How safe are your parent s retirement plans? Retirement Protection Plan

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1 MLC Insurance How safe are your parent s retirement plans? Retirement Protection Plan

2 How safe are your parent s retirement plans? Consider a protection plan For them and your children

3 Retirement Protection Plan If your parents are approaching retirement, they may be wondering how life is going to treat them on the health and financial fronts. Those can be challenging enough in themselves. However, if something happened to you and you weren t insured, you d want to make sure your children were looked after financially, whether your parent/s became the legal guardian or played a supportive role. If this were to happen your parent/s wouldn t be alone. Around 22,500 Australian grandparents are already looking after their grandchildren. 1 Grandparent families by age of youngest child. 1 % Age group (years) 1 ABS: Family Characteristics, Australia, Page 01

4 A growing concern While financial worries wouldn t be top of mind during such family trauma, if you haven t planned ahead there could be serious financial pressure on your parent s retirement funds. By investing in either Life, and/or Total and Permanent Disability and/or Critical Illness insurance, you can ease the financial pressure of raising your children. This means your parent/s can focus on providing the emotional support and family structure to stabilise your children s home life. Page 02

5 The cold hard facts An adequate standard of living in retirement requires 70-80% of pre-retirement expenditure. 1 Baby Boomers are expected to live, on average, some seven years longer than their parents. 2 To raise two children from birth to age 21 can cost $537, Your parent/s may find they can t get State education allowances or school cards. 4 If they re a self-funded retiree (or still in the workforce) Centrelink s Means Tests may result in them not being eligible for any family support payment. 4 Cancer has overtaken cardiovascular disease as the leading cause of burden. 5 All of which would put a serious dent in your parent s retirement nest-egg. 1 The Australia Institute; Rich Boomer, Poor Boomer, NATSEM, Wealth and Inheritance, NATSEM, Australian child costs in Australian Institute of Family Studies, Grandparents raising grandchildren a new class of disadvantaged Australians, Australian Institute of Health and Welfare, Cancer and heart disease cause the biggest burden, Page 03

6 Making your insurance more affordable long-term When you take out insurance, there are generally two ways you can pay your premium (rather like choosing between a fixed or variable rate home loan). 1. A stepped premium that is calculated each year in line with your age. 2. Or a level premium that is calculated based on your age when the cover commenced. While stepped premiums are usually lower in the early years, level premiums can be a more cost-effective option if you continue the insurance over a longer period. Page 04

7 Stepped vs Level Premium Comparison. Life Cover / Total & Permanent Disability (TPD) / Critical Illness. Assumptions: Male, age 38, non-smoker. Life Cover Standard of $1 million, Critical Illness of $500,000 and TPD of $500,000. Based on MLC Limited s premium rates as at 1st May The sum insured is not indexed by inflation. When deciding which premium option, it pays to keep in mind insurance is about protecting your debts and income for the long-term. As you can see, level premiums 1 are consistent over time, while stepped premiums increase dramatically as you get older. 1 Level premium doesn t mean your premiums are guaranteed or do not change. Level premium rates may increase over time due MLC Premium Sustainability to rate increases, CPI increases and policy fee increases. Income However, Protection: unlike stepped male premium, age 40 level non premium smoker (excluding CPI and the policy fee) doesn t go up by age-related increases. Page 05

8 Benefit from up-front tax concessions You could consider buying insurance through super, as you may be able to take advantage of a range of up-front tax concessions that generally 1 aren t available when insuring outside super. For example: 2 if you receive less than 10% of your total income from eligible employment (eg you re self-employed or not employed), you can generally claim your super contributions as a tax deduction. This is regardless of whether the contributions are used by the super fund to purchase investments or insurance; if you re an employee and are eligible to make salary sacrifice contributions, you may be able to buy insurance through a super fund with pre-tax dollars; or 2 if you earn less than $60,342 pa you may be eligible to receive a Government co-contribution 3 of up to $1,500 that could help you cover the cost of insurance. These concessions can make it cheaper to insure through a super fund, or help you to purchase a higher level of cover. For many people, once all their other essential day-to-day bills are paid, there can be little left over to pay the insurance premiums. If you re in this situation, rather than risk going without insurance, insuring through super offers a potential solution as the premiums can be deducted from your account balance. 1 If you purchase income protection insurance outside a super fund, you may be eligible to claim the premiums as a tax deduction. 2 Includes assessable income plus reportable fringe benefits. 3 To qualify for a Government co-contribution, you will need to meet certain conditions. Page 06

9 Case study David & Susan Jones David was 15 when he started an apprenticeship at his local steel works. Forty years later, he was still working at the same factory. His wife Susan has kept the family ticking along, having raised four children to become independent adults with their own families. After a company restructure was announced, David took the opportunity to ask for a redundancy and succeeded in getting a healthy redundancy package. This, together with his superannuation and accumulated benefits, meant David and Susan were sitting pretty for an early retirement. Both David and Susan viewed this as a great opportunity to enjoy time with their grandchildren and to travel around Australia. On Boxing Day of that year, David s eldest son Rodney had a massive brain haemorrhage and passed away. And, because he was young and didn t see the need for any life insurance, Rodney left his wife Erin and three children without any means of support. As any parent or grandparent would, David & Susan took in Erin and the kids into the family home. The unplanned financial impact on David, Susan and their retirement plans was devastating and they were unable to do most of the things that they had hoped 40 years of work would allow them to do. This case study is for illustrative purposes only. Page 07

10 What should I do? Speak to your financial adviser about how to protect and manage the financial future of both you and your loved ones. For example, you could choose MLC Personal Protection Portfolio, a comprehensive portfolio of insurance that protects against specific risks and allows you to choose the cover you want, when you want. It even gives you the flexibility to rearrange your cover as your circumstances change. 1 The portfolio includes: Life Cover, Critical Illness, Total and Permanent Disability, Income Protection, Business Expenses. Essentially, the MLC Personal Protection Portfolio helps you financially protect both you and your family s future. And, because it s a specially designed package of insurance, generally you pay only one policy fee, no matter how many types of insurance you choose as part of the portfolio. 1 Full details are contained in the MLC Personal Protection Portfolio Product Disclosure Statement. Page 08

11 Important information This flyer is published by MLC Limited (ABN , AFSL ), who has its registered office at Miller Street, North Sydney NSW MLC Limited is a member of the National Australia Group of companies, and is the issuer of Personal Protection Portfolio (PPP). A PPP policy does not represent a deposit with, or a liability of, National Australia Bank Limited (ABN ) or any other member of the National Australia Group of companies (other than a liability of MLC Limited as insurer). The flyer is intended to provide general information only, without taking into account any person s objectives, financial situation or needs. A person should, before acting on this information, consider the appropriateness of the information having regard to their personal objectives, financial situation or needs. A person should obtain financial advice regarding his or her own circumstances before making any insurance decision. The product information contained in this brochure must be read in conjunction with the Product Disclosure Statement (PDS) and the Policy Document as terms, conditions and exclusions apply. Information about MLC Personal Protection Portfolio (PPP) and MLC Life Cover Super (LCS) are contained in the current version of the PDS. Applications for PPP and LCS, which are subject to acceptance by MLC, must be made on the Application Form contained in the PDS. Persons should obtain a copy of this PDS and consider it before making any decision about whether to acquire or hold the product. A copy of the PDS is available upon request by phoning MLC on or by visiting our website at mlc.com.au. MLC Nominees Pty Limited (ABN , AFSL , RSE L ) of Miller Street, North Sydney, NSW 2060 is the issuer of MLC Life Cover Super as Trustee for The Universal Super Scheme ( the Scheme ) (ABN , R ). As Trustee of the Scheme, MLC Nominees Pty Limited is responsible for the management of the Scheme; MLC Life Cover Super is part of the Scheme and when you obtain an interest in MLC Life Cover Super, you become a member of the Scheme. Neither National Australia Bank Limited, nor any other member of the National Australia Group of companies (other than MLC Limited as insurer) guarantees or accepts liability in respect of PPP. A PPP policy and an interest in a LCS policy held through the Scheme does not represent a deposit with or liability of MLC, National Australia Bank Limited (ABN , AFSL ) or any of their related bodies corporate (other than a liability of MLC Limited as insurer). Neither National Australia Bank Limited, nor any of its related bodies corporate (other than MLC Limited as insurer) guarantees or accepts liability in respect of PPP and LCS.

12 MLC Insurance How to contact MLC For more information call MLC from anywhere in Australia on or contact your adviser Website: mlc.com.au Postal address: MLC Limited, PO Box 200 North Sydney, NSW M0708