This is last part 4 of the 4 parts series about the assets we own.

What assets we own – Part 1 Australian property

What assets we own – Part 2 Our properties

What assets we own – Part 3 Our ETFs

What assets we own – Part 4 Our pension funds (Superfunds) investment

Last portion of our investments is in our superannuation pension fund. In Australia most employers contribute to employee pension fund 9.5% of their wages. Some, usually public employers more. Most of the pension funds are now defined contribution as opposed to defined benefit, where fund guaranteed you certain future pension income based on your contributions, employer and years of employment. These days most of the pension funds here just manage your investments and you bear risks linked to the investment performance. If the investment tanks your pension would go down too. Most of the Australians will be allowed to access their funds in super at the age of 60. Contributions and profits in super are taxed only 15% up to certain limits, which makes it mostly tax advantageous compared to managed funds outside super.

In my personal view, Australian pension system is excellent and one of the best in the world, somewhere close to Netherlands. Forced saving system, tax advantages, large amount of financial inflows available for investment to support the economy, large amount of saved financial assets helping to stabilise the economy, forced financial education of future pensioners who are responsible for their pension assets, system promoting self-sufficiency in pension to limit the cost of pensioner being paid by state. I find pension system saving assets for future pensions economically conservative and superior compared to standard pension systems, where current pensions are covered by current tax inflows. Of course I deeply believe in good government safety net for pensioners who were unlucky or not capable to accumulate sufficient assets for their retirement pension.

Both, me and my wife we were lucky to work for Universities which paid their employees on the top of their salaries 17% super contributions (standard is now 9.5%). That high employer contributions and good market performance allowed us to have same amount in super at the age of 45 as most of the retirees at 60. And we have never been too far away from average Australian salaries.

There are quite a few choices you can make in our superfund where to invest money. Including alternatives, real estate trusts, conservative bonds and various premix investments. We have stayed mostly in Balanced option where your funds are invested about 70/30% shares/bonds, cash. Shares’ portion is invested in Australian shares (not index but closely follows index) at 38%, international shares 22%, property 5%, infrastructure and private equity 5%.

I have noticed that many US based bloggers have better control over their investment in their pension fund, where they can use Vanguard ETFs and various premix investment which would be more cost effective. It is not that common here down under so far. I could have set up self managed superfund but potential hassle with admin and audit plus realising the capital gains while transferring the assets is not something I would like to go through now. Also our industry not for profit superfund is one of the better pension funds on the Australian market.

I will have access to my money only in 15 years (unless the rules are not changed which happens quite commonly) so there is a plenty of time for growth. My wife is a little bit older than me which means she might have an access bit earlier. That means we should soon start thinking about developing system how to maximise our tax sheltered investments. So far I have not topped up employer’s contributions, but time is coming when I should start doing so. I have always prized flexibility over maximum efficiency of our investments and if you are in your 30s money is not accessible for you next 3 decades, though it might have great performance efficiency. Now as we are coming close to 50s we will be considering new strategies how to maximise our investments in our superfunds.

These are our family income generating assets. Please note that I include also our residence on Sunshine Coast as an asset based on following reasons. Our residence generates income from the second house on the property, we are ready to let out or sell if needed and downsize. Or move within or outside Australia. There are always many things you can do before you get yourself another ordinary job. Of course unless you get great job you will love. That’s why owning assets is so great. My main wake up call was to stop buying consumer garbage pushed on poor workers by marketing machinery and start buying investment assets which pay you. That would be about 15 years ago, but I am not sure.

Please note our investing is driven by many things which are not always familiar to US based reader. Most of Australians do not need separate funds for health care which is generally free here. There is asset and income tested pension for all citizens if everything else goes wrong. We do not have any student debt as we have paid our Australian degrees cash (and my first degree in Prague was free). And though we have started with zero about 20 years ago, we did not have negative net wealth. We did not have any other common debts as car, credit card or consumer loans.

Good luck and happy to hear your thoughts.

What assets we own – Part 1 Australian property

What assets we own – Part 2 Our properties

What assets we own – Part 3 Our ETFs

What assets we own – Part 4 Our pension funds (Superfunds) investment