Planning for Retirement. Willis Towers Watson, May 2016

Transcription

1 Planning for Retirement Willis Towers Watson, May 2016

2 Disclaimer The information in this presentation is general advice only. It is not personal advice. This presentation is not intended to and should not be taken as a recommendation of any investment options, and it does not take into account your particular objectives, financial circumstances or needs. Before making any investment decisions regarding this information, you should consider your objectives, financial situation and needs. You may also wish to consider obtaining professional advice before making your decision. Towers Watson Australia Pty Ltd (ABN , AFSL ) 2

3 Agenda 2016 Budget Update Superannuation contributions, benefits and tax Retirement income streams Centrelink s Age Pension Investing in a low return environment Ceasing employment with Nissan Nissan Superannuation Plan Questions 3

4 2016 Budget Update The Government indicated the 2016 Budget aims to: Boost economic and job growth Get the budget back on track to surplus Ensure modernised and sustainable superannuation and taxation systems The Budget proposals are not yet legislated The majority of proposals will require legislative amendments and therefore approval from both houses of parliament Upcoming Federal election may also impact which proposals are ultimately legislated 4

5 2016 Budget Update Superannuation Reforms Proposed changes to superannuation contributions: Effective 7:30pm AEST 3 May 2016: Non-concessional lifetime cap of $500,000 Takes into account non-concessional contributions made after 1 July 2007 Effective 1 July 2017: Concessional contribution cap reduced to $25,000 regardless of age Able to make additional concessional contributions where concessional contribution cap has not been reached in previous five financial years Individuals up to age 75 able to claim tax deduction for concessional contributions up to the $25,000 cap, regardless of employment arrangement Additional 15% tax to apply to concessional contributions for individuals with assessable income (plus concessional contributions) in excess of $250,000 per annum (Division 293) Assessable income threshold for Division 293 currently $300,000 5

6 2016 Budget Update Superannuation Reforms Proposed changes to superannuation pensions: Effective 1 July 2017: The amount individuals can transfer to retirement phase accounts (pensions) capped at $1.6 million Tax exemption for earnings on assets supporting Transition to Retirement Pensions will be removed and earnings will be taxed at a maximum of 15% 6

7 2016 Budget Update Other Measures Effective 1 July 2016: Upper limit for the middle income tax bracket of 32.5% will increase from $80,000 to $87,000 per annum Effective 1 July 2017: Low Income Superannuation Tax Offset (LISTO) Will reduce tax on superannuation contributions for individuals with taxable income less than $37,000 per annum Refund of tax on concessional contributions up to cap of $500 per annum Low income spouse contribution tax offset Income threshold to be increased from $10,800 to $37,000 per annum Provides tax offset of 18% on after-tax contributions of up to $3,000 made by the contributing spouse (maximum offset of $540 per annum) 7

8 Superannuation Contributions 2015/16 and 2016/17 Concessional Contribution Cap < 50 years $30,000 > 50 years $35, /18 Concessional Contribution Cap $25,000 regardless of age Employer Contributions (accumulation members), Notional Taxed Contributions (defined benefit members) and Voluntary Salary Sacrifice contributions count towards the concessional cap Excess contributions taxed at your marginal rate plus relevant levies and ATO interest (less 15% tax already paid by the super fund) Up to 85% of excess contributions may be withdrawn from super You may use superannuation to pay the excess tax assessment Excess contributions not withdrawn count towards non-concessional cap Classified as taxable component 8

9 Superannuation Contributions The Superannuation Guarantee (SG) rate will remain at 9.5% until 30 June 2021 and then increase by 0.5% each year until it reaches 12% from 1 July 2025 Effective Date SG % Prior to 30 June % 1 July % 1 July % 1 July % 1 July % 1 July % Depending on your employer contribution rate or NTC you may have the capacity to make additional voluntary contributions For example, if your 2015/16 employer contribution/ntc is $8,550 per annum and: You are < 50 years, capacity to salary sacrifice $21,450 per annum You are > 50 years, capacity to salary sacrifice $26,450 per annum 9

10 Superannuation Contributions Notional Taxed Contribution (defined benefit members only) For members of a defined benefit fund like the Nissan Superannuation Plan, the Plan s actuary is required to report a Notional Taxed Contribution to the Australian Tax Office The notional amount counts towards the concessional contribution cap, rather than the company s actual contributions Any pre-tax compulsory contributions are included in notional amount If you require more information on your Notional Taxed Contribution, please contact Marcus Wappet 10

11 Superannuation Contributions Non-concessional Contributions $500,000 non-concessional lifetime cap Includes contributions made on or after 1 July 2007 Commenced 7:30pm AEST on 3 May 2016 (if legislated) Invested in accumulation account in accordance with your selected investment strategy Excess contributions may be withdrawn, earnings taxed Excess non-concessional contributions that are not withdrawn are taxed at the top marginal rate, plus applicable levies Classified as tax-free component 11

12 Superannuation Tax (2015/16 and 2016/17) Accumulation Phase Income Capital gains Pension Phase Income Capital gains Lump Sum Withdrawals < preservation age Preservation age to age 60 > 60 years Pensions Preservation age to age 60 > 60 years A maximum of 15%, which can be reduced by deductions and other offsets such as imputation credits 15% for asset held less than 12 months 10% for asset held more than 12 months Zero Tax-free Tax-free Taxable 20% plus relevant levies Tax-free Tax-free Taxable First $195,000 tax-free, remainder taxed at 15% plus relevant levies Tax-free Taxable Tax-free Tax-free Taxable Tax-free Taxable Tax-free Marginal tax rate less 15% rebate plus relevant levies Tax-free 12

13 Superannuation Preservation Preserved benefits cannot be accessed until a condition of release is met: Leave employment after age 60 Attain age 65 Leave employment after preservation age with the intention of permanently retiring Born Preservation age Before 1 July Between 1/7/60 and 30/6/61 56 Between 1/7/61 and 30/6/62 57 Between 1/7/62 and 30/6/63 58 Between 1/7/63 and 30/6/64 59 After 1/7/64 60 Death, Permanent Incapacity or Terminal Medical Condition Other approved circumstances (e.g. severe financial hardship or compassionate grounds) 13

14 Account-Based Pensions From 1 July 2017, maximum benefit transfer cap of $1.6 million (if legislated) Taxable and tax-free components are fixed when pension commences No maximum limit on annual pension payments (except Transition to Retirement Pensions 10%) Minimum pension requirements calculated when pension commenced and 1 July each year: Age Minimum Annual Pension Under 65 years 4% years 5% years 6% years 7% years 9% years 11% Over 95 years 14% 14

15 Transition to Retirement Pensions Ability to access superannuation prior to full retirement Pension is non-commutable whilst working Minimum pension based on age/pension factors Maximum pension of 10% of July 1 account balance each year Available for accumulation members of Nissan Superannuation Plan, but not defined benefit members (unless you elect to convert to accumulation) Taxed as follows: Investment Returns Current From 1 July 2017 (Proposed) Income maximum of 15% Capital gains Zero 15% for asset held less than 12 months 10% for asset held more than 12 months Pensions Preservation age to age 60 Tax-free Tax-free Taxable Marginal tax rate less 15% rebate plus relevant levies > 60 years Tax-free Taxable Tax-free 15

16 Centrelink Age Pension Eligibility Men and women born before 1 July 1952 are eligible at 65 For people born after 1 July 1952: Men and women born between Eligible for age pension at 1 July 1952 and 31 December years 1 January 1954 and 30 June years 1 July 1955 and 31 December years After 31 December years 16

17 Centrelink Age Pension Current Legislation as at 20 March 2016 Homeowners Lower Threshold Upper Threshold Maximum Pension Single Asset Test $205,500 $788,250 Income Test (pa) $4,212 $49,655 $22,721.40* Couple Asset Test $291,500 $1,170,000 Income Test (pa) $7,488 $75,993 * Inclusive of Pension and Clean Energy Supplements Excludes family home and superannuation assets prior to eligibility Income Test excludes up to $250 of employment income per fortnight ($6,500 per annum). Unused exemption is accumulated throughout financial year. Above the lower threshold, pension entitlement reduces: Asset Test: $1.50 per fortnight per $1,000 of assessable assets $34,252.40* Income Test: $0.50 per fortnight for a single and $0.25 for each member of a couple, for each $1.00 of assessable income 17

18 Centrelink Age Pension The Income Test currently applies a deeming rate to all financial assets regardless of actual income derived: Status Threshold Deeming Rate Single Couple Up to $48, % Over $48, % Up to $80, % Over $80, % Deeming applies to Account-Based pensions: Of eligible individuals not entitled to an age pension at 1 January 2015 Where the Account-Based pension commenced on or after 1 January

19 Centrelink Age Pension From 1 January 2017: Increase of the lower asset test threshold for homeowners and non-homeowners Increase of the asset test taper rate from $1.50 per fortnight to $3.00 per fortnight per $1,000 of assets over the lower asset test threshold, resulting in a reduction in the upper asset test threshold for homeowners and non-homeowners Lower Threshold Upper Threshold Current Proposed Current Proposed Single Couple Homeowner $205,500 $250,000 $788,250 $547,000 Non-homeowner $354,500 $450,000 $937,250 $747,000 Homeowner $291,500 $375,000 $1,170,000 $823,000 Non-homeowner $440,500 $575,000 $1,319,000 $1,023,000 Individuals who lose their entitlement due to the Asset Test changes will retain the Commonwealth Seniors Health Card 19

20 Investment Options The Nissan Superannuation Plan offers three investment options to accumulation, defined benefit (additional accumulation benefit only) and retained benefit members: Growth: 75% growth assets / 25% income assets Balanced 50/50: 50% growth assets / 50% income assets Cash: 100% income assets From 1 March 2016 members are able to split their eligible accounts across the three investment options Whilst assets supporting defined benefits are invested in the Balanced 50/50 option, defined benefit members may exercise Member Investment Choice for additional voluntary and rollover benefits Your investment choice can be changed monthly (subject to buy/sell spreads) by completing the Changing Your Investment Choice Form Completed forms must be received by the Plan s administrator at least five working days before the end of the month, with investment switches effective at the beginning of the following month 20

21 Investment Options The following piecharts detail the target asset allocation for each option: Growth Balanced 50/50 Cash Asset Class Growth Balanced 50/50 Cash Australian shares 28% to 42% 16% to 30% International shares (hedged) 10.5% to 24.5% 5% to 19% International shares (unhedged) 10.5% to 24.5% 5% to 19% Global listed property 3% to 7% 0% to 10% 0% Australian fixed interest 8% to 12% 13% to 27% International fixed interest 8% to 12% 13% to 27% Cash 3% to 7% 3% to 17% 100% 21

22 Investment Performance Period ending 31 March Growth Balanced 50/50 Cash % -2.09% 1.72% % 13.38% 2.20% % 8.98% 2.26% 5 year average return (pa) 7.96% N/A N/A Peer fund median* 7.19% N/A N/A * SuperRatings SR50 Balanced (60-76) Index median return. Source: SuperRatings Pty Ltd s Survey published on 19 April 2016, This is not financial product advice, independent professional advice must be obtained before making any financial decisions. 22

23 Investing in a Low Return Environment Outlook is for muted economic growth and inflation supported by low interest rates Cash rates set the risk free rate of return and therefore are a major driver of expected returns over the medium to long term With low cash rates predicted, medium term returns are likely to around 1.5% to 2.0% pa lower than the long-term (normative) average Investors may need to: Review their investment strategy Reduce their investment return expectations Consider whether to reallocate away from low yielding asset classes Consider whether to take on more risk in order to achieve return objectives Review their lifestyle objectives / expenditure 23

24 Investing in a Low Return Environment Riskfree rate Risk premium Impact of market being wrong Asset return Risk-free rate is the rate of real return that can be generated by investing in risk-free assets - assumed to be the cash rate 24

25 Investing in a Low Return Environment Riskfree rate Risk premium Impact of market being wrong Asset return Risk premium is the return in excess of the risk-free rate that is expected given the risks associated with the asset Australian Shares International Shares Property Fixed Interest / Bonds Cash 25

26 Investing in a Low Return Environment Riskfree rate Risk premium Impact of market being wrong Asset return Potential for assets to be overvalued/undervalued by the market due to incorrect or overstated expectations of future economic conditions 26

27 Australian Share Market Bear Markets since 1900 Months % fall Months after low to make new high 12 month % gain from low Average since Average since April ? 12? -20??? 27

28 Things to consider when ceasing employment with Nissan If your superannuation benefit is > $10,000 you can: Leave it invested in the Nissan Superannuation Plan s Retained Benefit Division Transfer benefit to another complying superannuation fund If your superannuation benefit < $10,000 you have 90 days to nominate another complying superannuation fund, otherwise your benefit will be automatically transferred to the Plan s nominated Eligible Rollover Fund (currently AMP Eligible Rollover Fund) Defined benefit (if applicable) will be converted to accumulation benefit on cessation of employment and invested in the Balanced 50/50 option may need to review your investment choice if leaving benefit in the Retained Benefit Division Depending on your age, you may be eligible to continue your insurance cover via a personal policy without medical underwriting: < 50 years: can apply to continue your Death and Total & Permanent Disability Cover > 50 years: can apply to continue your Death Cover > 65 years: not eligible to continue your insurance 28

29 Estate Planning A regular review of your Estate Planning arrangements ensures assets are transferred appropriately and tax effectively upon death Will Enduring Power of Attorney Medical Power of Attorney Superannuation death benefit nomination Estate Assets Owned individually Owned as tenants in common Non-estate Assets Jointly owned property Superannuation and Pensions Life Insurance Assets owned by trusts and companies 29

30 Your Action Plan Have you Reviewed your capacity to make voluntary superannuation contributions? Assessed the appropriateness of your current investment choice? Reviewed whether you have sufficient personal insurance? Got a valid superannuation death benefit nomination? Is it binding? Got a current Will and Power of Attorney? 30

31 Questions More information on the Nissan Super Plan can be found at: Or Helpline Willis Towers Watson Financial Planning Carol Doloughan