Superannuation Contributions and Investment Strategies

This article discusses the collection of funds through superannuation contributions and investment strategies for employees. It explains the two types of plans available and the factors to consider before making investment decisions. The concept of time value of money is also explained. The article concludes with expert recommendations for employees to make informed investment decisions. Course code and college/university not mentioned.

Finance

Introduction
Collection of funds using the superannuation method an organizational pension program also
has been taken by the government into force so that the employees can be benefited by it. It
can also be referred to as a company's pension plan. Funds that are deposited by an employee
for the superannuation contribution will be an area of any type of taxes and will be collected
until the time the employee is retired or withdraws him from the job. (Boyd, 2013) Also by
the use of the superannuation strategies in the organization, there has been knowledge of
Savings and investment indulged in the mind of the employees. There is a much different
type of factors which should be analyzed by the tertiary sector employees before investing
their money of savings collected from the superannuation contributions. The employees are
given the choice of plans between investment choice plan and defined benefit plan. (Bragg,
2016) So the employee should analyze the time value factors and then make investments in
the scheme or strategy he would like to invest. The proper analysis will help them to retain
sufficient earnings on their savings thus making this profitable for them.
Superannuation contributions
Superannuation is the funds which are collected by the employees as a part of their salary
which is further used to invest in different type of schemes that can employees to earn high
rate of Returns. This high rate of return and their savings combined will also help them to
have a proper Lifestyle after their retirement (Datar M. S., 2015). The collection of the
superannuation contribution has been made mandatory by many of the countries. It was
previously in July 2014 the employees why said to provide 9.5% of their salaries as part of
superannuation contributions which have been said to increase on 1st July 2018 to 10%
percent. Also, an increment of 0.5% annually should also be done until the year 2022 and tell
the mark of 12% is achieved. (Datar S. , 2016)
The money which is collected by the use of superannuation contribution is given to the
Financial Institutions which can help them to invest money is and proper portfolios which
will give them a high rate of returns in near future.
The economic sectors of the environment have been divided basically into the three
categories which are Primary secondary and tertiary sector on the basis of which we can
analyze the contributions made by superannuation. (Holtzman, 2013) The main focus of the
tertiary sector employees should be to try and make best possible advice in relation to the

investment that they are going to make by the use of superannuation fund. A small amount of
tax is also collected which can be used by the government afterward in order to improve the
social security systems, thus helping the employees to attain a peaceful environment for his
retirement. There are basically two types of plan in which time employee can invest his
collected fund which is - defined benefit plan and investments choice plan (Horngren, 2012).
The investment choice plan is a type of benefit plan in which the power is provided to the
Employees to choose the type of portfolio in which they want to invest their collected funds.
The employee should have an appetite for such kind of investment programs because it is not
necessary that the employee will only get benefits as he may also incur losses in this kind of
programs. There are various schemes in which an employee can invest his finds which are
equity share funds, stable funds, and trustee’s selection fund. (Kieso, 2014)The decision in
relation to the scheme which the employee chooses to invest his money should be taken after
clear analysis of all the risk and returns that may prevail upon the employee in near future.
The defined benefit plan can be explained as an investment opportunity that gives the
employee a fixed amount or rate of interest on the savings that have been determined on the
basis of many factors that are affecting the environment after the completion of is working
tenure. There are no risk factors that may affect this kind of schemes. (Mattessich, 2016) The
main factors of the environment and employee that are taken into factors by deciding the rate
of return our age, average salary, working tenure, etc. The employees and made aware of the
return that they will be provided at the time of their retirement or withdrawal from the firm.
Relevant factors that are needed to be taken into account
All the factors that are getting affected by the environmental risks should be analyzed
carefully before the employee ascertain the scheme in which he is going to invest his
superannuation contributions. (McLaney & Adril, 2016) The employees, who are not in the
condition to take any kind of risk with their money, should try and invest their contributions
in the defined benefit plan so that they get returns on their investment without any prevailing
risks. If the employees are ready to take race they can choose the investment choice plan and
make assumptions by the analysis of the market to find the scheme and which they are going
to invest their contributions. A proper analysis of these kinds of schemes is very necessary if
the employee wants to get returns on his contribution. Any type of misjudging of the schemes
will lead employees to invest their money in unprofitable portfolios and thus make them
suffer losses. (Noreen, 2015) Therefore the decision of the choice of a plan should only be

made after the analysis of all the present environmental conditions that may prevail inside or
outside the organization and also the fact about the amount of returns that the employee will
be getting on his invested contributions should be analyzed carefully.
The concept of time value of money
TVM or the time value of money is a concept which states that the present worth of the
money is not identical to the same worth of money in future. (Rayman, 2009) The principle
of Finance clearly states that the money should be invested in any of the portfolios and thus
the value of the money can be increased by earning interest. If the money is kept ideal, then
the value or worth of the money is said to decrease with time. And the contributions that are
made by the employees in order to make savings should be invested in the different type of
portfolios or schemes which will help them to earn high rate of returns when the maturity or
withdrawal of their employment is experienced. The collection of funds using the
superannuation can strategy is a very long process and hence the money collected should be
invested in a type of portfolio scheme which will be providing them with high returns at the
time of their retirement. (Rosenfield, 2009) Also, the concept of time is money should be
taken into fact file making any kind of decision. The dynamicity of the market never lets the
worth of money to remain same and hence making it important for the employees to invest
their superannuation contributions in any type of investment scheme so that they can obtain
maximum output at the time of their retirement. Thus we can say that the concept of time
value of money is very important while conducting the decision-making process in any of the
financing activities.
Recommendations
It is very hard for the employees to ascertain in which kind of investment scheme they are in
going to invest their superannuation contributions because of the dynamicity of the market
conditions. So it is very important for the employees to take help of professionals while
making any decisions regarding the choice of plan in which they are going to invest their
superannuation contributions. It has been observed in the past that employees who have
invested their money into blue-chip companies have incurred losses and people who have
invested their money in vulnerable shares have incurred huge profits. Thus the choice of the
strategy in which the funds will be invested is very hard to ascertain because of the different
type of environmental changes which are affecting the worth of money. While making
decisions in regard to the superannuation fund the finance manager plays a very important

role as he or she may have the power to invest the money of the employees so that it is not
kept ideal. At last the risks and the taxes that may prevail on the contributions made by the
employees should also be taken into consideration before making an investment in any types
of portfolio.
Conclusion
The money that has been collected by the collection of the superannuation fund by the
employees will only be profitable if they are invested in a proper manner so that they can
earn outputs and returns on it. The choices between the different types of plans are a major
concern for the investment strategies because a clear analysis should be made about the needs
of the employees in order to make such decisions. TVM should also be a very important
factor at the time of making an investment because of the degrading value of money with a
change in time. Also, the scheme in which the money is going to be invested should be
analyzed carefully as the risks and drawbacks may affect the amount which will be attained
as profit and losses by the employees.

Bibliography
Boyd, W. K. (2013). Cost Accounting For Dummies. Hoboken: Wiley.
Bragg, S. M. (2016). GAAP Guidebook. [S.I]: AccountingTools, Inc.
Datar, M. S. (2015). Cost accounting. Boston: Pearson.
Datar, S. (2016). Horngren's Cost Accounting: A Managerial Emphasis. Hoboken: Wiley.
Holtzman, M. (2013). Managerial Accounting For Dummies. Hoboken, NJ: Wiley.
Horngren, C. (2012). Cost accounting. Upper Saddle River, N.J.: Pearson/Prentice Hall.
Kieso, D. E. (2014). 2014 FASB Update Intermediate Accounting. New York: Wiley.
Mattessich, R. (2016). Reality and accounting. [S.I.]: Routledge.
McLaney, E., & Adril, D. P. (2016). Accounting and Finance: An Introduction. United Kingdom:
Pearson.
Noreen, E. (2015). The theory of constraints and its implications for management accounting. Great
Barrington, MA: North River Press.
Rayman, A. (2009). Accounting Standards: True or False? . New York (Estados Unidos): Routledge.
Rosenfield, P. (2009). Contemporary Issues in Financial Reporting: A User-Oriented Approach
(Routledge New Works in Accounting History). [S.I.]: Wiley.