Aware Super launches term deposits option

Aware Super members with minimum account balances of $15,000 can now invest a portion of their super directly in term deposits for three, six, nine, or 12 months. 

Previously, the option was only available to members of VicSuper, which merged with Aware Super (formerly First State Super) in 2020.  

Without needing to use an SMSF-style investment platform, members will be able to invest directly in term deposits at rates ranging between 4.85 per cent and 5.25 per cent per annum, the fund said. 

“Term deposits have been growing in popularity as interest rates have increased and, while they won’t suit members who want all their super invested in growth assets, we know many people value the certainty of a fixed rate of return,” observed Aware Super’s group executive for member growth, Steve Travis.

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“Term deposits are also often available through SMSF-style platforms, but these platforms are generally designed for people who want to be particularly hands-on in managing their super and have the time and expertise to do so.

“Our term deposits will also help Australia’s independent financial advisers in delivering exceptional service to their clients, providing a new investment choice to help them meet their clients’ needs.”

The fund added that each term deposit must be a minimum of $5,000 and a maximum of $5 million and it will be invested in National Australia Bank.

Presently, outside the super system, Australians have to pay their marginal tax rates on the interest they receive on term deposits at 34.5¢ in every dollar, including the Medicare levy, for a person earning the average wage and up to 47¢ for someone in the top tax bracket.

Within the super system, interest on term deposits is taxed at a maximum of just 15¢ in the dollar or tax-free for members in the pension phase.

According to Aware Super, at current interest rates, a person earning the average wage who invests $10,000 in a 12-month term deposit through the super fund will earn around $445 in interest after tax, excluding fees and charges. Outside the super system, the same person would earn interest after tax of around $345.

Travis highlighted that the tax concessions in the super system are in place to incentivise and help Australians to save for retirement, easing the burden on taxpayers by reducing demand for the age pension.

He said: “Many people are still unaware how much they can benefit from making use of these concessions.

“There’s a very real risk that a significant group of Australians is saving for retirement in part outside the super system, using bank-issued term deposits to do so, and inadvertently missing out on these benefits.”