Glossary of Terms

This glossary will help you decode terms you may come across when dealing with your finances during an emigration:

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.

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 highgrowth and lower growth asset classes. An average balanced fund is often used as a benchmark for funds to compare their investment performance.

Benchmark

Usually represents the minimum performance objective for an investment portfolio.

Concessional contributions

Superannuation contributions made from beforetax 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 selfemployed 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.

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 nonconcessional 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.

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.

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.

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.

Non-Concessional contributions

Superannuation contributions made from money that you have already paid the tax on. Non-concessional contributions include spouse contributions and contributions made under the Super Co-contribution Scheme. They also include the non-taxable element of transfers from overseas schemes, including UK pensions.

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.

Preretiree

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.

Value investing

Investing in an asset that is seen as undervalued and selling when the asset is overvalued.

Wealth accumulator

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

Yield

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