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Monday, 31 July 2022
 

Aware Super has launched another compelling investment option for members, allowing them to invest directly in term deposits so they can lock in a fixed rate of return while taking advantage of concessional tax settings in the super system.

Members can now invest a portion of their super directly in term deposits for three, six, nine or 12 months at rates currently ranging from 4.85% to 5.25% per annum – all without the hassle of using an SMSF-style investment platform.

It delivers an attractive alternative to bank-issued term deposits. Outside the super system, Australians have to pay their marginal tax rates on the interest they receive on term deposits – 34.5c in every dollar, including the Medicare levy, for a person earning the average wage*, and up to 47c for someone in the top tax bracket.

Within the super system, interest on term deposits – like returns on other assets in super – is taxed at a maximum of just 15c in the dollar, or tax free for members in the pension phase.

At current interest rates, a person earning the average wage who invests $10,000 in a 12- month term deposit through Aware Super will earn around $445 in interest after tax, excluding fees and charges. Outside the super system, the same person would earn interest after tax of around $345.

The Aware Super term-deposit offering also adds a valuable tool to the toolkit for independent financial advisers, providing a new option to help them better serve their clients.

Aware Super’s Group Executive Member Growth, Steve Travis, said it was part of an enhanced menu of investment options. It comes amid an extensive digital upgrade program that is delivering a host of new services and extra benefits of scale for members.

”We pride ourselves on being super helpful for our 1.1 million members and this is another great example of the way we’re delivering,” Mr Travis said. ”Term deposits have been growing in popularity as interest rates have increased and, while they won’t suit members who want all their super invested in growth assets, we know many people value the certainty of a fixed rate of return.”

Few industry super funds offer term deposits as a standalone investment option. While super funds commonly use term deposits in the broader investment mix for their cash options, the returns are pooled with those from other assets – meaning their members with these options can’t lock in a rate for a specific term.

”Term deposits are also often available through SMSF-style platforms, but these platforms are generally designed for people who want to be particularly hands-on in managing their Page 2 super and have the time and expertise to do so,” Mr Travis said. ”For many people, that simply isn’t an option. 

”Our term deposits will also help Australia’s independent financial advisers in delivering exceptional service to their clients, providing a new investment choice to help them meet their clients’ needs.”

The tax concessions in the super system were in place to incentivise and help Australians to save for retirement, easing the burden on taxpayers by reducing demand for the Age Pension, he said.

”Many people are still unaware how much they can benefit from making use of these concessions,” Mr Travis said. "There’s a very real risk that a significant group of Australians is saving for retirement in part outside the super system, using bank-issued term deposits to do so, and inadvertently missing out on these benefits.

”Our Term Deposit option provides an important alternative for these people, allowing them to make full use of the tax concessions available within super and helping to further set them up for their best retirement possible.” 

Aware Super has previously announced the launch of other new options as part of its upgraded investment menu, including four low-cost indexed options and two additional socially conscious options.

Note to Editors

Aware Super members with minimum account balances of $15,000 can invest in term deposits using the fund’s new Term Deposit option. Term deposits were previously only available to members of VicSuper, one of the fund's legacy brands.

Each term deposit must be a minimum of $5,000 and a maximum of $5 million. The funds are invested in National Australia Bank, and are not covered by the Government Guarantee (Financial Claims Scheme).

The greater of $10,000 or 10% of the member’s account balance must be invested in options other than term deposits, as deductions such as administration fees, insurance premiums and pension payments can’t be withdrawn from funds in a term deposit option. 

When the term deposit matures, tax payable on earned interest is deducted, and funds are transferred into the Cash option. Members can then transfer the funds to another investment option of their choice or apply for another term deposit if they wish. The term deposit rates quoted in this release are current at 31 July 2023.


* Based on ABS Average Weekly Earnings data released on 23/02/2023

For media enquiries, contact:

Peter Taylor, External Communications Specialist

t: 0487104313

e: media@aware.com.au

About us

Meet Money magazine’s Best Super Fund and a Canstar Outstanding Value award winner, for 2023^ : Aware Super. As one of Australia’s largest profit-for-members funds, we always remember whose money it is and whose future we’re looking after.

That means being super helpful in ways our 1.1 million members need, and sometimes in ways they don’t expect. From super returns for retirement of 9.4%** p.a. over 10 years for our High Growth option, to expert super advice and guidance for right now. We are committed to helping our 1.1 million members get more from their super, so they can get more for their future. 

Visit aware.com.au


^ Visit www.aware.com.au/awards for awards information.

** High Growth option to 31 March 2023 after investment fees and costs and tax on investment income. Top 10 in the SuperRatings Fund. Crediting Rate Survey SR50 Growth (77-90) Index (46 options) over the period. Past performance is not an indicator of future performance.