ACU Your super and voluntary early retirement options when you leave

Transcription

1 ACU Your super and vountary eary retirement options when you eave March 2009 February 2008 Important notice The information in this seminar is of a genera nature. It does not take into account your individua needs and objectives. It provides some information about superannuation, vountary eary retirement (VER) payments and associated tax matters. Before making an investment decision, you shoud speak to a financia adviser to consider whether this information is appropriate to your needs, objectives and circumstances. This information is current as at 16 March 2009.

2 Today s agenda Empoyer benefits and their tax treatment What happens to your super when you eave? Tax on your super benefits How much super is enough? How to buid your super UniSuper website and other information Your eaving work benefits Empoyer Superannuation VER payment Long service eave Annua eave Pension Lump sum Pension & ump sum combination

3 Tax on your VER payment Under age 65 Tax-free Component $7,350 pus $3,676 per competed year of empoyment Cash payment ony No tax payabe Cannot be roed over Tax on your VER Under age 65 ETP cash payment Remainder is Empoyment Termination Payment (ETP) ETP has two components Tax-free component reating to pre-1 Juy 1983 empoyment Remainder is taxabe component Cash Payment taxabe component Age 55 and over up to $145,000 taxed at 16.5% Amounts over $145,000 taxed at 46.5% Cannot be roed over

4 Exampes of VER payment Exampe 1 Age 62, Academic Leve B Inc 6 30 years empoyment VER payment is $114, Taxation Tax-free portion of payment is: $7,350 + ($3,676 x 30) = $117,630 No tax is payabe Cannot be roed over Exampes of VER payment Exampe 2 Age 62, Academic Leve C Inc 6 20 years 9 months empoyment VER payment is $136, Taxation Tax-free portion of payment is: $7,350 + ($3,676 x 20) = $80,870 $80,870 tax-free $55, Empoyment Termination Payment Cash payment tax: $55, x 16.5% = $9,105

5 Tax on ong service eave VER Start date 15 Aug 1978 Exit date 95% tax-free 5% incuded in assessabe income and taxed at margina rate + Medicare 100% incuded in assessabe income and taxed at a maximum rate of 30% + Medicare Cannot be roed over Tax on annua eave VER Start date Exit date 100% incuded in assessabe income and taxed at a maximum rate of 30% + Medicare Cannot be roed over

6 What happens to your super when you eave? ACU wi notify UniSuper that you have eft Information on your UniSuper Benefits and Options Age 55 and above UniSuper wi forward you this information If UniSuper doesn t receive your instructions within 90 days, benefit defauts to Retained Benefits Account When can you access a Super ump sum? Preserved benefits generay must be retained in a superannuation fund unti you reach preservation age and retire from the workforce Restricted non-preserved benefits usuay can ony be reeased after you satisfy a condition of reease, such as eaving current empoyment Unrestricted non-preserved benefits - can be reeased at any time upon request

7 Your Super options Retain in UniSuper Indexed Pension Joint Life Indexed Pension Singe Life Fexi Pension Cash-out (subject to preservation) Roover to another Fund Any combination of above Defer payment (defined benefit members ony) Over age 55 Retained Benefits Account Retain your future access to UniSuper pension products Can make future contributions or roovers Can make withdrawas subject to preservation rues Choice of investment options pre-mixed or sef-seect Defined Benefit members wi convert their ump sum to an accumuation account (if they do not defer)

8 UniSuper s Retirement Income Streams Reguar retirement income Tax-effective: 15% tax offset from tax-free income from 60 no tax on investment earnings (Fexi Pension) Low management costs Indexed Pension paid 28 th of each month to nominated bank account Fexi Pension choice of monthy, quartery, haf-yeary and annua payments Defined Benefit Indexed Pension Formua-based Joint Life Indexed Pension Defined Benefit members who joined prior to 1 Juy 1998 Advantages Payabe for member s & spouse s ifetime Indexed each year to CPI Age Pension asset test concessions Payments are tax-free from age 60 Risks No residua ump sum is paid to your estate You cannot access your capita

9 Commercia Rate Indexed Pension (CRIP) CRIP is a joint or singe ife purchased Indexed Pension Purchased using Accumuation account ump sum; or Defined Benefit ump sum (Defined Benefit members who joined after 30 June 1998) CRIP features 10 year minimum payment period Joint Life CRIP offers reversionary pension of 62.5% or 100% of pension at death Fexi Pension Account based income stream No maximum imit on pension payments Age based % minimum pension payments Age % of Account Baance

10 Fexi Pension Advantages Lump sum withdrawas Payments are tax-free from age 60 Investment earnings are tax-free Choice of investment options Low fees Residua ump sum payabe on death Risks Longevity risk outiving your capita Investment risk Fexi Pension investment options Members can choose: a singe pre-mixed investment option, or sef-seect their own investment option mix

11 Pre-mixed investment options Option Growth / Defensive Asset Mix (%) Risk of Negative Return Performance Objective CPI+ Cash 0/100 Negigibe 1.0% pa Capita Stabe 30/70 1 year in % pa Conservative Baanced 50/50 1 year in 6 2.5% pa Baanced 70/30 1 year in 5 3.0% pa Sociay Responsibe Baanced 74/26 1 year in 5 2.5% - 3.0% pa Growth 85/15 1 year in 5 4.0% pa Sociay Responsibe High Growth 100/0 1 year in 4 4.0% - 4.5% pa High Growth 100/0 1 year in 4 5.0% pa Sef-seect investment option mix The sef-seect investment menu incudes the 8 pre-mixed options and 4 singe-asset cass options. Option Growth / Defensive Asset Mix (%) Risk of Negative Return Performance Objective CPI+ Austraian Fixed Interest 0/100 1 year in 9 1.5% pa Listed Property 100/0 1 year in 4 2.5% pa Austraian Shares 100/0 1 year in 3 3.5% pa Internationa Shares 100/0 1 year in 4 3.5% pa For a sef-seect investment option, an additiona fee of $30 is charged each 6 months.

12 Tax on Super ump sum payments Two components tax-free and taxabe Taxabe component is taxed as foows: Under 55: taxed at 21.5% Age 55-59: ni up to $145,000 threshod*, excess taxed at 16.5% Tax-free from age 60 *Threshod for 2008/09 Taxation of pensions Members aged Pension payments drawn proportionay from taxabe and taxfree components 15% tax offset appied to taxabe portion No tax on investment earnings in Fexi Pension account Members aged 60 and over Pension payments are tax-free and non-assessabe No tax on investment earnings in Fexi Pension account

13 How much super is enough? Can I achieve my desired ifestye in retirement? What income do I need to achieve my desired ifestye? Modest Lifestye Better than Age Pension, but ony abe to afford basic activities Comfortabe Lifestye Can be invoved in a broad range of eisure and recreationa activities combined with a good standard of iving Estabish your retirement income goas Cost Per Week Singe Homeowner Modest Lifestye Comfortabe Lifestye Housing ongoing ony $68 $90 Energy $12 $14 Food $67 $133 Cothing $15 $31 Househod goods & services $49 $88 Heath $13 $53 Transport $77 $118 Leisure $44 $142 Persona care $26 $26 Acoho & tobacco $0 $23 Tota per week $372 $718 Tota per year $19,399 $37,452 Coupe Homeowner Modest Lifestye Comfortabe Lifestye $70 $92 $15 $16 $141 $188 $25 $57 $52 $93 $24 $105 $78 $119 $74 $205 $41 $41 $0 $46 $520 $960 $27,151 $50,086 Source: Westpac/ASFA Retirement Living Standard (June 2008)

14 How much super is enough? Can I achieve my desired ifestye in retirement? How much do I need to save to achieve it? Modest Lifestye Singe Modest Lifestye Coupe Comfortabe Lifestye Singe Comfortabe Lifestye Coupe Retirement income p.a. $19,399 $27,151 $37,452 $50,086 Approximate required ump sum at age 65 # $268,000 $356,000 $519,000 $657,000 # Based on average ife expectancy and a rea rate of return of 6%pa (assumed CPI of 3%pa) How much super is enough? Can I achieve my desired ifestye in retirement? Prepare a budget Are my current super arrangements sufficient to achieve the eve of income I think I need? Buid my super to achieve my desired ifestye in retirement

15 How to buid your super Reduce costs by: Consoidating mutipe super accounts Increase your retirement savings by: Reguar contributions Transition to retirement Reguar contributions Lump sums Via BPay Cheque to UniSuper Payro deductions Before-tax contributions (saary sacrifice) After-tax contributions

16 Reguar contributions Exampe of achieving additiona $50,000 at retirement. Assumptions: Contribution made fortnighty Rea rate of return of 4% p.a. Years from retirement Net contribution per fortnight 5 $ $ $59 35 $36 45 $23 Saary sacrifice contributions Saary sacrifice contributions are very tax-effective: Before-tax saary contributed directy to superannuation Contributions tax of 15% on entry to superannuation Funds compound in a tax-effective environment

17 Saary sacrifice contributions (cont) Contribution imit appies: Saary sacrifice and empoyer contributions count If under 50, annua imit of $50,000 appies If 50 or more, transitiona annua imit of $100,000 appies unti 30 June 2012 Saary sacrifice contributions (cont) Exampe: Individua on margina tax rate of 41.5% saary sacrificing $20,000 p.a. Taken as Saary Saary Sacrificed Saary sacrifice amount $20,000 $20,000 Tax rate 41.5% 15.0% Tax payabe $8,300 $3,000 Net funds for investment $11,700 $17,000 Net benefit $5,300 or 45% Immediatey 45% better off, before funds are invested Funds to compound in tax-effective environment Immediate net benefit of 24% for individuas on 31.5% tax rate

18 After-tax contributions Contribution imit appies: Annua imit of $150,000 If under 65, can use 3 year averaging provision (up to $450,000 in one year) If 65 or more, imited to $150,000 per annum* *must aso satisfy work test Transition to retirement Access your superannuation as an income stream whie you continue to work aged 55 or more Can commence a non-commutabe income stream No ump sum access, must be in the form of an income stream Maximum pension imit 10% of account baance at start of financia year No restrictions if aged 65 or more No work test No requirement to semi-retire (reduce work hours) Saary sacrifice excess income into superannuation

19 Transition to retirement (cont) Genera guideines Minimum super baance of $200,000 in order to generate sufficient pension (maximum 10% of baance) Is best utiised over an extended period of time Litte vaue in saary sacrificing beow taxabe income eve of $30,000 Litte achieved if taxabe income aready at or beow $30,000 If aged 55 59, shoud generay have taxabe income of at east $100,000, ie. we into 40% tax bracket or higher If aged 60 or more shoud generay have taxabe income of at east $50,000, ie. we into 30% tax bracket or higher Transition to retirement (cont) Issues to consider For Defined Benefit members: Residua funds transferred to Accumuation 2 Future contributions to Accumuation 2 Cease entitement to Defined Benefit conditions and become Accumuation 2 member

20 Staying in touch with your super Handy cacuators to hep track your super progress Enro in a UniSuper seminar Take an onine tutoria See your account in action in the protected site MemberOnine The fund s investment performance at a gance A the information you need: atest news how to grow your super how to change your investment options, and a of our forms and brochures for you to access anytime. Read the atest super news Need more information? UniSuper s website UniSuper s to free Hepine Tak to your Superannuation Officer

21 Thank you Your questions are wecome