Are you better off investing inside super or putting your money into investments outside super?

Investing in your super

By the time you reach retirement, your super could be one of your largest assets so it’s important to understand the benefits super offers.

The advantages of superannuation are:

  • It’s compulsory savings because most employers are legally required to contribute to your super account.
  • Investment earnings within super are taxed at a maximum of 15%, which is lower than tax on investment earnings outside super. Earnings within your super do not form part of your personal taxation liabilities
  • Tax incentives are available when adding money to super. For example, salary sacrifice contributions reduce your taxable income and spouse contributions could generate a tax rebate.
  • Your money is managed by a large team of investment specialists who oversee investment portfolios across a wide range of asset classes and are always seeking opportunities.
  • Your money is pooled with the money of all our other members, which gives us the scale to invest in assets not usually available to single or smaller investors.
  • We recognise that we must be increasingly mindful of the footprint our investments make in markets, communities and on the environment.
  • We offer a socially responsible investment option, which means you are investing in companies that meet specific sustainability criteria, e.g. no tobacco.

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Investing outside super

Super has some great benefits but it’s only one investment alternative. And if you need your money before retirement, super is probably not the right choice.

Here’s a snapshot of just some of your investment choices outside super:


Over the longer term, the share market tends to offer the highest average returns. But over the short term, share market returns can be very volatile. So if you’re thinking about investing in shares, your timeframe is critical. The experts suggest a minimum timeframe of at least seven years so you have time to recover from any market downturns.

  • Shares tend to provide higher returns over a shorter space of time.
  • Potential income through dividends.
  • Lots of free advice and help available online (make sure that you use reputable sources).
  • You can choose the type of shares you want to invest in and your level of risk.
  • You don’t need huge amounts of capital to begin investing in shares.

  • Share values can fall, and may even leave the investor left with nothing.
  • If the company goes bankrupt, you are the last to be paid, and you might not even get any money back.
  • Share values fluctuate day by day and month by month, so must be watched carefully.
  • Understanding shares involves time and a lot of research and analysis.
  • There are often costs involved, so it is important to shop around.

Managed funds

Managed investment funds (also called unit trusts) are similar to super funds, but without the access restrictions. A managed fund pools the money of individual investors to provide access to a range of assets and investment sectors.

  • Access to different asset classes and investment opportunities that might not be available to individual investors, such as government bonds, large-scale property investments and infrastructure.
  • Some managed funds invest across many different asset sectors, while others concentrate on one specific sector. This allows you to pick and choose which fund you invest in according to other investments you might have. If you hold a lot of shares, for example, you might think about a fixed interest fund to balance or ‘diversify’ your investments.
  • You don’t need a lot of money to get started. Most managed funds accept as little as $1,000.
  • You can withdraw your money at any time.

  • Watch the level of fees you pay. Annual management fees vary significantly, depending on how actively the fund manager manages your investments. These fees can be as low as 0.25% for cash-type funds through to as much as 2.5% for some of the more actively managed growth investments.
  • You don’t have full control because you don’t choose the assets your money buys, or when they are to be bought and sold. This level of control can be important if you need to precisely manage capital gains and losses within your portfolio for tax reasons.
  • You’ll be responsible for paying tax on any earnings and capital gains from your managed fund investments through your own income tax return.

Investment bonds

Investment bonds can be a tax-effective way to invest for the long term but there are certain rules about contributions and withdrawals that you need to understand. The primary attraction of investment bonds is that earnings are taxed at a rate of 30%, provided the bond is held for more than 10 years (and no further tax is payable when the bond is cashed in). Another benefit is that you can make additional contributions over the life of the bond. 

Find out more on investment bonds

What to consider

When you’re considering the alternatives, some of the things to think about are:

  • What is the purpose of the investment? Grandkids’ education, a home or home renovations, a car, an overseas trip? If it’s to save for retirement or early retirement, super comes back into the equation. 
  • How much investment risk are you prepared to accept? The higher the expected or required return, the greater the risk. 
  • What’s your personal tax situation? Sure, everyone thinks they pay too much tax but there are some legitimate ways to minimise your tax bill.
  • How long do you have to invest?
  • Do you want to be involved in managing your investments or would you prefer to give that responsibility to an investment manager?