Alcoa of Australia. Retirement Plan. In this newsletter

Transcription

1 Retirement Plan In this newsletter Important Plan news Federal Budget 2013 Investment performance Are you in the right investment option? Trustee update Web enhancements Helpline Making your Plan better! It s been a busy few months for the Alcoa Retirement Plan! We re making a number of improvements and changes, driven by the need to give our members better service as well as keeping the Plan up to date and running eectively. We ve also taken a look at how we ll respond to significant industry and legislative changes that come into eect this year and in coming years. You ll find a brief summary of these enhancements and changes below, and we ve covered these o in much more detail on the following pages. Our approach to MySuper MySuper legislation came into eect from 1 July this year. Read on for more information about MySuper and how the Plan and the Employer will respond. We re improving the way we disclose management costs The amount you re charged for your accumulation super in the Plan won t change, but the way we disclose our management costs will. Read on to see how the changes will improve transparency. You ll no longer be charged switch fees when you change investment options Going forward, switch fees will no longer be charged, no matter how many times you change investment options. Read on for more information about this change. SG increases will aect some members in the Plan In the first of a series of legislated increases, the Superannuation Guarantee (SG) changed from 9% to 9.25% of Ordinary Time Earnings from 1 July This will impact some members in the Plan. Read on to see whether you ll be aected. Before-tax contribution caps are increasing (for some members) The Government has increased the before-tax (concessional) contribution cap for people over 60 to boost their super. Read on for more information about this and forthcoming changes to the before-tax cap. MEMBER NEWSLETTER SEPTEMBER 2013 Alcoa of Australia

2 We ve considered our response to MySuper We re improving the way we disclose our management costs From 1 July this year, super funds are able to oer a new default super product called MySuper it s likely you ve heard about this in the media or you may have even read about it in our last newsletter. We re improving the way we disclose our management costs in order to make sure we re as transparent as possible by disclosing both direct and indirect management costs to our members. MySuper is a part of the Stronger Super reforms which were announced by the Federal Government in response to the Super System (Cooper) Review in September The Stronger Super reforms are the most significant changes to the superannuation industry in the past 20 years and will have a range of implications for fund members, employers and superannuation funds around Australia. At the moment, when we tell you the management costs charged, we show you the direct management costs. Going forward we will also show you the indirect management costs. MySuper is designed to be a simple superannuation product which can replace the current default investment option that funds oer to their members. Superannuation funds have the choice of whether to oer a MySuper product or not if it is in the best interests of their members. The Alcoa Plan at this stage will not be oering a MySuper product. The Trustee has decided to retain the current arrangements as a MySuper arrangement may mean increased complexity and costs for our members in the Plan. We ll be communicating further with you about the Alcoa Plan and the Employer s response to MySuper and the Stronger Super requirements in the coming weeks. Will this aect me? No. The fees themselves will not change, just the way we present them to you. Keep an eye out for additional information when you receive your Benefit Statement from the Plan or when you access your account online at Next steps Going forward, we ll disclose both the direct management costs charged and the indirect management costs charged. This means that we ll be updating all Scheme documentation that discloses management costs, such as the Product Disclosure Statement documents (PDS) and the Benefit Statements we send to you on an annual basis. If you re interested in finding out more about the Plan s fee structure, check out the updated PDS. You can get hold of the PDS on the Plan s website (from the Documents & forms section) or by calling the Helpline on What s the dierence between a direct management cost and an indirect management cost? Direct management costs are those deducted by the Plan before investment returns are credited to your account. Indirect management costs, on the other hand, are the costs deducted within the underlying pooled investment products that form part of the Plan s investments. The pooled investment product owners deduct costs before passing returns to the Plan. 2

3 No more investment switch fees! We re pleased to announce that you are no longer charged a fee when you change your investment options. The change came into eect from 1 July Previously, you were charged a fee if you changed investment options more than twice in a rolling 12 month period. We re pleased to pass these savings to our members. Will this aect me? Yes, if you change investment options more than twice in any rolling twelve month period you no longer need to worry about this fee. Next steps This change has already been implemented. No action is required on your part. Some members benefit from the increase in SG! As you may be aware, from 1 July 2013 the Superannuation Guarantee (SG) rate increased from 9% to 9.25% of Ordinary Time Earnings (OTE)*. This is part of a series of increases to the SG rate over the next six years (taking the SG rate to 12% by July 2019) and will impact on some members of the Plan. * Subject to the maximum superannuation contribution base of approximately $192,160 per annum for the financial year. Will this aect me? It depends on what kind of member you are. Take a look at the table below to see if you may be aected and how. I am An Accumulation member and permanent employee An Accumulation member and casual employee A Defined Benefit member Will I be aected? No Yes Yes The finer points Alcoa will continue to contribute 14% of your base salary on your behalf Generally, Alcoa s contribution on your behalf will increase from 9% to 9.25% of your OTE Indirectly, your entitlement is subject to a minimum benefit which will increase in line with the SG increase You can find out more information about Alcoa s contributions by checking out the Plan s PDS, available on the Plan s website or by calling the Helpline on Next steps This change has already been implemented. No action is required on your part. However if you re interested in finding out more, check out the Superannuation Guarantee payments and the Alcoa Plan factsheet available on the Plan s website. Before-tax contributions are increasing (for some members) The concessional contributions cap (i.e. the cap for beforetax contributions), which is currently $25,000 for everyone, is changing as follows: If you re over the age of 60: from 1 July 2013 your concessional contributions cap increased from $25,000 to $35,000 If you re over the age of 50: from 1 July 2014 your concessional contributions cap will increase from $25,000 to $35,000 The concessional contributions limit remains at $25,000 for everyone else* The government announced it would not proceed with earlier proposals to limit the new higher cap to those aged 50 or more with superannuation balances below $500,000. * While the caps for those age 60 and over, and from 1 July 2014, 50 and over, are not indexed, the $25,000 limit for those under 50 is indexed and is expected to reach $35,000 by 1 July Will this aect me? The new $35,000 cap for people over 60 represents a potential opportunity to boost your super in the Plan when you re nearing retirement. Next steps If you re over 60, this may be a great opportunity to boost your super. Talking to a financial adviser may help you consider whether making additional before-tax contributions is the right strategy for you. Still have questions about any of these changes? We know super can be a tricky topic. That s why we have a dedicated team of Plan Helpline consultants ready and available to assist you. Feel free to get in touch if you have questions about anything we ve covered in the above, or if you have any questions about your super in general. You can reach them on You may also like to check out the website As an Alcoa Plan member you also have access to expert financial planning advice from Mercer and your first session is free! Call the Helpline to make your appointment. 3

4 Investment performance Equity Option Capital Stable Option Australian Shares 43% Global Shares (unhedged) 21% Global Shares (hedged) 21% Property 5% Infrastructure 5% Private Equity 5% Australian Shares 13% Global Shares (unhedged) 6% Global Shares (hedged) 6% Property 5% Infrastructure 5% Australian Fixed Interest 15% Global Fixed Interest (hedged) 15% Credit 3% Cash 32% Period to 30 June 2013 Return* Accumulation+ Retained Pension 1 year 21.05% 20.76% 23.51% 5 years 3.68% 3.57% 2.85% 10 years 7.00% 6.94% 5.66% Period to 30 June 2013 Return* Accumulation+ Retained Pension 1 year 9.55% 9.29% 10.64% 5 years 5.23% 5.12% 5.64% 10 years 5.61% 5.55% 6.17% Growth Option + Australian Shares 29% Global Shares (unhedged) 14% Global Shares (hedged) 14% Property 5% Infrastructure 6% Private Equity 3% Australian Fixed Interest 5% Global Fixed Interest (hedged) 10% Credit 8% Cash 6% Cash Option Cash 100% Period to 30 June 2013 Return* Accumulation+ Retained Pension 1 year 16.31% 16.04% 18.21% 5 years 4.45% 4.34% 4.23% 10 years 6.74% 6.69% 6.19% Period to 30 June 2013 Return* Accumulation+ Retained Pension 1 year 4.23% 4.23% 4.97% 5 years 4.75% 4.75% 5.60% 8 years^ 4.85% 4.85% 5.72% Why do my returns dier from other members? Dierent accounts are charged dierent rates of fees which are deducted from Plan earnings. This means each credited return will dier slightly. Remember also returns for Pension members do not include deductions for tax. Remember: Past performance is not necessarily indicative of future performance. + Includes Defined Benefit members who have a supplementary accumulation account. * Returns are shown after deduction of tax at 15% and investment expenses for Accumulation, Retained Members and Defined Benefit Members, and after deduction of investment expenses for Pension members (tax is not payable once you re drawing a pension). ^ From inception. + The Plan s default investment option (to 1 January 2013). 4

5 Trustee update The Alcoa Plan is run by the Alcoa of Australia Retirement Plan Pty Ltd, charged with the task of ensuring your super is well managed and accessible to you when you re eligible to receive it. The Trustee Board consists of eight directors, four of whom are appointed by Alcoa, and four elected by you, the Plan s members. We ve appointed a new Chairman on the retirement of Mr John Phillips AO who served the Plan for over 20 years. The Trustees thank Mr Phillips for his significant contribution and wish him all the very best for the future. Mr Tom Adams was appointed on 10 April 2013 as Chairman to replace Mr John Phillips AO who retired on the same date. The current board consists of the following members: Employer Representatives Mr Anthony (Tom) Adams (Chairman) Ms Jann Kinsela Mr Michael Parker (appointed to the Board 10 April 2013) Ms Elizabeth White (appointed to the Board 19 September 2012) Employee Representatives Mr Andrew Hacking Mr Brett Noonan Mr Peter Rozentals Mr David Thomas 5

6 Federal budget 2013 The 2013 Federal Budget did not include any major new announcements relating to superannuation. However, it did reiterate and refine a number of changes to superannuation originally announced on 5 April Some of the proposed superannuation changes that may aect you are outlined below. Remember, this is not a full and detailed list of changes. You can access a more in-depth account of the 2013 Federal Budget by calling the Helpline on Increased Medicare Levy The Government proposes to increase the Medicare levy by half a percentage point from 1 July If legislation is passed, from 1 July 2014, the Medicare levy will rise from 1.5% to 2% of taxable income. The increase, which is designed to help pay for the Government s National Disability Insurance Scheme, will have an impact on superannuation-related taxes including, amongst other things: Excess non-concessional contribution tax (will increase from 46.5% to 47%) No-TFN tax payable on superannuation contributions where the member has not provided their Tax File Number (will increase from 46.5% to 47%) The increase will also impact fringe benefit tax rates from 1 April 2014 (the tax rate applied to the taxable amount will increase from 46.5% to 47%). Possible implications If you need to withdraw funds from super prior to age 60, the tax applied will be higher. There may be additional tax on your death benefit if left to a non-dependant. Tax on earnings The Government has proposed that, from 1 July 2014, investment income from assets supporting a super income stream, such as an account based pension, will only be tax free up to $100,000 a year. Income above $100,000 a year will be taxed at 15%. Withdrawals will remain tax-free for those aged 60 and over and will attract existing tax rates for those aged under 60. Possible implications This change is expected to aect retirees with large pension accounts (e.g. greater than $2 million); but lower account balances could be aected in a year where investment earnings are high. The $100,000 threshold will be indexed to the Consumer Price Index (CPI) and will increase in $10,000 increments, meaning more retirees may be aected over time if CPI does not keep pace with inflation. The Government has indicated that, if it is re-elected, these changes will be introduced after the election. The Opposition has indicated it will not proceed with the new tax on pension investment income if elected. Additional tax on high incomes In late June the Government passed legislation to allow the tax oice to charge people who earn more than $300,000 per year a 30% tax rate on concessional super contributions, rather than 15%. This reform was announced as part of the 2012 Federal Budget and will apply from 1 July Possible implications People who earn $300,000 or more may see their contributions tax more than double. There are numerous amounts that are included in the $300,000 threshold, such as taxable income, concessional superannuation contributions (excluding those subject to excess concessional contributions tax), investment income, fringe benefits, bonuses and capital gains you should speak to a licensed, or appropriately authorised, financial planner to see whether the new additional tax will aect you. 6

7 Are you in the right investment option? If you want to make your money work as hard as you do, one of the easiest (and most eective) ways to do this is make sure your super is invested in the right investment option you ll thank yourself once you reach retirement! Now is as good a time as any to take a good hard look at your current investment arrangements in the Plan and ask yourself: is my super invested in a way that best suits my current circumstances? Remember, as a member of the Plan, you can choose from investing in one (or a combination) of four investment options, giving you plenty of control. Whether you re looking to review your investment option because you re in the Plan s default investment option, or you re just doing a regular review of your investment arrangements in the Plan, there are a number of things you might like to think about. Consider when you are likely to need your retirement savings This is one of the critical issues. It s easy to think that you will access your retirement savings when you stop work but you will also need access to your savings throughout retirement. When you retire your money should still be working for you even if you are making withdrawals. Check out the Approaching Retirement factsheet on the Plan s website for more information about the wide range of options available to you in the Plan. Your feelings about investing As always, it s important that you feel comfortable with your chosen investment strategy and options. If sharp fluctuations and short-term negative returns worry you, an option which is likely to provide more stable returns may suit you better. Your personal financial circumstances Finally, take into account any investments you have outside the Plan (including your house if you plan to downsize) and anyone who will depend on you financially when you retire. Seek help if you need it For help choosing or changing your investment option, we encourage you to talk to a financial adviser. Investments can certainly be a complex topic, but don t let this deter you there are experts who can help. By talking to a licensed financial adviser you can get help working through your options and guidance towards making a decision that best matches your situation. Consider the cost of living as well When you consider investment returns, you need to take inflation (the cost of living) into account. For example, if your savings earn 3% a year after tax, and the cost of living increases by more than 3% a year, then at the end of the year your investment would be worth less in terms of the purchasing power of the money you ve saved. A low-risk option such as the Plan Cash option may suit you at some stages of life but in the long term may not keep pace with inflation. Your plans for retirement We all have dierent plans and expectations for our retirement. If your plans include luxuries such as overseas travel and starting a new (and potentially expensive) hobby, you may need to save more than someone with less ambitious plans. 7

8 Web enhancements Our website is better than ever! As part of a commitment to continuous improvement, a number of enhancements have recently been made. In fact, you may have already noticed some of the following: We can help you find lost super online Many of us have super buried all over the place. In fact, if you ve had more than one job, chances are you have more than one super account. If you think you might have some lost super, we ll help you track it down. All you need to do is provide us (the Trustee) with your Tax File Number (TFN) and give us consent to use this to find any additional super accounts. This is easy to do if you haven t already done so, you ll receive a member alert when you log in to the Alcoa Plan website. Once you re logged in, simply follow the prompts and we ll arrange the rest! If you don t receive a prompt (for example, you have switched o your member alerts), go to the Personal details tab, where you can update your TFN and give consent from there, or call the Helpline for assistance on We ve gone mobile! Now it s even easier for you to view important account information anywhere, with the Alcoa Plan s new mobile website. The mobile optimised site allows you to see your account balance, transaction history, personal details, investments and contributions. You can also update your PIN and, if you have any questions, call our friendly Helpline sta at the touch of a button. If you haven t already, make sure you check it out. Simply enter into your smartphone browser or scan the QR code opposite using your smartphone s QR reader. Happy browsing! More information about your annual contribution caps now available The Annual contribution caps page has been enhanced to allow the display of contribution caps for the previous review period. This means that each financial year, (i.e. the 12 months to 30 June) you ll also be able to see information about the previous year s contributions so you can compare how you re tracking against the current caps. You ll find this via a new Previous year link on the current Annual contribution caps page. Not sure how to use a QR code? Quick Response codes ( QR codes) are a simple way to show information that can be easily scanned and processed. Put simply, they re a bit like bar codes, but for smartphones. If you have a smartphone, all you need to do is download a QR Reader application (if you don t have one already) from your smartphone s app store. These are available free of charge. Now, open the app and use it to take a picture of the code. It will decode and take the action specified in this case, taking you to the Plan s mobile site. Contacting the Alcoa Plan Helpline: Address: GPO Box 4303, Melbourne VIC 3001 Web: This newsletter is issued by Alcoa of Australia Retirement Plan Pty Ltd ABN RSE License No L , as trustee of the Alcoa of Australia Retirement Plan ABN Registration No R The Trustee is not licensed to provide financial advice and the information in this newsletter is general information only and does not take into account the specific needs, or personal or financial circumstances or any persons. Readers should obtain financial advice from a licensed, or appropriately authorised, financial planner before making any changes to their superannuation arrangements or investments. Members should also read the Plan s PDS. This document contains information about the Plan s investment performance. Please remember that past performance is not necessarily an indication of future performance. 8