All About Super Fact Sheet

Transcription

1 All About Super Fact Sheet IFFP News Super still the super saver: As the effects of the worst global economic downturn in 40 years generate a second year of negative returns, super fund members could be forgiven for wondering whether their compulsory and extra contributions to superannuation have delivered all they were hoped to. The double digit returns enjoyed a few years ago may not re-appear for some time, however industry funds have not suffered the drops in performance seen in the retail sector. High levels of diversification into infrastructure, private equity and other unlisted assets have shielded most members from the worst impacts of the slide in share markets. Whilst this may not seem much of a consolation as you open your annual statement, industry funds are still the leading performers in both good times and bad. Long-term super remains a positive It is important to stress that superannuation is a long-term investment designed to span an individual s entire working life. Viewing the returns of the last two years alone provides a very limited report card of true performance. There are many simple steps you can take, particularly if you are over 50 years to build your super and recover some of the ground that has been lost. Members who take the time to contact their fund and seek simple advice, attend an education seminar or meet with a planner to discuss their goals will be better placed as markets start to recover. Super remains one of the most effective means to achieve increased financial security in retirement. Our universal system is amongst the world s best. Perhaps one the most important lessons to be learnt from the recent economic crisis is that taking an active interest in your super should start now, not when you turn 65. Age Pension qualification age to rise Another change suggested in the Federal Budget was the age at which the Age Pension can now be accessed. The qualifying age for the Age Pension and Commonwealth Seniors Health Card may increase to 67 from See below for other age brackets.

2 A change like this would mean you need to have enough extra savings in super to hold you an additional two years before you could even qualify to access the Age Pension. Recent figures released by the Association of Superannuation Funds of Australia (ASFA) have also revealed the importance taking an early interest in your super by calculating the cost of living in both a comfortable and modest lifestyle in retirement. The figures indicate that the Age Pension is not enough to provide retirees with either lifestyle. This demonstrates the importance of why a solid savings/investment base from superannuation is essential to give yourself the best opportunity to have both an enjoyable and comfortable standard of living in retirement. Taxation incentives There are also many tax benefits around superannuation that do not apply to alternative investment options. Contributions made to superannuation funds attract only the concessional rate of tax (usually around 15%), whereas the individual s marginal tax rate (up to 46.5%) would otherwise be used if funds were placed in other investment types such as shares or bonds. Furthermore, the attractive tax treatment of superannuation benefits to individuals aged over 60 is not extended to alternative investments. These advantages demonstrate why super is still an essential and reliable long term investment for living comfortably in retirement. However, the key to successful super investment is appropriate selection of account types and investment options for your stage of life. For more information on superannuation and other retirement options contact your industry fund or an IFFP financial planner on EDITORIAL: 10 years of commission-free advice 2009 marks the 10th Anniversary of Industry Fund Financial Planning (IFFP). In 1999, the decision taken by Industry Fund Services (IFS) and key funds to establish a small planning practice with a fundamental no commissions philosophy went unremarked at the time. A decade later debate still continues in the community over the need to reform the commission based advice systems of the retail sector. In the meantime, IFFP has grown into a national organisation providing a range of planning services to the members of over 25 leading industry and public sector funds. When a member contacts an IFFP planner they know they receive quality, well researched advice based only on their best interests. No hidden fees, commissions or asset-based charges. IFS have long campaigned for change in the provision of advice, to remove conflicts, commissions and improve member benefits across the superannuation sector. With our partner funds we established a planning service to meet those core objectives. Thousands of members and their families have benefited from the IFFP fee-for-service advice model over our first ten years of operation. We are= pleased that the rest of the industry is finally trying to catch up to us. David Haynes General Manager, IFS

3 How the taxman can help you retire with more: Retirement is one of the biggest life changes most of us will ever experience. As it approaches it is not unusual for people to be excited, nervous, confused or a combination of all three. And then there are the really big questions such as what am I going to do with my time? and do I have enough money to retire with? Many of us may still think of retirement as receiving the gold watch and completely leaving paid employment to move in to full retirement one Friday you are commuting to work and on the Monday you are gardening. However, this is really not the case anymore many Australians aged 55 and over are not ready to fully leave the paid workforce they are still active and valued employees. Many are also aware that they have not had sufficient time in the superannuation system to accumulate enough money to fund a comfortable retirement. A more modern and realistic picture of retirement is now called Transitioning to Retirement or TTR, where people access their super and use this to either: >> Slowly reduce their hours and use money from their super income stream (super pension) to make up the difference between what they are earning and what they need to live on, OR >> Continue working full time and significantly increase their current superannuation balance by taking advantage of tax benefits by salary sacrificing larger sums into super and supplementing their income with regular payments from a Super Income Stream. No matter which option you choose it is important that you are maximising your financial situation and ensuring that you do so within the current rules. While the taxman can help increase your super balance using TTR strategies, he will also penalise you if you don t get it right. Playing by the Government s rules There are many taxation and Centrelink guidelines that you need to be aware of. After the March 2009 Federal Budget many of these guidelines changed around the following areas. Qualification for additional benefits Income derived from a TTR product is taxed at the concessional rate for individuals under the age of 60 and is tax free for those who are older. Therefore, opportunities to meet thresholds that receive government assistance may be easier just prior to retirement and during retirement. TTR strategies may enable individuals to qualify for: >> a part pension >> Government co-contribution >> Commonwealth Seniors Health Card (CSH C) >> Medicare low income threshold. Cap on concessional contributions For the financial years , the concessional contributions cap is $50,000 per year for individuals aged 50 years and over and $25,000 for younger investors aged under 50. So, for many people there is now more urgency to start the TTR process earlier. Under these changes you will not be able to beef up your superannuation a year or two before retirement. Withdrawal limits The Australian Tax Office (ATO) requires that TTR account holders draw a minimum amount of their superannuation account balance (depending on their age) as calculated at the start of the financial year. Go to ato.gov.au for more information on minimum draw down amounts for each age bracket.

4 2009 Federal Budget significantly affects TTR holders Current TTR account holders may find that the changes in the 2009 Federal Budget to contributions caps and qualification rules for additional benefits have a significant impact on their strategies. Many of the changes made will take effect from 1 July 2009, so it may be beneficial to consult your financial planner to ensure your strategy still meets your current goals with optimal results. If you are at least 50 years of age and are interested in receiving more information regarding TTR strategies or ensuring that your retirement plans are in line with the new contribution rules, our experienced financial planners can assist you in constructing a strategy to meet all your financial needs. Call IFFP on to make an appointment or visit iffp.com.au for more information. Out of uncertainty comes opportunity There is no question that the Australian economy has experienced hard times as a result of the Global Financial Crisis. Falling share and commodity prices, reduced economic activity and rising unemployment have all played a part in many of the global economies including Australia experiencing hard financial times. However while investment markets have experienced low and negative returns in the past 12 months, it is important to remember that economies continually move in cycles. Periods of market uncertainty are often followed by periods of opportunity, and in recent months we have begun to see the first emerging signs of recovery in the financial market place. The International Monetary Fund (IMF) has stated that the slowdown in Australia has been relatively mild compared with other developed countries and now forecasts only a modest contraction for Australia during 2009/10. The IMF also expects a sharp rebound in 2010 due to Government spending and reduction in debt by households and businesses. Share markets commonly experience strong recoveries of at least 30% growth in the first 12 months of any economic downturn, and while it may appear that any growth is likely to be tentative for some time, these early signs could be seen by many as the first positive indication that the worst of the Global Financial Crisis may be over. As a result, now might be the time to ask yourself the question is my money invested in the right options for me am I positioned to take advantage of any potential recovery in 2009/10? Depending upon your life stage the type of investment options that are most appropriate for you and your financial goals will vary. Whether you are looking to grow your assets to build your financial wealth, or aiming to maximise your savings as you approach retirement, now may be the perfect time to seek financial advice about your investment options. If you would like more information about your superannuation investments, contact your industry super fund. If you wish to speak to someone about other possible investment options outside of superannuation, an IFFP financial planner can assist to ensure your funds are invested appropriately for your financial situation and goals. Call to make an appointment.

5 Top tips to own your home faster For most people, home loan repayments are their single largest financial commitment. With interest rates currently at record lows, here are some tips for you to consider in helping you pay off your home loan faster, and ultimately have more money in your pocket. 1: Make extra repayments whenever you can >> Pay more than the minimum monthly repayment required. >> If your monthly repayments drop due to interest rate cuts, continue to pay your current repayment amount. >> Consider one-off lump sum payments when you have spare cash available. 2: Consolidate your loans >> Loans or debt such as Personal Loans and Credit Cards often carry much higher rates of interest than home loans. By consolidating all your debts into your home loan you are ultimately reducing the level of interest you pay overall. 3: Consider paying your loan weekly or fortnightly >> By dividing your original monthly repayment into two or four instalments means that you actually pay more over the course of a calendar month. This results in less interest being charged to your loan over the course of a month. 4: Look beyond the big four banks for better deals >> Be aware of low introductory rates offered by lenders. They will often only be effective for small periods of time before the standard home loan rates are implemented. >> Ensure that your loan is flexible to meet changing circumstances over the year term of your loan. These include extra repayment options, redraw facility, and split rate options. 5: Keep accurate records and check your statements >> Maintain detailed records and copies of your everyday deposits, ATM transactions and other loan documentation. By monitoring your own finances you can avoid being charged hefty fees by your lender to access the same information. >> Look for extra fees being charged by your lender in your monthly statement. Disclaimer Industry Fund Financial Planning (IFFP) is a division of Industry Fund Services Pty Ltd, ABN , AFSL This is a private communication to clients and contains general information only. As the particular circumstances and needs of individual investors may vary greatly, the information herein should not be used as a substitute for personalised professional advice. You should assess your own financial situation before making any investment decisions based on this information.