Collection of funds using the superannuation method an organizational pension program also has been taken by the government into force so that the employees can be benefited by it. It can also be referred to as a company’s pension plan. Funds that are deposited by an employee for the superannuation contribution will be an area of any type of taxes and will be collected until the time the employee is retired or withdraws him from the job. (Boyd, 2013) Also by the use of the superannuation strategies in the organization, there has been knowledge of Savings and investment indulged in the mind of the employees. There is a much different type of factors which should be analyzed by the tertiary sector employees before investing their money of savings collected from the superannuation contributions. The employees are given the choice of plans between investment choice plan and defined benefit plan. (Bragg, 2016) So the employee should analyze the time value factors and then make investments in the scheme or strategy he would like to invest. The proper analysis will help them to retain sufficient earnings on their savings thus making this profitable for them.
Superannuation is the funds which are collected by the employees as a part of their salary which is further used to invest in different type of schemes that can employees to earn high rate of Returns. This high rate of return and their savings combined will also help them to have a proper Lifestyle after their retirement (Datar M. S., 2015). The collection of the superannuation contribution has been made mandatory by many of the countries. It was previously in July 2014 the employees why said to provide 9.5% of their salaries as part of superannuation contributions which have been said to increase on 1st July 2018 to 10% percent. Also, an increment of 0.5% annually should also be done until the year 2022 and tell the mark of 12% is achieved. (Datar S. , 2016)
The money which is collected by the use of superannuation contribution is given to the Financial Institutions which can help them to invest money is and proper portfolios which will give them a high rate of returns in near future.
The economic sectors of the environment have been divided basically into the three categories which are Primary secondary and tertiary sector on the basis of which we can analyze the contributions made by superannuation. (Holtzman, 2013) The main focus of the tertiary sector employees should be to try and make best possible advice in relation to the investment that they are going to make by the use of superannuation fund. A small amount of tax is also collected which can be used by the government afterward in order to improve the social security systems, thus helping the employees to attain a peaceful environment for his retirement. There are basically two types of plan in which time employee can invest his collected fund which is – defined benefit plan and investments choice plan (Horngren, 2012).
The investment choice plan is a type of benefit plan in which the power is provided to the Employees to choose the type of portfolio in which they want to invest their collected funds. The employee should have an appetite for such kind of investment programs because it is not necessary that the employee will only get benefits as he may also incur losses in this kind of programs. There are various schemes in which an employee can invest his finds which are equity share funds, stable funds, and trustee’s selection fund. (Kieso, 2014)The decision in relation to the scheme which the employee chooses to invest his money should be taken after clear analysis of all the risk and returns that may prevail upon the employee in near future.
The defined benefit plan can be explained as an investment opportunity that gives the employee a fixed amount or rate of interest on the savings that have been determined on the basis of many factors that are affecting the environment after the completion of is working tenure. There are no risk factors that may affect this kind of schemes. (Mattessich, 2016) The main factors of the environment and employee that are taken into factors by deciding the rate of return our age, average salary, working tenure, etc. The employees and made aware of the return that they will be provided at the time of their retirement or withdrawal from the firm.
All the factors that are getting affected by the environmental risks should be analyzed carefully before the employee ascertain the scheme in which he is going to invest his superannuation contributions. (McLaney & Adril, 2016) The employees, who are not in the condition to take any kind of risk with their money, should try and invest their contributions in the defined benefit plan so that they get returns on their investment without any prevailing risks. If the employees are ready to take race they can choose the investment choice plan and make assumptions by the analysis of the market to find the scheme and which they are going to invest their contributions. A proper analysis of these kinds of schemes is very necessary if the employee wants to get returns on his contribution. Any type of misjudging of the schemes will lead employees to invest their money in unprofitable portfolios and thus make them suffer losses. (Noreen, 2015) Therefore the decision of the choice of a plan should only be made after the analysis of all the present environmental conditions that may prevail inside or outside the organization and also the fact about the amount of returns that the employee will be getting on his invested contributions should be analyzed carefully.
TVM or the time value of money is a concept which states that the present worth of the money is not identical to the same worth of money in future. (Rayman, 2009) The principle of Finance clearly states that the money should be invested in any of the portfolios and thus the value of the money can be increased by earning interest. If the money is kept ideal, then the value or worth of the money is said to decrease with time. And the contributions that are made by the employees in order to make savings should be invested in the different type of portfolios or schemes which will help them to earn high rate of returns when the maturity or withdrawal of their employment is experienced. The collection of funds using the superannuation can strategy is a very long process and hence the money collected should be invested in a type of portfolio scheme which will be providing them with high returns at the time of their retirement. (Rosenfield, 2009) Also, the concept of time is money should be taken into fact file making any kind of decision. The dynamicity of the market never lets the worth of money to remain same and hence making it important for the employees to invest their superannuation contributions in any type of investment scheme so that they can obtain maximum output at the time of their retirement. Thus we can say that the concept of time value of money is very important while conducting the decision-making process in any of the financing activities.
It is very hard for the employees to ascertain in which kind of investment scheme they are in going to invest their superannuation contributions because of the dynamicity of the market conditions. So it is very important for the employees to take help of professionals while making any decisions regarding the choice of plan in which they are going to invest their superannuation contributions. It has been observed in the past that employees who have invested their money into blue-chip companies have incurred losses and people who have invested their money in vulnerable shares have incurred huge profits. Thus the choice of the strategy in which the funds will be invested is very hard to ascertain because of the different type of environmental changes which are affecting the worth of money. While making decisions in regard to the superannuation fund the finance manager plays a very important role as he or she may have the power to invest the money of the employees so that it is not kept ideal. At last the risks and the taxes that may prevail on the contributions made by the employees should also be taken into consideration before making an investment in any types of portfolio.
Conclusion
The money that has been collected by the collection of the superannuation fund by the employees will only be profitable if they are invested in a proper manner so that they can earn outputs and returns on it. The choices between the different types of plans are a major concern for the investment strategies because a clear analysis should be made about the needs of the employees in order to make such decisions. TVM should also be a very important factor at the time of making an investment because of the degrading value of money with a change in time. Also, the scheme in which the money is going to be invested should be analyzed carefully as the risks and drawbacks may affect the amount which will be attained as profit and losses by the employees.
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