Setting your super up for success
Making the most of your super starts with knowing the basics of how it works. There are simple things you can do now that can make a big difference to your super in the long run.Learn more
Setting your super up for success
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Welcome and thank you for taking the time to join the AustralianSuper's Setting your super up for success presentation. Your super might be something you don't spend much time thinking about, and retirement might seem a long way off. But aside from a house, your super could be the biggest investment you have in your life, and it's all for your future. In today's presentation, we'll cover tips and strategies to help you set up your super for success. My name is Jaclyn and I'm an Education Manager at AustralianSuper. My job is to help you better understand how super works.
Before we start, it is important to understand that the information we are covering today is general financial advice, and doesn't take into account your personal objectives, situation or needs. Before making a decision, consider if the information is right for you and read the relevant PDS by visiting australiansuper.com/pds or by calling 1300 300 273. Also it's important to note that investment returns are not guaranteed and past performance is not a reliable indicator of future returns.
Today, we will be covering a number of concepts to help to set your super up for success including: understanding the basics of super, then we'll take a look at tips and strategies to manage your financial wellbeing, take control of your super, and the simple actions you can take now to set your super up for success. Superannuation is one of those things that can be easy to ignore, especially if we have a lot going on with our finances outside super and life in general. When we're young, retirement can feel like it's forever away. So tinkering around with our retirement savings that we may not be able to access for 20 or 30 years might not feel like a priority, but getting on top of your super at an early age could help you have the lifestyle you want later in life. To better understand super, let's take a closer look at the super basics.
Super is money set aside while you're working, so you'll have money to live off when you retire. Your employer directs a percentage of your salary to your nominated super account. There are some exceptional circumstances in which employers aren't required to pay super, for example, some contractors. This money is invested by your super fund and can earns returns, which could help grow your retirement savings for your future. When we say returns, we're referring to how much money the money you have invested in super has made. There are often some misconceptions about super, but as mentioned before, it could be one of your biggest assets. Your super is here to provide you with an income in retirement once you have stopped working. Without super and other savings, you may be relying on the Age Pension. Super can provide income for you to help you have the lifestyle you would like in retirement. It is also tax-effective with contributions potentially reducing your tax and the investment earnings inside your super, being taxed at 15% per annum in accumulation and 0% in retirement. This could be potentially lower than your taxable income.
But one of the true wonders of super is compound interest. The value of investing over the long term. Compounding is an important part of investing. In fact, it's often referred to as one of the great wonders of investing. In relation to your super, put simply, compounding is the investment returns generated on the returns you've already earned. Picture this: A snowball rolling along. It may start small, but it grows the longer it rolls. That's because it's adding layer after layer. The snowball represents your balance and the layers represent the compounding returns. Compound returns are earned on your entire super balance. Your super fund continues to invest these additional returns. The process repeats, continuing to accumulate returns as long as your super is invested, leading your balance to grow through employer and voluntary contributions while still compounding the returns.
Everything we do at AustralianSuper is designed to help people achieve their best retirement. As one of the biggest funds in the world, our size and scale mean that we have access to some of the world's best investments. Choosing the right investment is important. It can affect how much your savings grow and how long they last. You can decide to either leave your investment in the default investment option, which is the Balanced option, a PreMixed option, or choose and manage your own. You can also make and change investment choices after you become a member. You can choose one or a variety of options. And if you don't make a choice, your super savings will be invested in our Balanced option. PreMixed options are diversified options that invest across different combinations of asset classes, such as shares, property, infrastructure, fixed interest, and cash. There are a number of PreMixed options, which include High Growth, Balanced, Socially Aware, Index Diversified, Conservative Balanced, and Stable. DIY Mix options are single asset class portfolios. You choose how much you want to invest in each mix that can also include one or more PreMixed options. Your DIY Mix choices are Australian Shares, International Shares, Diversified Fixed Interest, and Cash. The Member Direct investment option gives you the greatest control of all options. You can invest your own super in a range of listed securities, including shares in the S&P/ASX 300 Index, Exchange Traded Funds, Listed Investment Companies, or term deposits. A good place to start in making this decision is to read the AustralianSuper Investment Guide which is available at australiansuper.com/investmentguide This guide can help you make your decision. You'll look at your investment needs and then go through your options in more detail. Alternatively, you can speak to a phone-based Financial Adviser who can look at your situation and provide advice on the most appropriate investment option for you.
Before we look at how you can benefit from taking control and making the most of your super, it's important to ensure you have taken control of your financial wellbeing outside super. A great place to start is managing your savings and understanding your spending habits. Setting short-term, mid-term, and long-term financial goals is an important step toward becoming financially secure. If you aren't working toward anything specific, you'll likely spend more than you should. You'll then come up short when you need money for unexpected bills, not to mention when you want to make a big purchase or retire. Vague goals don't necessarily work. Goals should be specific. Your goal is direct, detailed, and meaningful. It should be measurable. Your goal is quantifiable to track progress or success. Attainable, your goal is realistic, and you have the tools and the resources to attain it. Relevant, your goal matters to you. Time-based, your goal has a deadline. You can then break them down into smaller goals to ensure you are chipping away at these, which can help with motivation to continue working towards your goals. But what's next?
Once you've set your goals, it's actually a good time to look at what you were spending and create a budget. For those that already have a budget, how did that go? Did you stick to it? Do you review it regularly? The best way to control your finances is to do a budget. It will show you if you are spending more or less than you can afford. It can highlight where you can save money, or if you have surplus, it allows you to make other plans, such as saving for your goal or make super contributions if appropriate. Once you know your budget, you can set up a savings plan to better manage your finances. This could include implementing a bucket approach. The first step to becoming a budgeting expert is deciding how many buckets you need and what they are. An example might be a bucket for your bills, which covers things like your rent or mortgage repayments, as well as utility bills and repaying any debts. Then you could have a bucket for the everyday, which could cover things like groceries, public transport, and petrol. Then another could be a spend bucket. This could be for anything from catching the latest Marvel movie to eating out on a date night or even those shoes you've been eyeing off. And finally, a savings bucket. This will cover any emergencies and also things you're saving up for. It could be a family trip to Europe, your first house, or a new set of wheels. Once you've put a budget together, tracked your spending and implemented a bucket approach, this is something that you can continue to review regularly and work towards your goals.
So far, we've covered steps to manage your financial wellbeing with setting goals, budgeting, and allocating savings. It is now a great time to take a look at the five steps to take control of your super. In setting up your super for success, it's important you have chosen the best super fund for you. A great place to start is to do a comparison. There are a number of factors to consider when conducting a comparison including performance. How your super performs over the long term will make a big difference to your money for retirement. Fees It's important that you're paying reasonable fees. And insurance, which provides financial support for you and your family if anything happens to you.
If you have more than one super fund, you may want to consider consolidating your accounts if it's appropriate for you. Consolidating into one account might reduce the overall costs of your super accounts, helping you to grow your super. It's important to know before you consolidate to do your research. Use the comparison tool. Ask your super providers about any fees or charges that may apply. Another important consideration is your insurance cover. Before you rollover your accounts, it's important to ensure you have adequate insurance in place in your new account as you will most likely lose any insurance that was in place on the account you rollover.
Adding a little extra to your super can be a great way to boost your super savings for retirement. Paying extra into your super could save you tax and help you retire with more. Contributing small amounts over time is often easier than finding a spare lump sum of money. This way, your super can grow with investment returns. You can add to super in two ways. Before-tax, including employer contributions, salary sacrifice, extra employer, and tax-deductible personal contributions. These are also called concessional contributions. There is a limit to how much you can contribute each year for this type of contribution, which is $27,500 per annum. In certain circumstances, you can contribute more than the annual limit if you've not reached the contribution limits in prior years, which is known as the carry forward rule. The other way you can contribute is after-tax, which includes spouse contributions, after-tax employer, and non-deductible personal contributions. If you make contributions above the annual non-concessional contributions cap, you may be eligible to automatically gain access to future year's caps. This is known as the bring forward rule.
Depending on your total income, if you make after-tax contributions to your super account, the Government also makes a contribution called a co-contribution, up to a maximum of $500. The co-contribution is tax-free and isn't taxed when it's deposited into or withdrawn from your super account. You can find out if you qualify at australiansuper.com/Co-Contribution. As mentioned earlier, adding to your super can help it grow for the long term.
AustralianSuper provides most members with basic insurance cover with their super account with some age and eligibility conditions applied. This cover provides a basic level of protection if you die or become ill or injured. Eligible members receive age-based Death, Total and Permanent Disablement, and Income Protection cover. Age-based cover is designed to provide a minimum amount of cover for changing needs as you get older. Death cover can help ease financial stress by paying a lump sum to your beneficiaries if something happens to you. TPD can pay you a lump sum payment if you become totally and permanently disabled and can no longer work. Income Protection can help you if you become ill or injured at work or outside of work and can't temporarily work. It can provide monthly payments to help you get by while you're not earning your regular salary. You can adjust the level of cover you hold to meet your needs. For Income Protection, you can insure up to 85% of your income with either a 30-day or a 60-day wait and benefit period paid for two years or up to age 65. You can access more detail on insurance by reading the Insurance in your super guide available on the AustralianSuper website. You can also calculate an estimate of your insurance needs by using the Insurance Calculator available on our website. This is a great guide to estimate how much cover you should have and how much your cover should cost.
If you've taken the time to carefully choose the super fund and you're happy with how it's performing, one of the best things you can do is take your fund with you when you change jobs or retire. You can also use the tools available to you to track your super, including an online account and the mobile app.
It's also important to let your fund know what happens to your super in the event of your passing, and there are a few options when deciding what happens to your money. You can nominate a beneficiary in two ways: binding and non-binding. With a binding nomination, you complete a form providing formal written direction to AustralianSuper to tell us who you want your account balance and Death cover paid to so that it's legally binding. A binding nomination comes into effect from the date we accept it and expires three years from the date you signed the form. You can set up or change your binding nomination by completing a valid binding death benefit nomination form, and you will be prompted to update it every three years. With a non-binding beneficiary, you nominate who you'd prefer your account to be paid. However, your nomination is not legally binding. And although the fund will consider who you choose, ultimately, the fund are legally responsible and will need to consider relevant laws when making a decision. You can make a non-binding nomination by completing the Change my details form available at australiansuper.com/factsheets or through your online account at any time, or by calling us.
So who can you nominate as a valid beneficiary? You can nominate your spouse or partner, including same-sex or de facto relationships, your child of any age, interdependants who is someone who lives with you and shares a close personal relationship where one or both of you provide financial and domestic support and personal care of the other. Other financial dependants, such as someone who relies on you financially, or your estate or legal personal representative. So, it's important to check if you have a beneficiary and look into your options to make the right choice for you. We have covered a number of concepts today to help you set your super up for success.
We've looked at understanding the basics of super, including the power of compounding interest, managing your financial wellbeing, and taking control of your super, but it's so important to take the steps now to ensure you set your super up for success. You could start by creating a budget, which will give you a clear picture of your finances today and help you set your goals and ultimately achieve them. You could check that your account details are up to date to ensure that when you want to take any actions on your account, you're able to do so. Another great step is to search for lost super. It could be reassuring to know you have all your super in the one account if you don't find any. Alternatively, if you do find lost super, you can consolidate it into your account to ensure that all your super money is working for you. And finally, download the AustralianSuper app. This is a great tool to track your super, check where you're invested, what insurance you have, and monitor your contributions. You can also make additional contributions to your super from the app when it's appropriate. And a great way to look at the long-term impact of setting up your super for success is to use the Super Projection Calculator. The calculator is available on the AustralianSuper website and is a great tool to look at what your lifestyle might be in retirement. You can see what it is today if you make no changes, and what it could be if you decide to add extra to your super. It could have a significant impact on your future.
AustralianSuper aims to provide help and advice to members as they need it. And we do this in three main ways. Online via our website, which has a range of tools and calculators and information about AustralianSuper and super in general. You can speak with an advice team member over the phone for simple personal advice, covering topics relating to your AustralianSuper account, such as your investment options, making contributions to super, insurance, and retirement income options. This advice is provided at no additional cost to members. Its cost is included in the member fee that we all pay. So I would suggest that to get the best value from your AustralianSuper membership, it makes sense to seek advice as you need it. I will just note that phone advice for retirement or transition to retirement has a small fee. For those members that would prefer to meet with an adviser or maybe have more complex issues, AustralianSuper also offers access to Financial Planners based in our offices around Australia. This advice is usually provided face-to-face or as a virtual meeting. This financial advice service is at the member's own expense. You can also access advice in your local area with a registered Financial Adviser. You can find all the advice options through our Find an Adviser tool.
By attending today's session, you have already taken a step in learning more about making the most of your super. I encourage you to look at what is available to you and determine what is the best course of action for you. We thank you for attending and wish you all the very best with your financial journey.
Estate planning and your super
What happens to your money when you're gone? Nominating super beneficiaries and understanding the tax consequences (so loved ones can potentially avoid unexpected tax bills) are all part of smart estate planning.Learn more
Estate planning and your super
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Your super savings may last 20 years or more when you retire. Some of your savings may even outlive you, so it's important to let us know where you want your money to go. The concept of beneficiaries can raise lots of questions. Who should I nominate? What happens to my super when I pass away? And, will it be taxed? Today, in our Estate planning and your super presentation, we're going to unpack this and discuss what happens to your super when you pass, and how you can ensure it passes to those you intend to receive your benefits. My name is Darryl Florance and I'm an Education Manager. Part of the Education Team here at Australian Super. Helping you better understand how super works is important and why we're here today. I've been working in super and financial services for over 35 years.
Today, I'm joined by AustralianSuper Financial Adviser, Daihla McGinty, who is going to help us understand how estate planning and your super work together. So, welcome Daihla. Can you please tell me how you help people, in particular, when it comes to their beneficiaries?
Thanks, Darryl. It's great to be here today. My role as a Financial Adviser is to help people with retirement planning, but it also includes things such as estate planning. This is a really important discussion to have with people to really understand what they'd like to happen, in the event that they passed away, to ensure that things get passed as per their wishes.
Before we start, it's important to understand that the information we're covering today is general financial advice, and it doesn't take into account your personal objectives, situation or needs. Before making a decision, consider if the information is right for you, and read the relevant Product Disclosure Statement by visiting australiansuper.com/pds or by calling our national contact centre on 1300 300 273. It's important to note that investment returns are not guaranteed, and past performance is not a reliable indicator of future returns.
Through our discussion today, we'll look at what's included in an estate plan. We'll look at the rules around nominating beneficiaries, including who can be nominated. Then we'll work through the tax implications of different beneficiaries, and how this could be factored into your decisions. And, finally, the next steps you could take following today's presentation. In our roles, we meet a lot of different people and one of the most common things we hear is, "It's okay, I have a will. I don't need to worry about my beneficiaries." Now this is not necessarily the case. Before you start planning your estate, it's important to understand the way different assets are treated and the options available to you. Making sure your assets go to the right people after you pass is not always as simple as stating your wishes in your will. How your property and assets are distributed may depend on a number of factors. Many people think super forms a part of their estate. This is actually a misconception, and, in fact, your super isn't considered part of your estate and, therefore, not subject to the terms of your will. Therefore, it's important to ensure you have an estate plan plus nominated beneficiaries listed on your super account. We'll unpack this area in today's presentation. Daihla, can you please tell us what estate planning is, and what people should consider as part of their estate plan?
Estate planning involves the transfer of wealth between yourself and your chosen beneficiaries. Having a valid will in place is just one aspect of estate planning, however, having that will in place, can give you comfort and peace of mind to know that your wishes can be followed in the event of your death. A will is a legal document that sets out how you want assets that you own to be distributed when you pass away. You must have both legal and mental capacity to be able to make a valid will. If someone dies without a will, they die intestate. Being intestate means that the laws of the state or territory they live in will decide how their estate is administered. This highlights how important a will is to ensure your wishes are met. Then there are enduring powers of attorney, financial or medical, and enduring powers of guardianship. Again, different states have different rules in regards to these items. A power of attorney or enduring power of attorney can give you the peace of mind knowing that your affairs can continue to be taken care of in the event that you are not in a position to make certain types of decisions yourself. For example, this can include situations when you're overseas or incapacitated. There are a variety of powers of attorney available. The ones that are appropriate for you will depend on your circumstances, and what decisions you think are important in the event that you are unable or unavailable, to make those decisions yourself. A letter of wishes, also known as a statement of wishes, is an informal document that accompanies your will. A letter of wishes help to explain your will and make it easier for your executor to administer your estate, than if they just had your will to go by. It's not legally binding and it's much easier to make changes to than your official will. A health directive is a legal document that enables you to make decisions, now, about the treatment you would want, or not want to receive, if you ever became sick or injured and were incapable of communicating your wishes. In such circumstances, your health directive effectively becomes your voice. Finally, there are beneficiary nominations to ensure your super passes as per your wishes.
It's important to let your super fund know what you want to happen to your super in the event of your passing. And there are a few options when deciding what happens to your money. You can nominate a beneficiary in two ways, binding or non-binding. Once retired you also have another option, to nominate a reversionary beneficiary to continue to receive your regular pension payments. Daihla, can you please explain these types of beneficiary nominations?
For a binding nomination, you provide formal written direction to AustralianSuper to tell us who you want your account balance, including any applicable insurance, paid to, so that it's legally binding. A binding nomination comes into effect from the date we accept it and expires three years from the date you sign the form, as long as the nominees remained valid beneficiaries. You can set up or change your binding nomination by completing a valid Binding death benefit nomination form. A binding nomination instructs AustralianSuper how to pay your death benefit if you die. As long as it's valid, your nomination is legally binding and we must follow it. This is why it's important to consider changing or cancelling your binding nomination, if your circumstances change, so that your benefit will be paid in line with your current wishes.
For a non-binding beneficiary, you nominate who you'd prefer your account to be paid. However, your nomination is not legally binding, and although your super fund consider who you choose, ultimately, they are legally responsible and will need to consider relevant laws when making a decision. You can make a non-binding nomination by completing the Change my details form available at australiansuper.com/factsheets through your online account at any time, or by calling us on 1300 300 273.
Finally, if you have a pension account, you can nominate a reversionary beneficiary. A reversionary beneficiary will receive regular income payments from your account until the account balance reaches zero. You can set up or change your reversionary nomination by completing a valid Reversionary benefit nomination form.
When nominating a beneficiary, it's important to understand who you can nominate. So, who can you nominate? You can nominate your spouse or partner. A spouse includes legally married spouses or de facto spouses. A spouse can be a person you're legally married to but estranged from or separated from. So, if you haven't formally ended a marriage, your husband or wife is still considered your dependent under superannuation law. And while you can't be legally married to two people, it's still possible to have two spouses. A legally married spouse and a de facto spouse. Your child, of any age. A child includes an adopted child or a stepchild, even though a stepchild is included in the definition of a child, if you end the relationship with the natural parent or the natural parent dies, the child is no longer considered your stepchild. However, they may still be considered a financial dependant, or in an interdependency relationship with you, and could, therefore, continue to be a beneficiary of your super. Interdependants which is someone who lives with you and shares a close personal relationship, where one or both of you provide financial and domestic support, and personal care of the other. A financial dependant, generally, a person is financially dependent on you if the level of support you provide them is necessary and relied upon, so that if they don't receive it, they would be severely disadvantaged rather than merely unable to afford a higher standard of living. And, finally, you can nominate your estate or your legal personal representative. This will mean your super benefits could be paid as per the intentions of your will.
When we talk about dependants, they are actually two different dependants. A dependant under super legislation, known as the Superannuation Industry Supervision Act, or SIS Act, meaning who is eligible to be a beneficiary of the super benefits, and a dependant for tax purposes, meaning, who can receive the benefits tax-free. The SIS Act determines who can get your super directly from your super fund without having to go through your estate, these are your SIS dependants. Tax law determines who pays tax on the taxable component of any such payment. Tax dependants receive your super tax-free. A current spouse is considered a SIS dependant, so can receive your super benefits directly, and also receive these benefits tax-free. A former spouse is not considered a SIS dependant, so is unable to receive the super benefits directly from the super fund, but if they did receive the benefits via an estate, they could receive these benefits tax-free. A child under 18 is considered a SIS dependant, so it can receive your super benefits directly, and also receive these benefits tax-free. A child over 18, who is not a financial dependant, is considered a SIS dependant, so can receive your super benefits directly, but they are not considered a tax dependant and, therefore, would be required to pay tax on the taxable components of the super benefits. A financial dependant and an interdependant are considered a SIS dependant, so they can receive your super benefits directly, and also receive these benefits tax-free.
When we talk about tax potentially being payable on the death benefits, it's important to understand what that means. The taxation of death benefits from super varies depending on many factors, including tax components within the account, which are tax-free and taxable, whether the beneficiary is a dependent for tax purposes, which we've just discussed, whether the amount is taken as a lump sum or an income stream, and, in some cases, the age of the deceased and a beneficiary. For reversionary pensions, consideration may also need to be given to the introduction of the transfer balance cap for larger account balances. Daihla, can you please explain in more detail what the tax components are?
The tax-free component of a super account includes the following: after-tax contributions, Government co-contributions, and any tax-free component of a rollover from another super fund. Whilst the taxable component is the total of the following: employer contributions, salary sacrifice contributions, personal contributions where a tax deduction was claimed, and any investment earnings. Whilst the entire tax-free portion of the benefit is received with no tax payable, there can be tax payable on the taxable component of the total benefit. The tax payable is 15% plus the Medicare levy.
Let's take a look at an example of the implications of the tax payable with John and his family. John is 60 and married to Laura, 58. They have a son, Ben, who is 20, currently studying at uni and financially dependent. They have a daughter, Meg, who is 28 and married. Meg has a daughter, Ava, aged 4, who is John's granddaughter. Sadly, John passes away, and has a total super death benefit of $400,000. This is made up of 100% taxable component. Daihla, let's assume that the full $400,000 is paid to just one of John's family members. What are the tax implications if the full amount is paid to each of his family members?
As Laura is his spouse, she is considered a SIS dependant and she can receive the full super death benefits directly, and also receive these benefits tax-free. Ben, a financially dependent child, is also considered a SIS dependant, so he can receive the full super death benefits directly, and also receive these benefits tax-free. On the other hand, Meg, a child over 18, who is not financially dependent, is considered a SIS dependant, so she can receive these benefits directly, but Meg is not considered a tax dependant, and, therefore, would be required to pay tax on the taxable component of the super benefits. This is 15% plus the Medicare levy on the $400,000 benefit. Meaning if she received the full benefit, there would be tax payable of $68,000. Finally, Ava, who's John's granddaughter, is not a financial dependant, so would not be eligible to receive the benefit and is not a tax dependant either, so would have to pay tax on the benefits. However, if Ava was a financial dependant, for example, if she lived with her grandparents, she could be dependent for both super and tax purposes. So, this highlights the importance of planning when deciding on who your beneficiary should be.
Daihla, are there considerations or strategies available to help people plan and reduce the tax implications?
Absolutely, Darryl, there are a number of strategies that we can implement to help minimise or reduce the amount of tax payable. What's important to understand though, is everybody's situation is different. So, I would strongly suggest that you seek some personal financial advice if you wish to explore this area in more detail.
Thanks, Daihla. You've certainly highlighted just how important it is to plan and consider all of the options when nominating beneficiaries. Today, you've made the first step in planning and preparing by attending our presentation. However, there are some other steps that you can take. First, you can nominate or review your super beneficiaries factoring in what we've covered today, including who you can nominate and who qualifies as a tax dependant. You should consider legal advice on your estate planning requirements, including wills, power of attorney, and any other areas that may be applicable to your situation. And you should consider seeking financial advice. Like Daihla mentioned, there are strategies that may be appropriate to you that could potentially reduce the tax implications, but advice may also provide you with a peace of mind when making decisions.
Daihla, AustralianSuper has a range of financial advice options. How can someone determine which option may be best suited to their circumstances?
AustralianSuper aims to provide help and advice to members as they need it, and we do this in three main ways. Online via our website, which has a range of tools and calculators, and information about AustralianSuper and super in general. You can speak with an advice team member over the phone for simple personal advice, covering topics relating to your AustralianSuper account, such as, your investment options, making contributions to super, insurance, and retirement income options. This advice is provided at no additional cost to members. Its cost is included in the member fee we all pay. So, I would suggest that to get the best value from your AustralianSuper membership it makes sense to seek advice as you need it. I will just note that the phone advice for retirement or transition to retirement has a small fee. For those members that prefer to meet with an adviser or maybe have more complex issues, AustralianSuper also offers access to Financial Planners based in our offices around Australia. This advice is usually provided with face-to-face or via virtual meetings. This financial advice service is at members' own expense. You can also access advice in your local area with a registered Financial Adviser. You can find all of the advice options through our Find an Adviser tool on our website.
Thanks again, Daihla, for your insights today, and explaining the finer details of beneficiaries, the tax implications, and how important it is to plan and prepare. By attending today's session, you've already taken a step in understanding how estate planning and your super work together, how you can evaluate the most appropriate beneficiaries, and what the tax implications are, and the next steps you can take today. Thanks for joining us, and we wish you all the very best on your financial journey.
Tips to boost your super
Instead of having your super in a set and forget mode, simple actions like making extra contributions when you can, knowing the different types of contributions you can make, and understanding how much you’ll need for retirement can all help improve your super.Learn more
Tips to boost your super
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Welcome, and thank you for taking the time to join AustralianSuper's Tips to boost your super presentation. Now there are many things that we enjoy planning for including holidays, starting a family, buying a home, and we tend to spend a lot of time focusing on these. However, our retirement, which could be 20 to 30 years of our life isn't often given as much time. But your super could one day be the biggest investment that you have in your life. At AustralianSuper, we aim to help members achieve their best possible retirement outcome. And in today's presentation we'll cover the tips and strategies that may be available to you to help boost your super, and to help you have the best possible retirement. My name is Linda and I'm an Education Manager at AustralianSuper, and my job is to help you better understand how super works. Now, I've been working in the super industry for over 20 years. Today I'm joined by one of AustralianSuper's Financial Advisers, Duncan Collie. And Duncan's here to help me unpack the ways in which we can boost our super. Hi Duncan, can you please tell me how you help people boost their super?
Thanks, Linda, in my role as a Financial Adviser, I help members plan for their retirement. In meeting with my clients and getting to know them, I find out what's important to them and what they want to achieve. From here we can work through the strategies that will benefit them and help them to achieve their goals.
So, before we start, it's important to understand that the information that we're covering today is of a general nature, and it doesn't take into account your personal objectives, situation or needs. So before making a decision, consider if the information is right for you, and read the relevant PDS, by visiting australiansuper.com/pds or by calling 1300 300 273 Also it's important to note that investment returns are not guaranteed, and past performance is not a reliable indicator of future returns.
So there are a number of factors that can help you to boost your super, and today we'll be covering understanding how much super you might need, learning the ways that you can boost your super through contributions, understanding how investments form an important part of your super, and learning more about the different investment options that are available to you. When you reach retirement and you're able to access your super, you may also be eligible to access the Government Age Pension. While this sounds like an easy route to a comfortable retirement, many people are unsure of how much super they actually need in retirement. For instance, do you want to spend the same you are now? Do you want to travel? What will your day to day living expenses be? It's worth thinking about what type of lifestyle you'd actually like to have in retirement. The Association of Super Funds of Australia benchmarks the annual budget needed by Australians to fund either a comfortable or a modest standard of living in their retirement. This is a good starting point to determine what type of lifestyle you'd like and how much super you may need. Duncan, can you explain to me what a modest and comfortable lifestyle are?
A modest retirement lifestyle by the ASFA retirement standards, is considered better than the Age Pension, but still only able to afford fairly basic activities. However, a comfortable retirement lifestyle by the ASFA retirement standards, assuming the retiree is healthy, provides the ability to undertake a range of leisure and recreational activities, maintain a reasonable car, afford private health insurance and make purchases like electrical equipment, household goods, and new clothes as well as being able to take an occasional holiday. This is assuming the retiree owns their own home. A budget is a great place to start in determining your own exact needs, as everyone's situation is different. The next step is then how much super do you need to provide that lifestyle?
For a comfortable lifestyle, a single person would need a super balance of approximately $545,000 at retirement. While a couple would need a super balance of approximately $640,000. A great tool to use is our Super Projection Calculator. You can see how much super you could have at retirement, and how long it could last. And the difference additional contributions could make to your super balance. The calculator is available on the AustralianSuper website and is well worth a look.
Whether retirement is on the horizon or right around the corner, it's never too late to add more to your super. There are simple ways to contribute to your super while you're still earning a regular income. So, you'll have more for your best retirement. Extra contributions can make a big difference to your final super balance and your retirement lifestyle. Plus, there are ways that you can save on tax. Duncan, can you please explain the different ways that you can contribute to super?
You can add to super in two ways. Firstly, concessional contributions, also known as before-tax contributions, which include employer contributions, salary sacrifice, tax deductible personal contributions, and reportable super contributions. For example, employer paid insurance premiums. The maximum amount you can contribute is $27,500 per year. However, you may be entitled to contribute more than this, subject to eligibility using the carry forward rule. From the 1st of July 2019, you can carry forward any unused portion of the concessional contributions cap for up to five previous financial years if your total superannuation balance is less than $500,000 on 30th of June of the previous financial year. Unused concessional contribution cap starting from the 2018/19 financial year may be carried forward in this manner.
So, let's now take a look at the carry forward rule in action. So, in this example, we're going to have a look at Sarah, and how she can use the carry forward rule. In the 2019/20 financial year, Sarah has an available contribution cap of $25,000. Now her employer pays in $10,000 as part of her employer contributions, and that leaves her $15,000 remaining cap. This $15,000 can be carried forward into next financial year So in the 2020/21 financial year, Sarah now has a total available contribution cap of $40,000. The $15,000 from last financial year is added to the concessional contribution cap of $25,000. So, her employer pays in $10,000 as part of her employer contributions, which leaves her $30,000 remaining cap. Now this amount can be carried forward into this financial year. So, in the 21/22 financial year, Sarah now has a total available contribution cap of $57,500. The $30,000 from last financial year is added to the concessional contribution cap of $27,500. So, her employer again pays $10,000 as part of her employer contributions. However, this year she makes a personal deductible contribution of $20,000 from her available funds. Now this leaves her with $27,500 remaining cap, which can be carried forward to next year, but she also has a tax deduction for this financial year of $20,000, which is based on the personal deductible contribution that she made. So, to find out how much of your concessional cap that you have available, you can log into the ATO via your myGov account and look under the super section. So, Duncan, earlier you mentioned that there are two ways to contribute, what is the second way of contributing?
The other way you can contribute to super is via a non-concessional contribution, also known as an after-tax contribution, which is made from your after-tax take-home pay. This includes non-deductible personal contributions and after-tax spouse contributions received by you. The non-concessional cap is $110,000 per annum. This is subject to eligibility, including your total super balance and bring forward arrangements. The bring forward rule allows you to bring forward up to three years’ worth of non-concessional contributions, depending on your super balance and age. For example, if you contribute $330,000 in this financial year, you wouldn't be able to make a non-concessional contribution in the next two financial years.
If you’re interested in learning more about the different types of contributions you could make, contribution limits that apply and where potential benefits may exist for you, you can register for AustralianSuper’s live Tips to boost your super webinar at: australiansuper.com/webinars
Attendees also have the opportunity to participate in a live Q&A session with our AustralianSuper education managers at the end of the presentation. Now, back to you Linda for some more helpful hints.
You could be eligible for a Government co-contribution if you make an after-tax contribution to your super. Under the scheme, the Government matches 50 cents for every dollar that you contribute to your super from your after-tax pay, up to a maximum of $500 per annum. This co-contribution gets paid directly into your super account after you've lodged your tax return for that year, as long as your super fund has your tax file number.
So, we've covered a lot of detail on the different types of contributions and the ways that you can add to super. For more information, visit australiansuper.com/grow Another component to your super is how your super is invested. There are many different ways to invest your money. How you decide to invest can depend on your age, your financial situation, and your personality. So, Duncan, what are some of the considerations in understanding what type of investor you are?
One of the first steps to understanding what type of investments you should have your super invested in, is understanding what type of investor you are. This means knowing yourself, the types, and levels of investment risk you're prepared to take, as well as understanding how long you're investing for. The timeframe is a very important consideration, when determining your investment choice. Your investment timeframe is how long you plan to invest your super savings before you retire, as well as how long you want your savings to last once you do retire. Take a look at the table to see how long you might need to keep your savings invested in super, based on how old you are now, and your current life expectancy. Keep in mind, the timeframes shown are averages. So, you may well live beyond these ages. So, for a 40-year-old male today, he will have another 42 years until his life expectancy. And this is how long he would like his super to last.
One of the biggest considerations is that superannuation is a long-term investment. While it can be concerning to see returns go down during periods of volatility, it's important to remember ups and downs are a normal part of the investment cycle. A look back over history can be reassuring. It shows that significant share market downturns and recessions are not uncommon, and indeed should be anticipated over a lifetime of investing. Before 2020, the last major share market downturn was the GFC in 2008. At the time, it was a very challenging period, and there were large daily swings in super balances. But the important thing to remember is that markets did eventually recover, and we experienced strong investment returns over an extended period. So as an example, if you invested $50,000 into the AustralianSuper Balanced option on 1 July 2006, 15 years ago, and left it in the Balanced option for the entire period despite the GFC and various other market corrections, your investment would have grown to $147,859 as at 30 June 2021.
Choosing the right investment option is important. It can affect how much your savings grow and how long they last. So, you can choose one or more investment options for your super account. If you prefer not to make a choice, then your super will be invested in the default investment option, which is AustralianSuper's Balanced option. So, the PreMixed options means that AustralianSuper has determined the assets and the asset allocation for each of these options. As you look down the list from High Growth to Stable, the amount of growth assets, such as shares, reduces. As the allocation to growth assets reduces, so too does the investment risk and the expected rate of return. If none of the PreMixed options appeal to you, you can make your own investment mix by using the individual asset classes listed in the DIY options. If you want to be a bit more hands-on with your investment options, then you have the Member Direct option available as well. The Member Direct option allows you to pick and choose any shares included in the ASX 300 list, a limited range of exchange traded funds, and even some term deposits. Our investment options are quite flexible, so you could have all of your account invested in just one option or spread across multiple options.
A good place to start in making this decision is to read the AustralianSuper Investment guide, which is available australiansuper.com/investmentguide. This guide can help you make your decision. So, you'll look at your investment needs and then go through your options in more detail. Alternatively, you can speak to a phone-based Financial Adviser, who can look at your situation and provide advice on the most appropriate investment option for you.
So far, we focused on helping you to work out what type of investor you are, how comfortable you are with investment risks, and what amount of control you want. Here are a few other things to consider when making your investment choice, as well as some ways to help manage your investment strategy and minimise your risk. Focus on your long-term needs. And remember, that it's normal for markets to change both up and down. If you're not comfortable with your investments, review them, and seek some professional financial advice, and make your investment decisions based on informed factual research. As mentioned, a great place to start in understanding your investment options is with the AustralianSuper Investment Guide. You can download a copy at australiansuper.com/investmentguide or you can speak to an AustralianSuper phone-based Financial Adviser in order to receive the advice on the best option for you. So, we've covered a number of tips and strategies about boosting your super in today's presentation. Now it's important to us that you have the tools and the help and advice available to make the appropriate decisions for you.
So, we've discussed a number of helpful resources today. To estimate your super retirement, please check out our Super Projection Calculator at australiansuper.com/super-projection-calculator For more information on contributing to your super, please visit australiansuper.com/grow And finally, to learn about your investment options, download a copy of our Investment Guide at australiansuper.com/investmentguide Now, these are just some of the tools and resources that are available to you to assist you to boost your retirement savings and to achieve your best retirement outcome. So, Duncan, you spoke earlier about your role as a Financial Adviser. Can you give us an overview of the role that financial advice can play in boosting super?
It's never too early or too late to get financial advice. Seeking advice can help you get a plan in place and on the way to achieving your retirement goals, we'll consider things such as maximising your current income, reducing tax, increasing contributions, to super, focusing on any non-deductible debt and reviewing your risk profile. We can then start visualising what retirement might look like for you.
Now AustralianSuper has a range of different financial advice options, so how can someone determine which option may be best suited to circumstances.
AustralianSuper aims to provide help and advice to members as they need it. And we do this in three main ways. Online via our website, which has a range of tools and calculators, and information about AustralianSuper and super in general. You can speak with an advice team member over the phone for simple personal advice, covering topics relating to your AustralianSuper account, such as your investment options, making contributions to super, insurance, and retirement income options. This advice is provided at no additional cost to members. Its cost is included in the membership fee that we all pay. So, I would suggest that to get the best value from your AustralianSuper membership, it makes sense to seek advice as you need it. I'll just note that phone advice for retirement or transition to retirement has a small fee. For those members who would prefer to meet with an adviser, or maybe have more complex issues, AustralianSuper also offers access to Financial Planners based in our offices around Australia. This advice is usually provided with face-to-face or virtual meetings. The financial advice service is at the member’s own expense. You can also access advice in your local area with a registered Financial Adviser. You can find all the advice options through our Find an Adviser tool.
By attending today's session, you've already taken a step in learning more about making the most of your super. I encourage you to look at what is available to you and determine what is the best course of action for you. We thank you for attending and wish you all the very best with your financial journey.
The Government Age Pension – are you eligible?
Many Australians in retirement receive either a part or full Government Age Pension. And the good news is you don't have to use all of your super before you can access it. Learn how the Government Age Pension works, the eligibility criteria, and what income and assets impact it.Learn more
The Government Age Pension – are you eligible?
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When you think about your retirement and how you're going to fund it, you may only consider your super balance. But around 62% of Australians over the age of 65 receive a part or full Government Age Pension payments, and the two can work together to support you in retirement. These extra payments can support your super and help you manage your retirement budget. The balance between super and the Age Pension is different for everyone, but understanding both can help you feel more confident about your retirement.
My name is Claire and I'm an Education Manager at AustralianSuper. My job is to help you better understand how super works and I have been working in financial services for over 14 years. I'm joined today by AustralianSuper Financial Planner Kevin Moore to help us understand how your super and the Government Age Pension can work together. Welcome Kevin, can you please tell me how you help people, in particular, when it comes to their retirement and the Age Pension?
Thanks, Claire. My job as an AustralianSuper Financial Planner is to assist AustralianSuper members and would be members to get their best possible financial outcome, and for most people, that's their best possible retirement outcome. It's a fact of life that most Australian retirees will get a part or full Centrelink pension, so it's an integral part of any planning that we do to make sure that any of our AustralianSuper members who are looking at retirement to see whether they're eligible for any benefits, and for us to assist them to maximise those benefits, if possible.
Before we start, it is important to understand that the information we are covering today is general financial advice, and doesn't take into account your personal objectives, situation or needs. Before making a decision, consider if the information is right for you and read the relevant Product Disclosure Statement by visiting australiansuper.com/pds or by calling 1300 300 273. Also, it's important to note that investment returns are not guaranteed, and past performance is not a reliable indicator of future returns.
Most people attending today may have some understanding of the Age Pension and how it works. It is a regular fortnightly income payment from the Australian Government to provide financial support to retirees, and it is subject to a range of eligibility criteria, including your age, your assets, and your income levels. But most importantly, it can work together with your super to top up your retirement income. A common question we often hear is, do I have to wait until my super runs out entirely before I can apply for the Age Pension? And the answer to this is usually no, you can still have a super balance and other assets and income and apply for the Age Pension, as long as it's within the income and assets test limits, which we will cover today.
As I've mentioned, your level of income and the value of your assets affect the payment rate of your pension. There are different Age Pension rates for singles, couples, and homeowners. If you're in a couple, whether you're married, separated, or living with a de facto partner, can also affect your payment rate. Generally, Services Australia will consider you to be in a couple if you're married, in a registered relationship, or in a de facto relationship. When looking to apply for the Age Pension, the first factor when it comes to eligibility is your age and residential status. When it comes to super, retirement and the Age Pension, there are two important numbers you need to be aware of, your preservation age for super and your Age Pension qualifying age. Kevin, can you please step us through these two important considerations?
Super could form a major part of your retirement income, so it's important to understand when you can access it. Your preservation age is the minimum age you must reach before you can access your super, and it varies depending on the year you were born. In addition to reaching your preservation age, to access your super, you need to have permanently retired, or want to transition to retirement while you're working, or have changed jobs on or after turning 60, or have turned 65, even if you're still working. You will see from the table that if you were born before the 1st of July 1960, your preservation age was 55. That gradually increases up to age 60 for those who were born after the 1st of July 1964. We find that preservation age is often confused with the Age Pension qualifying age, which, in fact, is quite different. If you're eligible for the Age Pension, you will be able to apply for it when you reach your qualifying age. As you can see, your qualifying age is higher than your preservation age. That means that even if you've reached the age you can access your super, you may be a number of years away from being eligible to receive the Age Pension. The Age Pension qualifying age increases in line with your age. For example, if you were born before the 30th of June 1952, you would have qualified for the Age Pension from age 65. If you were born on or after the 1st of January 1957, your eligibility for the Age Pension will occur when you turn 67. Between these dates, the Age Pension qualifying age increases incrementally. You can work out from the table when you will be eligible for an Age Pension.
In most cases, being eligible for the Age Pension means being an Australian resident who has lived in Australia for at least 10 years. You must have lived in Australia for at least five years consecutively. You also need to be in Australia on the day you apply for the Age Pension. If you're not an Australian resident, there are some circumstances in which you could be eligible for the Age Pension. For example, those who have lived or worked in a country that has a social security agreement with Australia, and refugees. If you meet the age and residential requirements, your eligibility depends on two tests: an asset test and an income test.
As we've discussed, the value of your assets determines your eligibility for the Age Pension, as well as the payment rate you receive. To have the value of your assets determined, they're subject to what's called an assets test. Kevin, can you please explain what assets are assessable and which are exempt?
The asset test takes into account the value of the assets you own. This includes investments such as shares, cash, term deposits, bonds, includes super and retirement income accounts, yours and your partners, household contents, a car, property, although generally it doesn't include your principal home and up to two hectares of the land it's on. It's important to note that assets such as your household contents are the fire sale value, not the insured value. So, if you had a garage sale today and put everything you own on the front lawn, how much would you have in your hand at the end of the day? That is the value of your assets as considered by Centrelink. The test also considers assets that may not seem obvious. These include any deposits you may have paid on a granny flat or retirement village for the rest of your life and includes any gifts or assets you might have given to family members or friends. There are also assets that are exempt from the test, including your primary place of residence and surrounding land, up to two hectares on the same title. Some properties larger than two hectares on the same title, in some circumstances. It includes super accounts if under Age Pension age. So, for example, if your spouse or partner is under the Age Pension age, their super would not be assessed by Centrelink. And it also includes funeral bonds and cemetery plots. It's also important to understand the rules around gifting. The first thing regarding gifting is if you want to give money away or help out a loved one, you can. It's your money, you can do what you want with it. However, if you are receiving the Age Pension, it can impact on how much you may receive. It is considered gifting when someone gives away an asset or assets, or transfers, or sells an asset for a value that is less than market value. There are some allowable limits where you can gift without it adversely impacting your Age Pension payment. This is $10,000 per year, but not more than $30,000 over a five-year period. If you're a couple, that $10,000 and $30,000 is for both of you, not as individuals. After five years, the gifted amount is no longer assessable. The asset test has different thresholds for singles and couples, and whether you're a homeowner or a non-homeowner. If assets are below the lower threshold, you're eligible for the full Age Pension under the assets test. As the value of your assets increase, the amount of pension decreases. If your assets are over the upper threshold, you will not be eligible for the Age Pension.
For many Australians, measuring income isn't as simple as just looking at a payslip. Income can come from a variety of sources, such as investments and interest on savings. When it comes to the Age Pension, your combined income has to be under a certain limit for you to be eligible for payments, similar to the assets test. To assess your Age Pension eligibility in relation to the income test, the Government looks at your total earnings across all your income streams. This total income value along with your total asset value will determine if you're eligible for the pension, and how much your pension payments will be. Just like the asset test, the income test has different thresholds for singles and couples. If your income is below the lower threshold, you are eligible for the full Age Pension. As your income increases, the amount of pension decreases. If your income is over the upper threshold, you become ineligible for the Age Pension. The income test looks at all income sources. This includes employment income, wages you might earn from working, or money you might receive from businesses you own. It also looks at investment income. This include your super and income created from financial assets, such as savings accounts, managed investments, and shares. Income sources exempt from the test include rental assistance payments, child support, emergency relief payments, and regular payments from a close relative.
To assess the income from your investments, the Age Pension income test uses a set of rules known as deeming. Deeming works by assuming your financial investments are earning a certain amount of income, rather than considering what they're actually earning. The rate your investments are deemed to be earning is set by the Government and is known as the deeming rate. For example, for a single person, the first $56,400 in investment assets have a deeming rate of 0.25% applied, and any asset value above that amount, they have a deeming rate of 2.25% applied. When you compare this to your potential super returns, you could actually be earning more on your super or account based pension than the deeming rate that is applied.
There are a couple of other considerations and strategies that come into play if you are receiving or hoping to receive the Age Pension or are retired. Kevin, can you briefly explain what some of these are?
One of those considerations is the Work Bonus. I find many people get asked to come back and help out at work on a casual basis after they retire, or even find that they miss the social aspect that work brings. The Work Bonus refers to an exempt allowable amount of earned income from work, which includes self-employment for Age Pensioners. The first $300 per fortnight is exempt from the income assessment and can accrue for up to 12 months. This can be really helpful if you get asked to go back to work for a couple of weeks, as you can potentially do this with no impact to your Age Pension payment.
For those members that are not eligible for the Age Pension, there is the consideration of the Commonwealth Seniors Health Care card. This entitles the holders to concessions and discounts on everyday items to reduce the living expenses of retirees, and therefore reducing the need to draw on their retirement funds. This is income-tested, but not assets-tested. The majority of people I see that aren't eligible for the Age Pension are mostly able to qualify for this card, due to the current low deeming rates. Furthermore, those who have not yet reached their qualifying age may be eligible to claim the Low Income Health Care card. Checking eligibility for these types of concession cards are part of the advice process.
Although not an Age Pension or Government benefit, the downsizer contribution is a very useful strategy for retired or older Australians. If you're 55 or over and sell a property that has been your main residence for 10 or more years, you could be eligible to contribute to super via a downsizer contribution. This may be suitable if you want to sell your home and use any surplus funds to boost your retirement savings. You can add up to $300,000 per person into super, regardless of your work status, super balance, or what you've already contributed under the ordinary concessional and non-concessional contribution caps. However, one area to be aware of is that moving funds from a non-assessable asset for the Age Pension into an assessable asset may have implications for your Age Pension payment. It's also important to note that the contribution needs to be made within 90 days of settlement, so it might be worthwhile to seek advice prior to ensure that this is appropriate and has been planned before settlement.
If you're eligible for the Age Pension and approaching retirement age, you don't have to spend all your super before you're eligible for pension payments. You can draw payments from your super to top up any Government pension payments you're entitled to. You can do this by setting up an account based pension from your super. AustralianSuper's account based pension is called a Choice Income account.
You can learn more about the Age Pension and the rules that are applied at servicesaustralia.gov.au/agepension To understand more about how your super savings and the Age Pension can work together, please visit australiansuper.com/agepension And finally, to see what your retirement outcome could be, please visit the AustralianSuper Super Projection Calculator. Kevin, you spoke about your role earlier as a Financial Planner, can you give us an overview of the role financial advice can play in the journey to retirement?
It's never too early or too late to get financial advice. We help people when they reach Age Pension age, when there may be some opportunities to maximise Age Pension payments. Maybe you've received estate proceeds or considering downsizing your home. We will consider all of these strategies and any concessions or benefits you may be entitled to.
AustralianSuper has a range of financial advice options. How can someone determine which option may be best suited to their circumstances?
AustralianSuper aims to provide help and advice to members as they need it, and we do this in three main ways. Online via our website, which has a range of tools and calculators, and information about AustralianSuper and super in general. You can speak with an advice team member over the phone for simple personal advice, covering topics related to your AustralianSuper account, such as your investment options, making contributions to super, insurance and retirement income options. This advice is provided at no additional cost to members. Its cost is included in the member fee that we all pay. So, I would suggest that to get the best value from your AustralianSuper membership, it makes sense to seek advice as you need it. I will just note that the phone advice for retirement or transition to retirement has a small fee. For those members that would prefer to meet with an adviser or maybe have more complex issues, AustralianSuper also offers access to Financial Planners based in our offices around Australia. This advice is usually provided with face-to-face or virtual meetings. This financial advice service is at members' own expense. You can also access advice in your local area with a registered Financial Adviser. You can find all the advice options through our Find an Advisor tool.
Thank you for taking the time to attend today's presentation to look at how the Age Pension can work with your super, the eligibility criteria, and some of the other strategies and considerations that may be available to you as you navigate your retirement. Thank you, and we wish you all the best on your financial journey.
Annual Member Meeting
AustralianSuper held its 2022 Annual Member Meeting on 29 November 2022. The purpose of the meeting is for the Chair, Chief Executive and senior Executives to update you on the performance of the Fund and provide an outlook for the year ahead. It’s also an opportunity for members to ask questions about the governance and operation of the Fund.Find out more