Superannuation - Glossary of Terms

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Want to know your defined benefit plan from your accumulation fund, or your industry super from your retail fund? Or maybe you just want to know what a concessional contribution is. Don’t worry, we’ve got you covered with a comprehensive superannuation glossary of terms.

Important Notes

These are a general explanation of the meaning of terms used in relation to (product name).

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Policy wording may use different terms and you should read the terms and conditions of the relevant policy to understand the inclusions and exclusions of that policy. You cannot rely on these terms to the part of any policy you may purchase.

Refer to the product disclosure statement and Canstar’s FSCG.

Account-based income stream/account-based pension: A pension paid (generally on retirement) from superannuation benefits standing to the credit of your account. For most people aged 60 and over, these pension payments have been tax-free since July 2007. Previously, they were known as allocated pensions.

Annuity: An investment, purchased with a lump sum that guarantees to pay a set income for either an agreed number of years, or for life. Generally, your money is locked away for a fixed period or for life, though some annuities allow early withdrawals or for a ‘residual capital value’. The income payments may be indexed each year, often in line with inflation. Some annuities allow for reversionary beneficiaries (see definition below).

Australian 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.

Balanced fund – An investment portfolio that spreads its holdings over a range of high-growth and lower-growth asset classes. An average balanced fund is often used as a benchmark for funds to compare their investment performance.

Bear market – A market in which prices decline sharply in light of widespread pessimism about economic conditions. The opposite of a ‘bull market’.

Benchmark – Usually represents the minimum performance objective for an investment portfolio.

Bull market – A market in which prices rise in light of widespread optimism about economic conditions.

Concessional contributions – Superannuation contributions made from before-tax income for which a tax deduction can be claimed. They are also referred to as deductible contributions. 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.

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

Contribution cap – This is the limit on the amount of contributions that can be made for an individual. Contributions in excess of the cap will be subject to excess contributions tax. Concessional and non-concessional contributions have different cap amounts.

Direct share investment available – whether or not you can invest in securities as an individual with the fund, rather than as part of an aggregate group.

Dividend – The amount a company pays out to its shareholders from its after-tax earnings. For individual shareholders, the payout is in proportion to the number of shares held. When company profits are down, the company may decide to pay a reduced dividend, or no dividend at all.

Excess concessional contributions tax: A tax of 31.5% on your super contributions over the concessional contributions cap.

Fund-of-funds – A fund-of-funds is a single fund comprising a variety of different investment funds all wrapped up into one fund.

Growth investing – Investing for capital gain through company earnings. See also ‘Capital gain’

Growth phase: A superannuation interest is said to be in the growth phase if the member has not satisfied a relevant condition of release (see definition above) or the member has met a relevant condition of release but no benefit has been paid in respect of the superannuation interest. A superannuation interest will still be in growth phase where a member receives a benefit (other than a pension or annuity) as a result of satisfying a relevant condition of release, but is still entitled to receive further benefits from the fund.

Income protection insurance – insurance that pays benefits to you if you are unable to work due to illness or accident.

Insurance cost – costs for insurance in the event of death or TPD (total and permanent disability).

Investment fee – how much you must pay your investment manager, or the MER %. This typically depends on the investment option you choose.

Lump sum – A benefit payable as a single cash payment or as several part payments rather than as a pension or annuity.

Management fee – how much it costs to pay the fund for managing your super balance, this is usually tiered by balance level.

Membership fee – how much it costs to join the super fund

MER % – the management expense ratio, or what proportion of your investments you must pay your investment manager. For example: In an equity fund where the historical gross return might be 10%, a 1% expense ratio will consume approximately 10% of the investor’s return. In a bond fund where the historical gross return might be 8%, a 1% expense ratio will consume approximately 12.5% of the investor’s return. In a money market fund where the historical gross return might be 5%, a 1% expense ratio will consume approximately 20% of the investor’s historical total return.

Nester –consumers accumulating wealth and building for the future. They’re investing in ways outside their super: a first home, cash, etc. They don’t contribute much to their super and seek long term growth with low fees.

Non-concessional contributions – These are contributions made from a person’s after-tax income. The terms ‘non-concessional contributions’, ‘post-tax contributions’ and ‘after-tax contributions’ are often used interchangeably

Number of investment funds – the total number of funds the super institution has to offer – across all subcategories and strategies.

Number of pre-mix strategies – the available number of different investment strategies, ranging from “conservative growth” to “balanced growth” to “aggressive growth.” More funds mean more strategy options.

Outperformance – Obtaining a higher investment return than a benchmark or other measure against which that return is compared.

PDS – Product disclosure statement

Performance fee – how much you have to pay your investment manager for exceeding benchmarked performance.

Portfolio – An investor’s range of investment holdings. Usually it refers to its composition, i.e. the mix of different asset classes or, if in a single asset class like shares, the mix of different sectors and shares.

Pre-retiree – those approaching retirement with a large super balance and who are looking for a more conservative approach toward retirement investment.

Preservation age – The minimum age at which members can access their superannuation benefits, provided you have permanently retired from the workforce.

Salary sacrifice – An agreed arrangement between an employer and an employee whereby the employee agrees to sacrifice a part of their gross salary in exchange for a benefit, such as extra employer contributions to superannuation. An annual contribution limit applies.

Starter – consumers who are new to work or in their early working years. Typically they have very low super balances (less than $40,000) and aren’t concerned about investment options – they look for plans with the lowest fees

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. 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.

Transition to retirement available – an available income stream that you can use before you are 65 in order to transition into retirement by working fewer hours and supplementing your salary with income from your super.

Unclaimed superannuation – Superannuation that people have lost.

Value investing – Investing in an asset that is seen as undervalued and selling when the asset is overvalued. This type of investing tends to run counter to market trends.

Wealth Accumulator – peak of their earnings period, have accumulated a significant sum in their super fund and are looking to accelerate growth.

Withdrawal fee – A fee that a fund may charge when you make a full or partial withdrawal.

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

Considering Super Funds?

If you’re comparing Superannuation funds, the comparison table below displays some of the products currently available on Canstar’s database for Australians aged 30-39 with a balance of up to $55,000, sorted by Star Rating (highest to lowest), followed by company name (alphabetical). Use Canstar’s superannuation comparison selector to view a wider range of super funds.

Fee, performance and asset allocation information shown in the table above have been determined according to the investment profile in the Canstar Superannuation Star Ratings methodology that matches the age group you selected.

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