to motivate people to save for retirements. The Superannuation Industry Act 1993 introduced significant control and security over savings. The Act restricted funds from being invested in certain areas and required trustees to make sure that funds are secure. The Corporation Act concentrates on firms that control superannuation funds. The Act is concerned with disclosure, product disclosure statement, licensing, among others. Apart from the Acts, there is a covenant that regulates superannuation. The agreement is based on dual care and honest. It stipulates that the scheme should keep the money separate, act in the best interest of the members, and promote access to information among the members.
Evidently, changes have been introduced to the superannuation scheme to ensure that many people are involved. Concerning contributions, the employment requirement has been lifted and any person under the 65 years is eligible to contribute. Low-income earners are allowed to be co-contributors. Besides, legislative risks, such as taxation on payouts and stronger super reforms have been introduced to facilitate the scheme.
Although many Australians are not aware of the funds that can be invested in superannuation scheme, it is vital to underscore that various finances can be invested in it. According to SIS Act, industry, public sector, standard employer-sponsored, retail, and small superannuation funds can be invested in the system. The scheme is also typified by investment standards, which have enormous benefits. Operational requirements in superannuation are the investment strategy, the sole-purpose test, and record keeping.
Apart from the rules discussed previously, superannuation has preservation regulations and taxation benefits. Three categories of preservation that may apply to a member’s benefits are preserved, restricted non-preserved and unrestricted non-reserved advantages. A person can enjoy the gains when there is a condition of release. A condition of release occurs when one retires, reaches the age of 65, or dies. Moreover, it can take place when one has a permanent incapacitation or has a severe financial hardship.
Superannuation is characterized by significant advantages to employees and states. First, employees are likely to get higher net returns. Funds obtained from the scheme can be utilized for lifecycle investments, improving the lives of members, and eventually resulting in the overall growth of Australian economy. I would also like to note that many funds in the system have promoted super asset allocation, which has led to redeveloping and reshaping of the economy through contribution to different sectors.
In conclusion, I would like to say that financial planning is not only beneficial to citizens, but also to a country’s economy. Evidently, superannuation system in Australia is one of the best schemes that one can invest in for future spending. The plan is regulated by various Acts and has a covenant. Its operations regarding the responsibility of employers and employees have been well outlined. Moreover, three core pillars guide its running. Although many governments across the globe do not enforce contributions to such systems, I would advocate that they should do it to ensure their citizens do not encounter financial hardship after retirement or during a financial crisis. In fact, such schemes are likely to boost the economy of countries if they are adopted. My analysis indicates that both individuals and states gain.
