Superannuation: Factors to Consider for Investment Choice and Defined Benefit Plans

Superannuation
Executive Summary
Funding to superannuation is a major strategy because it helps the workers to multiply the
savings. It is a prudent approach because it will lead to benefits in the future. However, the
investment must be done in a prudent manner. In this report, the major emphasis will be on
the major factors that need to be taken into consideration by the tertiary sector employees
whether to place the superannuation contribution in the Defined benefit plan or the
investment choice plan. Further, various issues that surrounds the investment such as time
value of money, taxes are discussed.
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Superannuation
Contents
Introduction...........................................................................................................................................2
Superannuation contributions...............................................................................................................2
Relevant Factors that are to be taken into account...............................................................................4
The concept of time value of money.....................................................................................................5
Recommendation..................................................................................................................................6
Conclusion.............................................................................................................................................6
References.............................................................................................................................................8
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Superannuation
Introduction
The use of the contribution made for the superannuation has been a very keen strategy which
has indulged the workers to make saving and then use those funds in the future to invest those
funds in some kind of scheme which will allow them to multiply their savings. There should
be an analysis made before investing money of the superannuation funds because in the
tertiary sector employment there are several different types of factors which are affecting the
plan whether to invest in the investment choice or defined benefit plans. Also, time plays a
very important role in these types of cases which is thus affecting the decision making
process. If the investors will make a detailed analysis of the market, then they will be able to
determine the prices of the assets or stocks which can be helpful while making decisions
relating to the investment strategies (Power, 2014). These types of analysis mention the roles
of the fund managers in the process of deciding portfolios.
Superannuation contributions
The main purpose of contributions of the superannuation funds is to indulge the employees in
the habit of saving and thus making them invest the saved amounts in the future so that they
can have a peaceful and healthy retirement. Many of the countries have made the process of
collection of the superannuation funds necessary for the employers in which they collect the
funds on behalf of employees thus making the process mandatory in nature (Laux, 2014).
Because of the mandated rules of collecting the superannuation funds, there has been a huge
increase in the funds collected from the process thus making the role of the financial
institutions to invest the money in a proper factual manner so that it can provide the
individuals with proper returns on their saving investment (Kollmorgen , 2015).
There is three economic sectors primary, secondary and tertiary sector which have been the
relevant part of the economic sections of the superannuation contributions. The main function
of the tertiary employees is to give the employees proper advice for the investments they
need to make and also they play a major role in the implementation of the wisdom in the
productivity of different sectors. Previously the contribution of the funds was restricted to
three percent of the employee’s salary but it has now been increased to nine percent since the
year 2005. The employees indulge in the payment of the funds are also being made to pay a
specified percentage of the investments (Power, 2014). It should be duly noted that the use of
such systems have been promoted in order to mould the social security systems of the
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