Retirement glossary

Don’t be put off by terms such a defined benefit or contribution splitting – we’ve made the jargon simple in this quick retirement glossary of all the terms you need to know.1

Account-based pension

A pension purchased with your super money on retirement. You can choose the amount of pension you receive each year (minimum income payments required each year). For people aged 60 and over, these pension payments have been tax-free since July 2007. Previously known as allocated pensions.

Accumulation fund

The most common super fund type where your money grows or 'accumulates' over time from contributions and investment earnings.

Age Pension

Fortnightly income payments provided by the Federal Government to individuals of Age Pension age who meet certain eligibility and means testing criteria.

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. You have the option of choosing a return of capital or having no capital left at the end of the specified period, and income payments may be indexed each year, often in line with inflation.

Asset

Something you own from money, bonds, shares or a bank account to physical items such as a house, land, car, art, etc.

Asset allocation

Investment strategy that aims to balance risk and rewards by diversifying investments in line with your objectives and attitude to risk.

Asset classes

A group of investments with similar characteristics and subject to similar market forces.

Beneficiaries

People who will receive a benefit or asset in the event of your passing.

Binding death benefit nomination form

A legal document that you give to your super fund that tells the trustee who to pay your benefit to in the event of your death.

Capital gain

The difference between what you paid for your asset and the profit upon sale. Capital gains tax is a tax on profits made from buying or selling certain assets.

Co-contribution

A payment made by the government to the super fund of low or middle income earners to reward them for making personal contributions to super.

Concessional contributions

Super contributions made before tax deducted from income. It includes employer super guarantee, salary sacrifice, and any other contributions where a tax deduction is claimed.

Condition of release

A nominated event you must satisfy to be able to access your super including permanently retiring from the workforce after reaching preservation age, ceasing employment after turning age 60, reaching age 65 or becoming totally and permanently disabled.

Corporate governance

The system of rules, practices and processes by which a company is directed and controlled – including an SMSF.

Death benefit

A payment made from your super fund or insurer to your beneficiary upon your passing.

Defined benefit

A fund where the benefit is calculated based on a formula factoring in the person’s years of employment and salary at retirement.

Depreciation

Allocation of the cost of a tangible asset and its decline in value over its useful life.

Direct equities

Direct shares in a specific company.

Disruptive technology

Technology that significantly alters or displaces an established industry, business or technology.

Dividend

A share of profits paid regularly by a company to shareholders.

Enduring power of attorney

Authorises your nominated representative to make property and financial decisions for you at a specific time determined by you and continues to have effect if you become mentally incapacitated at a later date.

Equity

The value of an asset less the value of all liabilities on that asset.

Exchange traded fund (ETF)

A managed fund or unit trust quoted and traded on a stock exchange.

Executor

A person specified in your will, or appointed, to administer your will.

Fee-for-service

An amount paid to service providers including accountants, financial advisers and lawyers for specific work, completed at your request.

Financial adviser

A licenced professional providing advice on wealth management, investments, super and retirement.

Financial counsellor

A person who gives free, confidential and independent assistance for financial difficulty.

Franking credits

Tax credit that allows Australian companies to pass on company tax paid to shareholders to avoid double taxation.

Funeral bond

A capital guaranteed managed fund to help meet the future cost of funeral expenses. They generally have tax and Centrelink advantages.

Gearing

Borrowing to invest in assets such as shares and property.

Industry fund

A super fund originally for workers in a particular employment industry or industrial award. Now generally open to all Australians.

Liquidity

The availability of funds (or liquid assets) in a market, company or financial product.

Listed investment company (LIC)

A closed-end investment fund that invests in other companies, with the purpose of giving shareholders exposure to a variety of investments via its investment portfolio.

Low Income Superannuation Tax Offset (LISTO)

A Government initiative to help boost the retirement savings of low income earners. It is a payment that offsets the tax paid on concessional contributions.

Managed fund

An investment fund run by a manager on behalf of investors where investors’ money is pooled.

Non-concessional contributions

Super contributions made after tax is deducted from your income. These can be made from your personal savings by transferring capital to your super to increase retirement savings.

Non-binding death benefit nomination form

A document that you give to your super fund that provides the trustee with guidance on who you would like to get your super if you pass away. Trustees may be guided but are not bound by this document.

Pension

A super fund product providing an income stream in retirement.

Personal contribution

A voluntary amount you pay into your super fund.

Portfolio

The collection of assets held by an investor.

Preservation age

The age you can access your preserved super benefits. Generally between age 55 and 60, depending on your date of birth.

Preserved benefit

The super benefit amount that remains in the super fund until you reach preservation age.

Public trustee

Government agency or business delivering professional and independent services such as making wills, acting as an executor in deceased estates, managing trusts and Powers of Attorney.

Retirement savings account

A simple, low cost, low return account used to save money for retirement.

Salary sacrifice

An arrangement with your employer where you pay some of your pre-tax salary into super.

Self managed super fund (SMSF)

A super trust structure where members are also the trustees. SMSFs are regulated by the Australian Taxation Office and can have one to four members. All members must be trustees to ensure they are fully involved in the decision-making of the fund.

Sole purpose test

A test that ensures a super fund is maintained for the sole purpose of providing retirement benefits to its members, or to their dependants if a member passes away before retirement.

Statement of Advice (SOA)

A document issued by a licensed financial adviser that sets out the advice recommended for the client.

Superannuation (super)

Money deposited by you and your employers into a nominated super fund during your working life to provide income in retirement.

Superannuation guarantee (SG)

The minimum amount that your employer must pay into your super fund on your behalf.

Tax offset

An amount that reduces the amount of tax payable on taxable income

Term deposit

A cash investment placed with a financial institution for a fixed period of time, with a fixed interest rate paid at the end of the term.

Total return

The rate of return for an investment over a given period of time.

Transfer balance cap

The transfer balance cap is a limit on the total amount of super that can be transferred into the retirement phase. It is currently $1.6 million.

Transition-to-retirement income streams (TRIS)

Income streams that allow you to access your super while working, within set income limits, when you’ve reached preservation age.

Trust

An arrangement where a person or company (the trustee) holds assets for the benefit of someone else – this includes SMSFs.

Trustee

A person appointed to administer a trust, who has specific powers and duties set out in the trust deed and law which they must comply with.

Will

Legal document that sets out how you want your assets and personal possessions to be distributed upon your passing.

Work test

Sets out the requirements for a super fund to accept contributions for members aged 65-75 years. Individuals must work a minimum of 40 hours in a 30 consecutive day period to meet the work test. After 75 years, you can no longer make contributions to super unless they are employer contributions.

Yield

The rate of return on an investment.

Discover if self managed super is right for you*

Find out how we can help you achieve your retirement goals by talking to one of our SMSF directors.