Superannuation funds were formulated whereby employers are obliged to contribute a part of the income or wage of employees to a superannuation fund that is conserved until the employee has reached retirement and is ready for retirement when the fund can be touched to provide benefits of an income to the employee. Earlier pensions from taxpayers were used to give pensions to senior citizens upon retirement. The benefit of contributing to superannuation funds are that a form of forced savings is begun that invests the money in the right assets and its value is increased over long term. The contribution to superannuation is taxed at the rate of 15%. The employees are subjected to a higher tax rate if their money was not placed in superannuation.
A disadvantage of the superannuation scheme is that many who change jobs regularly would have small amounts of money in many superannuation funds and it will be difficult to mange. Each of the superannuation funds will have a large amount of fees for maintaining the accounts. Some of the accounts may become forgotten and thus unclaimed. The people investing in the superannuation funds should always keep track of which fund their superannuation is being made to. They can also roll over the money into a consolidated fund whenever they change jobs. These can lead to a simplification of the process of superannuation and the difficulty of tracking down lost money in a superannuation fund is reduced. Choosing a superannuation fund and the right one at that is important.
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