What is a retirement savings account?
Retirement savings accounts are not very common these days, however there are still a few available. Here's how retirement savings accounts work and how they compare to regular super funds.
We’re reader-supported and may be paid when you visit links to partner sites. We don’t compare all products in the market, but we’re working on it!
Retirement savings accounts are becoming increasingly rare, as the majority of Australians now open a superannuation account when they join the workforce. However, there are still some retirement savings accounts in the market, so this guide will outline how they work and how they compare to super funds.
What is a retirement savings account?
A retirement savings account is a type of account provided by a bank, building society, credit union or life insurance company. It's run in a similar way to a regular savings accounts, however it's designed for your retirement savings and you can't access the money until you're retired.
Typically a retirement savings account awards a higher rate of interest in comparison to a regular savings account, as the purpose of the account is to help you save for retirement. Once you've met a condition of release or reach your preservation age, you can start drawing down on your fund.
Not many banks offer retirement savings accounts anymore, since superannuation funds became compulsory for employees.
How is a retirement savings account different to a super fund?
Although they aren't superannuation accounts, retirement savings accounts do fall within superannuation regulations and the tax advantages that come with that. However with a retirement savings account even your tax-free portion can earn interest.
A super standard balanced or growth super fund will usually offer far higher returns than a retirement savings account. This is because super funds invest a large portion of your balance into shares, which are high return but also much higher risk.
Unlike the money in your super fund which is subject to the market performance, the money in your retirement savings account is covered by the bank guarantee scheme. While these accounts do sit within the superannuation regulations, they don't follow a trust structure, making it different from a superannuation fund.
Which bank's offer retirement savings accounts?
According to APRA, these banks still offer retirement savings accounts (as of July 2020). Some aren't open to new customers.
- Commonwealth Bank of Australia (closed to new customers)
- Qudos Mutual
- Queensland Country Credit Union
- Police and Nurses Limited
- Police Financial Services Limited(closed to new customers)
- Defence Bank Limited
- Heritage Bank Limited
- Australian Military Bank Ltd
What to look for in a retirement savings account
As we said earlier, there are very few retirement savings accounts available today. If you do want to open one, look for the following:
Competitive interest rate
A higher rate of interest will help your retirement savings work harder. This is especially true if it's compounded daily. However even with a high interest rate on your retirement savings account, you'll likely earn much better returns with a superannuation fund that is actively investing your balance.
No fees
To ensure that every dollar you deposit helps you save for your retirement, you should look for a retirement savings account that changes no account keeping fees and no annual fees.
Account access
Your retirement savings account provider should let you view your account details online or via a mobile banking app. Some service providers offer online tools that allow users to search for their lost super, which they can then transfer to their new accounts.
What are the pros and cons of using a retirement savings account?
The pros
- Less risk. A retirement savings account has much less risk than investing your super into a standard super fund.
- Tax advantages. A retirement savings account offers the same tax advantages as a superannuation account.
- No fees. Most retirement savings accounts do not charge any joining fees, ongoing account keeping fees, administration fees and commissions.
The cons
- Not that common anymore. Retirement savings accounts were initially introduced as a way to help Australians save for retirement, before everyone had a superannuation account. These accounts are becoming increasingly more redundant as the superannuation system matures.
- Low returns. These accounts will generate much lower returns on your money than other superannuation products. Even a conservative super fund option would likely deliver much better returns than a retirement savings account.
Tips for using a retirement savings account
Read the terms and conditions
Make sure you go through the product disclosure statement (PDS) before signing up for any retirement savings account. The summary page of this document should give you a clear indication of any applicable fees and charges.
Compare against super funds
Before opening a retirement savings account, compare similar accounts in the market to ensure you're finding the most suitable account for your needs. It's also important to compare these accounts against standard superannuation accounts. In particular, you can gauge how competitive the interest rate on your retirement savings account is when compared to the sorts of returns super funds typically deliver to their members. It is worth noting, however, that the return on funds invested into a standard super account is in no way guaranteed. Ultimately, it's up to you to decide the which strategy works best for you and your retirement plans.
Have you considered a super fund instead?
1 - 16 of 37
More guides on Finder
-
Worst Super Funds
Here’s a current list of the worst-performing super funds in Australia and steps for how to switch to a better fund.
-
Kogan Super | Performance, features and fees
Kogan Super offers 5 different investment options that each have low fees and mostly follow an indexed investment approach.
-
Retirement planning in Australia
This guide explains how to devise a superannuation strategy that works for you and how to plan for further income in old age, and gives you tips for pulling it all together.
-
Superhero Super: How to invest your super with Superhero
Superhero Super offers two different investment options which both give members more control over how their super is invested. Here's how the super account works.
-
What is superannuation?
Superannuation is the main way of saving for your retirement in Australia. Your superannuation is one big investment portfolio in your name that's managed for you by your super fund.
-
Superannuation statistics 2022
There are 23.2 million super accounts in Australia with assets totaling $3.4 trillion. Find out the latest superannuation statistics.
-
International Women’s Day Report 2021
Finder's International Women's Day report explores the personal finance gap between men and women and the key drivers of financial inequality.
-
Finder Investing Report
Finder's Investing Report 2021 discusses what this year has in store for shares, property, micro-investing and superannuation. Access the report here.
Ask an Expert
Which banks/institutes still have retirement savings accounts?
Hi Petra,
Thank you for reaching out to Finder.
You may refer to our list of savings accounts with compound interest. The page provides a list of banks that may assist you further in saving for your retirement. You can also check our guide about retirement savings accounts to know your other options. Hope this helps!
Cheers,
Reggie
which institutions offer Centrelink compliant Pensioner Deeming Accounts?
Hi Rodo,
Thanks for getting in touch!
We have a page that shows pensioner deeming accounts. The page has a table you can use to find the account that suits you. Hope this was helpful.
Best,
Nikki
Can a young worker with part-time employment arrange for Employer contributions to be remitted to a Retirement Savings Account? This would be to save administration costs which otherwise consume all the contributions over a year. If the answer is yes can the balance in the RSA be transferred later to a Super Fund when employment become full time, contributions more meaningful and the need for insurance more of an issue.
Hi Neil,
Thanks for your message and for visiting Finder.
To answer your question, – Yes, a young worker with part-time work can start saving for a retirement savings account and later on transfer to a super fund when the employee becomes full time.
RSA’s are in line with superannuation regulations and their tax advantages. Even your tax-free portion can earn interest, helping you through retirement. Once you’ve met a condition of release, you can organize for your super fund balance to be transferred to a retirement savings account, where you can start drawing down on your fund. A good RSA should ease your transition into retirement and it should provide you with a regular income when you retire.
Hope this helps! Feel free to message us anytime should you have further questions.
Cheers,
Nikki
Apart from a superannuation fund, are there any other options to create a private pension?
Hi John,
Thank you for your inquiry.
Regarding that matter, you may want to check directly with the Australian Government Department of Human Services for your options.
I hope this information has helped.
Cheers,
Harold
My only super account was closed due to bad mail redirection and the balance was sent to the ato. I contacted the ato and they said I should open a retirement savings account which has less fees. I don’t know much about super and rsa’s as I have spent most of my life unable to work much. What should I do to get this small amount 2000 as I now have a terminal disease. and need this money. The ato says they wont release it until I am 65 but I am not likely to make it to that age
Hi Juliet,
Sorry to hear about your situation.
If your account was closed, it may have been transferred to another super fund that holds unclaimed super or transferred to the ATO.
You can log into myGov via the ATO website to find the super and organise to transfer it to your account. Otherwise, our guide on finding unclaimed super may also be of help.
Regarding a retirement savings account, it works like a savings account but generally with a higher rate of interest. You can transfer your super into this account.
Hope this has helped.
Clarizza