Is the 10 year return better? How about the 15 year or 20 year return? 4.76% seems kind of low to me.
Where are you allowed to invest these funds?
This is correct and we can also salary sacrifice (pre-tax) as much as we want but the tax concessions only apply to the first $27,000ish combined employer and salary sacrifice into the account.
For example my marginal tax rate is 32.5% but funds deposited into super are only taxed at 15%. If I was to deposit more than $27,000ish (can’t remember the exatc number) into my super then the amount over $27,000 would be taxed at my marginal rate.
Super is probably the best legal tax reduction method for Australian employees
Unlike Taiwan’s system, there is no guarantee of investment return but this tends to mean better long term returns with some short term losses.
The funds get deposited into an account with a super fund, there are dozens of companies which all invest your money slightly differently and are extremely highly regulated. Some are for profit, some not for profit, you can also have a ‘self managed super fund’ but those are a pain for most people.
You can generally choose which superfund you would like to use but there are exceptions and all employers have a default fund
Most superfund have pre-mixed selections you can choose to invest with and that’s what most people do.
They funds are mostly invested in Australian and International shares but also bonds and property too.
My employer works with a private for-profit superfund with really low fees that works more like a regular share trading platform. I can invest in their pre-mixed option as well as buy shares from the ASX like a regular non-super share trading account. It’s sort of the benefits of a self-managed super fund without the compliance headache. Most people don’t do this though
The government invests the funds not you. I believe that the average return has hovered around 4% since inception. I’m sure Australia is way better. Taiwan is not as rich, the government is very paternalistic and super stingy (partly because taxes are very low by OECD standards).
So from what you’re saying, this is more like a forced savings account and less like an investment account, is that right? I mean, no one‘s really gonna get rich from this type of fund. After you fact in inflation, you probably just earn a couple of points in “interest”
It is an investment account but the legal requirement for a guaranteed ‘return’ forces more conservative investments. If the fund makes an EOY loss the difference comes from general government funds
Also (unlike Australia) there isn’t any competition to encourage better investment returns
This program is not intended to make anyone rich. It’s to make sure that people have at least some resources when they stop working.
Are you taxed in Taiwan on your income from pensions and/or life policies?
I don’t see why. Overseas pensions you mean?
Yes.
As to why, the pay-ins may well have (depending on particular countries fiscal rules) tax breaks or exemption from your source income tax so the pay-outs might be seen as a deferral