The moments that count

Shane: Hello. My name is Shane Hancock, and I am the Head of Member Products, Guidance and Advice at AustralianSuper. And welcome to our podcast, The moments that count. Before we start, it's important to note that the information discussed in this podcast is general only and doesn't take into account your needs or personal objectives. You should assess your own financial situation and needs.

Today, this podcast is being recorded at our head office on the land of the Wurundjeri people of the Kulin Nation. I and AustralianSuper acknowledges the traditional custodians of country throughout Australia. We pay our respects to elders past and present, and extend that respect to all Aboriginal and Torres Strait Islander people.

Quite often, AustralianSuper members will ask questions that are found through various channels. And mostly those questions are relevant for many members, so we thought it'd be great if we could share some of those questions and answers through this podcast.

To help answer those questions, I'll invite a guest expert to join me on the podcast. One of the most important areas of impact on our members' retirement savings is investment performance and hence has a high interest level for members.

And that's why today I'm very happy to be joined by one of the leaders of our investment team, Justine O’Connell who is the Head of Portfolio Construction. Welcome, Justine. Thanks for joining me.

Justine: Oh, thanks, Shane. Thanks for having me.

Shane: Justine, can you tell our audience a bit about yourself and what your role at AustralianSuper is?

Justine: My role is Head of Portfolio Construction, like you said, and it sits within the broader Asset Allocation Team. And in simple terms, my team is responsible for constructing the PreMixed investment options that we offer to our members. So, the flagship portfolio that we talk about a lot, particularly when we talk to members, is the Balanced option.

But we also offer a range of investment options across the risk-return spectrum, from high risk to low risk. And so my team is really focused on what asset classes we need to allocate in each option to meet the objectives within the constraints that we set for each option to deliver the retirement outcomes for members.

Shane: Thank you. Very important role for members and how they're investing their money. So, commonly, members will ask funds, what is going on? What's happening in the market? And it would be remiss of me not to ask you, what is your outlook of the investment market and what are some of the signs you're looking out for?

Justine: Well, there's always a lot going on in investment markets. So, you know, one of the most important things that we do in the asset allocation team and obviously in portfolio construction is we have an investment process which helps us to focus on the key things that we think really drive the economy and drive markets and then give us insights into how to position the portfolio.

So, hopefully it's helpful for members to understand we have two key inputs into our investment process. The first is the outlook for the economy and then what that means for investment markets. So, how are investment markets like equities and bonds going to respond to what's happening in the real economy?

The other key thing that we really always want to think about is value. And everyone knows what value is. And the same applies for asset classes or assets. Sometimes they're expensive and sometimes they're cheap. So, we want to think about when a good time to buy those asset classes is.

So, in terms of your actual question, the outlook, something we focus on at the moment. I know everyone will be aware that global central banks, and certainly the RBA as well have been aggressively hiking interest rates in order to bring down inflation, which, after a very long period of being pretty benign, has been much higher than it has been over the past sort of 30 years.

So, we're in quite a different environment than we have been for a long time. In the US, which is a key market for us in terms of informing how broader investment markets work, the Fed Reserve has increased rates to its highest point in the last 22 years, and in Australia, we are all aware that rates are now over 4%.

So what are the central banks trying to do? That's a pretty blunt instrument, but what they're trying to do is slow demand. And what typically happens when they increase interest rates and slow demand is that employment increases. And typically when policy or interest rates are very tight or very high, the result is that the economy ultimately ends up in recession.

When the economy is in recession, what then typically happens to asset classes is that risk assets or growth assets like equities, fall and other assets like fixed income and cash tend to do better in that sort of environment.

Shane: So when you say equities, you're talking about shares.

Justine: Shares, yeah. So, listed shares in particular. So, that's our outlook at the moment, really driven by central bank policy in terms of the outlook for the economy. So then when we look at asset classes in terms of what's expensive and what may look a bit cheaper, mainly across the board, most asset classes, particularly growth assets like listed equities, are a little bit expensive.

So, we've got a scenario where our outlook is for a recession because of tight policy and certain assets are more expensive than they have been historically and more defensive assets like cash and bonds look a little bit more attractive on that basis.

Shane: So based on that, and thank you for that explanation, have we as the fund looked differently at how we would invest now in this particular period?

Justine: Yes. So then the next step really, and that's key part of my team's role is to bring together the outlook and valuations and also to monitor a number of different factors in the economy to continue to test that is then to say, well, how do we actually want to construct the portfolio?

So, at a really high level, the portfolio is what we refer to as defensively positioned. So, that means we have more in bonds and cash than we usually would hold through a long-term cycle and we have less in equities. And we think about that versus a benchmark that we have for allocating assets.

We are a long-term investor in unlisted assets and so we still have a reasonable allocation to unlisted sets both mainly in infrastructure and also in private equity. So, we hold a bit more in those assets because we believe in the unlisted premium over the long term. So, we want to own and generate returns for members from those assets.

Shane: I was going to ask you this question later, but considering you've just referenced unlisted assets, can you just explain to our audience, some examples on what that is and why that is accessible for you guys to invest on behalf of our members that maybe an individual may not be able to do it themselves?

Justine: Yeah, absolutely. As I mentioned, we obviously invest across a number of different asset classes. When we're building the portfolio, we invest in listed equities, and most people can access listed equities. There's a number of different ways that people can invest in listed equities.

But we can really broaden our investment opportunity by also investing in unlisted assets and that just firstly gives us access to more investments because the world is comprised of both listed and unlisted investments and we can also use our scale and our strong cash flows. So we're really so lucky to have a really strong cash inflow profile and that gives us the ability to hold unlisted assets and invest in unlisted assets through the long term.

Some examples of unlisted assets are we hold a number of toll roads both here and offshore. Sydney Airport is another good example of an unlisted asset that we were able to buy with a broader consortium and we obviously own a number of large direct property investments offshore and in Australia as well.

Shane: There's some great examples there and I think it's one of the things that we try to demonstrate to members through different forums around those unlisted assets that we hold that as an individual it'd be almost impossible, but also the long term nature. So if you're going to Sydney Airport, you're paying for car parking, maybe think about your retirement, that's assisting.

But I think your point then around the ability for us to hold those through the members' money that's being invested allows us to continue to be active in our other investments. So I think it's really important for members to understand that they are owners of worldwide significant assets.

We've talked about the current investment markets and members – and consumers, Australians – are generally on higher alert in investment markets at times of uncertainty, but obviously we have a long-term view to investing. And you've touched on some of the key areas that we consider. Can you talk me through some of the core beliefs that AustralianSuper has when investing money for the long-term for members?

Justine: So the most important core belief, and I know this is true across the Fund, but certainly in the investment department, it resonates in everything we do, is that we are all focused on one thing, and that is generating the best returns within our risk appetite for our members to give them the best retirement.

And that's something we think about and refer to when we're thinking about these direct investments, what's in the best interests of our members and will generate the best return. So that's really foundational, I think.

In terms of more our investment beliefs – and this really struck me when I joined AustralianSuper – but we believe strongly in active management. Over 90% of the portfolio is actively managed whether it's, I referred earlier to how we're thinking about managing our asset allocation, but we actively manage the Australian equities portfolio. All parts of our portfolio where we think we can add value because every additional per cent – I was going to say basis point – but every additional per cent makes a significant difference to the end balance of members. So if we think we can make money, we should do that.

The third point is really around scale. I think it's a privilege to have the scale that we have and the strong cash flows that we have and we can use that in two or three really important ways. The first one is to reduce costs and we do that by internalizing teams. We think we can reduce external manager fees by doing it ourselves internally and using our scale. We can also with those internal people, we can generate great investment insights. We have over 300 investment people in the department and we can leverage those insights from the stock pickers in Australian equities to the economists and thematic long-run investors in the Asset Allocation Team.

And thinking collectively and sharing knowledge is so important to generating ideas and generating returns. And obviously we spoke to the other benefit of scale which is really around our ability to invest outside of listed markets and open up our opportunity set to invest not just in Australia directly, but also overseas and generate better returns for members that way as well.

Shane: I think that just picking up on that point you've talked about scale and one of the things that's really important for us in the fund is being bigger is only important if it makes us better. And so you've talked about that size is allowing us to have better net investment outcomes for members. Just reiterating that point that being large is one thing, but you need to use it for better member outcomes. And that's coming through very clearly in the way in which we think, and our core beliefs in investing money.

Justine: Yeah, I think that absolutely, because you're right, it only works if you can generate better net investment returns. It does require you to rethink over time how you invest, because how you invest a portfolio of $50 million relative to $100 billion is going to be different.

And we've got to a scale where it makes sense to internalize because we can realize those scale benefits and reduce costs. But that's the point at which you do it when you can realize either cost savings or better return outcomes.

So we do have to change how we invest. And one of the key things that we have talked about for a long time is moving more, investing offshore, setting up teams offshore to really open up the investment opportunity set and also to be able to invest at the scale that we are.

Shane: So that point there, again, for a member, reiterating what we said earlier about unlisted is the size and scale allows us to invest in assets that, as a smaller fund, we may not have been able to. And then you correlate that back to the member, that a member would not be able to for that outcome and that member benefit that drives all our decision making. So just taking it back a little bit, Justine, when you're talking about actively investing, can you explain to our audience the difference between active investing and passive investing, which people commonly ask us?

Justine: Yeah, absolutely. So the objective of passive investing is to achieve or to deliver the return of an agreed benchmark. So to try and make that real for someone listening, you often hear about the ASX 300 or the S&P 500 or the NASDAQ. They're all defined as benchmarks or indices. So, a passive investment in that context, it would deliver the return of that benchmark. That would be success for a passive investment.

Justine: Yeah, absolutely. So the objective of passive investing is to achieve or to deliver the return of an agreed benchmark. So to try and make that real for someone listening, you often hear about the ASX 300 or the S&P 500 or the NASDAQ. They're all defined as benchmarks or indices. So, a passive investment in that context, it would deliver the return of that benchmark. That would be success for a passive investment.

Active investing, in contrast, aims to make more money than that agreed benchmark. So, taking that same example for, say, the ASX 300, you may have an objective as an active investor to deliver the return of the ASX 300 plus 1%. And to achieve that objective, you then have to take deliberate deviations or different share allocations compared to that benchmark to generate a better return.

So you basically need to pick shares that do better than the average index and hold more of them over that period to generate that outperformance. If you don't hold the right shares, you do worse. And that's actually really hard to do sustainably over the long term. That's why we have really big teams of researchers and portfolio managers making those decisions to try and beat those benchmarks across the portfolio

Shane: Great. So as you reiterated earlier, we're an active investor, we use our size and scale to look for value and opportunities for our members as opposed to sticking to the benchmark. And you talked about those things that we might invest more in, but there'll be also assets that we choose to invest less in that an index manager may do.

So, Justine, question directly from a member: "Why can't members invest in overseas listed companies through the Member Direct investment options?"

Justine: So, trading in international shares can be complex. It exposes the member or the investor to different currencies other than the Australian dollar. And there's also a range of different tax regimes depending on which country you're investing in. But overall, it just means it's more complex and much less straightforward to invest in directly. But we do offer a number of other ways to get exposure to international listed shares.

Shane: How do we do that?

Justine: So I might talk through a few different ways. So, on our investment menu, we have what are referred to as DIY options, which are effectively single sector options and one of those options is an international shares option. That's an actively managed option that aims to outperform an overseas benchmark, and that's very straightforward for members to invest in.

We also offer the Member Direct platform, and across that platform there are a number of options to invest in international shares via ETFs. And via an ETF, you can get an exposure to a range of diversified companies and you just need to invest in the one option. So, it's a lot more simple for members.

So an example on the Member Direct platform is the NDQ, which, for example, tracks 100 of the largest non-financial companies listed on the NASDAQ or FANG, which invests in leading next-generation technology, including household names such as Apple, Facebook, Nvidia these days, et cetera.

So on the member direct platform there's broad-based ETFs which just invest across a range of sectors and geographies. But there are also then sort of more sector-specific international investment options like I've just mentioned, that are more focused on technology stocks for example.

Shane: And you referred earlier to our PreMixed option. The most commonly used PreMixed option is our Balanced option.

Justine: The Balanced option, yes.

Shane: Which also has exposure to international-listed companies.

Justine: It has over 50% in equities, of which around just under 60% of that is in international shares. So a reasonable proportion of the portfolio. We also have the high growth option which is mainly invested in shares either listed or unlisted by private equity infrastructure listed equities. And that again has a large proportion of the portfolio in international shares and that aims to outperform CPI by around 5% over the long term.

Shane: So, ultimately a member has multiple options to invest in, in this question in relation to international shares; a PreMixed option like the Balanced fund, where the member is just looking at their risk profile and in that example you've talked about it being, as the name says, balanced between high risk and medium-low risk, or they can be more specific in how they wish to invest, but using investment vehicles like our DIY mix or ETFs, as you referred to. So, there's options there available for members depending on their appetite for being directly involved or through a PreMixed option.

Justine: Yeah, absolutely.

Shane: Just to finish off and keeping in mind that this is general advice and not personal advice, but particularly with markets the way they have been, what would you say to someone who keeps a close eye on their super and thinking about retiring in the near future as it relates to investments?

Justine: So super can and usually does form a really important part of an individual's retirement solution. I would recommend getting professional advice on what would work best for you depending on your risk appetite and your personal circumstances.

I think that's really important, particularly as a member nears retirement. As general rule, returns are positively correlated with risk. So, high returns involve taking more risk, lower returns involve taking less risk. Just in really simple terms. One of the biggest risks for members retiring at 60 is the longevity risk, which refers to the risk of basically outliving your savings.

Given that people in Australia on average, live for another 20 or more years after retirement, super assets could be viewed – or should be viewed – with a longer investment horizon to think about managing that risk. So, often when you think about it, when a member retires, you still actually got a pretty long time horizon for investments.

Shane: I think that's a really pertinent point, and something that's quite commonly asked by members is, some people will think, I've got access to my money on retirement and 100%, it's your money, but the benefit of keeping it invested in the market for that period of time allows you to still have that longer-term horizon.

So, that's a really important point that you raise, and as importantly, that people should seek guidance or advice around their own personal objectives and needs. Justine, thank you so much for your time today. We've covered a lot of ground on a topic of significant interest for members and our listeners. So, thank you for your time and I look forward to having you back in the future.

Justine: Oh, it's my pleasure. So, thank you very much for having me.

Shane: Thank you for joining us today. If you're an AustralianSuper member and you would like to join us to share your story or have a question or topic you would like us to cover, then click the link in our show notes to get in touch. If you've enjoyed this podcast, subscribe and share with your friends and family. See you next time.

Shane: Hello. My name is Shane Hancock, and I am the Head of Member Products, Guidance and Advice at AustralianSuper. And welcome to our podcast, The moments that count. Before we start, it's important to note that the information discussed in this podcast is general only and doesn't take into account your needs or personal objectives.

You should assess your own financial situation and needs. Today, this podcast is being recorded at our head office on the land of the Wurundjeri people of the Kulin Nation. I and AustralianSuper acknowledges the traditional custodians of country throughout Australia. We pay our respects to elders past and present, and extend that respect to all Aboriginal and Torres Strait Islander people.

Australian super has the privilege of 3 million members trusting us with their retirement savings. Each of those members has their own story, and today we're going to hear one of those stories. I have the pleasure of being joined by David, a member of AustralianSuper. Welcome, David, and thanks for joining us today.

David: Thank you.

Shane: Before we get into retirement and your life to retirement, from what I've read and heard, you've had a very interesting life. So, tell us a bit about David.

David: Well, David came to Australia 60 years ago, at the age of 27, got a job immediately with Ford Motor Company.

Shane: Right.

David: With superannuation.

Shane: Excellent.

David: But it was voluntary then. So, four years later, when I quit and went to another job, a better job, more pay. I collected my super that I'd contributed and I spent it. And I got super in the next job.

And after six years of that, I quit, went back to Ford. I was invited back to Ford. And I got my super in my hand and I spent it. I put it, I was to deposit it on a house, but I spent it. So at the age of 37, I took a look at myself and said, you've wasted about 17 years with no superannuation, and it's not going to be all that long before you retire.

It seemed a long time at the time, but... I needed to start being serious about it. Now, Ford had a very good superannuation scheme, and I was lucky enough to be in senior management, it was very good.

But I retired at 55 because I had been working overseas, and I came back to Australia in 1991 on a very good deal and had put quite a bit in my personal savings account. But my superannuation was not worth very much. In fact, I retired after about 18 years of countable service with Ford with about $350,000.

That was in 1991. Now, that sounds a lot, or it may sound a lot, but it wasn't a lot. Even though the retirement experts said, yeah, you can live on $25,000 a year, I found that to be nonsense because my first year's expenditure in 1991 was something like $55,000.

Shane: Yeah, okay.

David: So it was crazy. So, luckily, I walked out of Ford, an early retirement with a nice package, but not much superannuation, and I went to work for CSIRO.

Shane: Before you did that, had you planned on retiring at that stage at Ford?

David: No, but let me explain. In 1991, when I came back from an overseas assignment, the market was in an absolute mess. It was a bad recession, a bad recession, and I didn't want to stay at Ford and watch all the jobs start drifting away. They had an early retirement scheme.

Shane: Like a redundancy type set-up.

David: Where they were encouraging people to leave. And I had signed a contract to say that I would not leave until three years after coming back from overseas.

Shane: Okay.

David: But I prevailed at the time and said, look, it's pointless my staying here. You haven't got any exciting jobs for me, so why don't you let me get what do they call it, the golden handshake?

Shane: Yeah, yeah.

David: And they said, okay, we'll do that. So that's what I did. And as it happened, CSIRO was just looking for a Chief Executive of the newly opened Australian Automotive Knowledge Centre.

It was right up my alley because it involved trying to persuade the companies who make components for cars, persuade them to do more research, which is what the government wanted, and that's why the thing was funded. So I got into that, and it was supposed to be for three years, but it turned into ten.

So I retired for the second time, and then I was overseas again when I got a phone call asking me to go back to CSIRO for another eight years. So I was something like, what, 73, more when I retired.

Shane: So you retired from CSIRO after ten years, you then went overseas, and then they asked you to come back, so you were holidaying, living overseas?

David: It was a holiday.

Shane: And they brought you back and it's been another eight years, yeah, okay.

David: So that's why I was lucky.

Shane: Yeah. Well, as we talked about earlier, hard work turns into luck sometimes.

David: Well, I was lucky because that enabled me to put as much as I possibly could afford into superannuation. And the superannuation scheme at the time was a lot looser than it is today, so I was able to tuck it away and wound up with a pretty handsome nest egg.

Shane: So let's wind back to the beginning. So you came to Australia in your 20s and you started at Ford. Where did you migrate from?

David: From Zambia.

Shane: Okay.

David: It was Northern Rhodesia when I left there, but it was becoming independent.

Shane: Okay.

David: People were being killed and hassled and I had a wife and two babies and it was impossible to tell, really, I was lucky enough to be able to leave. But people who had been born and bred there and had property there, they found it impossible to leave because they couldn't sell what they had, very difficult for them.

Shane: And was there connection to Australia that made you choose?

David: Well, if you're living in paradise, which is what it was in Africa at that time, and you know you've got to leave, where are you going to go? You want to go from one paradise to another. Somebody told me that Australia was paradise, but don't go there unless you can afford to be unemployed for a couple of years. It might not be easy to get the right kind of job, which was nonsense, because I walked into a job within days of arriving in Australia.

Shane: Yeah. So you landed in Melbourne.

David: Actually, somebody got me an apartment in Ocean Grove. If you're looking for a job...

Shane: Although Ford is not far from it, I'm assuming you started at Ford Geelong?

David: Precisely. I called Ford in Geelong and said, I've just got here. Have you got any jobs? Thinking they would offer me a job in the factory. But in fact, they said, what do you do? I went for an interview. They said, what do you do? And I told them and they said, oh, I've got just a job for you in the head office.

Shane: What was the role that you started at Ford doing?

David: It was called a purchase analyst.

Shane: And so what did that job do?

David: Well, if you're making a motor car, you might make some of the stuff yourself. The heavy stuff, like the cylinder block and the cylinder head, maybe, and maybe a few other things, but the body stampings, the outside panels, you'll probably make most of those yourself.

But everything else you're going to buy, the wheels, the tires, the steering wheel, the seats, the roof, all that stuff, the glass, battery, you name it, got to buy all that stuff. So there was about 100 and something suppliers around Australia who were selling parts to Ford.

Now, if you're going to buy those things and you're going to buy sort of 50,000 sets of stuff per year, you're going to be a bit choosy about what you buy or how much you pay for it. So you need to understand, you don't just say, look, I want to buy a wheel, and get three quotes and take the best quote, you're going to say, how much you're going to charge for 50,000 wheels? And it'd be 250,000, wouldn't it, five wheels a car. But you want to understand exactly what material it's made from, how they test it and how they design it.

Shane: Yeah, of course.

David: Transport it and all that. And you add all those costs together and you say, well, this is what I reckon it should cost. And the supplier says, well, this is what I think it should cost. And you negotiate and you get the price. That's what the business of purchasing and procurement in a motor company is all about.

Ford just in 1963, had just opened the factory in Broad Meadows, and they were just cranking up the volume, and it got to 50,000 a year. And so my job was the analysis of those costs. A cost analysis job.

Shane: And you progressed significantly through Ford. I would have thought that first role gave you a really good insight of cost drivers of the organization.

David: It did, except they decided that they wanted to train me for something else because automation was just beginning. And so they sent me to IBM for training with computers and I thought that would be magic. So I learned about that. I learned about systems analysis. But by then I decided that there was a better opportunity, more money in a job in Sydney. So, I moved to Sydney.

Shane: Okay, with Ford or?

David: No, no, with another company who happened to make motor car parts, air conditioning, heaters, that sort of stuff.

Shane: It's an industry that obviously was quite significant in Australia that doesn't really exist now does it?

David: It was growing then and it was important to Australia. And it was an important employer. And there were lots of migrants coming in. And they needed jobs. They needed the kind of jobs that Ford was offering.

In the factory at Ford, there were something like 17 different languages spoken, so we can imagine you want to put up a notice saying, warning or don't come to work on Friday, you got to put that up in 17 languages. It's a complex business.

Shane: Absolutely. Yeah. There's a couple of different timings you talked about, so the first I think you talked about your first early retirement from Ford, was that around the '91 period, with the market and high-interest rates? So you had a significant market environment. And then, looking forward, there was obviously the GFC in 2008, which was also a period of time where you might have been making some decisions around your future. Is that right?

David: Yes. Well, at the time, I had my money with a private bank that's supposed to give special service to people who've got a bit of money. But it was all for their benefit, not mine. Their fees were high, and it took me quite a time to realize that there was a better way to do things. And a financial adviser friend of mine said, "Put it in AustralianSuper." Best bit of advice I ever got. I did that, and I stopped paying something like $15,000 to $16,000 a year fees. It went down to less than $1,000 a year, something.

Shane: And so you saw an advisor. Was that at around the GFC period, or is it just a separate time?

David: That was about 2012.

Shane: Yeah, okay. Yeah.

David: I'd suffered by then from the GFC, where I think my super went, it was about half.

Shane: And you were still working then, or you'd retired again, for the second time?

David: I had a third career, I was teaching English to medical people because there was a need for that at the time.

Shane: Tell me about that, because your wife was a teacher, is that right?

David: Yeah.

Shane: Okay, so tell me about that transition to English teaching.

David: It was 2008. I was still working with CSIRO, and my wife was getting more and more people coming to her for help with English, medical people who need to pass a very high-level English exam in order to get registration. So they needed help.

And she was getting more and more clients. So as I wound down from CSIRO, I thought I could be more useful to my wife and help her out if I had the certificate that said you can teach English to professional people. So there happened to be Cambridge University was putting on course for teaching English to adults. I took that course, started another career.

Shane: And how old were you then? You're in your 70s, early 70s?

David: Yes.

Shane: And the motivation for that was to help your wife or was it also an element of self-improvement?

David: Also to keep the brain working. At that stage, there was a lot of talk about Alzheimer's, and I became pretty concerned about not wanting Alzheimer's. My father had died from dementia at the age of 78. So I was approaching 78 and I thought, I haven't got long to go, I'd better start taking all the precautions. So keeping the brain active was the most important thing I did.

Shane: Yeah. And so I understand you still do a bit of that. You and your wife have a bit of a daily competition. Tell me about that.

David: That's just over lunch. We do the crosswords. Yeah. She does the Target. I do the Ken Ken, Sudoku. We do the cryptic and the quick crosswords. And we have a competition.

Shane: Who wins?

David: Pretty even, pretty even.

Shane: Yeah, okay.

David: It's amazing. You know, 15 years ago, I would have been quite a bit ahead, but she caught up. She's a smart person.

Shane: Well, does the loser have to do the dishes?

David: We've got a good dishwasher.

Shane: It's interesting because I know, obviously, you've talked about keeping the mind active. You also do a bit of physical activity as well.

David: I bought a contraption, that exercise of the upper body, and I do all that. And we've got a walking machine I just want to keep reasonably fit.

Shane: Yeah. So through the period of your career change, and you said you had two children, is that right?

David: I got four children.

Shane: Four children, right.

David: Two from the first marriage.

Shane: Yeah.

David: And two from the second. The youngest is 44, the oldest is 63, I think, and they all live within 10 kilometres of my place.

Shane: Perfect. Lovely. It's a close family. Yeah. So during the period, so your wife now was teaching. Was she in and out of the workforce during that period of time through home duties?

David: No, actually, in the 80s, she had a lovely job. She was really passionately following this job. But I uprooted her and the kids and took them to Taiwan to work with Ford. And that was an interesting place, but it was pretty tough. The culture was totally different, and I was working seven days a week. And it was a tough time for the family.

But we struggled, we got through it, and it was very lucrative. That was important to me because having been divorced and having been at 37 with nothing, absolutely nothing, I needed to put money away. And overseas service was good for that.

Shane: So that life event of the first divorce influenced your decisions around where you wanted to be going forward...

David: Actually I can't pretend that I had a big life plan. I really took what came. I think opportunities presented themselves, and people offered me jobs. I did apply for the CSIRO job, but I was asked to apply. That's the only job I ever applied for. Lucky, I say lucky.

Shane: Well, as I said before, you say lucky, but you've obviously, clearly impressed a lot of people over the journey to have those opportunities.

David: I don't know about impressed. I've annoyed a lot of them.

Shane: They gave you the job to keep you quiet. So, you talked about the financial planner that you saw, which resulted in you changing your superannuation, your wife's superannuation, so generally, when we're looking at retirement, we're looking at it as a household event. So did you both go and see the advisor? Was it a formal conversation, or you said it was a friend?

David: It was a friend.

Shane: Yeah. Okay. And so beyond that guidance, where else have you sort of sought your financial decision-making thoughts from?

David: Well, I know where the money is. I chose the different forms of the different makeup of the funds in superannuation. I made sure that my wife had more in her account than I've got in mine, because she's six years younger than I and therefore I'm likely to go first.

And I wanted to make sure that she was secure. I wanted to make sure there was something to leave for the kids. And that raises the point that currently there's a debate going on about whether people who die and leave their superannuation to the kids, whether that's really moral or fair.

And I can understand how it happens, especially in my position. I don't know how long I've got. I'm 87 now, so there's not all that long to go. And I want to make sure that I'm comfortable for that time. But what happens if I live till I'm 100 and it's not out of the question. As I joke with my GP, he signs the script for pills that keep me alive. And I'm saying to him, how do you feel about world overpopulation? And he laughs, but he still gives me the pills.

Shane: Yeah. So, that point then, about funding your retirement, so I understand that you're a self-funded retiree, so your superannuation is your primary source of income. Is that right?

David: Only source of income.

Shane: Okay. And so you draw an income stream, a monthly or fortnightly payment, and your wife does the same thing?

David: Yes.

Shane: Okay. And so your draw down amount that you take on a monthly basis or fortnightly basis, you said you're a little bit concerned about whether that will last as long as you?

David: Well, no, it's a consideration. I've made sure because I'm pretty insecure underneath it all, having been, having lived through the World War II, there's something insecure about me. I've got to make sure that I've got enough money to do what I want to do.

So I've made sure that I've got enough. She's got enough. We've both got enough. And in fact, on the way, I was lucky enough to be able to afford to lend each kid the money to buy a house and interest-free, and they paid it back, and that got lent to the next one and the next one.

Shane: Yeah, right, okay. But clearly you've had a pathway of what's important to you and ensured that your financial situation supported that the best you could.

David: And I feel so sorry for the people, the younger people today who are not able to get into their own home. I think it's terribly important for people to have their own home, and I'm terribly sorry for the people who can't do that.

Shane: Yeah. It's difficult. And I think you mentioned earlier about how you regretted accessing your super, but also the reason you did it was to buy a home back then.

David: Well, yeah, that's true.

Shane: And so, beyond the things that you and your wife do to keep yourself active, what else do you do in retirement? Are you travelling?

David: I'm a bit of a handyman.

Shane: Yeah, okay.

David: I take a pride in making sure that anything that goes wrong in the house, I can fix. I have a good tool set. Ford still provides me with a car, so I don't tinker with cars.

Shane: Yeah, okay.

David: And really, to tell the truth, I'm not all that interested in cars as cars. My formal studies have been in logistics, and I'm interested in the role that cars played in helping society get where it is today.

Shane: And so you said you're very handy, and you've also got your family very close. Does that mean you're called upon to do handyman duties?

David: No, I don't think they'd trust me.

Shane: But is it true that you actually built the house that you're in now?

David: Oh, no, I didn't build it, but I influenced the design. I got a proper designer to design the thing. But saying I want this thing or this thing. Or I'd say I and my wife said we want this here, this there...

Shane: Of course, of course. Are you doing any travel in retirement?

David: Yes, we've been sort of away every year.

Shane: Okay, good on you.

David: And we belong to an Institute of International Affairs, and that meets pretty much every week. We have lectures and talks, an ambassador that's visiting, we try to capture them, and they talk to us, and we have talks from experts on international affairs. Keeps us active, keeps us interesting.

And we've been to most of the places anyway, and we've been to lots and lots of interesting places. We've been to a lot of the historical Rome places and all that. We've had a very, very lucky life.

Shane: You keep saying the word lucky. It sounds like it's...

David: Well, the more you say how lucky you are, the better the luck gets.

Shane: And the more appreciative maybe you are. So just to finish up, David, what's some tips that you might want to give some of our listeners about thinking about retirement?

David: Well, it's funny, it was just a couple of days ago, I was talking to the person who cut my hair, and I said, have you got superannuation? She said yes. I've had superannuation. She said, "But, I was in my mid 30s and became a single mother with three kids." She said, "But I had superannuation." Now, she hasn't taken much care over managing her super.

She just says, "Oh, I just leave it alone." I did what I could to encourage her to take more interest in what kind of super, what the mix is, how it's performing, go to the meetings to learn about what the superannuation fund is doing. She talked about her first fund with high fees.

So, I encouraged her to take more interest, and I would encourage anybody to take a real interest in where their superannuation is and how it performs and what the opportunities are and what the risks are and what the rules are.

Shane: I think that tip that you provided there to take interest in the super, the really key point there for me and something we try to educate our members on, is whilst some people don't see the money coming out of their pay and going into this, it is their money. It is your money, and you should take interest.

David: The money that the company is putting in is your money.

Shane: A 100%. It's all your money. And if you had X thousand dollars under the couch or in the bank, you would take ownership of it. That's what people should do with their super. I think that's a really good tip. So, David, thank you so much for joining us. It's been really enjoyable talking to you. You’ve had a fascinating life. All the best for what comes next and thanks again for coming in!

David: My pleasure.

Shane: Thank you for joining us today. If you're an AustralianSuper member and you would like to join us to share your story or have a question or topic you would like us to cover, then click the link in our show notes to get in touch. If you've enjoyed this podcast, subscribe and share with your friends and family. See you next time.

Shane: Hello. My name is Shane Hancock, and I am the Head of Member Products, Guidance and Advice at AustralianSuper. And welcome to our podcast, The moments that count. Before we start, it's important to note that the information discussed in this podcast is general only and doesn't take into account your needs or personal objectives.

You should assess your own financial situation and needs. Today, this podcast is being recorded at our head office on the land of the Wurundjeri people of the Kulin Nation. I and AustralianSuper acknowledges the traditional custodians of country throughout Australia. We pay our respects to elders past and present, and extend that respect to all Aboriginal and Torres Strait Islander people.

Quite often, AustralianSuper members will ask questions that are found through various channels. And mostly those questions are relevant for many members, so we thought it'd be great if we could share some of those questions and answers through this podcast.

And today, I'm very happy to be joined by Jaclyn Livingstone, an Education Manager at AustralianSuper. Welcome, Jaclyn.

Jaclyn: Thanks, Shane. It's nice to be here.

Shane: Today's topic is what happens to my super if I die? So not an uplifting topic, but a very common question that we do get from members. Can you talk us through what actually happens to someone's super when they die?

Jaclyn: Yes, it's quite a common question that does come up. Often we hear from members, what happens with my super when I pass away? In that case, it will depend on what that person has as their beneficiary, if they've made a beneficiary option. So that's a very important thing to do.

And one common thing that does come up is that often people think that their superannuation is covered by their will. That can be quite a common misconception. So it's an important thing to look at.

Shane: Okay, so a couple of things there. Let's talk about beneficiaries for a minute. Can you talk us through firstly, what type of beneficiaries can someone have and then how does someone go about nominating a beneficiary?

Jaclyn: Yeah, there's a few different options when it comes to beneficiaries. They can make a binding nomination, they can make a non-binding nomination, and they can also do a reversionary nomination if they're at the stage where they're starting to do their retirement income.

So, a few different options there. It's a simple process we try to make to actually nominate a beneficiary. All you have to do for those that want to do a non-binding nomination, they can easily do that online or they can give us a call over the telephone as well. So some pretty easy options there.

For a binding nomination, they do need to complete a special form. So, it's a little bit more of a formal document that they need to complete. They get it witnessed by two people as well so that it's legally binding.

Shane: So can you tell me the difference between the binding and non-binding? And just to confirm, you talked about reversionary, which we'll come back to, but binding and non-binding, does that just apply to someone's superannuation account or it can also apply to their pension account?

Jaclyn: Very good question. It could apply to both your superannuation account or it can apply to your pension account as well. So you've got both options for those binding and non-binding options.

The difference between them is that the binding nomination is legally binding on the fund. Depending if the nomination is valid. So that is something sometimes that people do prefer to have that gives them a little bit more peace of mind, whereas the non-binding nomination is essentially like a preference.

So, it's who you'd prefer to receive the funds, but at the time of passing, the fund does have to check the rules and laws at the time to make sure that's the person that will receive those funds.

Shane: So you talked a minute ago, you said if they're eligible. So who could someone nominate as a beneficiary for their super, who could be paid?

Jaclyn: Yeah, this is a common thing that comes up that can be a little bit confusing for people. I've seen some interesting nominations in the past, but a valid nomination under superannuation law is that it has to be either a dependent person that could include a spouse or a child, or it could include a financial dependent or someone that's interdependent.

So, someone that you're typically living with and caring for. The other option, because a lot of people I might meet, they might be single or they don't have dependents, they can always nominate a legal personal representative. So this is where you're nominating for your super to be paid according to your will.

Shane: Okay, let's go there. So tell us about how that might work, if someone puts their super as part of their estate.

Jaclyn: Yeah, so, a person can nominate, if they've made a will and they've nominated with their superannuation, they've ticked that they wanted to nominate their legal personal representative, then that means that their superannuation will be paid according to the instructions that they've put in their will. But it is important that they also do the will so that the instructions are there.

Shane: So if someone nominates a binding beneficiary, but they also reference their super in their will, does the fund still apply the binding nomination in relation to their payment?

Jaclyn: Yes. So in that circumstance, they will pay the beneficiary according to what is in the binding nomination as long as it's valid and at that point in time, yes.

Shane: So I assume, considering the binding nature of a binding nomination, it's important that people review their beneficiary nominations?

Jaclyn: Absolutely. It's one of those things that's very easy for people to put to the back of their minds, but it is something to keep up to date. And that's why with a binding nomination, we have a lapsing nomination where it's required to renew this every three years so that we can keep it at the forefront of our minds and we always notify people as well to say it's up for renewal a few months prior.

Shane: Excellent. So it's really important people keep track of that. So the other nomination that you talked about earlier was a reversionary nomination. So that's obviously for someone who has a pension account. So, again, for our listeners, they're receiving an income on a regular basis. They're retired, they got access to their super. Explain to us a reversionary nomination.

Jaclyn: A reversionary nomination is where a person, typically a partner, would receive the income that the deceased partner had been receiving. So the account is essentially set up in the surviving partner's name, but it just keeps the income flow similar to what they had been used to when their partner was around. So it keeps their income needs at somewhat a similar level.

Shane: So in simple terms, the account that was in the member who's passed on basically becomes the account of the surviving spouse, and they continue to receive the income. And if they've already got an income stream, they're just receiving two income stream amounts equivalent to what the family got previously.

Jaclyn: You're absolutely right.

Shane: So, Jaclyn, what if someone doesn't nominate a beneficiary?

Jaclyn: Oh, it's a very good question, because it depends a little bit, essentially. So the fund can always check to see if there's dependents in that person's life that may need to receive the funds, or they may look to pay the funds according to that person's estate.

So, it would either be directed according to their will or what the state laws are. This sort of reinforces why it's really important to make a will and provide your directions, because otherwise it might not be as clear cut at the time of passing. So it's an important thing to do.

Shane: So make a will or make a nomination a beneficiary.

Jaclyn: Absolutely.

Shane: Last question, for people that are receiving payment after someone's passing, whether it be a beneficiary or through a state, is there any tax payable?

Jaclyn: Yeah, this is a common one that comes up as well and can catch a few people out because it's quite a complex thing to understand and there'll be a few different things that impact whether tax will be applied.

One of the most known things is that it depends on the person that receives the fund. So whether that person is considered to be a tax dependent, so that can include a partner or a child that's financially dependent on you. That could be up to the age of them being 25, or if they're disabled, that can be longer than that as well.

A financial dependent for tax purposes could also receive funds tax-free. Or a person that's interdependent on can also potentially receive funds tax-free. But it does get a little bit more technical because it does depend on how your contributions are allocated in your account.

So whether they're under the taxable component or the tax-free component, so it can get a little bit more tricky. And this is where sometimes when people are doing their estate planning and they're working with a financial advisor, it can be really good to work on this strategy because there can be ways for people to potentially save on the tax that their beneficiaries would have to pay.

But a common one that people often get pulled up on is when they have an adult child that's not dependent on them, they can sometimes be subject to paying some tax on what they receive from their benefit.

Shane: Great. And so you'd refer to someone who can seek advice, but also the ATO website or call AustralianSuper.

Jaclyn: Absolutely, yes. Yeah, it can get a little bit more complex down that side of things.

Shane: Yes, it definitely sounds that way. Thanks for joining us today, Jaclyn.

Jaclyn: Thank you.

Shane: Thank you for joining us today. If you're an AustralianSuper member and you would like to join us to share your story or have a question or topic you would like us to cover, then click the link in our show notes to get in touch. If you've enjoyed this podcast, subscribe and share with your friends and family. See you next time.

Shane: Hello. My name is Shane Hancock, and I am the Head of Member Products, Guidance and Advice at AustralianSuper. And welcome to our podcast, The moments that count. Before we start, it's important to note that the information discussed in this podcast is general only and doesn't take into account your needs or personal objectives.

You should assess your own financial situation and needs. Today, this podcast is being recorded at our head office on the land of the Wurundjeri people of the Kulin Nation. I and AustralianSuper acknowledges the traditional custodians of country throughout Australia. We pay our respects to elders past and present, and extend that respect to all Aboriginal and Torres Strait Islander people.

Australian Super has the privilege of three million members trusting us with their retirement savings. Each of those members has their own story and today we're going to hear one of those stories.

I have the pleasure of being joined by Lisa Defazio, a member of AustralianSuper. Welcome, Lisa and thanks for joining us today.

Lisa: I'm pleased to be here.

Shane: So before we get into talking about planning for retirement or life in retirement, tell us a little bit about Lisa.

Lisa: Okay, so I am Melbourne-based, always have been. I was working in fashion for quite a long time and that's one of those industries that have kind of been affected by global changes and things like that.

So I've adapted what I do and through sort of self-teaching and learning, I've moved more into graphic design and that sort of area. So still within the design space, but the work that I'm doing now is more part time or contract.

So I'm looking to the future and sort of considering what next and how do I want to change things up looking towards retirement. I am 54, so I think I'm young and I think it's important to really appreciate every year, even though we're growing older. So yeah, it's probably going to happen sooner than later for me and I want to enjoy that stage of my life.

Shane: Excellent. So tell me a bit about the fashion industry. So what were you doing in?

Lisa: I studied at RMIT. I was sort of the most naive girl there all the way from Thomastown and met girls and had a great friend and she was from East Melbourne and I remember we had a chat and she said, where are you from?

And I said, I'm from Thomastown. She said, where's that? And I said, where are you from? She said, East Melbourne. I went, oh, where's that?

Shane: The MCG.

Lisa: That's how green I was. So I've been really lucky. I had worked before I sort of graduated. I worked in bridal wear and then I worked for larger companies designing for Maya and things like that in Children's.

Later went on to do some bespoke work when my children were small. So dressmaking basically. And yeah, I've worked in all different facets.

Shane: And you mentioned that things changed in that industry. So I'm assuming you're off-shoring and other things and you made the decision to use your skills in other ways.

Lisa: So then within that fashion space, I was sort of doing, you know, using software that was creating digital graphics and things like that that went back onto surfwear and that's kind of progressed through the years and I'm working more in that marketing space.

Shane: And am I right you and your husband have a graphic design business?

Lisa: Yeah, that's right. And I sort of work in special projects. So if there's something outside of the scope of what we normally offer, that's up to me to sort of investigate that.

So that might be in sourcing products or prototyping and I do a lot of pitch decks as well for different people and sort of getting an original idea and articulating that, whether that be a physical product or a presentation around that.

Shane: So the creative side.

Lisa: Yeah. And then I do a whole lot of other creative because I've got the time now. So yeah.

Shane: And so how long have you had the business?

Lisa: My husband's had the business for 30 years. I've only been involved for the past 10.

Shane: So the transition from fashion into graphic design was assisted. The fact that your husband had that established business and then you were able to utilize your skill set.

Lisa: Yeah, exactly.

Shane: Very interesting. So from what I understand is when COVID hit, you started to think differently about life and then potentially what the future looks like. Can you talk me through your thinking there?

Lisa: Look, I think with COVID, there was a real contraction around everything and particularly with our freedoms and things like that. And so I think it's very important to try things.

And I think rather than saying that something has ended or something has ceased, I embrace it as there's been change and that you're able to move forward from. So for me, post-COVID, I really want to get back to enjoying things and I want to really dedicate time towards those things that reward me. They might never become the most successful thing. It just needs to make sense to me.

Shane: I think many of us looked pre-COVID and we were on that wheel of busyness and everything else. And so you've rechecked yourself in that period and said, "Well, is that actually where I want my future to be?"

Lisa: Yeah. And I think COVID has released us from a lot of the have-to's. So there were a lot of obligatory things that we do because we think it's going to please somebody else. And I think it's actually shaken things up in a really positive way because people just have got it now.

They're like, you know what? I just need to please myself. And we have space to do that. And people are genuinely happy for you if you go off and do your own thing and don't do the obligatory thing, whatever that might be, or the expectation. So yeah, I'm very happy making sculptures.

And, you know, I'm doing all those things that I thought wasn't within my realm or within perhaps my, I'd miss that space. Or I could've, would've, should've been a sculptor if I wasn't a fashion designer or... So now I'm kind of just doing everything, all of it.

Shane: So thinking about retirement, you are very young. So the traditional retirement is not upon you yet. But it seems to me that you've reprioritised where you're spending your time. And so that's resulted in reducing your work time.

Lisa: That's right.

Shane: And so when you start to think about that, what are the things you were considering when thinking, "Okay, I really want to spend more time having fun or doing things of interest or pushing myself..." What sort of process did you go through to make that decision beyond the desire to do some cool stuff?

Lisa: Yeah, well, look, I think you need to really consider financially where you're at in terms of retirement. What I've done is I've actually very recently had some financial advice and I think getting that has been revealing to have a stranger say, "Okay, tell me, show me, you know, where you're at."

And then for them to come back to you and say, "Did you know there's 17 different options you've never thought of before?" And it really opened up my world. And I think instead of thinking in terms of the house, my life, retirement, finances, I'm now thinking in terms of sell this, go here. You know, like it's a freedom rather than a constriction, which I find it's been a revelation.

Shane: So tell me a bit about the... I just want to delve a little bit more into this financial advice piece because it is clearly an important part of not just retirement planning, but any form of planning for those that can afford to receive that advice.

And there's other options available around help and guidance. So firstly, how did you find the advisor that you ended up seeing?

Lisa: I got to the point where I thought, I don't know what to do anymore. And rather than being sort of reactive, I thought I'd be proactive. And I was just having conversations with friends and saying, do you know anyone? Have you sought this? Have you sought that?

And it was an advice from a friend to contact someone. And look, honestly, I was very lucky. We had a couple of sessions that weren't charged to us. And it gave me enough information to sort of shake up my thinking.

Shane: And then you went back for the full...

Lisa: Not at this stage, but it's opened my eyes and it's got me really thinking about how rather than feeling weighed down, you can really be nimble with your assets and your life.

Shane: So when you went to see the advisor, did you have sort of a firm view around what you might get out of that interaction? And then were there any surprises in what actually you did receive?

Lisa: I had no preconceived ideas. Finance is not my thing. I'm not a numbers person. I'm not. I just... I deal with facts. I'm very sort of grounded and factual. But it kind of got to the point where, okay, I'm not working as much as I used to. And what do I want to do moving forward?

The house is too big, the children have grown up and left. And what would be a smart move? So I was open to hearing what he suggested. And what would be the best way to use what we've got, the assets or whatever is happening within our finances. And I was just completely surprised by suggestions to say, yeah, sell this, do that, all the emotions taken out of it.

And it's like, you can maximize your future. You can actually build on what you've got. And it was like, oh, okay. So it's not the full stop. It's actually the starting gate. So yeah, it's exciting.

Shane: It is exciting. And I think it's a common theme we hear from people who are seeking some form of help is they don't know what they don't know.

So for you, it seemed like for many people, there's sort of this black and white, I've got this asset, I've got super, I've got an income. And that's my future versus the diversity.

But am I right to assume I'm sort of sensing there was an element of confidence and emotional relief, for lack of a better term, about some of the information that you were receiving. It wasn't just a transactional financial conversation.

Lisa: Yeah, that's right. That's right. I think it's just about being shown options. And you don't know what those options are. It's like anything you go through the first time, the first time you buy a house or the first time you buy a car or have a child. We don't know what that landscape is like.

And I think that approaching this sort of space where it's like, I am living like I'm semi-retired. I'm fortunate enough, which led me to think, well, how can I make what I've got work for me? And working in a creative field, I've had different jobs. And when I started work, Super wasn't compulsory. So I'm of that generation that took it on later.

Shane: And so the last couple of questions around the advice process is that am I right to again assume that this advice has built some trust with you through this early process?

Lisa: Yeah, absolutely.

Shane: And so if you were to look to go back to get advice of a more tailored nature, whether it be a statement or advice, is that someone you'd probably turn to?

Lisa: Definitely, definitely. And I think what I'm trying to do at the moment is really look at my motivations moving forward. You know, what do I really want? What is really important to me? What motivates me? What excites me? What's going to still excite me when I'm in my 60s? And what do I want to have done leading up to that? How do I want to live when I'm older?

Shane: And are you thinking at the moment of that motivation and moving ahead, have you got a plan? Are you thinking five years ahead or are you sort of just taking it a bit shorter term than that?

Lisa: Yeah, definitely shorter term. But in the long run, I want to be the lady that's like 90 at Glastonbury, you know, at the festival and maybe, you know, just going wild.

Shane: Well, I've just noticed that Guns and Roses have played there in the 90s, so you might be okay.

Lisa: Well, you see, and I think it's really nice. I just think that older people are being embraced more. You know, you've got the cool grannies on TikTok and God knows. There's hope for me yet. I'm yet to be famous. So you know...

Shane: You've got plenty of years ahead of you. But it is even one of the things that we're picking up through this podcast is the enjoyment people are getting in that retirement phase, but the things that they didn't realise they could do and the different things that they're trying.

And it's very clear from the short time that we've known each other that you're willing to open yourself up to new things. Going back again to the process, you were given some ideas from the financial planner and different things you can think about.

Are there any particular actions you took, so financial actions that you took, e.g. doing something with your super or other things that you hadn't done before that might help you progress your retirement?

Lisa: What it made me do was actually look at what I was spending and he gave me a great bit of insight to more or less say, you know, have a look at what you're spending now and then you need to have that as a projection to what you're going to live on in the future plus inflation, of course. And that was startling. It was absolutely gobsmacking the amount of money that I need to live on a day.

Shane: Well, compared to what your current spending habits were versus a budget, is that what you're...

Lisa: What's a budget? Like, I just haven't been thinking that I'm spending a lot of money. I think I'm quite sensible. I don't...you know, I suppose I...my treating myself is eating fine food or seeing something at the theatre or something like that. But that doesn't happen all the time or I didn't think it was, but it does.

Shane: So when you went through that spending and I've been through the advice process myself, is they categorize your spending into different categories?

Lisa: Well, look, I did my own because he said, this is what we need to do. And I thought, well, I need to know where my head's at. So I thought, well, maybe I can, you know, and I went through and I sort of itemized. And most of it was on eating and going out.

And my children don't live with me anymore. There's only two of us, a dog and a cat. Yet I'm spending all this money and it made me stop and think, oh, you know, be sensible.

Shane: Yeah. And so did you put a budget in place as a result of that process?

Lisa: I'm just more wary. I'm just a little bit more, "Oh, okay, that was a $70 lunch or what have you." Like, whereas before I wasn't thinking about it and I'm just being a little bit more prudent.

Shane: And how does that line up? Because you want to do things that you enjoy and you're motivated by. And then there's obviously the flip of that is at what financial costs, is that hindering each other at the moment? Or you just say being aware of...

Lisa: No, it's more just being aware.

Shane: Yeah. And so when you say that's the now, is there anything in relation to the future? So super, for example, have you done anything different with your super?

Lisa: A few years ago, I topped up my super, which I'm really glad I did. So that's been positive. It's more about what I do with the larger assets and what I want to do moving forward, what you sell, where you live and so forth. But being mindful.

Shane: And that hasn't, those things around other assets or where you live, you haven't changed anything at this stage. You're just thinking what you might do.

Lisa: Not at this stage.

Shane: And the other question around the advice process or the thinking process, was your husband involved in that conversation with the advisor?

Lisa: Yes, he was. He was. And he is a successful businessman who has, you know, he's very talented and he's made some very good moves. And I think we both had a really traditional fixed idea around this is the house. The house is everything. That's it. Then there's retirement and that's your super.

And I think it was like almost, you know, the light bulb moment when you sort of learn that, oh, you don't need this. You don't need that. You can move here. You can, you know, just to shake it all up. You know, not everything is set in stone.

Shane: And so he's still working full time?

Lisa: Yep.

Shane: And is that through requirement, enjoyment?

Lisa: He loves it.

Shane: He loves it?

Lisa: Oh, he would work 12 hours a day. That's his happy space. He thrives on it.

Shane: So when you're thinking about it as a couple about, so you're, I want to use the term semi-retired, but as I say, it feels awkward because you're so young to, you know, it's more about... So you're thinking that and you've decided what you want to get out of life. He's thinking, "I love work, work is a key motivator for me..." And so do you think there's a time where he'll think about retirement or he's not quite there yet?

Lisa: No, I think he'll work as long as possible. I think it's what makes him tick.

Shane: And does he, so as far as funding retirement, if, you know, if he ever does retire, and we see that a lot where people continuing to work for as long as possible. They might reduce work hours or other things. Is the business a big part of his financial retirement plan?

Lisa: Yes, yes.

Shane: So that he would look to possibly sell or offload that if that was the case.

Lisa: Yeah.

Shane: Okay. So when you move through to possibly accessing a superannuation, you're meeting preservation age or accessing age pension, is that something you've thought about yet?

Lisa: It's a while off. Yeah. And I do continue to work and I am continuing to explore different options. And I think for me, I'll always be active in a workspace or in a productive sense.

Shane: Yeah.

Lisa: That does make me happy, but it's not necessarily in a business sense.

Shane: No, no, it makes sense. I get it.

Lisa: It does.

Shane: So a common sort of question we ask people is that you had this epiphany for lack of a better term during COVID that you want to spend more time on the things that you're passionate about and enjoyment. So you had a vision. What's reality like compared to that vision?

Lisa: It's great. It's great. Look, I think for me, I think a lot of people think they want to do, you know, one thing or they've got this one unmet desire, whatever that is, it might be creating something or, you know, it'll be this one notion and they might hold it really close to their chest and it's so precious and it's so hard and they'll give it one go.

Whereas I think just swing away. Just go for it. Just to have every mad idea, do them all. It's for myself. It really is. And it satisfies me. I've made short films. I write. I do... And it makes me feel alive and I want to do that moving forward into retirement and that's, I want more crazy ideas, you know?

Shane: So I was going to ask you, tell me something you've taken a swing at, but you just told me you've made some short films and--

Lisa: Oh, and I write scripts. And I entered them into various competitions and things like that.

Shane: Anything famous you should be looking out for?

Lisa: I've got a YouTube channel.

Shane: Yeah, all right.

Lisa: So it's been quiet for a while.

Shane: You can give a YouTube channel a plug?

Lisa: Yeah. So it's just my name, Lisa Defazio, and it's called Have You Got a Minute. And that was prompted by a real fear of public speaking.

Shane: Yeah.

Lisa: And so I did a few courses and I love to shine a light on passionate people that don't really have... A lot of really talented people aren't good at promoting themselves. So it was just, I'd find something, I'd love it, whether it be some food or a restaurant or a band or, and so that channel was about that.

Shane: Yeah.

Lisa: So I might go back to that, but, you know, I think there's a lot of other wackier ideas that I haven't explored yet.

Shane: Give me one of those. Tell me a wacky idea you want to explore.

Lisa: At the moment I'm doing these acrylic sculptures and they're kinetic and they all spin and they turn. And I think that'd be really good for meditation or even if you're bedridden or something like that. It's quite a meditative thing. So, yeah, they're really cool.

Shane: It sounds very cool and you've definitely shown your creative side here and I'm going to go and look at that YouTube channel. One other thing, am I right to say that you got some form of injury to your ankle or leg or something?

Lisa: Yes, yes.

Shane: And as a result of that, it gave you a bit of a view of what maybe... Can you talk me through that a little bit?

Lisa: I had this lovely experience where I was meeting up with a friend in the city and it had been raining. I was in a restaurant and I hadn't even sat down to have lunch and I hit the deck and I'd managed to slip on some water. And my left foot sort of tucked under and I broke a bone on the top of the foot. But I didn't realize this until the bruising went away and I went for a walk.

I thought the foot's okay and I started to jog. And as soon as I went down, I thought, "Oh, there's something very wrong." So I'd fractured a bone. So I had a boot on for eight weeks and then probably a year later, I was walking my dog and stepped backward. And I was on a little volcanic rock and I sort of twisted and I was on one leg with the hands waving.

And I thought, I've caught my balance and then I heard snap and I went backwards and I chipped the bottom of the ankle. So I was in a boot again.

Shane: Same foot?

Lisa: Yeah, same foot, different bone. And it just was cumbersome. I had this dodgy foot. It's taken a lot of time and money and specialist appointments and I was sort of developing a limp because I was, you know, different tendons and things overcompensate. And I was really getting quite wonky.

And I thought, well, this is what aging might look like. So I've been able to recover and I'm still just so grateful that I can walk and I feel good on my feet again and wear shoes that I like and things like that. But it was a wake up call. And I thought, do as much as you can while you're still well enough.

Shane: Yeah. So was that around the COVID time as well?

Lisa: Yeah.

Shane: Yeah. So you're all that mixed together. That's another trigger point for you to say, I need to make the most of X many years.

Lisa: And so and as look, and I think too, like we discussed, you know, being aware of how much we spend and things like that. And I think too, sometimes we need to be a little bit more conservative with our spending and things like that. That can be fun too.

You can eat some really crappy food in a crappy space and have fun around that. It doesn't have to be fine dining. If you can experience enjoyment in what you're doing, whether it be something sort of very standard or something elevated, it's really important to enjoy where you are. And I think moving forward into old age to still give yourself joy is the key.

Shane: Key.

Lisa: Yeah.

Shane: Well, my final question was going to be, do you have any words of wisdom for our listeners regarding preparation and thinking about retirement?

Lisa: I do actually.

Shane: Yeah, fire away.

Lisa: I think that we need to remember what made us happy as children when we were wide-eyed. And I think that they're the triggers and they're the really formative things that make your character. They make you who you are.

And if you can have that in you through the rest of your life, even if you're watching someone ride a bike that you used to enjoy and just remember that tapping into that core of who you are and the joy, where your joy comes from, carry that with you.

Shane: That's great advice, Lisa. Thank you for joining us. I actually have no doubt at all the next journey for you, you're going to make every poster a winner and I've personally got a lot out of talking to you today. So thank you. Thank you for joining us.

Lisa: Pleasure.

Shane: Thank you for joining us today. If you're an AustralianSuper member and you would like to join us to share your story or have a question or topic you would like us to cover, then click the link in our show notes to get in touch.

If you've enjoyed this podcast, subscribe and share with your friends and family. See you next time.

Shane: Hello. My name is Shane Hancock, and I am the Head of Member Products, Guidance and Advice at AustralianSuper. And welcome to our podcast, The moments that count. Before we start, it's important to note that the information discussed in this podcast is general only and doesn't take into account your needs or personal objectives.

You should assess your own financial situation and needs. Today, this podcast is being recorded at our head office on the land of the Wurundjeri people of the Kulin Nation. I and AustralianSuper acknowledges the traditional custodians of country throughout Australia. We pay our respects to elders past and present, and extend that respect to all Aboriginal and Torres Strait Islander people.

Quite often, AustralianSuper members will ask questions that are funnelled through various channels and mostly those questions are relevant for many members, so we thought it'd be great if we could share some of those questions and answers through this podcast.

And today, I'm very happy to be joined by Peter Treseder, Education Manager at AustralianSuper. Peter has been educating members for over 20 years. Welcome, Peter and thanks for joining me!

Peter: Thanks for inviting me along, Shane.

Shane: So today we want to talk a bit about accessing your super. So can you tell us when someone can access their super?

Peter: Well, to access super, the technical term is a condition of release. Now, one of those is turning 65 and another is ceasing work after you've obtained your preservation age. And your preservation age depends on when you were born.

So there's a sliding scale. If you're born before the 1st of July, 1960, your preservation age is 55. So you passed it some years back. If you're born on the 1st of July in 1964 or later, your preservation age is 60.

So you haven't reached it yet. Those listening will think, well, what about in between? For each financial year, it increases by one year. So the '60-'61 financial year, preservation age is 56. The next financial year is 57, 58, 59. That takes you up to the end of June, 64.

Shane: So what does the preservation age mean in generality?

Peter: It means that's when your super is available to use, you can get your hands on it and do what you want with it. So there's two boxes you need to tick, that ceasing work and to have reached that preservation age.

So I might stop work because I can stop work whenever I want. If I stop work at 58 and my preservation age is 60, all I can do is smile and wave at my super for a couple of years.

Shane: So you have to be finished work and you have to meet your preservation age to access your super?

Peter: Yes.

Shane: So what about if I reach my preservation age, I retire and then I go back to work a year later and I'm still under 65? Do I have to give my super back?

Peter: No. That super is released to you. It becomes what's, in technical terms, non-preserved, which means you can keep on accessing that as quickly or as slowly as possible.

Your new employer is going to pay new contributions into a super account. You can't access those super contributions till you cease work with that employer because you've already reached a preservation age, but you've got to cease with that employer to get those contributions.

Shane: So when someone can access a super for retirement purposes, what can they do with the money?

Peter: Well, they can do whatever they want with it. They might spend it wisely, they might spend it recklessly. But you've got to realise, the superannuation system, that money is there to fund your retirement.

So you might want to look at how are you going to budget, what you're going to spend in retirement, what are your income sources? Because when you stop work, you're getting no income from labour. Your income is going to come from other sources, usually your super, savings, investments and maybe the government pension.

It's a matter of working out, well, what's my aim of income in retirement and where's that money going to come from? And hopefully you've got enough savings, super, whatever, and maybe the age pension will get you to the level of income you're after.

Shane: So if someone accesses their super through retirement preservation age, they can cash it out?

Peter: Yes.

Shane: Or what else could they do with it?

Peter: Oh, look, they could move it into an account based pension which is still in the superannuation world. So it sits in that concessionally taxed world of superannuation. The difference being, in an account based pension, there's like a tap on the side of your super account and you control that tap.

You can turn it on as hard as you want, the government requires you to take a minimum amount, but sometimes that's a better way of managing money in retirement, because all during your working life, you got a salary each week, fortnight, whatever, and you managed that.

And if you have an account-based pension, you're getting a similar income that you can set up to pay you monthly, fortnightly, once a year.

Shane: And you can still invest the money while you're in that super account as well. So you could actually be invested in a growth asset, a balanced fund, cash, whatever you want it to be whilst it's still in that environment.

Peter: Yeah, it's just like your superannuation account, you can choose how it's invested. And you said, I might choose different options, I might choose one option and I might draw out, let's say, 4%, but the option earns 6%. I've got more at the end of that first year than I started with.

Shane: And is there different tax arrangements for someone in an account-based pension versus when they're in their super or versus taking the money out?

Peter: Look, there's some slight differences. The main consistent one is if you're over age 60, what you take out of super is tax-free.

So it doesn't matter whether you're taking out as lump sums out of a super account or as an income stream out of an account based pension. If you're under 60, but you've reached your preservation age because you can't get it out until you've reached your preservation age.

If it's an income stream, the income is taxed at your marginal tax rate, but you get a 15% offset against that tax. So if my tax rate is $0.30 in the dollar, I'll effectively pay $0.15 in the dollar.

So one of the government's incentives they brought in a number of years ago was the incentive to leave your money in super till 60, because after 60, it's tax free.

Shane: Right. And so someone goes down that pathway of meeting a preservation age, rolling it over into an account-based pension. Is that money locked away or can they still access the super because they've reached preservation?

Peter: They can still access all that super. So, as I said, there's a tap at the side that may be given me $1,000 a week, a month, whatever.

I suddenly decide I need to have a holiday to Europe. I can put my hand in the top of the bucket and pull out a lump sum at any point. And again, I'm over 60. That lump sum is tax-free.

Shane: Yeah. And I think that's a really important point to make, because we do see many people here and many people who get concerned about rolling it into a pension because they think they're locking their money away again, which they've waited so many years to get access to.

So, important point there. You roll it over to an account-based pension, you get the income stream, but the cash is still available anytime you want. It's your money to access for your purposes.

Peter: Exactly. I meet so many members that say, oh, I'm going to retire and take my money out of super and put in the bank, because then I can go use my ATM card and get money out when I want. I say, well, you set an account based pension, you get the advantages of keeping it in a tax concessional world of superannuation.

The account-based pension will pay money into your bank account and you can still use your ATM card and get the money out.

Shane: So, Pete, we've talked about preservation age and retirement and the connection there. What are some other scenarios where people could access their super?

Peter: One is severe financial hardship and another is under compassionate grounds. Now, there's more details on the AustralianSuper website of how you can access that and also the ATO website of what the conditions are to access that.

So severe financial hardship is you're doing it tough and you need money, and there's rules around that. And compassionate grounds are often around a medical issue, treatment or maybe even I've got a partner that needs full-time care, or we got to put in ramps and safety bars in the bathroom around the house, compassionate grounds.

Shane: So if anyone's not sure and might feel like they're in some of those situations, then they can go to the AustralianSuper website or contact AustralianSuper or their super fund, who will be able to guide them through the different scenarios in which they might be able to access their super.

Peter: Oh, exactly. And in my role in education, I always say to people, if you don't know, ask. Even if you're expecting the answer no, still ask, because if you get the answer no, you haven't lost anything. But if the answer was going to be yes and you didn't ask the question, you've missed out.

Shane: Yeah, it's a good tip. So what are some other things, you've talked about tax before a minute ago, what are some other things that people might want to consider before they access their super early?

Peter: Well, it comes down to how long is that money going to last? I mean, I might be able to access my super at 60, but I might not be eligible for the age pension till I'm 67, so I've got to self-fund myself for those seven years, assuming I'm going to get some pension.

So the later you retire, the more you accumulate, and the period of retirement is going to be closer for you, so the money might last longer. So working out what your position is, are you ready, and we refer many members to our online calculator where you can say, look, I've got this much money now. What's it going to be worth? What's going to be in it when I plan to retire at age X?

And the calculator, with a number of assumptions about earning rates and tax, says, okay, you've got X now; in 20 years' time, you're going to have five times X. And five times X will give you an income of 30, 40, $50,000 for the rest of your life, if that's what you're aiming for, you're on target.

If you're aiming for something higher, you've got time to make some changes to your super to build up extra money to give you the retirement income that you're after.

Shane: And so, Pete, you touched earlier about government age pension and Centrelink, government benefits. Are there things that people need to consider relating to their government benefits when accessing super pre or post-retirement?

Peter: Look, it all depends. I mean, when you're applying for the age pension, there's a qualifying and as I said before, if you're born in 1957 or later, it's age 67. The government also have an income test and an asset test.

If your pension age, everything that you own except for your family home, is counted as an asset. And it's the way the government's sort of saying, well, if you've got substantial savings, they don't see as great a need for you to receive a full pension, so you might only get a part pension.

So it really comes down to working out, as I said before, what level of income you're after and what are those sources? We'd all like to retire early, but if you retire early, you haven't given your super time to grow and you may not be able to fund the lifestyle you're after. And the earlier you retire, the more money you're going to need, because you're life expectancy doesn't change just because you retire at age 55 rather than 65.

Shane: So it's important to have some form of a plan, whether it be speaking to a financial planner or at least having some of your own approach to planning through calculators, projections and otherwise.

Peter: Oh, exactly. We promote the use of a financial planner, whether they be an AustralianSuper financial planner or someone they can find through their own resources to get the numbers right. Because Australians have a wonderful three-word attitude towards their retirement planning. It's very Australian. You could probably guess three words, Shane.

Shane: She'll be right.

Peter: That's it. If you add mate at the end, it makes it more Australian, but it might not always be right. And getting some advice around what you're aiming for and where you are now can give people a lot of comfort.

"Okay, I'm retiring in ten years' time, I'm panicking." Well, a bit of a financial advice might see if you're tracking okay or if you'll have time to make some changes to get you to where you want to.

Shane: Thank you, Peter. I think you've given our audience some really good information into how to access your super. As mentioned previously, the information in this podcast is general advice only and doesn't take into consideration your needs or personal circumstances.

If you'd like guidance or advice, contact AustralianSuper or your financial adviser. Thanks again, Peter.

Peter: Nice. Thanks, Shane.

Shane: Thank you for joining us today. If you're an AustralianSuper member and you would like to join us to share your story or have a question or topic you would like us to cover, then click the link in our show notes to get in touch. If you've enjoyed this podcast, subscribe and share with your friends and family. See you next time.