In this section we explain the meaning of some commonly used terms in superannuation. To view the definition simply click on the link below.
- Abridged Accounts
A short version of a superannuation fund's financial statements. While it can vary, this phrase usually describes short versions of a fund's Statement of Financial Position and Operating Statement.
- Account Balance
The net benefit in your Superannuation account, normally after any applicable administration fees, taxation, insurance charges etc.
- Accrued Benefit
The accumulated amount in a member's account at a point in time.
- Administration Fee
A fee charged to a member's account to cover the administration of that account.
- Administrator
An individual or organisation which carries out the day to day operations of a superannuation fund. This usually includes keeping all records, paying benefits, issuing account details and dealing with inquiries.
- Allocated Pension
A long term arrangement which provides a retired person with a regular cash flow by paying out an investment in accordance with legislated guidelines. Payments can generally vary between fortnightly, monthly, quarterly or yearly.
- Allocation
The processing of contributions received by an Administrator to record them in a member's account.
- Annualised
The expression of a rate of return for a period other than a year, as an annual equivalent.
- Approved Deposit Fund (ADF)
A savings vehicle into which an SLS can be deposited.
- Asset Allocation
The apportionment of an investment portfolio among different asset classes (shares, bonds, property, cash, international investments) from time to time, in accordance with a superannuation fund's investment policy.
- Asset Class
A broadly defined category of financial assets (eg. international or domestic shares, cash, bonds, etc.)
- Assets
The resources of an organisation or individual, which are held to produce a future income/benefit or capital gain. This may include shares, property, cash, bonds, etc.
- Audit
A process which an organisation or individual conducts to check that they follow minimum internal and external standards and controls.
- Australian Prudential Regulation Authority (APRA)
The Federal Government body, which ensures that Insurance Companies, Superannuation Funds, Banks, Building Societies and Credit Societies follow the law.
- Balanced Fund
A common name for a portfolio that is usually invested in significant proportions of the major asset classes e.g. the Westscheme Trustee's Selection.
- Bank Bill
A Bill of Exchange which has been accepted and/or endorsed by a bank.
- Benchmark
An index or other market measuring system which is used to assess the performance/risk of an investment portfolio.
- Beneficiary
An organisation or person for whose benefit assets are held by another organisation or person. Beneficiaries of a superannuation fund are the members and their dependants.
- Benefit
The amount a member would be entitled to receive on withdrawing from a superannuation fund.
- Bonds
A debt acknowledgement, IOU or similar issued by a borrower; usually a Government or a corporation.
- Capital Guaranteed
An investment which includes some form of guaranteed return of capital.
- Capped
A ceiling of the rate of interest paid on a loan or investment. Sometimes the actual rate can be less than the capped rate, but never more.
- Cash
One of the broad asset classes, invariably with the lowest volatility of the asset classes in an investment portfolio. Usually made up of official or unofficial short-term (less than 12 months) money market instruments, e.g. bank bills, treasury notes.
- Compliance
A check undertaken on a regular basis to ensure internal standards and external legal requirements are complied with.
- Complying Fund
A superannuation fund, which complies within operational standards set out in the SIS (see below) legislation, enabling the fund to receive concessional taxation treatment.
- Concessional Contributions
Contributions made by an employer (including contributions made under a salary sacrifice arrangement) and personal contributions claimed as a tax deduction by a self-employed person.
- Consumer Price Index (CPI)
The measure of changes in the value of a 'basket' of goods and services, usually reported on a quarterly basis by the Australian Bureau of Statistics.
- Contributions - Employer
Superannuation payments made to a superannuation fund by an employer for its employees.
- Contributions - Member
Superannuation payments paid into a superannuation fund by a member, usually as a Personal Contribution (after-tax) but also see Salary Sacrifice.
- Crediting Rate
The rate at which a fund's earnings are distributed to members' accounts.
- Currency
Units of exchange that must be used to purchase goods and services in a particular country, e.g. Australian dollars in Australia.
- Custodian
An organisation or individual, which holds and safeguards the assets of another.
- Death Benefit
The payment made by a superannuation fund to the beneficiaries of a deceased member. This payment is made up of the deceased member's accrued benefit and any insurance cover payable on death.
- Deferred Annuity
An arrangement whereby you invest a lump sum or SLS (see below) before retirement and at a later date, usually after you retire, you start receiving periodic payments as an income stream.
- Derivatives
Investments which derive their value from other assets, e.g. futures, options, warrants and forward rate agreements.
- Development Capital
Investments in small unlisted companies. These companies have a good track record and show potential to generate even better returns with more financial support.
- Director Trustee
Director of a corporation that acts as the trustee of a superannuation fund. Sometimes also called a Trustee Director.
- Diversified
The spreading of investments over a number of different asset classes in order to reduce risk.
- Early Release
The payment of a benefit or RSA (see below) balance to a person before they reach retirement age. From 1 July 1997 release may be made due to Severe Financial Hardship as defined by the Federal Government or on Compassionate Grounds approved by APRA.
- Earnings
A superannuation fund's earnings are its revenue from interest, capital gains, dividends, bonuses, etc. less applicable expenses.
- Emerging Markets
The financial markets of developing countries, many of which are experiencing significant and sustained growth.
- Futures
An obligation to make or take delivery of a specified quantity and quality of an underlying asset at a particular time in the future, and at a price that was agreed when the contract was made.
- Hedging
The practice of undertaking one investment activity in order to protect against loss in another.
- Indemnity Insurance
Sometimes known as Trustees Liability insurance. It offers protection to the Trustees of a superannuation fund against claims arising from negligence, error or breach of trust. It does not cover fraudulent or dishonest acts of the Trustees.
- Index
A statistical representation of the overall movement in an asset class.
- Indexed Fund
A portfolio that is structured to achieve the returns of the indices on which it is based.
- Industry Superannuation Fund
These funds are standard, multi-employer sponsored funds with equal representation on their Trustee Boards of participating employers and members.
- Inflation
Commonly used term that describes the increase in the prices of goods and services in an economy. Also see CPI.
- Insurance - Additional Death & TPD
You can apply to purchase any number of units of insurance cover to get the amount of cover you require. However, you must provide health evidence to Westscheme's insurer in your application.
- Insurance - Death
An insurance policy that promises payment to beneficiaries if the person covered dies.
- Insurance - Mortgage Based
This insurance cover is the same as regular Additional Death & TPD insurance except you don't need to provide the same detailed medical information. Westscheme must receive your application within 60 days of your home loan settling.
- Insurance - Total & Permanent Disability
An insurance policy which promises payment to the person covered if he or she becomes totally and permanently disabled.
- Interest
The return paid by an investee/borrower or earned by an investor/lender on amounts that have been invested or loaned. It can be calculated and/or set as compound interest or simple interest.
- Investment Advisor
A person or organisation that advises others on investments. Investment advice should only be taken from a licensed investment advisor.
- Investment Choice
The availability to members of superannuation funds of a variety of investment portfolio options and combinations thereof, in which they may choose to invest their account balances and future contributions.
- Investment Managers
An individual or company that manages the investments of others.
- Investment Objective
The return that Investment Managers, Trustees, individuals and others aim to achieve through investing their portfolios.
- Liabilities
Amounts which individuals and organisations are obliged to pay to others. Usually the principal liabilities of a superannuation fund are the benefits it has to pay its members or their beneficiaries.
- Managed Portfolio
A collection of assets of one or more classes managed by an investment manager.
- Maximise Returns
A term used where an investment manager or trustee sets an investment strategy, which aims to achieve the maximum return possible on a portfolio for a given level of risk.
- Member Protection
Where a member of a super fund/RSA (see below) with an account balance of less than $1,000 is protected from paying fees (other than applicable Insurance Premiums and Contributions Tax) greater than the net investment performance credited to their account
- Negative Return
When a loss is incurred on an investment.
- Net Investment Performance
Net investment performance is the term used in Westscheme publications to describe both gains (positive) and losses (negative), after fees and applicable taxes, allocated to members' accounts.
- Non Preserved
The component of some members' accounts with superannuation funds/RSAs (see below) that can be cashed in subject to certain events occurring, e.g. changing employment, before those members reach Preservation Age.
- Non-Concessional Contributions
Contributions made from a person's after-tax income including any contributions made by your spouse to your superannuation account. 'Non-concessional contributions', 'post-tax contributions' and 'after-tax contributions' are often used interchangeably.
- Ordinary Time Earnings (OTE)
New rules, effective 1 July 2009 will change the way OTE are defined. To read more visit the What's New section of this website, or contact a Client Service Manager.
- Personal Contributions
Contributions paid into a superannuation fund/RSA by a member, from their after tax income.
- Portability
The ability to retain your superannuation fund when you change employers or to transfer your account balance from the fund used by your previous employer to the fund used by your current employer. Westscheme members' accounts are portable.
- Portfolio
A collection of assets in one or more classes.
- Preservation
The legislated provision that prohibits withdrawal of certain superannuation components until a member reaches Preservation Age. Early release of benefits to a member due to severe financial hardship or on specified compassionate grounds is permitted.
- Property
One of the major asset classes. Classified as a Growth Asset.
- Regulated Superannuation Fund
A fund receives tax concessions if it is a Regulated Superannuation Fund under the SIS (see below) legislation and operates under those provisions.
- Reserves
A fund's earnings which are not allocated to members' accounts when net investment performance is applied. Usually used to 'smooth' the returns to members.
- Retirement
Departure from the workforce. A person who permanently retires after Preservation Age, is permitted to withdraw his or her superannuation benefits. A retired person who is over 65 years of age may also be entitled to a Social Security Age Pension.
- Retirement Savings Account
A capital guaranteed, low fee, portable retirement savings product provided by banks, credit unions, building societies, and life insurance companies. Widely regarded as inappropriate for long-term superannuation savings.
- Revenue
The flow of cash or other income. For a superannuation fund these are member and employer contributions, and investment and other income.
- Risk
Conventionally the chance of making a loss on an investment. However, in the investment world it is the probability of the actual return on an investment being different to the expected return.
- Rolling Average
The averaging of an investment portfolio's return over moving periods (of normally 3 years or more) into its annual equivalent. Sometimes also referred to as 'moving average'.
- Rollover
The transfer of a benefit or SLS (see below) between superannuation funds, Deferred Annuities or Approved Deposit Funds.
- Salary Sacrifice
The portion of pre-tax salary that an employee forgoes to access an alternative benefit from their employer such as additional superannuation contributions, a car, expense allowances, etc.
- Severe Financial Hardship
For severe financial hardship as defined by the Federal Government, contact Westscheme Administration on 1800 198 327 or 08 9278 7070.
- Shares
A security issued by a company which gives the purchaser (share holder) certain rights to participate in how it is run, receive a portion of its profits as dividends and share in its assets on wind up. Shares are also called Equities or Stocks.
- Smoothing
An adjustment of investment returns to achieve a less volatile crediting rate usually by using Reserves.
- Spouse Account
A facility introduced in 1998 to allow individuals to make superannuation contributions for their spouses and receive a tax rebate in certain circumstances.
- Superannuation
A long-term savings arrangement, which operates primarily to provide income for retirement. Superannuation savings are usually made through trust funds, and if these funds meet prescribed Government standards, they are eligible for tax concessions.
- Superannuation Complaints Tribunal (SCT)
A tribunal set up by the Federal Government to deal with complaints regarding decisions made by superannuation funds. Members must first use their fund's Complaints Resolution Procedure before approaching the SCT.
- Superannuation Guarantee (SG)
Introduced by the Federal Government on 1 July 1992 as the minimum superannuation contribution that an employer is required to pay for an employee to a complying fund. Employers are liable to a penalty SG Charge if they do not comply.
- Superannuation Industry (Supervision) Legislation (SIS)
Commonwealth laws that prescribe prudential standards for the superannuation industry and regulate its operations. The Australian Prudential Regulation Authority (APRA) is responsible for ensuring that industry participants comply with this legislation.
- Superannuation Lump Sum (SLS)
A benefit payment taken as a lump sum amount from a superannuation fund, a retirement savings account or ADF rather than in the form of an income stream.
- Tax Rebate
A reduction in tax liability allowed in certain circumstances to a taxpayer by the ATO. Also known as a tax offset (usually defined as a percentage). Has the same value to all eligible taxpayers and is not linked to a taxpayer's marginal tax rate.
- Transfer
The transfer of a member's account from one superannuation fund, RSA or Approved Deposit Fund to another. See also rollover.
- Trust Deed
The name given to the legal document which sets out the rules that govern the operations of a superannuation fund. In addition to its Trust Deed, a superannuation fund must also comply with applicable legislation, e.g. SIS.
- Trustee
Persons, usually the directors of the company which acts as the trustee of a superannuation fund, who are legally responsible for that fund in accordance with applicable legislation and its Trust Deed. See also Director Trustee.
- Unallocated
Member and employer contributions received by a superannuation fund remain unallocated until they are duly recorded in the accounts of the members concerned.
- Unit Trust
A collective product in which small investors pool their investments by buying units in a trust. The pool is then invested in one or more asset classes by a manager.
- Vesting
The process by which the entitlement to a benefit is transferred to a member. A Westscheme benefit is fully vested in the member concerned at all times. In the past, in many superannuation funds, vesting occurred only gradually over many years.
- Withdraw
To take a Benefit from a superannuation fund on retirement or as an early release, or as a Rollover.