The slightly odd question you should be asking your super fund

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If you’re about to retire, there’s a slightly odd question that is worth asking your super fund: Are you about to pay me a retirement bonus?

For years super funds have competed on investment returns, fees and insurance. Now, as more and more Australians switch from saving to living off their super, another point of difference is emerging: many funds are offering a one-off payment when you move from an accumulation into a retirement account.

They come with all sorts of catchy names, such as a retirement bonus, a pension bonus, a retirement reward or a balance booster, but the underlying idea is much the same.

So where does the bonus come from? And how do you know if you’ll get one?

This is not a government payment, or your super fund handing you a “welcome to retirement” gift. It’s money that your super fund has preserved over the years to pay tax that they’ll no longer need to pay to the government once you move your funds into the tax-free retirement phase.

Let me explain. While you’re building your super in an accumulation account, the fund pays tax on investment earnings – generally up to 15 per cent. And if it invests in shares or property that have increased in value and have not yet been sold, it might also set aside money to cover the capital gains tax that could be due later.

Retirement bonuses have become a hot retention tool, and something you need to be aware of as you make the big move into retirement.

But when you move your money into the retirement phase account and start drawing an........

© The Age