SMSF savings account lending glossary of terms
Please note that these are a general explanation of the meaning of terms used in relation to savings accounts. Your bank or financial institution may use different terms, and you should read your product disclosure statement (PDS) carefully to understand everything that may apply to your account. You cannot rely on these terms in relation to any savings account you may open.
Account-keeping fees: An ongoing fee charged to cover or partially cover the bank’s internal costs of creating and maintaining the account.
Annual equivalent rate (AER): A rate that can be compared between lenders, which shows what the interest rate would be if interest was paid and compounded once each year. Any advertisement for a savings product that quotes an interest rate must also quote the AER so that you can compare what return you could expect over time.
Beneficiary: A person who will receive benefits from the SMSF paid to them upon their retirement, and who has contributions made on their behalf.
Bonus savings account: Accounts that give bonus interest whenever the accountholder makes no withdrawals and deposits a certain amount of money into the account (usually around $50 or $100).
Cash management account: A savings account for high balances (usually $10,000 – $20,000) with a higher interest rate and the flexibility of a transaction account.
Conditions of release: These are restrictions placed on superannuation funds for how and when preserved benefits can be paid. A condition of release must be met before a benefit is paid. The following conditions of release have ‘nil’ cashing restrictions. These include: retirement, reaching age 65, reaching preservation age and permanently retired, death, permanent Incapacity or termination of employment and the benefit is less than $200.
Diversification: The concept of investing the SMSF money into multiple different asset classes so as to minimise risk – to prevent “putting all your eggs in one basket”. Should one asset (e.g. property) suffer a downturn, other asset classes (e.g. stocks, bonds) may be less affected or unaffected, which helps to buffer the SMSF against some level of investment risk.
Introductory rate: An introductory bonus offer where a variable interest rate applies to the account for a set time period. At the end of the bonus period, rates revert to the base rates.
Minimum drawdown rate: Also known simply as the minimum withdrawal rate, this is the minimum amount of money you must withdraw from your SMSF each year. The amount is calculated based on your age and remaining account-based pension balance.
Promotional rate: An interest rate which is only offered during a specified promotional period. When the promotional period ends, the interest rate will generally revert to the base rate. Similar to an introductory rate.
Reversionary beneficiary: The person who will receive the benefit of the SMSF if the original member dies.
Trust Deed: The legal document which describes the establishment and operations of an SMSF, including trustees, membership rules, investment strategy, and contribution rules.
Trustee: A person who has been appointed under the Trust Deed to be responsible for managing the investments and legal compliance requirements of the SMSF. There can be multiple trustees of a super fund. A trustee may be a corporate trustee, whereby a company is appointed as a trustee of a fund; in such a case, all directors of the company must be members of the fund.
Yield: The rate of return earned on an investment.
