Glossary

Glossary
Term	Definition
Asset Allocation	Asset allocations describe how an investment is spread across different asset classes
Asset class	A group of investments that have similar risk and return characteristics. For example, property, fixed interest or shares
Australian Securities and Investments Commission (ASIC)	ASIC is the Australian regulator for companies, financial markets, financial services and professionals who deal with super, insurance, credit and banking.
Australian Taxation Office (ATO)	The ATO collects taxes and other revenue for the Australian Government. It also manages the super guarantee, super co-contributions and the Lost Members Register.
Beneficiaries	These are the people who will receive your super in the event of your death. They are restricted by law to be your spouse, children or people who are financially dependent on you.
Binding Nomination	A method of defining the particular beneficiaries you want your super to go to. If you make a valid binding nomination, the Trustee is bound to pay your benefit according to your wishes in the event of your death. Binding nominations must be renewed every three years.
Capital	Money, or any other form of wealth that is used for profit making purposes
Capital gain	A capital gain arises when the money received when selling an asset is greater than the purchase price.
Complying super fund	A fund that meets the regulatory and legislative standards for super funds. Complying funds are eligible for concessional tax treatment.
Compound returns	Compound returns is where interest is calculated on interest already earned, as well as the sum invested.
Consolidating super	Consolidating super means moving super from a number of funds into fewer funds.
Consumer price index (CPI)	CPI is a measure of inflation that is used to compare the cost of living over time.
Contributions	Contributions are the money that you or your employer put into your super account.
Crediting Rate	The crediting rate is a declared rate of earnings determined by the Trustee and applied to member accounts in certain categories of the Fund.
Default fund	A default fund is a complying super fund to which your employer will make contributions if you don't make a choice, or choose a fund that cannot accept your employer's contributions.
Defensive assets	Defensive assets are typically less risky and generally produce lower returns over the long term, e.g. bonds or cash.
Diversification	The spreading of investment funds among different securities, localities, asset classes and fund managers to limit the overall level of risk.
Eligible rollover fund	An eligible rollover fund is a special type of fund set up to receive the benefits of members from other funds. These members usually cannot be located, have a very low account balance or have not contributed to super for a long time.
Employer sponsored	These members have an employer who makes superannuation guarantee contributions on their behalf.
Fees and costs	Super funds charge fees to manage and administer your super. These are expressed as a dollar amount, a percentage of your balance or a combination.
Fluctuations	Rises and falls in the values of investments
Government co-contribution	Government co-contributions are payments made by the government to the super accounts of low-income earners who make voluntary contributions.
Inactive account	Your account is deemed inactive if no contributions are received for more than one year.
Industry funds	Industry funds are usually established with strong affiliations with particular industries and are run only to benefit members.
Inflation	Inflation is the rise in the cost of goods and services. Investment goals generally refer to inflation (measured by the CPI) because earnings must outstrip inflation to represent a real increase in value.
Insurance benefits	Insurance benefits are money paid to someone holding an insurance policy (or their beneficiaries) upon a predefined condition being met.
Interest	Interest is a percentage amount paid in a certain period (most commonly per year) on money invested or borrowed.
Investment horizon	Investment horizon refers to the length of time you intend to keep your super invested. For most people, this will extend to the age at which your super is expected to run out in retirement, not the age at which you retire from the workforce.
Investment manager/fund manager	Fund managers are experts who invest money on behalf of others, including super funds.
Investment Objective	This is the goal for the investment option, to be assessed against the target return.
Investment option	Investment options are made available to cater to the various investment horizons and risk appetites of members.
Investment portfolio	An investment portfolio is the collection of assets held by a particular investor.
Negative returns	A negative return results if there is a reduction in the value of investments. If this occurred, members accounts would be debited by the percentage of the loss in value that year
Preservation age	The preservation age is the age at which you are permitted to unconditionally withdraw your super from the superannuation system. Currently, this is between 55 and 60 years, depending in when you were born.
Product disclosure statement (PDS)	A PDS lists the benefits, costs, risks and other information required by law about financial products, including super. A PDS should disclose everything required to make an informed decision about the product.
Retail or public-offer funds	Retail or public-offer funds are operated by financial institutions as a business. These funds are open to the general public.
Return	The return is the difference between the value of an investment over a period of time. Increased value means a positive return. Decreased value means a negative return.
Risk	Investment risk is an indication of how likely it is that an investment will lose value over a period of time.
Rollover	Another word for transferring super from one or more super funds into another super fund.
Salary Sacrifice	Salary sacrifice means making payments - such as super contributions - from your pre-tax salary in lieu of receiving the same amount as salary.
Self employed members	You are considered to be self-employed by the ATO and eligible to claim a tax deduction on your super contributions.
Shares	Shares represent an ownership of a part of a business. Shares are bought and sold as a type of investment.
Stand-alone	Stand-alone members are required to make an initial contribution or transfer of $1,500 to establish an account, but are not required to make ongoing contributions.
Standard choice form	A Standard choice form is used to instruct your employer to pay your super contributions to a complying super fund.
Super guarantee	The super guarantee (SG) requires employers in Australia to make contributions for most employees to a complying super fund. Most employers are required to contribute an amount equal to 9% of each employee's earnings base, based on ordinary time earnings (OTE).
Superannuation (super)	Super is money put aside during your working life for use in retirement.
Superannuation Contributions Surcharge	The superannuation contributions surcharge is an additional tax on certain superannuation contributions, made after 20 August 1996 and before 1 July 2005. It generally affects people who earn higher incomes (sourced from www.ato.gov.au).
Switching	The process of selling one investment option and then using the money to invest in a different investment option.
Target return	This is the returns that the Trustee aims to achieve for the relevant investment option and is the return against which the achievement of the investment objectives is measured.
Trustee	The trustee's sole purpose is to oversee the management of your Fund and its investments to provide the best possible financial benefits for members.
Unit prices	The price used to express the value of investments in an investment option. Unit prices rise and fall in line with the underlying investment performance of the investment option.