Although you may not yet be ready to retire, the fact that you will one day be the recipient of superannuation funds in your senior years is inevitable. Unfortunately, so too is dealing with all of the terminology and jargon that accompany the superannuation industry. Because it can be difficult to relate each term to what it represents, becoming familiar with at least a few terms can be beneficial.
ABP – Account-Based Pension
The ABP is actually a superannuation product that supplies a retiree with their payments on a regular basis. But the ABP can also be known as Income Stream, Account-Based Pension, Allocated Pension and Pension. All of these terms are used interchangeably in the industry, so it’s a good idea to know them all.
Payment of super benefits occurs in two basic ways; via a payment in lump sum that occurs only one time, or through a pension that’s account-based (the ABP). The two methods can also be combined.
Some soon-to-be retirees consider rollover to be a type of super contribution. But rollover is actually a process that occurs when one superannuation account balance is transferred from one super fund to another. Rollover can be done by completing a transfer form, which is then sent to the existing fund. In order to transfer funds successfully, identification will also be required in the form of a passport or drivers’ licence.
This term refers to a rule in the superannuation industry. This rule was introduced in order to prevent low super account balances from being eaten away by charges and fees. Member protection disallows the charging of annual administration fee by superannuation funds. However the account balance must be below $1000 in order for this rule to be applicable. As well, member protection is only for accounts where employers make contributions.
If you are employed by a company and don’t have a choice about the super fund you are a member of, then the fund supplied by your employer must provide you with at least minimum insurance cover, which is Death and TPD (Total Permanent Disablement). How much cover an employee receives is dependent on their age. However, the amount of cover will decrease as an employee gets older. This insurance cover is automatically activated when a company receives an employer’s SG contributions.
An employer must choose which kind of super fund to offer to their employees. The fund they choose is referred to as the default fund. Employers make contributions to the default fund when employees don’t choose their own fund. One benefit of this fund for employees is that they don’t have to apply for insurance cover, as this is automatic with the default fund.
Of course, there are many forms of jargon and terminology that are associated with the superannuation industry that simply can’t be covered here due to lack of space. However, our free eBook has a lot of helpful information. It can be downloaded right from our site. But those who prefer to speak with a retirement professional can also get the information they need by calling one of our experts.
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