Superpartners Superannuation terms

Terminology

Definition

AAL (Automatic Acceptance Limit)

Number of Insurance units able to be granted to a Member without the need to complete a Health Statement, subject to the member meeting the eligibility rules of the Fund or Insurer.

ABC EXT Period

Account Based Charging Extended Cover Period means the period (generally expressed in months) for which premium deductions continue to be made under the extended cover period.

Account Based

Account Based Charging is the method of premium payment whereby charges are deducted from the Member’s account balance. This method of premium payment requires an employer contribution to trigger the process. However, ongoing contributions are not required and deductions will continue until the expiry of the ABC Extended Cover Period.

Account Keeping Fees

Charges deducted from individual members accounts as part of the annual review process. These fees are related to the number of weeks members have been in the fund.

Administration Fee

The fee charged by a fund against a member's account to cover administration costs. Most industry funds charge a low flat fee, expressed as an amount per week.

Age Cover Expires

The age in years (expressed as either Age Attained or Age Next Birthday) at which cover ceases. Note cover may cease at different ages for different benefit types.

Allocated Pension

An income stream purchased with an Eligible Termination Payment, which is designed to suit the member’s circumstances.

Annuity

Arrangement whereby payments are made to a person at regular intervals in return for the investment of a lump sum

Anti-Detriment Refund

Refunding the allowable part of the member's government contribution taxes when a death benefit is paid.

Approved Leave

Where a member has been granted approved leave for any purpose by their employer and applies to have their insurance cover extended under the fund during the period of leave. The cover may be for Death and/or TPD depending on the fund and the premium payment is required for the full period of leave.

ASIC (Australian Securities and Investments Commission)

The Australian Securities and Investments Commission enforce company and financial services laws to protect consumers, investors and creditors. It regulates and informs the public about Australian companies, financial markets, financial services organisations and professionals who deal and advise in investments, superannuation, insurance, deposit taking and credit.

Assets

The resources held by a fund on behalf of its members. Among other things, these may include shares, property, cash or bonds.

Australian Financial Services Licence (AFSL)

The licence that is granted by the Australian Securities and Investments Commission (ASIC) to superannuation Funds.

Award Superannuation

Superannuation entitlements that are determined by a Federal or State industrial award. In some cases these entitlements may provide entitlements to employees which are additional to the minimum requirement of the Superannuation Guarantee

Beneficiary

A person entitled to or in receipt of a benefit under a fund, which is normally the member and his/her dependants.

Benefit

The amount of a member's entitlement in the fund, or, in the event of the member's death, to which the other beneficiaries are entitled. Other than in cases of death or disablement, most benefits are only payable on retirement.

Benefit payment fee

A fee charged against a member's account to cover costs of processing a benefit payment. Most industry funds have very low flat fees, or no benefit payment fee at all.

Binding Nomination Fee

Fee charged when a member requests to have a beneficiary on their account, which is classified as a binding nomination, as opposed to a nominated or preferred beneficiary.

Commencement of Cover

The date from which cover commences for a member under the fund and insurance rules.

Complaint

A complaint is when a client expresses dissatisfaction verbally or in writing regarding any aspect of our business. It may not always be a complaint that Superpartners can satisfy because it is a fund rule or a legislative requirement. Nevertheless, it is a complaint and should be dealt with effectively. Complaints will often require additional effort to resolve to the satisfaction of members, employers and/or fund.

Complying Fund

A superannuation fund that complies with the operational standards specified in the Superannuation Industry (Supervision) Act.

Compulsory

In relation to insurance, where under the fund or insurance rules, a member must be allocated insurance cover upon joining.

Contribution Fees

These are charges deducted from member’s accounts that are based on contribution activity. As such this is an activity-based fee.

Continuation Option

Option to continue insurance cover, generally death only but may relate to disability cover, e.g. group salary continuance. Cover is direct with the insurer under an individual policy when the extended cover period or free cover period under the fund is about to cease. The continuation option is subject to eligibility conditions.

Contribution Return

Also known as Contribution Advice.

Contribution Splitting Fee

Fee charged when a member requests to split their money between themselves and their husband/ wife.

Cost Per Unit

Member – dollar amount charged as an insurance premium per unit of cover.
Insurer – dollar amount payable to as premium to the insurer per unit. Note the cost per unit for the Member may not always equal the cost per unit paid to the insurer, the difference being a levy imposed by the Fund.

Crediting Rate

The rate of interest paid to members on their account balance, usually expressed as a percentage per annum. For most industry funds, accounts are credited on an annual basis. Note that the crediting rate may vary from the fund's earning rate through the use of reserves to smooth returns to members.

Date Arrangements Effective

Date from which any new insurance arrangements or changes became effective.

Death Benefit

The amount payable to a member's beneficiaries and/or dependants in the event of the member's death.

Death Insurance (Death cover)

Insurance arrangement whereby the member's beneficiaries and/or dependants receive an insured amount in the event of the member's death. Many funds offer a range of choices as to the level of cover, often expressed as the amount of cover per unit of insurance. It is common for the amount of cover per unit to decline as a member's age increases, as a result of the increased risk of death as one ages. Insurance premiums are deducted from the member's account. It is most important that members should read the detail of their own fund's insurance arrangements, and decide what options, if any, they wish to exercise.

Declared Rates

Declared rates are the final interest rates declared by the Fund and allocated to members as part of the review process

Deed of Adherence

A formal agreement between the employer and the fund describing the conditions under which the employer is received into the fund. Normally, the fund’s standard Employer Application form serves as the Deed of Adherence.

Default Insurance Cover

The level and type of cover automatically allocated to a Member when he/she has not made an insurance selection when joining the fund or any subsequent offer made to the Member.  Note: the default may include no insurance.

Dependant

The spouse, including a de facto spouse, child, or any other person who is financially dependent, either in whole or in part, on the member at the time of death.

Disability Insurance

Insurance arrangement whereby the member may be paid a benefit in the event of becoming disabled. Different funds have different arrangements that may cover Total & Permanent Disablement (TPD) or temporary disablement, and many give members the option of different levels of cover. Insurance premiums are usually deducted from the member's account. It is most important that members should read the detail of their own fund's insurance arrangements, and decide what options, if any, they wish to exercise.

Earnings rate

The rate of return to the fund on the monies invested by the fund, usually expressed as a percentage per annum. Note that this may vary from the fund's crediting rate due to fees being deducted and movement in reserves.

Eligibility Rules

The set of rules or conditions agreed to by the Fund and Insurer under which insurance cover may be allocated to members either upon joining or when applying to vary cover.

Eligible Rollover Fund (ERF)

A fund that is eligible to receive benefits automatically rolled over from other funds. Most industry superannuation funds have procedures in place to automatically transfer to an ERF account of members that have very low account balances which have been inactive for a substantial period of time, or when the member cannot be traced.

Employer Application Form

A formal agreement between the employer and the fund describing the conditions under which the employer is received into the fund. Normally, the fund’s standard Employer Application form serves as the Deed of Adherence.

Employer (Concessional) Contributions

The amount of money contributed by a member's employer to the superannuation fund. Concessional contributions are subject to contributions tax (of 15%).

Employer Kit

A package to help employers fulfil their obligations and to assist in the requirements for jointing the fund. Typically the kit includes items such as, Application for Participating Employer or Deed of Adherence, Employer Handbook, Member Applications and Member Handbooks, together with other fund specific information.

Employment Termination Payment (ETP)

Any lump sum payment from an employer on termination of employment. If the payment meets certain criteria, it will become a transitional termination payment.  Transitional termination payments eligible to be paid into superannuation are called Directed Termination Payments (DTPs).

Establishment Fee

This is the fee that is charged when a member opens a new account.

Exit Fees

Exit fees are the fees charged to a member in relation to the cost of processing their benefit.

Extended Cover

The facility where by premiums are deductions continue to be made from a Member’s account without the receipt of an employer contribution.

Extension Option

An option to continue to cover insurance cover within the fund, either Death and or TPD depending on the Fund, when the Extended Cover Period or Free Cover Period is about to cease.

Free Cover Period

The period expressed in months or days during which cover continues to be provided free of any premium payment when contributions are not received.
This period may be of a difference duration depending on whether the cover is for Death, TPD or group salary continuance.

Fund

A legal entity established to provide benefits for members.

Grace Period

Length of time agreed to by insurer in which employer contributions are considered to be received on time for the purposes of deducting insurance premiums in the case of a contribution based charge or for the reinstatement of cover and commencement of cover in Account Based Charging.

Group Salary Continuance (GSC)

See Income Protection.

Inactive Member

A fund member who is not currently receiving any contributions to his/her account.

Income Protection

An insured benefit payable as an income stream upon a member becoming totally disabled. The disability may be temporary in nature and must meet the definition of totally disability in the policy. Benefits are generally not payable for an initial waiting period (this period will vary from fund to fund) and are limited to a percentage of salary. Under superannuation, benefits are generally payable for up to 2 years.

Industry Superannuation Fund (Industry Fund)

A multi-employer superannuation fund, which will normally cover employees in a particular industry or group of industries, or in a particular geographic area. Because of their scope, industry funds tend to have large memberships. Their economies of scale, and the fact that they are "not-for-profit" and do not pay any fees or commissions to agents, make them extremely effective in keeping down costs to members. These funds have trustee boards with equal representation for employers and employees, and have been a very effective vehicle for the implementation of universal superannuation for Australian workers. They currently have more than 6.98 million members, and assets in excess of $45 billion. Examples of major industry funds can be seen on the Industry Funds Forum Home Page.

Insurance premiums

The sum of money paid to purchase insurance against death or disability. The premium is normally deducted from the member's account, although in some cases, the employer makes payment direct for their employees' insurance premiums, and no charge is made against the member's account.

Insured Death Benefit

Benefit payable upon an insured member’s death based on the Fund’s benefit schedule/scale.

Insured TPD benefit

Benefit payable upon an insured member meeting the TPD definition contained in the insurance contract (policy) and based on the Fund’s benefit schedule/scale.

Interest Rate

The return on money invested, usually expressed as a percentage per annum.

Interim Rates

Interim rates are the interest rates declared by the Trustee and allocated to members exiting the Fund during the year.

Investment Choice

Arrangement whereby members of a fund are offered a choice of investment options within the fund. An increasing number of industry funds are now offering members such choices. The choices generally give members a range of options in terms of risk & expected return. In most cases, there is a "default" option that applies to those members who do not decide to make a choice or who are not eligible to make a choice.

Investment Management Fee

The fees charged by an investment manager for their services. The fee is normally charged as a percentage of the funds invested, and may be performance-based. The fees are normally deducted from the fund's earnings before determination of the fund's earning rate. Because of their size and efficiency, industry funds are generally able to get very low investment management fees compared with master funds and other smaller funds.

Investment Manager

An organisation appointed by a fund to manage the investment of part of the fund's assets. It is common for funds to appoint a range of investment managers, who may have specialist expertise in particular areas of investment.

Lapsed Insurance Member

Where an employer hasn’t made a contribution on behalf of a member within a set period of time (ie 6 months) that members’ insurance benefits cease.  A member who has a nil account balance is lapsed after a specific time as set by the fund. The date they were lapsed is added to the member’s arrangement. The member’s status does not change.

Lapsed Letters

Letter issued to member advising of the imminent ceasing of cover due to employer contributions not being received.

Limited Cover

Means that the member will only be covered for claims that arise from an illness that became apparent or an injury that occurred on or after the day that cover last commenced. Limited cover may apply to either Death and/or TPD.

Lump Sum

A benefit payable in a single cash payment rather than as pension or annuity.

Lump Sum Payment Summary (LSPS)

Statement that must be sent to a member whenever a lump sum benefit is paid.

Management Expense Ratio (MER)

The ongoing management charges charged by a fund over a year can be expressed as a percentage of the fund's assets. This figure allows you to compare the management charges of one product with other products.  This percentage indicates the overall management, administration and investment expenses incurred by the Fund (each year).

Master Fund

A fund which allows a large number of unconnected companies &/or individuals to operate through the same fund. Banks, life insurance companies and specialist superannuation administrators generally operate funds.

Maximum Insurance

The maximum number of units or dollar value of cover that the insurer is prepared to allocate to a Member. The maximum level may vary according to the benefit type. The maximum level may be exceeded under agreed terms of a transfer.

Member Benefit Protection

A legal requirement whereby, for accounts with a balance below $1,000, a fund is not allowed to charge administration fees in excess of the interest credited. In this way fees will not continually erode a small inactive account. Note that the protection does not apply with respect to tax on employer contributions or any insurance premiums deducted.

Member Booklet

Information booklet (the "Product Disclosure Statement") which members receive when they join the fund, and which sets out the key features of the fund.

Member Contributions

Contributions made by a member to his/her account. These are additional to any employer contributions.

Member Investment Choice (MIC)

An option whereby a Fund gives members the opportunity to choose from different investment streams, such as:

• Low risk / stable growth investments (e.g. fixed interest loans)
• Moderate risk / medium growth investments (e.g. properties)
• High risk / high growth investments (e.g. equities)

Members may direct their money into the investment streams by:
assigning a fixed dollar amount or percentage of the current balance of their superannuation account to one or more of the investment streams, and assigning a fixed dollar amount or percentage of their future superannuation contributions to one or more of the investment streams.

Non-preserved Amount

The part of a member's benefit that is not subject to preservation.

Opting Out

The ability of a Member to opt out of insurance cover either at the time of joining or subsequent to joining. This option may be subject to conditions depending on the fund rules.

Ordinary Time Earnings (OTE)

The earnings (before tax) on an employees ordinary hours of work, generally excluding overtime, which is used as the basis for calculating employer contributions for Superannuation Guarantee purposes.

Parental Leave

Option where a member may apply to have his/her cover (generally for Death and TPD) continued free of charge within the Fund whilst the Member is on approved Parental/Maternity Leave. Cover under this option is generally limited to 1 unit and is subject to conditions.

Portability

The ability to take your super with you when you change your job. Industry funds are particularly well placed in this regard, as members can often stay with the same fund despite changing employers or industries.

Preservation

The legal requirement that certain superannuation benefits must be retained in a super fund or rollover fund until the member retires after reaching preservation age. Only in very limited circumstances, including total and permanent disablement and extreme financial hardship, can preserved amounts be released before the member reaches this age.

Preservation Age

The age, at which the member can have access to preserved benefits, provided the member has permanently retired from the workforce. The preservation age is gradually increasing from 55 years:     

Preserved Amount

The part of a member's benefit that is subject to preservation.

Protected Member

A member whose benefits total less than $1,000 and has had mandated (e.g. SG) contributions made to their account.

Public Offer

An account held for a member who is self employed or has opened up an account on their own accord. No employer contributions are expected to be received into this account.

Real Rate of Return

The amount by which the rate of return exceeded the rate of inflation over a period. For example some industry funds have an investment goal that their rate of return to members should, over any three year period, exceed the rate of inflation by an average of at least 3% per annum (depending on the particular investment strategy and objectives). This would be the same as a real rate of return of 3% per annum.

Registered

Following receipt of a benefit claim, the claim has been vetted and entered onto our system (ie all clean claims have been processed to ‘Exited Status’ for approval).

Reserves

That part of a fund's assets which is not allocated to members' accounts when interest is credited. Reserves are used to reduce the level of variation in returns to members. For example, in a year of good returns, a fund might put some of the earnings into reserve, and declare a lower crediting rate than the fund earned, while in a year of poor returns, the reserves might be reduced in order to increase the crediting rate to members.

Retirement Savings Account (RSA)

An RSA is a superannuation product that is provided by banks, building societies, credit unions, life insurance companies or prescribed financial institutions and is not managed as a trust on behalf of beneficiaries. RSA's must be capital guaranteed, fully portable, owned and controlled by the member and subject to the retirement income standards applying to other superannuation products. RSA's have different disclosure requirements than superannuation funds.

Rollover or transfer

The transfer of a benefit into a superannuation fund, Approved Deposit Fund (ADF), Retirement Savings Account (RSA) or deferred annuity from another superannuation fund, Approved Deposit Fund (ADF), Retirement Savings Account (RSA) or deferred annuity.

Rollover Benefit Statement (RBS)

Statement accompanying a rollover or transfer between funds containing information such as tax components, preservation amounts and contributions for the financial year to date.

Salary Sacrifice

An agreed arrangement between an employer and employee whereby the employee's gross salary is reduced by a certain amount, and the employer's contributions to the superannuation fund are increased by the same amount. Note that the amount of the salary sacrifice must be in addition to the normal contributions required to be made by the employer. This can be a very tax-effective way of saving for the employee, although it should be noted that the additional amount contributed to the super fund would be subject to preservation. Salary Sacrifice contributions fall into the concessional contribution category.

Self Employed

A person who works for him/herself, whose income does not come from an employer.

Superannuation

A means of setting aside funds during working life for use in retirement.  

Superannuation Complaints Tribunal (SCT)

A tribunal established by the Federal Government to deal with complaints about decisions of super fund trustees. The tribunal requires complaints to be fully addressed through the fund's internal dispute resolution procedure before considering a complaint.

Superannuation Guarantee (SG)

The minimum amount that an employer is required to contribute to a complying superannuation fund on behalf of each qualifying employee.

Superannuation Guarantee Charge (SGC

Employers who fail to meet their SG obligations are liable to a substantial financial penalty, called the Superannuation Guarantee Charge (SGC).

Superannuation Industry (Supervision) Act (SIS Act)

The legislation that governs the operation of all complying superannuation funds. 

Supplier

Any person or organisation that has been contracted to provide a service to a fund. Some examples are, debt-collector, insurer, tax adviser or, insolvency expert.

Switching Fee

The fee for switching your investments

Termination Fee

The fee for closing your account

The Australian Prudential Regulation Authority (APRA)

APRA is the single prudential regulator of banks, insurance companies, superannuation funds, credit unions, and building and friendly societies. APRA is not responsible for product disclosure standards, customer complaints or licensing agents and brokers. These are the responsibility of ASIC (see above).

Total and Permanent Disablement (TPD)

A condition for which many funds provide insurance cover. The definition of TPD may vary slightly, but generally requires that, for payment of the benefit, the trustee must be satisfied that the member will -never again- be able to work in any occupation to which they may be suited by reason of their training, education or experience. It is a frequent misunderstanding of members that they would be covered if they are unable to return to the position which they held before they became disabled, but the test is normally much stricter than this. Some funds do provide different forms of disability insurance cover, such as temporary disablement cover, and it is most important that members should read the information on insurance provided by their fund.

Trust Deed

The legal document that sets out the rules governing the operation of a super fund. Members are entitled to view a copy of the trust deed, although they may be charged a reasonable fee to be sent a copy.

TTD

Total and temporary disablement. Often described by insurers as: "The complete and continuous inability by reason of accident or sickness to earn remuneration in respect of your specified occupation and you are not earning remuneration from any other occupation."

VET

Benefit Payment - Preliminary examination of a benefit payment claim form from a member to check for obvious errors or omissions. Contribution Advice - Preliminary examination of a contribution advice on receipt from employer to check for obvious errors or omissions.

Withdrawal Fee

The fee on each amount, when you withdrawal money from the fund (including your final withdrawal)