Retirement “bonuses”

When I first started in the industry over 8 years ago – there was no such thing as a retirement bonus (except for 1 super fund). There was and technically still is two main forms of superannuation funds with two different ways of calculating tax.

For example:

• Industry Funds: Tax is paid up to 15% on earnings within the accumulation phase. Then when you come to retirement and want to setup an account-based pension. Your balance is your balance and from there on – any further fund earnings are tax free in the pension environment.
• Wrap Funds or Self-Managed Super Funds: These funds pay tax on any capital gains and income up to 15% in accumulation phase. Then when you get to retirement – you are able in most cases to transfer the balance into an account-based pension and NOT pay any tax on any unrealised capital gains within the fund.

Now industry funds have been at a disadvantage to these wrap funds for years due to them not having this flexibility due to their “pooled” investment structure and you may not be getting your actual tax benefits relevant to YOU as the tax is built into the unit price.

A lot of scrambling by these industry funds has now started as they are trying to give members a “bonus” of missed tax concessions they previously weren’t getting by moving their superannuation to account-based pension phase. For example, Aware Super just brought out their version of a retirement bonus on the 18th of November 2024 which can be seen here.

Other funds like QSuper have been doing it since mid-2016. Hopefully moving forward, we can see a more standardised approach to these “retirement bonuses” as there are a lot of rules around them and certain clawback periods with different providers. For example, with some funds, if you retire and move you accumulation account to an account-based pension, then withdraw the funds to pay your home loan out – you may lose the retirement bonus which isn’t really fair as the industry fund you are with, still benefited from your tax concessions and they just disappear in the “pool”. I am not saying industry funds are better or worse than others, it is just important clients are aware the pros and cons of each and know what they are getting into and what benefits they may get or may miss out on.