In an Australian context (and some others), Superannuation (“Super”) refers to the compulsory pension or retirement savings system. Employers in Australia are required to contribute a certain percentage of an employee’s earnings (the “Superannuation Guarantee”, which is around 10.5% as of mid-2020s and scheduled to gradually rise) into a superannuation fund of the employee’s choice . These funds are typically managed by financial institutions and invested on behalf of employees until retirement, when employees can access their superannuation (usually as a lump sum or income stream, subject to rules). Superannuation in Australia is a cornerstone of retirement planning and is mandatory for most employees (with few exceptions).
Employees can also make voluntary contributions to boost their super. The contributions are generally taxed at a favorable rate (15%) within the fund rather than at the employee’s marginal income tax rate, up to certain limits. For payroll, handling superannuation means calculating the contribution on each eligible wage payment and remitting those contributions to the respective super funds by the quarterly due dates (or more frequently). Failure to pay the correct super contributions can result in penalties for employers (the Superannuation Guarantee Charge).
Many other countries have similar systems but under different names: for instance, in the UK it’s simply called employer pension contributions under auto-enrollment, but “superannuation” is often specifically used in the Australian context and a few others.
Also historically, “superannuation” in some countries referred to public service or defined benefit pension schemes. In general use, superannuation = retirement savings accumulated during working life.
In conversation an Australian might say, “Is my super being paid correctly?”, meaning are their employer contributions going into their retirement account. In sum, Superannuation is the mechanism in Australia for employer-funded retirement savings, a mandatory benefit that ensures individuals have savings for retirement in addition to any public age pension, with significant implications for payroll processing and compliance.
