Countdown to retirement

Transcription

1 Dow Australia Superannuation Fund Countdown to retirement You may not like to be reminded that you re getting older but now that you re over 50, if you haven t already thought about your options, it s time to start planning for your retirement. After all, you want to make sure you can enjoy your lifestyle and not be worried about your finances. This guide helps you understand the steps to take as your countdown to retirement begins. 5 Getting started the steps to consider as you approach retirement. Page 1. 4 Understanding when to retire what the rules are, how your super is calculated and working out when you can afford to retire. Page Your options on retirement information on the choices you have when you reach retirement. Page 7. Reviewing your investment options making sure your super is invested in the most appropriate way to meet your retirement needs. Page Where to get further help and information who can help you with your retirement decisions. Page 12. We don t always get to choose when we retire or leave work. If you ve recently been made redundant, turn to page 5 to find out how you will receive your benefits.

2 5 Getting started There are a number of steps you need to take to prepare yourself for retirement. These steps will vary depending on how many years away your retirement is.

3 More than five years from retirement If your retirement is more than five years away, you can start your planning now to maximise your super savings making it more likely that you ll have enough money to live on in retirement. You can: Work out when you would like to retire and how much money you will need see pages 3 to 6. Understand the options available to you through the Dow Australia Superannuation Fund to help you save for your retirement. Take time to learn more about the basics of investing. Review your current investment choice to see if your super is invested appropriately for you see pages 10 to 11. Five years from retirement Now that retirement is getting closer, it s important that you regularly review your retirement options. You may want to speak to a licensed financial adviser to help you: Track down any super benefits you have outside of the Fund. Estimate how much you will have when you retire including other super funds and other savings or assets you may have outside of super. Work out whether you will be eligible for the full or part age pension. Calculate whether you should be topping up your super savings or whether your current contribution levels are enough to meet your retirement needs. Work out if you re still on track to retire at your chosen retirement age. Decide whether your current investment strategy is right for your needs. Discuss any potential tax issues and how to address them before you retire. Do you have a Will? If you like, you can nominate your estate instead of making individual nominations through the Fund (see below). If your benefit is paid to your estate, it will be distributed according to your Will, so it s important that this is also up-to-date. If you don t have a Will, you should speak to a legal adviser for advice on how to set one up. Are the right people protected if you die? The Fund provides your family with benefits if you die. To make sure the right people receive these benefits, it s important that you keep your beneficiary information up-to-date. Through the Fund, you have the option of making a binding or a non- binding nomination. For details, refer to the Super Guide, part of the Fund s Product Disclosure Statement, available at mysuper.towerswatson.com/dow or from the Fund Administrator on It s also important that you review the information you have for other funds you are a member of, particularly ones you joined many years ago, as your circumstances may have changed over the years. Dow Australia Superannuation Fund Retirement Guide 1

4 One year from retirement By now you should know how much money you will need in retirement and where it s coming from. At this stage, it s a good idea to speak to your licensed financial adviser to: Review your financial position and check whether you can still afford to retire on your chosen retirement date. Don t forget, you may have other savings outside of super, such as property, shares or savings accounts. Discuss the best way to take your super benefits, for example, as a lump sum, account-based pension, transition to retirement pension or lifetime pension (annuity), or a combination of these. You may also want to research the market for pension options to make sure you get the best product to meet your needs. Make sure your Will and beneficiary information are up-to-date. Revisit your investment strategy to ensure it continues to meet your needs. In particular, if you are in a high risk option, consider whether you will have time to make up any losses made between now and when you will need to access your money. Discuss your insurance options. Do you and your family currently have the insurance cover you need and what will happen when you retire? Will your policies continue or do you need to take out new cover? Six months from retirement The countdown is almost over and now s the time to put any final preparations in place before the big day arrives. At this stage it s a good idea to: Request estimates for final payouts from the Fund and any other super funds you have. Remind your employer and colleagues of your planned retirement date. This will allow time for a handover of work and give you the opportunity to discuss any early retirement options. Check your Will is in order. Have any relevant check-ups with your doctor, dentist and optometrist. Plan what you will do with all your free time! On retirement Once you ve retired, you will receive confirmation of your final benefit from the Fund Administrator. This will show you the value of your benefit in the Fund at the time of your retirement. You will normally receive this information around four business days after you retire, however, in some circumstances it can take some time for this data to become available. At this stage you will need to: Complete and return the Application for Benefit Payment form provided by the Fund Administrator to tell the Trustee how you would like your retirement benefit to be paid. If you have reached age 65 and the Trustee does not hear from you within 90 days, your benefit will be transferred to an Eligible Rollover Fund. For details, refer to the Fund s latest Annual Report. If you re applying for a pension, complete the relevant forms either for the Dow Fund or another complying super fund. Apply for the age pension, if eligible. If you have other super funds, you should contact them directly to let them know you are retiring so that they can send you confirmation of your final benefit. Do you know that you can continue your insurance cover after you retire or leave the Fund? Retiring does not mean you no longer need insurance cover to protect your loved ones. If you would like to continue the insurance cover you have as an employed member of the Fund, you may be able to do so within 60 days of retiring without the need to provide evidence of good health. You must be less than age 60 to continue with your death and disability cover or less than age 65 to continue your death cover. You must be a permanent employee to be eligible for this continuation option or, if you are a casual or contractor, be moving to permanent employment of at least 15 hours per week. This cover would be provided through a personal insurance policy at your own expense. For details about this continuation option and a summary of all the conditions that apply, refer to the Insurance Guide, part of the Fund's Product Disclosure Statement available at or from the Fund Administrator on Dow Australia Superannuation Fund Retirement Guide

5 4 When to retire Deciding when to retire isn t as simple as just picking a date. You need to consider when you can retire, both legally and financially. When can you access your super? Preservation rules The Government has established preservation rules, which mean that some or all of your super must be retained in the superannuation system until you reach your preservation age. Your preservation age depends on when you were born, as shown in the following table: Date of birth Preservation age Before 1 July July 1960 to 30 June July 1961 to 30 June July 1962 to 30 June July 1963 to 30 June July 1964 or later 60 Generally, you must keep the preserved part of your superannuation in a fund (either in this Fund or another complying superannuation fund) until you reach age 60*. However, you can start to receive some of this money as a pension while transitioning to retirement (see from page 7 for details). You can also choose to take the non-preserved part of your super as cash, or save it with your preserved benefit. Your preserved benefits may also be available in other limited circumstances (contact the Fund Administrator for information). If you are over age 60 when you leave employment with the Company, you can take all your super as cash, tax free, even if you continue working somewhere else afterwards. *If you are aged between your preservation age and 60 and you intend to permanently retire from the workforce, you can take all your super as cash straightaway but tax may apply. Dow Australia Superannuation Fund Retirement Guide 3

6 Key milestones How you access your super depends on your age and possible future employment. The table below shows some key milestones that apply to super and affect the level of super you might receive when you retire. Your age or older 75 (or your preservation age if you were born after 1 July 1960) (depending on your date of birth) If you are permanently retiring, you can access all of your super now but tax may apply. If you are continuing to work, either for the Company or elsewhere, you can only access the non- preserved part of your benefit as a lump sum or pension. You are eligible to apply for an Account-Based Pension (see pages 7 to 9 for details) if you are permanently retired or a Transition to Retirement Pension if you continue working. You can now receive all of your super tax free, even if you are not permanently retiring. To be eligible for the Age Pension you must be 65 years or older. From 1 July 2017, the qualifying age for the Age Pension will increase from 65 years to 65 years and 6 months. The qualifying age will then increase by 6 months every 2 years, reaching 67 years by 1 July Date of birth Qualifying age 1 July 1952 to 31 December years and 6 months 1 January 1954 to 30 June years 1 July 1955 to 31 December years and 6 months From 1 January years You cannot make future contributions towards your super (however Superannuation Guarantee contributions can be made, if you are still working and eligible). For more information on the tax that applies when you retire, please see the separate factsheet: How tax applies to your retirement or redundancy payments. 4 Dow Australia Superannuation Fund Retirement Guide

7 How your retirement benefit is calculated in the Fund When you leave the Company, for any reason other than death or disablement, your benefit is the sum of your super accounts with the Fund. Your super accounts are calculated as follows: Company statutory contributions + Company additional contributions + member contributions + rollovers in from other funds +/ Investment earnings Taxes, surcharge (if any), fees including insurance fees (if any), benefits paid or transferred, and contributions split with your spouse If you retire from age 60 onwards, you will not pay tax on the retirement benefit you receive. If you retire before age 60, you will only pay tax if you withdraw your benefit in cash. You won t pay benefits tax if you leave your money in the Fund or transfer it to another complying super fund. For more details about how your benefit is calculated, refer to the Super Guide, part of the Product Disclosure Statement available at or from the Fund Administrator on Company statutory contributions are currently 9.5% of the salary or pay you earn for your normal working hours, usually including any bonuses, commissions, loadings and allowances related to work, but excluding overtime, lump sum payments, reimbursement of expenses and other items unrelated to work performance. This is known as your Ordinary Time Earnings. If you contribute to your super in the Fund, you will receive a Company additional contribution as follows: You pay 2%, the Company pays 1% You pay 3% or more, the Company pays 1.5% Your contributions and the Company s additional contribution are calculated using your Fund Salary. This is your regular salary or wage, not including allowances, overtime, bonuses, penalty rates or commission, or the value of any benefit to which you may be entitled. If you work shifts, your Fund Salary includes any shift allowance and special allowance. What happens if you are made redundant? We don t always get to choose when we retire, or leave work. If you ve recently been made redundant by the Company or you re thinking of taking a redundancy package, your payment will consist of: A tax-free redundancy component; Your accrued annual and long service leave entitlements; and An Employment Termination Payment (ETP). The tax-free component of your redundancy payment is calculated as $9,780, plus $4,891 for each completed year of service you have with the Company. These amounts are current for 2015/16 and indexed annually. For the latest figures, refer to the Australian Taxation Office s (ATO) website Your tax-free payment must be taken as cash. Your leave payment and ETP are both subject to tax. The level of tax you pay depends on when your leave was accrued and when you joined the Company. Please see the separate factsheet: How tax applies to your retirement or redundancy payments for details. Dow Australia Superannuation Fund Retirement Guide 5

8 When can you afford to retire? Given a choice, most of us would like to retire early but at the same time we want to make sure we are going to have enough money to cover our day-to-day needs and a few luxuries too! Retiring early If you are considering retiring earlier than age 65 (the current eligiblity age for the age pension), it is important to remember the following points: Fewer contributions will have been made to your account, therefore your super benefit will be smaller. Your accounts will not have had as long to earn investment income. The earlier you retire, the more years you will be relying on your super or the age pension to provide an income. You may not be eligible for the age pension. Retiring later If you delay your retirement and work past age 65, you may continue to accumulate super benefits in the Dow Fund in the same way until you reach age 75. After age 75, super funds can only accept Superannuation Guarantee contributions. It s also worth considering that at age 65, your death and total and permanent disability cover in the Fund will stop. If you retire before age 65, you may be able to continue your death and disability cover as a private insurance policy without the need to provide evidence of good health (conditions apply, see page 2 for more details). Partial retirement From your preservation age, the Fund s Transition to Retirement Pension gives you the option to access your super while you are still working. This gives you greater freedom and choice to manage your retirement gradually. To find out more about this option, see from page 7. A modest lifestyle in retirement* means that you have more than just the Age Pension, but you are still only able to afford fairly basic activities. A comfortable retirement lifestyle* is one that lets you afford a wide range of household goods and electronic equipment, private health insurance, good clothes and a reasonable car, the occasional overseas holiday and be involved in a broad range of leisure activities. * Westpac ASFA Retirement Standard, The Association of Superannuation Funds of Australia Ltd. Working out how much money you ll need in retirement The Retirement Planner on the Fund's website helps you understand how much money you might have when you retire and also how much you might need to support the lifestyle you want. Just click on the "Retirement Planner" button on the Fund s website, For a general overview of the level of income you are likely to need for a modest or comfortable lifestyle in retirement, go to click on Resources and then "Retirement Standard". 6 Dow Australia Superannuation Fund Retirement Guide

9 3 Your options on retirement When you retire, you have the option to: Invest your super in an Account-Based Pension from the Fund if you have reached your preservation age (at least age 55); Become a member of the Retained Benefits section of the Fund, if your benefit is at least $5,000; Take any part of your benefit in cash, if you have reached your preservation age (at least age 55); Transfer part or all of your benefit to another super fund of your choice; Purchase a pension (annuity) outside of the Fund. If you have reached your preservation age, you have the option to receive a retirement income while you continue to work, through a Transition to Retirement Pension from the Fund or elsewhere. (See page 8 for details about the Fund s Transition to Retirement Pension.) About the Fund s pension options The Fund offers two types of pension an Account-Based Pension, which is available if you have left the Company or retired after your preservation age, and a Transition to Retirement Account-Based Pension, which pays you an income while you continue to work, provided you have reached your preservation age (at least age 55). The table overleaf provides a summary of how each pension works. Dow Australia Superannuation Fund Retirement Guide 7

10 The Fund's pension options at a glance When can I apply? How much income can I receive from my pension? How often will I receive my pension payments? Can I change the level and frequency of my payments? Can I receive lump sum payments from my account? Where will my pension be paid? How much money do I need to invest? How is my pension invested? Will the Company continue to contribute to my super? Can I continue to make additional voluntary contributions to my super in the Fund? Will my insurance cover continue? What happens if I die while still receiving my pension? Are there any joining fees? Account-Based Pension When you retire from age 55 (provided you have reached your preservation age). You choose how much income you would like to receive from your pension. The Government has set a minimum annual amount of income you must receive. There is no maximum limit. For details, refer to the Fund s Pension Product Disclosure Statement: A guide to your super Account-Based Pension members. Once a month. 8 Dow Australia Superannuation Fund Retirement Guide Transition to Retirement Account-Based Pension While you re still working, provided you have reached your preservation age (at least age 55). You choose how much income you would like to receive. The Government has set annual minimum and maximum annual amounts of income you can receive. For details, refer to the Fund s Pension Product Disclosure Statement. You can vary your income level within the Government limits at any time by contacting the Fund Administrator. You cannot change the frequency of your payments. Yes, provided you withdraw at least $2,000 each time. If your account balance is less than $10,000 and you want to make a lump sum withdrawal, you must withdraw the total balance of your account. Your pension income will be paid directly into your nominated bank account. You must start your pension with a minimum of $50,000. Generally no, although there are some exceptions. For details refer to the Fund s Pension Product Disclosure Statement. You have the same investment choices as you do while you are an employed member of the Fund. For details refer to the Pension Product Disclosure Statement, which is available on the Fund's website or from the Fund Administrator. No. Your Company contributions will stop when you retire. No, once you have started an Account-Based Pension you cannot make further contributions to it. You can, however, start a new pension with an initial investment of $50,000 but must have remained a member of the Fund. Your standard insurance cover in the Fund will stop when you retire. If you are a permanent employee under age 65, you may have the option to continue your insurance when you retire under a personal policy without the need for evidence of good health. Conditions apply. See page 2 for details. Yes. You will have two separate accounts in the Fund. You will continue to receive contributions from the Company to your Employee accumulation super account while you remain employed. Your Pension account cannot receive any new contributions. Yes. You can continue making contributions to your Employee account while you remain employed. Your Pension account cannot receive any further contributions once you start it. Yes. Your insurance cover in the Fund will continue while you remain employed (subject to the insurer s conditions). If you die before your account runs out, the balance will be paid to your estate or to your spouse (including de facto and same-sex partner). Your spouse will either receive regular pension payments until the account runs out or they can request the balance as a lump sum. See the Fund s Pension Product Disclosure Statement for details on how to nominate your spouse. No initial fees are deducted from your benefit if you choose to establish either an Account-Based or Transition to Retirement Pension in the Fund. Some fees will apply to manage and administer your account. For details, refer to the Fund s Pension Product Disclosure Statement, which is available on the Fund s website or from the Fund Administrator.

11 For further details about either the Fund s Account-Based or Transition to Retirement Account-Based Pension, please refer to the Product Disclosure Statement, A guide to your super Account-Based Pension members, available on the Fund s website at Becoming a Retained Benefit member When you retire or leave the Company, if your benefit is more than $5,000, you can decide to leave it in the Retained Benefits Section. As a Retained Benefit member, your super will remain invested in an accumulation account, earning investment returns. As a Retained Benefit member you can choose how your account is invested from the same range of options available for employed members. Unless you choose otherwise, your super will automatically continue in the same investment option you had before you retired. For details about the Retained Benefits Section of the Fund, please refer to the Super Guide, part of the Fund's Product Disclosure Statement, available on the Fund s website at or from the Fund Administrator on Taking part or all of your benefit in cash From age 60, you can take part or all of your retirement benefit as cash, tax-free, when you leave the Company. From your preservation age (at least age 55) until you reach age 60, tax may apply according to your benefit components. For more information on the tax that applies when you retire, please see the separate factsheet: How tax applies to your retirement or redundancy payments. Transferring your benefit to another complying superannuation fund On retirement you can transfer all or part of your super to another super fund of your choice, providing it is approved under superannuation law. If you want to transfer your benefit to another fund, you should speak to the Fund Administrator. Purchasing a pension On retirement you can use your super to purchase a lifetime pension (annuity). As the name suggests, a lifetime pension will pay you a guaranteed income for life. The level of income you receive will depend on the amount of benefit you have to invest and the type of lifetime pension you select. You cannot purchase a lifetime pension through the Fund. However, there are a number of lifetime pensions available in the market. You should speak to a licensed financial adviser before making a decision to buy a lifetime pension. You can also use your super to purchase a non-lifetime or 'term' pension. With this type of pension you select the term and whether you want there to be any capital available at the end of the term. The terms and conditions of the pension will be different depending on your specific requirements and timeframes. When establishing a lifetime or term pension, it is important to understand the specific product features as there is often a limited opportunity to vary the terms and conditions once you pension is established and any cooling off period expires. Dow Australia Superannuation Fund Retirement Guide 9

12 2 Reviewing your investment options In the lead up to retirement It is important that you regularly review how your super is invested to ensure that it is right for your needs. This is particularly important if you are currently invested in a higher risk growth option which is more likely to experience frequent variance in return due to the underlying volatility associated with growth assets, such as property and shares. However, if you consider that Australians are living longer if you are retiring at age 60, on average, you can expect to live another 23 years* if you are a man or 26* years if you are a woman you may not need to access all of your retirement savings immediately. Less risky investment types, such as fixed interest or cash, might not produce the best longer term investment result for your retirement savings. * Australian Life Tables , Australian Government Actuary. Available from 10 Dow Australia Superannuation Fund Retirement Guide

13 Things aren t always as you expect It s safe to say that, for most of us, the closer we get to retirement, the less risk we think we should take with our savings. However, the graph on the right shows that if we choose an investment option that has less growth assets and is therefore considered lower risk, the risk of not having enough money in retirement actually increases. So, the more you invest in higher risk growth assets, the less likelihood that your super will run out. On retirement, if you become a Retained Benefits member or Account-Based Pensioner of the Fund, you should continue to regularly monitor your investment choice as the returns you receive on your investments will have a direct impact on the value of your account. The earnings you make once you ve retired make up a large proportion of your retirement income. If returns are positive, the value of your account will increase. If returns are negative, the value of your account will reduce. If you start a pension with another super fund, you should check their terms and conditions to see whether investment choice applies. Chance of income shortfall 60% 40% 20% 0% Investment and spending in retirement 30% 50% 70% 90% Growth allocation NOTE: Initial balance of $500,000, target annual income of $44,150 (real). Note: Source Investment and Spending in Retirement the Longevity Risk Impact in the Watson Wyatt View April 2009 which quotes modelling of the chance of a couple running out of money in retirement. The model looks at a 65 year old couple who are homeowners and have $500,000 at retirement. They have no other assets and choose an annual income of $44,150 including the age pension. They invest their initial balance in a hypothetical 70% Growth investment portfolio. Asset class returns, volatilities and correlations are drawn from the Watson Wyatt Asset Model. The median return for a 70% growth allocation was 7.63% per year (3.86% per year in excess of Average Weekly Earnings). What is certain As we near and/or reach retirement, we should all take the time to review our investment options and decide on an approach that suits us. Unless you are particularly investment savvy, we recommend that you get help from a licensed financial adviser. They will be able to look at your individual financial position and help you work out a strategy that is going to produce the best result for your retirement savings. For details of how to find an adviser, see page 13. The Fund offers a range of investment options to suit your needs depending on the level of risk you are willing to take. For details about the Fund s investment options and the different types of investment risks to consider, refer to the Fund s Product Disclosure Statement for the relevant category. These are available at or from the Fund Administrator. Dow Australia Superannuation Fund Retirement Guide 11

14 1 Where to get further help and information 12 Dow Australia Superannuation Fund Retirement Guide

15 For further information about your super, you can: Visit the Fund s website, Call the Fund Administrator on or Need advice? If you need advice about your super, you should speak to a licensed financial adviser. By taking into account your individual circumstances, they can provide options that are right for you. Towers Watson Australia Pty Ltd has arrangements in place to help you with your financial planning. If you would like to speak with a Towers Watson financial planner based in Melbourne, contact Susan Rio on (03) The Financial Planning Association (FPA) is also available to help you find a financial planner by referring you to one in your area. FPA can be contacted on or via their website at Information on seeking financial advice and tips on choosing a financial adviser are provided on the Australian Securities & Investments Commission s website at Write to the Fund Administrator at: Dow Australia Superannuation Fund PO Box 1442 Parramatta NSW dowsuper.australia@towerswatson.com Dow Australia Superannuation Fund Retirement Guide 13

16 Dow Australia Superannuation Fund Throughout this publication, we refer to the Company. This is the employer for employees of Dow Chemical (Australia) Pty Ltd, Dow AgroSciences Australia Limited, Rohm and Haas Australia Pty Ltd and affiliated companies. The information in this publication is specifically developed for domestic residents/retirees. It is general information only and does not take into account your particular objectives, financial circumstances or needs. It is not personal or tax advice. Information on legislation and tax in this document is current as at the date of publication and may change. Any examples included are for illustration only and are not intended to be recommendations or preferred courses of action. You should consider obtaining professional advice about your particular circumstances before making any financial or investment decisions based on the information contained in this document. Issued by Towers Watson Superannuation Pty Ltd (ABN , AFSL ), as Trustee of the Dow Australia Superannuation Fund (ABN ). July 2015.