Jargon Buster

We would love to simplify the way the industry refers to superannuation … unfortunately in reality, we’re bound by legislation, product terminology and jargon that has been around for years. To help break down some of the barriers and make things easier to understand, we’ve developed a Jargon Buster that provides simple explanations for some of the more commonly used superannuation references. We hope it helps you!

AccidentWhen referring to insurance, an accident is an injury caused by accidental, external and visible means, independent of any other cause.
Accumulation schemeA type of super fund where your super balance builds up over time from your employer contributions, personal contributions as well as investment earnings. How much your account grows depends on the number and amount of contributions received, the length of time your super is invested, fees and costs deducted and the overall performance of the underlying assets you are invested in e.g. what investment strategy you have chosen.
Age pensionA government payment for seniors who are unable to support themselves in their retirement, or who qualify for a Government payment based on their assets and income.
Age Pension ageFrom 1 July 2017, the qualifying age for the Age Pension for men and women will increase from 65 to 65.5 years. The qualifying age for the Age Pension will then increase by 6 months every 2 years, until reaching 67 by 1 July 2023.
Allocated pensionA type of retirement income payment when an individual invests a lump sum and then draws a regular pension. The regular payments are apportioned so that the pension is expected to last as long as the recipient's life expectancy.
Accumulation fundA superannuation fund where a members contributions accumulate, minus any fees, insurance payments or tax. An accumulation fund is usually payable to a member at retirement.
Administration feeThe fee charged by a superannuation fund to cover their administration costs.
After-tax contributionsSuper contributions which you make from your take-home or net salary such as voluntary contributions. There are limits (or caps) on how much you can contribute in a year.
Alternative assetsAlternative assets usually include Private Equity, Infrastructure, Hedge Funds and are included by some funds as complimentary to their more traditional investments.
AnnuityA regular payment, paid at regular intervals from the investment of a lump sum. Similar to a pension, allocated pension or deferred annuity.
Asset ClassA broad category of financial securities that you can invest in. Examples include: Cash, Fixed Interest, Property and Shares.
AssetsWhere funds invest their financial resources for their members. Traditionally these include Cash, Property, International shares, Australian shares and Bonds.
Assets under managementThis is the combination of all the assets that a superannuation fund would manage on behalf of all members.
ATOThe Australian Taxation Office.
APRAThe Australian Prudential Regulation Authority - a Commonwealth government department that looks after the regulation and monitoring of both superannuation and insurance providers and the industry as a whole.
ASICThe Australian Securities and Investments Commission - a Commonwealth government department that looks after the administering of laws and the Corporations Act that protects consumers in relation to banking, investments, insurance and superannuation.
Automatic acceptanceIs insurance cover that provides a level of cover within your super fund. This means that members don’t need to provide medical details to obtain this cover.
Balanced fundAn investment portfolio that includes a range of high and low risk investment options that are spread across different asset classes to reduce the risk of these investments.
Before-tax contributionsSuper contributions that are deducted from your total or gross income, such as Salary sacrifice contributions.
BenchmarkThis is the measure that a superannuation fund uses to compare and measure the investment performance of it's fund.
BeneficiaryThe person(s) that a member nominates to receive their superannuation investment and or death benefits in the event of their death. To receive this benefit, the recipient must be related or financially dependant or be a legal representative of the person insured.
BenefitThe amount the member or their estate will receive or is entitled to in the event of the members death.
Binding death nominationA legally binding document that outlines the person(s) who will receive the members death benefit. It is worth noting that the nomination has to be valid, or the Trustee of the Superannuation fund may not enforce what the member has requested. To be valid your nomination must be updated every 3 years.
BondsBonds are fixed interest securities that are issued by the government or companies in return for cash from lenders or investors.
Capital gains / growthOccurs when the market value of an investment increases.
Capital guaranteeAn investment in which the investor's principal is shielded from losses. With a capital guaranteed fund, any losses experienced by the underlying investments are absorbed by the fund company, which tends to invest the majority of fund capital in very conservative securities to help minimise the likelihood of losses, a move that also generally equates to modest returns.
Cash investmentsCash investments may take various forms, including a cash deposit held at a bank, term deposits or short-term securities such as bank bills that are traded between investors on the money market. Cash investments such as bank bills carry a low level of investment risk and generally achieve stable, although relatively low, returns.
Certified IDID needs to be certified by a JP to rollover your funds or make changes to your superannuation policy. In order to assist you with your certified documents, Lawlink Australia features a Public Register of Justice of the Peace's (JP), which helps you to locate a JP in your local area. Simply put in your postcode and it will show you the name, location and phone number of those near you who can certify your documents. http://jp.lawlink.nsw.gov.au/public/welcomePublic.do
Commonwealth Government Super Co-contributionA Commonwealth Government initiative designed to increase the retirement savings of Australians, by matching your personal after-tax contributions. If your annual salary is less than $46,920 and you make after-tax contributions to your super. The Government will co-contribute $0.50 per dollar up to a maximum $500 if you are eligible.
Complying superannuation fundA superannuation fund that receives concessional tax treatment.
Compound interestInterest calculated on your principal investment and as interest accrues, you are earning interest on your interest.
Concessional contributionsAny contributions made to a super account before tax is deducted, for example employer Super Guarantee or salary sacrifice contributions.
ConsolidationThis can be referred to also as a rollover or roll-in, when you combine two or more super products you have into the one account.
Contributions taxThe tax payable on amounts paid into a superannuation fund, generally 15%. Your super fund usually reduces your superannuation account by your share of this tax.
Corporate or company fundA fund that is available to people who work for a particular employer. This may be run by the company or through a Fund Manager or Master Trust. Some Master Trusts provide wholesale deals to employers.
Contribution splittingAllows you to split your super contributions with your spouse. A portion of your super can be split into an account held by your spouse.
Defensive assetsAssets that typically provide lower levels of risk than other assets. The trade off is usually lower returns over the long term. An example of a defensive asset is investing in Cash.
Defined benefit fundA super fund which defines the member's retirement benefit as a multiple of their salary. The multiple is based on the investor's period of service and is not linked to contributions made over the period of employment.
DependantIncludes your spouse (or former spouse or de facto, including same-sex spouse), a child under 18 (including an adopted, step or ex-nuptial child), or any person who is financially dependent on you or any person with whom you have an interdependent relationship.
DiversificationAn investment approach that involves investing across a range of asset classes, rather than investing in only one type of asset. Diversification suggests that the positive performance of one asset class may help mitigate the negative performance of another.
ETP (Eligible Termination Payment)Payments you receive from a super fund or from your employer on termination of employment. This may include benefits for resignation, retirement and redundancy. ETP's are taxed concessionally.
FeesMoney you are charged for services provided as part of the management of your fund, to conduct a transaction on your fund or for personal financial advice.
Growth asset classesIncludes higher risk asset classes, such as Shares and Property. Growth asset classes typically generate high returns with higher levels of volatility.
Imputation (or franking) creditsTax credits which are passed on to shareholders from listed companies who have already paid tax on profits, before dividends are made.
Industry fundAvailable if you work within a certain industry or under a certain industrial award. Some are available for the public to join.
Income Protection (IP) InsuranceIncome Protection insurance provides a vital safety net to protect you and your family from financial hardship. If you’re sick, injured and unable to work for an extended period, Income Protection helps by replacing a percentage of your lost income.
Income streamAn income stream is a series of regular payments over a period of time, like being paid wages or a salary. Most people have a choice of taking their super as an income stream or as a lump sum.
Investment choiceYou can choose from a range of investment plans within your superannuation fund. Each one with a different objective for target performance; from 'growth' (high risk) through to 'cash' (low risk). Investment plans each have a unique asset allocation, comprising different types of assets such as Shares, Property and Fixed Interest - so you can choose a plan that suits your particular risk profile.
Investment returns'Return' is defined as the gain or loss in the value of your investment.
Investment timeframeThe period of time you expect to hold your investment or portfolio. Your investment timeframe is an important factor in determining your risk profile.
Lump sumA superannuation benefit taken as a lump sum payment rather than being rolled into a pension or annuity and taken as an income stream.
Management feeThe fees and costs for managing your product, specifically the amount you pay for specific investment options. This is money paid to the investment manager for managing your money.
MemberA person who has contributions made for them or who receives a benefit from a fund. In retirement, a member has the option of receiving either a lump-sum payment or a pension, or a combination of both.
Member contributionsPersonal contributions to a superannuation fund including Personal after or before-tax contributions, which can be claimed as a tax deduction under certain circumstances.
Non-commutable income streamA non-commutable income stream is one that pays a regular income from your super, but does not allow lump-sum withdrawals.
Non-concessional contributionsA contribution that is made from your after-tax income (as opposed to your employer's contributions, which are made before-tax is deducted). It is also known as a personal contribution.
PDS (Product Disclosure Statement)A document required by law that describes the main features of a financial product being issued or sold.
PensionA type of income stream you might receive in retirement, either from your super fund or the Government.
Personal after-tax contributionsContributions you make with after-tax money, such as your take-home pay, and include Member Contributions and Spouse Contributions. These are also called "non-concessional" contributions.
Personal contributionsContributions that you can make that are over and above the compulsory Superannuation Guarantee contributions that your employer must make on behalf, if you are eligible.
PreservationEnsures your money is kept in super until your 'preservation age' which is a requirement by legislation. Until this age, you will be unable to access your super benefit (other than in certain defined circumstances such as financial hardship).
Preservation ageThe age at which a person may acquire access to accumulated preserved superannuation benefits.
Restricted non-preservedRestricted non-preserved benefits are those benefits which are not preserved, but cannot be cashed until you meet a condition of release - such as termination of employment.
Retail FundRetail funds are run by financial institutions and are open to investment by the general public. Within retail super the most popular fund option is a Master Trust. Master Trusts are characterised by offering a wide range of multi-manager and single-sector investment options and are managed by leading Fund Managers.
RiskRisk is the variability of investment returns. When you invest, there is typically a trade-off between risk and return. Generally, the higher the potential return, the higher the potential risk. Similarly, investments offering lower returns tend to have a lower level of risk. Diversification is a way to reduce your risk.
Risk profileYour risk profile is a description of you, based on how much risk you are willing to take when you invest your money. Investors willing to take on a lot of risk, or 'growth' investors, typically seek to maximise their longer term investment and are less worried about the possibility of a negative return. On the other hand, conservative investors typically seek more stable returns.
RolloverWhen you transfer your super from one superannuation fund to another superannuation fund. It is sometimes referred to as 'consolidation'.
Salary Continuance InsuranceProvides a percentage of your pre-disability monthly income (subject to a maximum amount) for up to two years, if you become disabled due to sickness or injury.
Salary sacrificeA way to make before-tax (concessional) contributions to your super. The money you 'sacrifice' is paid directly from your salary into your super account before you pay income tax. Sacrificed contributions are subject to 15% tax in the fund.
Self Managed Superannuation FundA fund that is controlled and managed by the members of the fund. All members are Trustees and make decisions about how the fund is run, what investments it holds and the type of benefits it can pay. The level of control and flexibility that SMSF's allow are seen as some of their main advantages.
SISA ActSuperannuation Industry (Supervision) Act 1993. Funds must comply with the act in order to be taxed concessionally at a maximum rate of 15%.
Sole Purpose TestThe Sole Purpose Test is a test that ensures a superannuation fund is maintained for the purpose of providing benefits to its members upon their retirement (or reaching a certain age), or for beneficiaries if a member dies. The Trustee of a regulated superannuation fund must comply with the Sole Purpose Test to be eligible for the taxation concessions available to a complying superannuation fund.
Spouse contributionsA contribution to one spouse's super fund by the other spouse. Tax offsets may be claimed for making spouse contributions.
Superannuation Guarantee (SG)The compulsory rate (defined by the Commonwealth Government) of contributions your employer must make to your super. As of 1 July 2013 the rate increased to 9.25%, before gradually increasing to 12% by 1 July 2019.
Transition to RetirementA strategy that allows you to access your superannuation benefit once you have reached preservation age, in the form of a non-commutable income stream, while you continue to work full or part time.
Trust DeedA legal document that lays down the rules within which a Trust must operate and describes how benefits will accrue to the beneficiaries under the trust.
TrusteeBonds are fixed interest securities that are issued by the Government or companies in return for cash from lenders or investors.
Unrestricted non-preservedBenefits for which a condition of release has previously been met, and may be accessed at any time (subject to your superannuation fund's rules.)
Voluntary contributionsAdditional contributions you can make that are over and above the compulsory 9.25% SG that your employer must make on your behalf. You can make contributions after-tax (non-concessional contributions) or before-tax (concessional contributions), also known as salary sacrificing. They can also be regular or lump-sum payments.