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A superannuation pension is a type of pension plan that provides some sort of ongoing payment to the pensioner after retirement. The term is commonly used in Australia, the UK, and other countries around the world, and the exact process of creating the fund from when these funds are disbursed will vary. The idea behind any type of superannuation pension is to provide income to retired employees that helps them to maintain an equitable lifestyle.
The money used to issue superannuation pension payments to qualified former employees usually comes from what is known as a superannuation fund. This fund is usually built up over the years by a combination of payments made by the employer. The amount of the superannuation pension tendered to a given employee will usually depend on the number of years of service provided to the company, as well as the amount of the wages or salary that the employee earned on average over those years. While the monthly payment is normally not equal to the actual wages or salary earned at the time of retirement, it is not unusual for the payments to be as much as 80% of that pre-retirement figure.
In some plans, employees also have the option to pay into the pension fund. When this is the case, the amount of the superannuation pension that is ultimately received is usually a little higher in terms of the monthly disbursements. Company policies as well as governmental regulations will often limit the amount of money that employees may contribute on an annual basis into these funds, and may also limit the amount of matching funds that employers may contribute per employee. Depending on tax laws in the nation in which the employee resides, there may be tax breaks on those contributions, with the retiree paying taxes on the disbursements as they are received.
A superannuation pension plan may also be provided by a national or federal government as well as by an employee. A number of nations currently collect some sort of taxes on employee wages and salaries that are then earmarked for use in funding the pension program, with those programs often authorized to invest the collected funds as a means of creating additional wealth for the plan. When this is the case, participants in the plan often receive annual updates, showing the reported gross income figures for years past and a breakdown of what type of pension payments would be received if the employee chose to retire at one of several different ages. This type of detail can often help individuals decide if they can afford to go with early retirement at 55 or 62, or if there is a need to work up to 65 or even 70 years of age.