Retirement Income Streams. Information from the Australian Government Department of Families, Community Services and Indigenous Affairs (FaCSIA) 2007

Size: px
Start display at page:

Download "Retirement Income Streams. Information from the Australian Government Department of Families, Community Services and Indigenous Affairs (FaCSIA) 2007"

Transcription

1 Retirement Income Streams Information from the Australian Government Department of Families, Community Services and Indigenous Affairs (FaCSIA) 2007

2 Contents Disclaimer of liability iv Retirement Income Streams...1 What are Retirement Income Streams?...1 Is a retirement income stream suitable for you?...2 How can you benefit from reading this?...3 Income Streams What types are there?...3 Who provides them?...6 Matching Income Stream features to your needs...7 What are the risks?...8 Budgeting for Retirement...9 Developing a retirement income budget...9 How long will you need an income stream for?...11 Will your needs change?...12 How long will your money last?...13 Other income sources...15 Types of Income Streams Account Based...15 Access to your money...16 Income Payment Rules...16 How does my investment account value change?...18 Investment choices...19 Account Based Market Linked Income Streams...22 Selecting the term for your income...22 Access to your money...23 Income Payment Rules...24 What happens each year?...25 How does my investment account value change?...25 Are there fees and charges?...27 What happens when you die with an account based income stream?...27 Reversionary Income...27 Lump Sum...28 Flexible Option...28 Advantages and disadvantages...28 Types of Income Streams Non Account Based...28 Lifetime Income Streams...29 Fixed Term Income Streams...32 Comparison of different types of income stream products...36 What are the Tax Rules?...38 Usually Tax Free...38 Payments under Age Will I get a tax offset?...39 Excess Offset Usage...40 Working out tax (untaxed funds)...40 Working out tax (non-super funds)...41 Social Security Rules...42 Categories of Income Streams ii -

3 What are the means testing rules?...46 How to work out the income and assets test values...47 Retirement Income Stream Estate Planning Issues iii -

4 Disclaimer of liability The Commonwealth accepts no responsibility for the accuracy or completeness of any material contained in this information. Additionally, the Commonwealth disclaims all liability to any person in respect of anything, and of the consequences of anything, done or omitted to be done by any such person in reliance, whether wholly or partially, upon any information presented here. The situations and names appearing in this information are used to illustrate real life situations and do not refer to actual individuals. Caution: Material in this information is made available on the understanding that the Commonwealth is not providing professional advice. Before relying on any of the material in this information, readers should obtain appropriate professional advice. Views and recommendations of third parties that may be included in this information, do not necessarily reflect the views of the Commonwealth, or indicate a commitment to a particular course of action. The Department of Families, Community Services and Indigenous Affairs wish to acknowledge the contribution of John McIlroy in writing this. John has been involved with the retirement income stream industry over many years and is a director of financial services training company, Financial Essentials. - iv -

5 Retirement Income Streams Information to help you plan your retirement years Having an adequate income throughout your retirement years is a fundamental part of enjoying retirement. Retirement income streams are a popular investment choice for retirees as a way of producing regular income payments throughout retirement. Gaining a good knowledge of retirement income streams involves understanding: what they are; how they work; what types there are; who provides them; what the risks are; how they are taxed; and how they are counted for the social security means tests. You can then work out what retirement income stream suits your needs. On 9 May 2006, in the context of the 2006 Budget, the Australian Government announced its intention to streamline and simplify the current arrangements that apply to peoples superannuation benefits. These were very significant changes for retirees and retirement income streams and this information incorporates those changes. What are Retirement Income Streams? During working life, and certainly well before retirement, we become used to earning a regular income. For most people the regular income comes in the form of a salary or wage which is paid at least monthly. Because of the regularity of income during our working life, we usually adapt our spending to fit in with our income patterns. We might for example, buy the groceries on payday, or pay our major bills monthly. And for most of us, managing our tax is not a big issue as our employer will have deducted income tax instalments from our pay before we receive the net amount. At the end of the year we receive a tax summary and lodge this with our personal tax return. All in all, this is a relatively straightforward process we get a regular income and we don t have to budget for large tax bills at the end of the year. By the time retirement comes around we usually have our income and spending patterns well practised, although these may change a little in retirement. At retirement, or at some stage before, we also need to plan what we are going to do with our retirement savings. Usually this will involve looking at what to do with our superannuation money and any other savings that we may have accumulated along the way

6 One of the things you can do with some or all of your superannuation and/or other money is to invest it in a retirement income stream. When dealing with superannuation money, this may mean nothing more than receiving an income (instead of a lump sum) from your current superannuation fund, or it may mean using that money to purchase an income stream from a new fund. Using a retirement income stream is simply a way of dealing with many of the financial issues to which you have become accustomed before retirement. Retirement income streams are simply investments which allow you to obtain regular income and capital payments, and thereby provide you with a basis for managing ongoing income and spending patterns. And with most income streams, they are tax exempt thereby your gross amount equals your take home pay. Retiring does not mean that your need for regular income payments suddenly stops, so it s wise to consider this form of retirement income as part of your options in retirement. There are various types of retirement income streams that we will examine, some of which may suit you and others may not. However, the basic principle is the same investing to obtain a regular tax paid income stream. Is a retirement income stream suitable for you? There are lots of things to consider in planning for retirement. The number of years we spend in retirement is increasing and this part of our life will generally be a very long period of time. Planning anything for such a long period of time is quite difficult as many things can change along the way. Planning retirement is no different, particularly when you consider what might change in future years. For example, there is a fair chance that the house you live in at the start of retirement will not be your place of abode in 10 to 15 years time. You may decide at a future point in time to perhaps move to a smaller residence or move to another location. And further on you may consider other types of accommodation with access to medical care. With properties there are always ongoing maintenance costs. The property will need painting, plumbing, electrical or other repairs at some point in time. Or you may decide to do some renovations. You may also have the prospect of receiving an inheritance at some point in time and this may impact on how you plan your retirement. And of course there are always the uncertainties that happen in life which may involve substantial expenses

7 So while having a regular income in retirement is a fundamental part of retirement planning, there are lots of other things to consider also. Having access to some cash is very important to meet special needs and having some flexibility in your financial affairs is usually sound planning. Retirement income streams are not the only option you have for investing your retirement savings, however they can cater for many retirement needs, primarily the regular income need. We have identified just a few of the things that can change throughout the retirement phase of life and having the flexibility to alter your plans may be very important. Some retirement income streams are not very flexible and you should consider the advantages and disadvantages of each type of income stream carefully. After becoming more familiar with them you may decide that other options best suit your needs. How can you benefit from reading this? By taking a little time to read this you should be able to: understand the role of retirement income streams as an option for investing accumulated retirement savings see that there are numerous types of income streams which cater for varying needs in retirement be able to compare this type of retirement investment option with other investments take greater control of your retirement plans work with case studies of similar retirement situations to yours see how you don t need to have a fortune to make use of income streams get valuable tips on retirement budgeting learn about taxation and social security rules which may affect you The retirement income stream concept is not difficult as with any investment it just takes a little time to become familiar with all the terms and understand how the products work in practice. Income Streams What types are there? There are two main types of retirement income streams pensions and annuities. There are two types of retirement income streams pensions and annuities, but for the investor there is not much difference between the two types

8 Pensions A pension is the name given to income streams which are payable from superannuation funds, whereas an annuity is the name given to income streams which are generally payable from life insurance companies. There are many similarities between these two types of income streams. There are a number of different superannuation funds which may provide pensions. For example, a public sector superannuation fund (such as for Commonwealth public servants), provides pensions to retired employees. There are also publicly offered superannuation funds (often referred to as retail funds) which offer pensions. Usually, a person would rollover their money from their superannuation fund to one of these funds and then commence to receive an income stream which happens to be called a pension. While the funds providing the pension payments may differ, and indeed the type of pension payments may differ, their objective is still the same to provide a regular income to people in retirement from their superannuation savings. Annuities An annuity is a little different in that it is purchased from a limited range of organisations, mainly life insurance companies. Traditionally, the word annuity has referred to situations where a person exchanges a sum of money for a guaranteed series of income payments. However, in more recent times there has been more flexibility incorporated into arrangements involving annuities. If you invest in an annuity with a life insurance company you enter into a contract of insurance with that company that covers the terms of the regular annuity payments. With a pension, you become entitled to receive pension payments by virtue of being a member of the superannuation fund. So legally there is a difference, but from a practical viewpoint, annuities and pensions operate in a similar way. Pensions and annuities can have a lot of different product features and not all products offer the same features. There are two main groups of income stream products to learn about in terms of features and benefits. Some of these may be called pensions or annuities or you may find examples of both being offered by the one company. The key point to focus on first is what type of features do you want from your income stream? Apart from the distinction between pensions and annuities, income streams also fall into two other categories, being those that are account based and those that are not account based

9 Account Based Income Streams The account based variety is the most flexible type of income stream. When you invest in an account based income stream, you have an investment account within the relevant fund. Your investment account balance will increase as investment earnings are added to your account and decrease as you draw down regular income payments. For as long as the income stream lasts, you will have an account balance. The most common type of account based income stream has been referred to as an allocated pension. Around 80% of all income streams are allocated pensions. More recently, market linked pensions (also called term allocated pensions) have become popular. Non Account Based Income Streams These are income streams which do not have an account balance. They generally have a purchase price and you exchange a lump sum of money for an income stream over either a fixed period of years, or for your lifetime. These payments are guaranteed to be payable by the organisation providing the product. These are also referred to as fixed term pensions and annuities or lifetime pensions or annuities. Terminology Used There is a mix of terminology used to describe the various types of income streams. Type of Income Stream Category Pensions Pensions Annuities Annuities Account Based Non Account Based Account Based Non Account Based Common product names used Allocated pensions Market linked pensions (also called term allocated pensions) Lifetime pensions Fixed Term pensions Allocated annuities Market linked annuities Lifetime annuities Fixed Term annuities - 5 -

10 Who provides them? Retirement income streams are provided by many different organisations and superannuation funds. As mentioned earlier, annuities are incomes primarily provided by life insurance companies. These include allocated, lifetime and fixed term income streams. However not all life insurance companies provide all varieties. Life insurance companies offering income streams (ie everything except allocated and market linked income streams) are subject to certain government regulations. To support the guarantees that they offer, these companies must carry a prudent level of capital reserves so that they are able to withstand substantial fluctuations in investment markets without affecting the guarantees they have provided. These regulations are administered by the Australian Prudential Regulatory Authority (APRA). On the other hand, pensions are incomes paid from superannuation funds. APRA also applies prudential controls to superannuation funds offering lifetime, life expectancy or fixed term pensions. Life insurance companies are subject to stricter requirements in terms of reserving assets to meet their payment obligations than superannuation funds. The most common types of funds providing income streams are: Public Offer funds the name merely indicates that the general public (subject to meeting certain conditions) are able to join the fund. Most public offer funds are operated by large institutions including banks, life insurance companies, credit unions, investment managers and financial advisory groups. While there is a concentration towards account based income streams (allocated and market linked income streams) by this group of income providers they are also able to provide non account based income streams (lifetime and fixed term income streams). Defined Benefit funds these funds usually provide pension benefits to people who have been members of the fund for numerous years. The pension benefits are usually a percentage of the member s pre-retirement salary or wage and are usually payable for (at least) the lifetime of the member. The most common examples of defined benefit funds paying pensions are funds established for State Government and Commonwealth employees. Industry funds a number of industry funds provide pension benefits to members. Those that pay pension benefits generally restrict their activities to allocated pensions. These funds first became popular when superannuation became part of various industry awards. Management of the fund includes employer and employee (often union) trustees

11 Many of the large industry funds now have (limited) public offer status and are available to a wide range of workers. There are many industry funds in Australia some of the largest ones are Retail Employees Superannuation Trust (REST), Aust Super, and Health Employees Superannuation Trust of Australia (HESTA) amongst others. Self Managed funds these funds (which are also often referred to as DIY funds) make up a significant part of the Australian superannuation scene. Self Managed funds will have four or less members and more commonly one or two members only. While most are used by people in the pre-retirement phase of life, an increasing number are being used to provide retirement income streams. Self managed funds can be used for the delivery of most varieties of pensions, but the vast majority are used to provide account based allocated pensions. These types of funds are subject to the same income stream rules as other types of superannuation funds, except in relation to lifetime, life expectancy and fixed term pensions where there are a few special rules. Matching Income Stream features to your needs There are many different income streams from which to choose; some are guaranteed, some are not, some are payable for life and others are payable for fixed terms (short, medium or long terms). What you need to do is to match the most appropriate income stream (or streams) to your own specific circumstances. If you want to retain the most flexibility with your financial affairs, then it is likely that an account based income stream will be the most suitable option. Alternatively, if you seek a high level of security and flexibility is not a major issue then a lifetime or life expectancy income stream may be more appropriate. Of course, it may be that you want a bit of both a high level of security and certainty of income for part of your money and a high degree of flexibility with the balance. If this suits your needs then investing in more than one income stream may be the best option. There is no limit on the number of income streams you may invest in. In fact, you may choose to invest in more than one income stream simply to spread your risk. You should also consider how much of your available money to invest in income streams. They are not the only option available and it is always prudent to retain access to - 7 -

12 some money for emergencies or other irregular expenses such as home maintenance costs. What are the risks? As with any investment, retirement income streams involve some degree of risk. Everyone views risks differently, however with income streams there are 3 main dimensions to risk: Security means how much risk is involved in the investments underlying the income stream. Certainty means how predictable the amount of the payments is from the income stream. Outliving means the risk that you will outlive your income stream payments. Only lifetime income streams do not have this risk. However, within the range of income streams available there are ways in which you can reduce risks to a low level. Here are 8 key tips to get you started: Tip 1 You can always invest in more than one income stream and they may be offered by more than one institution or fund a tried and true way of not putting all your eggs in the one basket. Remember that there is no limit on the number of income streams you can invest in. However having too many may start to increase the costs of investing, particularly if your affairs get too complicated. Tip 2 Be aware that there are very low risk income streams such as those payable for lifetime and fixed terms where an institution has usually provided a guarantee that they will continue to pay you an income at a specified level for a fixed number of years or for life. Tip 3 With most income streams, particularly the guaranteed income streams, you may elect to have your annual income payments indexed to the Consumer Price Index (CPI) or some other set annual increase. By doing this you have some protection against losing the purchasing power of your money. Tip 4 Within the income streams that carry the most risk (the account based varieties) there are usually numerous investment choices available. Some of them are quite low risk, and some products may even provide a guaranteed investment return for set periods of time. Tip 5 When evaluating investment choices within account based income streams (allocated and market linked income streams), remember that there are choices available from quite low risk through to those that have higher risk. It is a case of matching the investment choices to the risk you are prepared to take (ie. how averse are you to receiving variable or even negative investment returns in short term periods?)

13 Tip 6 When considering the risk in account based income streams you should be aware that options offering some exposure to sharemarkets and property markets will generally, over the long term, produce higher investment returns than those that simply invest in fixed interest and cash. Tip 7 Be aware that some income streams (the allocated variety) allow you access to your capital, whereas other types of income streams either do not allow access or have restrictions on doing so. Capital needs must be considered carefully. Tip 8 When considering investments in income streams, consider the risks that you may be taking in the context of all of your investments. For example, if you are investing only 25% of your money in an income stream which carries some investment risk, this may be quite appropriate if your other investments are invested securely (eg. term deposits). Budgeting for Retirement Developing a retirement income budget To successfully plan your financial future, start by doing a stocktake of your current position. This involves documenting your current assets and debts. It also involves working out a budget of expenses, so that you can clearly see how much income you need to meet essential living expenses and optional expenses. A simple worksheet for documenting your financial position and your income needs follows. Take time to complete this as it will make your planning so much easier. Calculation of your Net Worth Your Assets Home Car House contents Jewellery and other valuables Investment property Shares Investments in managed funds Bank, Building Society or Credit Union accounts Term deposits Government bonds Superannuation benefits Payment for unused annual leave Payment for unused long service leave Insurance policies Other $ Value - 9 -

14 Total Assets (A) Your Debts Home mortgage Car loan Home improvement loan Personal loan for other purposes Credit card balance Store charge accounts Investment property loan Taxation owing Other Total Debts (B) $ Value Your Net Worth (A B) Your Income Stream Budget Weekly Living Expenses $ per week Other Expenses $ per annum Food Council rates Clothing Water rates Entertainment Car registration Petrol Car insurance Fares Gifts Telephone Donations Electricity Education costs Gas Gardening Rent House maintenance Health insurance Travel costs Medical expenses Life insurance Chemist Mortgage expenses Newspapers and magazines Other loan expenses Hobbies Membership fees Other Other Total Weekly Expenses Multiply by 52 Annual Living Costs (C) Total Other Expenses (D) If you add columns C and D together you will have your annual income stream budget. This budget may vary a little from year to year as your circumstances and needs change. Retain this version, so you can simply review it and update it from year to year

15 Now that you have worked out your essential living expenses, prepare a short list of the items of expenditure that are not essential, but which you would like to do or feel you will have to do, either now or at some time over the next few years. Optional Expenditure or Capital items Your Optional Expenditure $ Total Optional Expenditure Armed with your financial stocktake, we can now move on to resolving some of the other key financial questions. How long will you need an income stream for? It would make planning our finances so much easier if we knew exactly how long we were going to live. So how can we estimate how long we need our money to last? The best way is to work from average life expectancies. The Government produces details of average life expectancies based on historical information. These are updated from time to time, and the good news is that average life expectancies are getting longer. While this is great news in one sense, it also means that our retirement money generally needs to last longer. A selection of the average life expectancy factors are shown in the following table: Age Male Female

16 Age Male Female Australian Life Tables, , Government Actuary By way of example, a male and female who are both age 65, would be expected to live over 17 and 21 years respectively. Life expectancies in 5 to 10 years time may be significantly longer, but this should provide some guide for planning your income stream needs into the future. Will your needs change? There is a very high probability that your financial needs will change over time. It is very unlikely that you will need the same amount of income over a long period of time for a variety of reasons: Inflation while Australia has been experiencing comparatively low levels of inflation for a number of years, there is still some inflation and there is always the possibility that it could increase. Inflation is an important factor to consider, and some income streams allow you to select an indexation option, where your income level increases with movements in the Consumer Price Index. Alternatively you can have it indexed by a certain percentage each year. For example, you could have your income increased by 3% per annum, to cope with increasing costs. Spending changes at various stages in retirement our income needs will change simply because our spending patterns change. This might include specific holiday costs which may not be part of our normal budget. There may be other items of expenditure such as house maintenance costs which are unforeseen. There are lots of reasons why our income needs will change from time to time

17 Capital needs similarly the need to have access to capital may change over time. There is a strong chance that at some stage in retirement there will be issues such as major car repairs, upgrading a car or moving house to deal with. There may also be significant costs later in life associated with health matters, nursing care and using other services as we become less capable of doing all the things we used to do. Having access to money for key larger items of expense is sound planning. As such it is necessary to consider these aspects when you invest in an income stream. If you refer to the detailed information on the different types of income streams you will be able to see that these needs can be catered for in different ways. How long will your money last? This is the big question. How long your retirement savings will last depends on many things. If you decide to invest money in a lifetime income stream you will know that the income will continue for life. So it is not a case of how long it will last but rather, will the income you receive be enough? You should consider whether or not you will be entitled to any age pension or social security allowance, and any other investment or employment income you may receive. We examine the age pension issue in more detail later. Where you invest in an income stream which is payable for a fixed number of years you have the comfort of knowing that the income payments will continue for the period of years you select. With an account based income stream, your income payments stop when your investment account runs out. So the key with these type of income streams is to maximise the investment return on your account to make your money last longer. This doesn t mean that you should take big risks with your investments it s just that the better you manage your money, the longer it will be able to provide you with an income. We ll look at this issue in more depth later, but consider the following example. in Real life... Charlie and Grace invested $150,000 in an account based income stream. When they chose the fund they were given some investment choices. They were both aged 64 and knew that their average life expectancies were over 18 and 22 years respectively. They were both enjoying good health and they decided that they should think of this as a very long term investment. They chose the Managed option, which meant that indirectly they had about 50% of their money invested in the share and property markets. Over the 20 years, they were able to earn 7% per annum on their money. When they first invested in the account based income stream, they needed to draw $10,000 of income per annum. Each year they increased their income payments by 3% per annum

18 With this level of income payments and the 7% per annum investment earnings their money lasted for 24 years. *Note that in this example we assume that the investment earnings rate is the same for each of the 24 years. This is unlikely to occur as investment earnings will vary from year to year. The following table provides you with some idea about how long your money will last. The table shows different investment earning rates, ranging from 4% to 8% per annum. The table also shows the level of income that may be drawn, expressed as a percentage of the starting capital. In each case these income figures are assumed to increase each year with inflation, which is assumed to be 3% per annum. To help you use this table consider 6% per annum investment earnings and an income rate which is also 6%. This means in the first year, your investment account would remain constant, because the money coming out of the account is the same as the earnings. In the second year, the income payments go up by 3% and as such the investment account balance will start to reduce. The table shows that the investment account will be exhausted after 25 years. The table is designed as a guide only to how long your money may last and does not represent an actual allocated pension or allocated annuity account. Later on there is an actual example of an account based pension. Table showing the number of years savings will last in an Account Based Income Stream Income Payment Level (% of Capital) Investment Earnings - 4% per annum Investment Earnings - 6% per annum Investment Earnings - 8% per annum 5% 24 years 32 years 35+ years 6% 19 years 25 years 35 years 7% 16 years 20 years 27 years 8% 14 years 17 years 21 years In the above table it is assumed for simplicity that income payments are drawn annually in arrears and that investment earnings are added to the account annually in arrears also. The investment earnings are net of any fees which may be charged. The income levels do not take into account the minimum payments each year that may apply for an account based income stream. This means that the actual income from an allocated pension or allocated annuity may vary from that calculated in the above table

19 Other income sources How long your money will last depends on many things, as can be seen from the above example. The impact of income from other sources will be very important. If for example, you earn some money from part-time employment in your early retirement years, you will be able to keep more of your capital intact, or perhaps actually build on it for a while. If you are entitled to a full or part age pension then this will assist in providing for your income needs. If you are entitled to a part age pension, you may not need to draw down your retirement capital as quickly and be able to spread your retirement savings out over a longer time frame. Types of Income Streams Account Based Account based income streams are the most flexible type of income stream. When you invest in an account based income stream you have an investment account within the relevant fund. Your investment account balance will increase as investment earnings are added to your account and decrease as you draw down regular income payments. For as long as the income stream lasts, you will have an account balance. The most popular types of account based income streams have been referred to as allocated pensions and allocated annuities. An allocated pension is provided from a superannuation fund, whereas an allocated annuity is an annuity contract issued by a life insurance company. Apart from this difference they are almost identical. When you are considering account based income streams, you should be aware that you can only use superannuation money to invest in them. Superannuation money means any money that is within a superannuation fund and certain types of superannuation lump sum payments. So any savings that you have outside superannuation would need to be contributed to a superannuation fund prior to investing in an account based income stream. Anyone can contribute to superannuation prior to age 65 without satisfying eligibility rules. After age 65, eligibility conditions need to be met. To contribute to a fund you need to have worked at least 40 hours within a consecutive 30 day period in the financial year in which the contribution is made

20 Access to your money Account based income streams offer you the most flexible option as far as having access to your money is concerned. You are generally able to withdraw all or part of your money at any time. For example, if an unforeseen expense arose a few years after your account based income stream commenced you would be normally able to access money from your investment account. Generally, there are no limits placed on how often you may make these types of withdrawals. You are also able to switch your money from one account based income stream to another if for any reason you want to change providers. There is also some flexibility to match the income payments to your needs. At the beginning of each financial year you may select the level of income that you wish to draw, although the income selected must meet the minimum required level. The income payments will continue to be made to you until either you withdraw your money completely, or your investment account is exhausted. The investment earnings added to your account will depend on the type of investment choices you make. Most account based income streams offer you a range of investment choices, some of which involve more risks than others. One important point to note about account based income streams is that in most cases there are no guarantees given that you will have an income for your lifetime. The longevity of your income stream will depend on a number of factors, the most important being how much you draw out annually and what investment earnings you receive. Account based income streams are very popular investments, with investments in the allocated pension variety representing around 80% of all money invested in income streams. Income Payment Rules There are a few rules associated with account based income streams and the income payments you receive. Each year the total annual payments (income and/or capital) must be above a minimum limit. A set of factors, called Percentage Factors (or PFs), are used to work out the minimum annual payment limit each year. To calculate the minimum level, your investment account balance at 1 July each year is multiplied by the appropriate PFs, and the result is rounded to the nearest $

21 This calculation then sets a lower limit to the annual payments for that financial year. Subject to this limit, you are free to choose the preferred level and frequency of income payments for the year, and there is no maximum level. The following table provides PFs for a selection of ages: Age at 1 July Min PF Under 65 4% 65 to 74 5% 75 to 79 6% 80 to 84 7% 85 to 89 9% 90 to 94 11% 95 and over 14% Extract of schedule 7 of the SIS Regulations (1994) Unlike life expectancies, PFs are the same for males and females of the same age. Let s see how they work in practice. in Real life... Jack is aged 64 and is single. He invests $100,000 in an account based income stream on 1 July. From the above table we can see that his minimum PF is 4%. When Jack works out his minimum annual payment he will multiply $100,000 by 4%: $100,000 X 4% = $4,000 So Jack can draw an income of anywhere above $4,000. This limit applies for that financial year. So what happens each year? Each year the provider of Jack s account based income stream will do a similar calculation and let Jack know what his new limit is. Assume that a year has gone by and Jack, now age 65, has $99,000 in his account. At age 65 his PFs is 5%. The new calculation will be: Minimum payment $99,000 X 5% = $4,950 Jack can make a new income nomination at or above this limit for the financial year and this procedure is repeated each year

22 How does my investment account value change? Your account value will vary regularly. It will go down in value when you draw an income payment and increase when investment earnings are added to your account. The following example will provide an insight into what happens over time. Let s revisit Jack from the previous example. He was 64 when he started his account based income stream. We ll assume Jack received an income of $7,000 in his first year (which was above his minimum). Each year Jack increases the income amount by 3% per annum. We ll assume that Jack is able to earn 6.5% per annum on his money after fees. The following table shows Jack s annual income, his annual minimum payment and the movement in his investment account over time. Remember that investment returns can vary significantly from time to time and may even be negative. Age Jack s investment account balance at start of year Investment earnings at 6.5% per annum Jack s income payment each year Minimum income each year Jack s investment account balance at end of year ,000 6,500 7,000 4,000 99, ,500 6,468 7,210 4,970 98, ,758 6,419 7,426 4,940 97, ,750 6,354 7,649 4,890 96, ,455 6,270 7,879 4,820 94, ,846 6,165 8,115 4,740 92, ,896 6,038 8,358 4,640 90, ,576 5,887 8,609 4,530 87, ,854 5,711 8,867 4,400 84, ,698 5,505 9,133 4,230 81, ,070 5,270 9,407 4,050 76, ,932 5,001 9,690 4,610 72, ,243 4,696 9,980 4,330 66, ,958 4,352 10,280 4,020 61, ,031 3,967 10,588 3,660 54, ,409 3,537 10,906 3,260 47, ,040 3,058 11,233 3,290 38, ,865 2,526 11,570 2,720 29, ,821 1,938 11,917 2,087 19, ,843 1,290 12,275 1,400 8, , ,433 n/a

23 You will see from the above table that Jack s investment account value goes down a little in the first year as he is taking out more than he is getting from investment earnings. Also, each year his income is increasing (as we assumed a 3% increase each year) and this is above his minimum level. After Jack turns 84, his investment account value reduces to nil and his income stream stops. Jack would have a number of options if he wanted to make his money last a bit longer. He could stop the 3% per annum increase in his income at some point, or he could reduce his income after a period of time or in certain years. You will see that Jack s income is substantially above the minimum level for all years. Another option for Jack would be to examine all the investment choices his allocated income stream offers, to see whether or not he is in the most suitable option to boost his investment earnings. Investment choices So let s have a look at the typical investment choices which you may encounter within allocated income streams. Capital Guaranteed The term capital guaranteed generally means that 100% of the money you invest is guaranteed by the provider to be returned to you at a future date together with any earnings. The guarantee may not cover fees which are deducted from your initial investment. The term is often confused with investments where the interest rate on the investment is guaranteed but the capital isn t. In many cases, both the capital and the interest are guaranteed. You need to establish what the guarantee refers to it s not something you can make assumptions about. Capital Secure This choice is usually for short term or very security conscious investors. This investment choice generally does not involve the giving of guarantees in relation to your capital. It also generally does not involve any guarantees in relation to the interest or investment earnings on your money. Instead, this choice usually refers to a conservative style of investing. A capital secure investment will generally hold a high proportion of its money in cash, short term money market securities, government and bank-backed securities

24 The investment return on a capital secure choice will generally track short term interest rates. While the investments held within this investment choice are highly secure, you are not usually immune from losing part of your capital as a result of adverse investment markets although it is highly unlikely that this would occur. Capital Stable This choice is for investors who are looking for a relatively stable investment and who are comfortable accepting short term fluctuations in investment returns. There is no set definition of a capital stable investment choice. When investment managers refer to short term fluctuations in returns they usually mean that there may be some short periods where returns are negative. However, they generally would not expect to have a negative return over any 12 month period. This doesn t mean that it can t happen, it is simply not usual or expected. The investments held in capital stable choices vary depending on the views of each manager. As a rule of thumb you would not expect to see more than 25% 30% of the total investments in shares (Australian or International) and property. These investments aim is to produce a relatively stable pattern of returns by limiting the exposure to investments which fluctuate more in value. Managed or Balanced This choice is suited to investors who want higher returns over the medium to long term. To use this investment choice you must be prepared to accept moderate fluctuations in returns over the shorter term. With this choice, it is possible that you may experience negative returns over a 12 month period. The chance of having two consecutive years of negative returns is however quite slim. If you are considering this choice, you should not be a short term investor. As a guide, you should be looking at your investment over a 3 to 7 year time frame. The underlying investments are generally spread over the full range of assets, including Australian Shares, fixed interest investments, cash, property and overseas investments. The percentages allocated to each area vary considerably between investment managers. Usually you would not expect to see more than 60% of the total investments in the areas of shares and property. Growth This choice has many similarities to the managed choice in that investments are usually spread over all types of investments. It is also similar in that you would need to have an investment time frame of 3 to 7 years. It is not the choice for short term investors or investors who are not tolerant to market fluctuations

25 The main difference is that growth choices may have more invested in the growth areas of shares and property than managed choices. Australian Shares Some allocated income streams have a wide range of choices, which include investing in single investment categories such as Australian shares. If you were to select a category such as Australian shares, you would have that part of your money exposed to the Australian sharemarket. With this exposure comes the volatility associated with investing in shares and the possibility of significant fluctuations in your investment returns. As with the growth and managed choices you need to have a minimum investment time frame of at least 3 years, but more probably 5 years. International Shares This is similar to the Australian share choice except that the investments are shares in overseas companies. Most international share choices will have shares in most economic regions. You may see the total investments split between North America, Europe, Japan and South East Asia. The proportion allocated to each region will depend on the manager s views on how that region will fare in the future. It may also depend on the level of opportunities the manager sees in companies within that region. With international share investments, there is an added risk of currency fluctuation. This risk must be considered before making investments in this sector. As with the Australian shares choice, you should have a minimum time frame of 3 to 5 years and be prepared to accept a higher level of volatility with your investments. Property Securities Some allocated income streams offer a specialist property choice. The underlying investments of this choice are usually listed property trusts, which are involved in the residential, office and industrial property markets. These trusts own the properties, lease them to a variety of tenants, and pass the income (less costs) from the buildings back to the investor. This choice carries risk in that this part of your money would be fully exposed to the property markets. You should therefore look at this option on the basis of a long term investment and have a minimum 3 to 5 year time frame. Australian Fixed Interest Just as you can invest in shares or property, you can also invest in a specialist fixed interest choice. The underlying investments are usually government and semi

26 government bonds, and other high quality fixed interest securities issued by Australian companies. Other Choices Most of the choices available are outlined above. There are others which do not fit the descriptions above and some which go by a different name, but are very similar to the choices previously described. Account Based Market Linked Income Streams Another type of account based income stream is a Market linked pension or annuity. They are sometimes referred to as term allocated pensions or (TAPs). When you are considering a market linked income stream you should be aware that you can only use superannuation money to invest in them. Selecting the term for your income With a market linked income stream the income payments are paid for a fixed term. The duration of the term depends on when the income stream commences and your age at that time. For a market linked income stream that commences before 20 September 2007, the term may be determined broadly by reference to your life expectancy at the commencement of the income stream. A table of current average life expectancies is shown earlier. You can choose a term anywhere between the following minimum and maximum terms: Minimum Term the income stream must be payable for a minimum fixed term equal to your life expectancy (rounded up). For a male of 65 the life expectancy is 17.7 years and hence an 18 year term would be relevant. Maximum Term the income stream must be payable for a term equal to the period from the commencement day of the income stream until the primary beneficiary reaches age 100. For a male of 65 that is 35 years. As you can see there is a wide range between the minimum and maximum terms in this case. In some less common circumstances it might be possible to use a different method of working out the term. This only applies where the income stream is set up so that on death the income payments must revert automatically to a spouse and the spouse has a longer life expectancy. This is referred to as a reversionary income stream. The term can be between the following ranges:

27 a minimum term equal to the longer life expectancy of the reversionary spouse at commencement; and a maximum term equal to the period from the commencement day of the income stream until the spouse reaches age 100. This option can only be used to provide access to a longer term. Term Example Selecting your term James is age 65 and his wife Helen is aged 60. If James wants to acquire a Term Allocated Pension that reverts to Helen on his death, he can select a term for his pension of between: 18 and 35 years (based on the term for a 65 year old male); or 26 and 40 years (based on the longest term for a 60 year old female). If James does not want to nominate Helen as a reversionary pensioner he can only choose a term between 18 and 35 years. Access to your money Unlike other Account Based income streams, market linked income streams are a lot less flexible when it comes to accessing your capital investment. Generally, most market linked income streams are non-commutable. This simply means that, except in very limited circumstances, the capital you invest in them is not accessible at any time. Because of this restriction on accessing your money you should not, as a general rule, invest all of your money in them. You should keep part of your money in other investments where you have access or you could use some part of your money to purchase an allocated income stream. By doing so you will have the ability to meet unexpected lump sum expenses. If you select a term based on your spouse s life expectancy, in the event of your death the market linked income stream must be paid to your spouse for the remaining term. Your spouse cannot convert the pension into a cash lump sum at your death. Market Linked Income Streams commencing on or after 20 September 2007 In some cases, after 20 September 2007 you can purchase a market linked income stream still provided the fixed term is chosen such that the minimum annual payment (as determined by applying the relevant percentage factor) is met each year. The factors are the same as those listed for other account based income streams

Understanding retirement income Version 5.0

Understanding retirement income Version 5.0 Understanding retirement income Version 5.0 This document provides some additional information to help you understand the financial planning concepts discussed in the SOA in relation to understanding retirement.

More information

COMMINSURE LIFETIME INCOME ANNUITY.

COMMINSURE LIFETIME INCOME ANNUITY. COMMINSURE LIFETIME INCOME ANNUITY. A retirement income solution now with a Death Benefit Guarantee. A CommInsure Lifetime Income Annuity now offers even more comfort, protection and value with a Death

More information

Current as at 1 July 2014 Adviser use only. Technical guide: Challenger Lifetime and Term Annuities

Current as at 1 July 2014 Adviser use only. Technical guide: Challenger Lifetime and Term Annuities Current as at 1 July 2014 Adviser use only Technical guide: Challenger Lifetime and Term Annuities Table of contents Introduction 1 Challenger Lifetime Annuities 2 Product features 3 Centrelink treatment

More information

Challenger Guaranteed Annuity (Liquid Lifetime)

Challenger Guaranteed Annuity (Liquid Lifetime) Challenger Guaranteed Annuity (Liquid Lifetime) Product Disclosure Statement (PDS) Dated 27 October 2014 Challenger Guaranteed Annuity (SPIN CHG0005AU) Issuer Challenger Life Company Limited (ABN 44 072

More information

Smart strategies for maximising retirement income

Smart strategies for maximising retirement income Smart strategies for maximising retirement income 2010 Why you need to create a life-long income Australia has one of the highest life expectancies in the world and the average retirement length has increased

More information

Smart strategies for maximising retirement income 2012/13

Smart strategies for maximising retirement income 2012/13 Smart strategies for maximising retirement income 2012/13 Why you need to create a life long income Australia has one of the highest life expectancies in the world and the average retirement length has

More information

INVESTMENT. Understanding your investment in super doesn t have to be hard. You don t need to be a financial whiz to make it work for you!

INVESTMENT. Understanding your investment in super doesn t have to be hard. You don t need to be a financial whiz to make it work for you! 1 Understanding your investment in super doesn t have to be hard. You don t need to be a financial whiz to make it work for you! You just need to understand your options and how you can make the most of

More information

secure your future the lump sum scheme Everything you need to know about your super DIVISION 2 - MEMBERS BOOKLET DIVISION 2 - MEMBERS BOOKLET

secure your future the lump sum scheme Everything you need to know about your super DIVISION 2 - MEMBERS BOOKLET DIVISION 2 - MEMBERS BOOKLET the lump sum scheme secure your future Everything you need to know about your super DIVISION 2 - MEMBERS BOOKLET 1 Adding power to your financial future 3 THE LUMP sum scheme MADE EASY 4 CONTRIBUTIONS

More information

Changes announced in last year s Budget have removed some of the

Changes announced in last year s Budget have removed some of the The Australian Journal of Financial Planning 71 Reverse mortgages and pension planning By Benedict Davies Technical Services Manager, Over Fifty Group Changes announced in last year s Budget have removed

More information

BT Super for Life. Product Disclosure Statement (PDS) Contents. Dated 1 July 2014

BT Super for Life. Product Disclosure Statement (PDS) Contents. Dated 1 July 2014 Contents BT Super for Life Product Disclosure Statement (PDS) Dated 1 July 2014 1. About BT Super for Life 2 2. How super works 2 3. Benefits of investing with BT Super for Life 3 4. Risks of super 5 5.

More information

Challenger Lifetime annuities

Challenger Lifetime annuities Challenger Lifetime annuities Regular and secure income for life Challenger Lifetime annuities A Challenger lifetime annuity is a secure investment that protects your savings and can provide an income

More information

Why Managed Funds Are One of Your Best Investment Options

Why Managed Funds Are One of Your Best Investment Options Why Managed Funds Are One of Your Best Investment Options What Is A Managed Investment Fund and What are its Advantages? Managed funds are collective investments where a number of investors pool their

More information

Challenger Guide to annuities

Challenger Guide to annuities Challenger Guide to annuities Secure your future with a safe, reliable income stream Table of contents About Challenger 1 Introduction 2 Retirement is different 3 About annuities 4 What is an annuity?

More information

SUPERANNUATION Retirement fundamentals

SUPERANNUATION Retirement fundamentals SUPERANNUATION Retirement fundamentals Your guide to retirement You ve been working hard to accumulate your superannuation, and now you re nearing the next stage of your life retirement. So what do you

More information

PRIVATE WEALTH. Client Questionnaire and Risk Profile

PRIVATE WEALTH. Client Questionnaire and Risk Profile PRIVATE WEALTH Questionnaire and Risk Profile Important Notice to The Australian Corporations Act (2001) requires that an Adviser making personal advice recommendations must have reasonable grounds for

More information

HOW TO BUY PROPERTY WITHIN YOUR SELF-MANAGED SUPERANNUATION FUND

HOW TO BUY PROPERTY WITHIN YOUR SELF-MANAGED SUPERANNUATION FUND HOW TO BUY PROPERTY WITHIN YOUR SELF-MANAGED SUPERANNUATION FUND COPYRIGHT All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or

More information

GUIDE TO RETIREMENT PLANNING FINANCIAL GUIDE. Making the most of the new pension rules to enjoy freedom and choice in your retirement

GUIDE TO RETIREMENT PLANNING FINANCIAL GUIDE. Making the most of the new pension rules to enjoy freedom and choice in your retirement GUIDE TO RETIREMENT PLANNING Making the most of the new pension rules to enjoy freedom and choice in your retirement FINANCIAL GUIDE WELCOME Making the most of the new pension rules to enjoy freedom and

More information

Smart strategies for your super

Smart strategies for your super Smart strategies for your super 2010 Make your super count Superannuation is still one of the best ways to accumulate wealth and save for your retirement. The main reason, of course, is the favourable

More information

MACQUARIE LIFETIME INCOME GUARANTEE POLICY

MACQUARIE LIFETIME INCOME GUARANTEE POLICY MACQUARIE LIFETIME INCOME GUARANTEE POLICY series 1: Product disclosure statement issued 8 march 2010 Important NOTICE This Product Disclosure Statement ( PDS ) is dated 8 March 2010 and together with

More information

Telstra Super Personal Plus

Telstra Super Personal Plus 01/ 17 NOVEMBER 2015 PRODUCT DISCLOSURE STATEMENT Telstra Super Personal Plus Making the most of your future Contents 01 About Telstra Super and Telstra Super Personal Plus 02 02 How super works 02 03

More information

BT Super for Life. Product Disclosure Statement (PDS) Contents. Dated: 1 July 2015

BT Super for Life. Product Disclosure Statement (PDS) Contents. Dated: 1 July 2015 Contents BT Super for Life Product Disclosure Statement (PDS) Dated: 1 July 2015 1. About BT Super for Life 2 2. How super works 2 3. Benefits of investing with 3 BT Super for Life 4. Risks of super 5

More information

Your retirement options. Making the most of your retirement

Your retirement options. Making the most of your retirement Your retirement options Making the most of your retirement Your retirement your choice Retirement it s an exciting time, but it s a challenging time. So many choices, so many possibilities so how do you

More information

Additional Voluntary Contributions (AVCs)

Additional Voluntary Contributions (AVCs) AVCs FINAL SALARY SECTION Important Note: With effect from 1st November 2015, no new Added Years AVC arrangements will be permitted. Existing contracts will not be affected by this change. Additional Voluntary

More information

Meeting with your Financial Planner: Helpful Directions

Meeting with your Financial Planner: Helpful Directions Meeting with your Financial Planner: Helpful Directions Please consider the following before our meeting: Information we anticipate you will need to provide at our first consultation: Part 1 1. Your domestic

More information

Your Guide. to the Meridian. Personal. Super Plan. Product Disclosure Statement. Issued 1 January 2004 MPS 4

Your Guide. to the Meridian. Personal. Super Plan. Product Disclosure Statement. Issued 1 January 2004 MPS 4 Your Guide to the Meridian Product Disclosure Statement Issued 1 January 2004 Personal Super Plan MPS 4 What this Guide is about MPSuper Product Disclosure Statement This Guide was prepared and issued

More information

Investment options and risk

Investment options and risk Investment options and risk Issued 1 November 2013 The information in this document forms part of the Product Disclosure Statement for the Commonwealth Superannuation Scheme (CSS), sixth edition, issued

More information

IFSA Guidance Note No. 21.00

IFSA Guidance Note No. 21.00 IFSA Guidance Note No. 21.00 Calculators Best Practice Guidance April 2007 Main features of this Guidance Note are: Highlight the importance of calculators in assisting users to make informed financial

More information

- on termination due to redundancy

- on termination due to redundancy The Increased Tax on Lump Sum Termination Payments By Ray Stevens (USA) INTRODUCTION In May, 1983, the Government announced increases in the taxation payable on lump sum superannuation benefits and on

More information

The Retirement Account. Certainty, flexibility and simplicity for life

The Retirement Account. Certainty, flexibility and simplicity for life Certainty, flexibility and simplicity for life Introducing Retirement Advantage Previously known as MGM Advantage and Stonehaven, we are a well-established company that can trace our roots back over 150

More information

If you work in Australia, your employer may have to contribute to a superannuation fund for you under the Superannuation Guarantee system if you:

If you work in Australia, your employer may have to contribute to a superannuation fund for you under the Superannuation Guarantee system if you: Superannuation is a tax advantaged way of saving for retirement and makes up two of the three pillars of the Government s retirement income policy. The three pillars are: A Government funded means-tested

More information

Sunsuper for life Investment guide

Sunsuper for life Investment guide Sunsuper for life Investment guide Identify your investor needs Learn more about Sunsuper's investment options Choose your super investment Preparation date: 9 June 2015 Issue date: 1 July 2015 How we

More information

The benefits of insuring through super. Macquarie Life

The benefits of insuring through super. Macquarie Life The benefits of insuring through super Macquarie Life While your clients are accumulating wealth, they also need to ensure adequate insurance cover is in place so they and their families are looked after

More information

Understanding annuities Secure your future with a safe, reliable income stream

Understanding annuities Secure your future with a safe, reliable income stream Understanding annuities Secure your future with a safe, reliable income stream Contents Retirement today 1 Growing assets versus protecting assets 3 What is an annuity? 4 Types of annuities 7 Benefits

More information

Client Questionnaire (Fact Finder)

Client Questionnaire (Fact Finder) Part 2 Client Questionnaire (Fact Finder) The information requested in this Client Questionnaire is necessary to enable recommendations to be made and will be used solely for that purpose. We accept no

More information

Plum Superannuation Fund Plum Superannuation Fund Plum Personal Plan Preparation date: 18 December 2015

Plum Superannuation Fund Plum Superannuation Fund Plum Personal Plan Preparation date: 18 December 2015 Plum Superannuation Fund Plum Superannuation Fund Plum Personal Plan Preparation date: 18 December 2015 This update to the Plum Superannuation Fund Product Disclosure Statement is provided as a result

More information

The Difference Between Providing A Pension And Retirement

The Difference Between Providing A Pension And Retirement Pensions made simple Take control of your future MIND THE GAP PENSIONS MADE SIMPLE FROM AVIVA Contents Page 1 First things first 2 2 Why pensions are so important 4 3 How a pension plan works 8 4 The tax

More information

A DIFFERENT KIND OF WEALTH MANAGEMENT FIRM. www.jaswealth.com.au. Superannuation 101. Everything you always wanted to know but were too afraid to ask

A DIFFERENT KIND OF WEALTH MANAGEMENT FIRM. www.jaswealth.com.au. Superannuation 101. Everything you always wanted to know but were too afraid to ask A DIFFERENT KIND OF WEALTH MANAGEMENT FIRM www.jaswealth.com.au Superannuation 101 Everything you always wanted to know but were too afraid to ask What is Superannuation? Superannuation 101 Contents What

More information

Superannuation. A Financial Planning Technical Guide

Superannuation. A Financial Planning Technical Guide Superannuation A Financial Planning Technical Guide 2 Superannuation Contents Superannuation overview 4 Superannuation contributions 4 Superannuation taxation 7 Preservation 9 Beneficiary nomination 9

More information

INVESTING YOUR SUPER. This document forms part of the NGS Super Member Guide (Product Disclosure Statement) dated 14 August 2015

INVESTING YOUR SUPER. This document forms part of the NGS Super Member Guide (Product Disclosure Statement) dated 14 August 2015 This document forms part of the NGS Super Member Guide (Product Disclosure Statement) dated 14 August 2015 INVESTING YOUR SUPER FACT SHEET 5 14 AUGUST 2015 NGS Super offers you flexibility and choice when

More information

RETIREMENT ANNUITY TRUST SCHEMES (RATS)

RETIREMENT ANNUITY TRUST SCHEMES (RATS) FACT SHEET RETIREMENT ANNUITY TRUST SCHEMES (RATS) With only a limited number of retirement annuity contracts (RAC) and personal pension schemes (PPS) available in Guernsey, the popularity of RATS is growing

More information

Planning for retirement

Planning for retirement Planning for retirement 1 Disclaimer This presentation contains general advice current as at April 2016 and has been prepared without taking account of your objectives, financial situation or needs. Before

More information

Terry White Chemists Superannuation a sub plan of FirstChoice Employer Super

Terry White Chemists Superannuation a sub plan of FirstChoice Employer Super July 2013 Page 1 Contents Category 1 - Permanent and Part Time staff working more than 15 hours per week Benefits in Brief...1 Getting Started...1 Your Investment Choices...2 Benefits of Insurance Cover...2

More information

Retirement Income Allocated Pension

Retirement Income Allocated Pension SUP E R ANNUATION Retirement Income Allocated Pension Product Information Booklet ISSUE DATE: 1 July 2015 PREPARATION DATE: 26 June 2015 Government Employees Superannuation Board ABN 43 418 292 917 Contents

More information

Tax deductible superannuation contributions

Tax deductible superannuation contributions Tax deductible superannuation contributions TB 35 TECHNICAL SERVICES ISSUED ON 29 OCTOBER 2014 ADVISER USE ONLY VERSION 1.1 Summary Employers and certain individuals can claim a tax deduction for contributions

More information

The five-step plan to a better retirement. A step by step guide to organising your finances

The five-step plan to a better retirement. A step by step guide to organising your finances The five-step plan to a better retirement A step by step guide to organising your finances This is one of the biggest financial decisions you ll make so it s important to get it right. At Fidelity we strongly

More information

Investment bonds. Summary. Who may benefit from an investment bond? TB 33

Investment bonds. Summary. Who may benefit from an investment bond? TB 33 TB 33 Investment bonds Issued on 1 July 2013. Summary There are a wide range of investments to choose from in today s market. One option is an investment bond which is a life insurance policy purchased

More information

Changes to regulatory settings for financial products dealing with longevity

Changes to regulatory settings for financial products dealing with longevity ASFA Research and Resource Centre Changes to regulatory settings for financial products dealing with longevity Ross Clare Director of Research October 2013 ASFA Level 6 66 Clarence Street Sydney NSW 2000

More information

personal financial planning interview questionnaire

personal financial planning interview questionnaire name: name: Financial advisor s name: Tony Novak, Freedom Benefits, 800-609-0683 Date of interview: Documents reviewed: Tax returns Liability insurance policies Medical insurance policies Life insurance

More information

1 What is the role of a financial planner when advising a client about retirement planning?

1 What is the role of a financial planner when advising a client about retirement planning? Questions with Guided Answers by Graeme Colley 2013 Reed International Books Australia Pty Limited trading as LexisNexis. Permission to download and make copies for classroom use is granted. Reproducing

More information

O P Q RETIREMENT & DEATH BENEFITS PLAN. For Employees of The OPQ Company MEMBERS' BOOKLET

O P Q RETIREMENT & DEATH BENEFITS PLAN. For Employees of The OPQ Company MEMBERS' BOOKLET O P Q RETIREMENT & DEATH BENEFITS PLAN For Employees of The OPQ Company MEMBERS' BOOKLET 2014 EDITION Reviewed January 2014 INTRODUCTION This booklet is an overview of the main benefits and conditions

More information

Making the most of your tax-free allowances

Making the most of your tax-free allowances UNISONMONEYTALK The personal finance newsletter for UNISON members published by Lighthouse Financial Advice Autumn 2015 Making the most of your tax-free allowances A key consideration for anyone with money

More information

Super taxes, caps, payments, thresholds and rebates

Super taxes, caps, payments, thresholds and rebates Fact Sheet Super taxes, caps, payments, thresholds and rebates This fact sheet provides a useful one-stop reference guide to the tax rates, caps, thresholds and rebates that apply or are related to superannuation

More information

Strategy Paper: Financial Planning for Generation-Y. SMSF Specialists Investment Management Financial Planning Accounting

Strategy Paper: Financial Planning for Generation-Y. SMSF Specialists Investment Management Financial Planning Accounting Strategy Paper: 190 Through Road Camberwell VIC 3124 T: (03) 9809 1221 F: (03) 9809 2055 enquiry@gfmwealth.com.au www.gfmwealth.com.au ABN 69 006 679 394 Financial Planning for Generation-Y SMSF Specialists

More information

Understanding Superannuation

Understanding Superannuation Understanding Superannuation Client Fact Sheet July 2012 Superannuation is an investment vehicle designed to assist Australians save for retirement. The Federal Government encourages saving through superannuation

More information

Sharemarket investment strategies

Sharemarket investment strategies Course 9 Sharemarket investment strategies Topic 1: Understanding the economy... 3 A top-down approach to investment analysis... 4 The Australian economy... 4 Keeping up-to-date... 5 Summary... 5 Topic

More information

Thinking about retirement. A guide to help you plan and fund your retirement lifestyle

Thinking about retirement. A guide to help you plan and fund your retirement lifestyle Thinking about retirement A guide to help you plan and fund your retirement lifestyle How to plan and fund your retirement By now, you ve done most of the hard work: holding down a career and acquiring

More information

Super and estate planning

Super and estate planning Booklet 4 Super and estate planning MAStech Smart technical solutions made simple Contents Introduction 01 Introduction 03 Making a start 04 What happens to your superannuation benefits after your death?

More information

Our guide to. buying an annuity

Our guide to. buying an annuity Our guide to buying an annuity 2 Our guide to buying an annuity Contents Introduction 3 Pension reforms Thinking about retirement 3 Money and budgeting How can we help? Your retirement timeline Key questions

More information

Key Features of the Local Government Additional Voluntary Contributions (AVC) Scheme for England & Wales

Key Features of the Local Government Additional Voluntary Contributions (AVC) Scheme for England & Wales Key Features of the Local Government Additional Voluntary Contributions (AVC) Scheme for England & Wales Important information you need to read The Financial Conduct Authority is an independent financial

More information

Your Super Guide. Product Disclosure Statement 15 December 2014 Nestlé Super Insured Accumulation category. Contents. Important Information

Your Super Guide. Product Disclosure Statement 15 December 2014 Nestlé Super Insured Accumulation category. Contents. Important Information Australia Group Superannuation Fund Your Super Guide Product Disclosure Statement 15 December 2014 Nestlé Super Insured Accumulation category Contents 1 About Nestlé Super p2 2 How super works p2 3 Benefits

More information

Commercial Property Investment Guide. Your guide to purchasing and managing a commercial investment property

Commercial Property Investment Guide. Your guide to purchasing and managing a commercial investment property Commercial Property Investment Guide Your guide to purchasing and managing a commercial investment property Contents Introduction 1 The benefits of commercial property investment 2 Why invest in property?

More information

Simplifying Statements of Advice. Retirement strategy example SOA

Simplifying Statements of Advice. Retirement strategy example SOA Simplifying Statements of Advice Retirement strategy example 10 February 2009 Development of FPA example Statements of Advice () Financial planners, politicians, and regulators alike share the common goals

More information

Taxpayers Australia Inc

Taxpayers Australia Inc Taxpayers Australia Inc Superannuation Australia (A wholly owned subsidiary of Taxpayers Australia Inc) Glossary of superannuation terms These terms are commonly used in the superannuation sector. Account-based

More information

How to Invest Your AvC pension

How to Invest Your AvC pension Shell Contributory Pension Fund Additional Voluntary Contributions Arrangement Understanding your AVC investment choices Produced in Association with the Trustee s Adviser Aon Hewitt July 2013 1 July 2013

More information

Nurturing your investment

Nurturing your investment helping life flow smoothly UNITED UTILITIES PENSION SCHEME Investment choices Nurturing your investment Contents Investment choices 1. A BRIEF GUIDE TO INVESTMENTS A reminder of the main different types

More information

Super income stream strategies webinar

Super income stream strategies webinar Super income stream strategies webinar Presented by: Brett Ricchini, Financial Advisor, 2 December 2014 Create your retirement plan Maximise your Super Income Stream to fund your future lifestyle aspirations

More information

Challenger Guaranteed Allocated Pension

Challenger Guaranteed Allocated Pension Challenger Guaranteed Allocated Pension Product Disclosure Statement (PDS) Dated 1 January 2015 Challenger Retirement Fund Allocated Pension (SPIN CIT0101AU) (ABN 87 883 998 803) (RSE Registration Number

More information

KEY GUIDE. Investing for income when you retire

KEY GUIDE. Investing for income when you retire KEY GUIDE Investing for income when you retire Planning the longest holiday of your life There comes a time when you stop working for your money and put your money to work for you. For most people, that

More information

A Guide to Investing in Property Using a Self Managed Super Fund

A Guide to Investing in Property Using a Self Managed Super Fund A Guide to Investing in Property Using a Self Managed Super Fund Why would I consider a SMSF? I already have a super fund. Self Managed Superannuation Funds (SMSF s) are the fastest growing sector of the

More information

The path to retirement success

The path to retirement success The path to retirement success How important are your investment and spending strategies? In this VIEW, Towers Watson Australia managing director ANDREW BOAL reports on investing for retirement success

More information

Retirement. Income. your way

Retirement. Income. your way Retirement. Income. your way YOUR GUIDE TO SUNFLEX RETIREMENT INCOME Life s brighter under the sun Table of contents Introduction... 3 The five retirement risks... 4 Money for Life... 5 Product Overview

More information

AustChoice Super general reference guide (ACH.02)

AustChoice Super general reference guide (ACH.02) AustChoice Super general reference guide (ACH.02) Issued: 28 May 2015 This guide contains important information not included in the AustChoice Super PDS. We recommend you read this entire guide. The information

More information

Challenger Adviser support tools

Challenger Adviser support tools Adviser support tools Brochures Calculators Webcasts and animation Always ready to provide support. We offer a range of retirement tools, calculators and resources online to help you ensure your clients

More information

Joe and Tina Setting up a secure retirement income

Joe and Tina Setting up a secure retirement income Joe and Tina Setting up a secure retirement income Clients Joe and Tina Age 65 and retiring Assets $400,000 superannuation in Joe s name Goals To always have money to pay for basic costs of living, have

More information

SHELL CONTRIBUTORY PENSION FUND. Additional Voluntary Contributions Arrangement Explanatory Book

SHELL CONTRIBUTORY PENSION FUND. Additional Voluntary Contributions Arrangement Explanatory Book SHELL CONTRIBUTORY PENSION FUND Additional Voluntary Contributions Arrangement Explanatory Book July 2013 CONTENTS 1 Introduction 3 2 What are AVCs? 7 Why pay AVCs? 10 How do AVCs work? 12 What options

More information

Structuring & Tax. Ensuring your plans for your super become a reality. By Ben Andreou Partner Head of Structuring & Tax

Structuring & Tax. Ensuring your plans for your super become a reality. By Ben Andreou Partner Head of Structuring & Tax Structuring & Tax Ensuring your plans for your super become a reality By Ben Andreou Partner Head of Structuring & Tax December 2015 Table of Contents Page Why should you read this paper?... 3 Background...

More information

Our managed funds products are issued by

Our managed funds products are issued by Our managed funds products are issued by 1 According to the Investment and Financial Services Association 1, Australia s first managed funds were introduced in 1954. Since then the industry has grown substantially

More information

The Hartford Income Security SM

The Hartford Income Security SM The Hartford Income Security SM A Fixed Deferred Payout Annuity Prepare To Live SM For Use In All States, Except Florida Start Building Your Future Income Today There s never been a better time to begin

More information

Super Saver Induction Booklet

Super Saver Induction Booklet VISION SUPER YOUR INDUSTRY SUPER FUND Super Saver Induction Booklet December 2013 99 Low fees and great value for money 99 Automatic Income Protection and Death & Disability cover 99 No commissions or

More information

Retirement Income Planning With Annuities. Your Relationship With Your Finances

Retirement Income Planning With Annuities. Your Relationship With Your Finances Retirement Income Planning With Annuities Your Relationship With Your Finances There are some pretty amazing things that happen around the time of retirement. For many, it is a time of incredible change,

More information

Your guide to Annuities

Your guide to Annuities Your guide to Annuities From Standard Life It s good to know what s around the next corner 1 of 24 If you would like a secure source of income and have a built up pension fund or a lump sum to invest,

More information

New Ways For High Net Worth Individuals

New Ways For High Net Worth Individuals New Ways For High Net Worth Individuals And Business Owners To Build Wealth Tax Effectively With Introduction A SMSF It may be that the SMSF is the absolute way of the future March 2010 Jeremy Cooper Head

More information

Freedom and Choice in Pensions. Your guide to the changes

Freedom and Choice in Pensions. Your guide to the changes Freedom and Choice in Pensions Your guide to the changes Contents Freedom and Choice 3-5 in Pensions Buy an annuity 6-7 Remain invested - 8-9 entering drawdown Take a cash lump sum 10 Will providers offer

More information

TREASURY FACT SHEET: HELPING AMERICAN FAMILIES ACHIEVE RETIREMENT SECURITY BY EXPANDING LIFETIME INCOME CHOICES

TREASURY FACT SHEET: HELPING AMERICAN FAMILIES ACHIEVE RETIREMENT SECURITY BY EXPANDING LIFETIME INCOME CHOICES TREASURY FACT SHEET: HELPING AMERICAN FAMILIES ACHIEVE RETIREMENT SECURITY BY EXPANDING LIFETIME INCOME CHOICES In September 2009, President Obama announced several new steps to make it easier for American

More information

Product Disclosure Statement

Product Disclosure Statement AMP Retirement Savings Account Product Disclosure Statement Contents 1. About AMP Retirement Savings Account 2. How super works 3. Benefits of investing with AMP Retirement Savings Account 4. Risks of

More information

IOOF Technical Advice Solutions Client strategies for advisers. Superannuation and death benefits in the Simpler Super environment.

IOOF Technical Advice Solutions Client strategies for advisers. Superannuation and death benefits in the Simpler Super environment. IOOF Technical Advice Solutions Client strategies for advisers Superannuation and death benefits in the Simpler Super environment Adviser use only IOOF Technical Advice Solutions Since 1 July 2007, the

More information

MLC MasterKey Super & Pension Fundamentals MLC MasterKey Super & Pension How to Guide

MLC MasterKey Super & Pension Fundamentals MLC MasterKey Super & Pension How to Guide MLC MasterKey Super & Pension Fundamentals MLC MasterKey Super & Pension How to Guide Preparation date 1 July 2015 Issued by The Trustee, MLC Nominees Pty Limited (MLC) ABN 93 002 814 959 AFSL 230702 The

More information

Self-Managed Super Fund Basics and Buying Property with your SMSF Money

Self-Managed Super Fund Basics and Buying Property with your SMSF Money RETIRE WITH MORE Self-Managed Super Fund Basics and Buying Property with your SMSF Money YOUR GUIDE TO BUYING PROPERTY WITH YOUR SMSF MONEY $$$ Unit 1, 3 Robinson Place Rockingham WA 6168 admin@integratax.com.au

More information

CREATE TAX ADVANTAGED RETIREMENT INCOME YOU CAN T OUTLIVE. create tax advantaged retirement income you can t outlive

CREATE TAX ADVANTAGED RETIREMENT INCOME YOU CAN T OUTLIVE. create tax advantaged retirement income you can t outlive create tax advantaged retirement income you can t outlive 1 Table Of Contents Insurance Companies Don t Just Sell Insurance... 4 Life Insurance Investing... 5 Guarantees... 7 Tax Strategy How to Get Tax-Free

More information

KEY FEATURES OF YOUR BUYOUT BOND ILLUSTRATION KEY FEATURES. and Conditions, available from your financial adviser.

KEY FEATURES OF YOUR BUYOUT BOND ILLUSTRATION KEY FEATURES. and Conditions, available from your financial adviser. 00000 Old Mutual Wealth Life Assurance Limited is a provider of long-term life assurance. It is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and Prudential

More information

An Adviser s Guide to Pensions

An Adviser s Guide to Pensions An Adviser s Guide to Pensions 1 An Adviser s Guide to Pensions Contents: Section 1: Personal Pensions 1.1 Eligibility 1.2 Maximum Benefits 1.3 Contributions & Tax Relief 1.4 Death Benefits 1.5 Retirement

More information

Product Disclosure Statement

Product Disclosure Statement Product Disclosure Statement MYSUPER AUTHORISATION NUMBER 72229227691044 1 July 2014 NESS Super, the industry fund to power your financial future inside 1 About NESS Super 2 2 How super works 2 3 Benefits

More information

The sooner you start thinking about growing your super, the better. But it s never too late.

The sooner you start thinking about growing your super, the better. But it s never too late. > Get calculating! If you d like to see the effect that personal contributions may have on your final entitlement, access the Super SA Benefit Projector on the Super SA website www.supersa.sa.gov.au. The

More information

Your retirement could have even more going for it

Your retirement could have even more going for it Your retirement could have even more going for it A straightforward guide to equity release For no obligation advice: call 0800 015 0993 www.justretirementsolutions.com Contents Imagine what you could

More information

Pathways Shared Equity Loan

Pathways Shared Equity Loan Department of Housing and Public Works Pathways Shared Equity Loan Become a home owner by purchasing a share of the property you are renting Questions and Answers Booklet Great state. Great opportunity.

More information

BAE SYSTEMS PENSIONS BECAUSE PLANNING IS PART OF THE JOURNEY RETIREMENT ACCOUNT GUIDE LEVEL 100+ MARCH 2015

BAE SYSTEMS PENSIONS BECAUSE PLANNING IS PART OF THE JOURNEY RETIREMENT ACCOUNT GUIDE LEVEL 100+ MARCH 2015 BAE SYSTEMS PENSIONS BECAUSE PLANNING IS PART OF THE JOURNEY RETIREMENT ACCOUNT GUIDE LEVEL 100+ MARCH 2015 CONTENTS Where your Scheme benefits come from 4 Your choices affect your retirement account 5

More information

Financial Planning. Introduction. Learning Objectives

Financial Planning. Introduction. Learning Objectives Financial Planning Introduction Financial Planning Learning Objectives Lesson 1 Budgeting: How to Live on Your Own and Not Move Home in a Week Prepare a budget and determine disposable income. Identify

More information

SMSF insurance options and strategies

SMSF insurance options and strategies SMSF insurance options and strategies Agenda Will be looking at: Requirement to consider insurance Why hold insurance through an SMSF? Life Insurance Permanent Incapacity Temporary Incapacity. Requirement

More information

This guide contains important information about your NSF Super investment options.

This guide contains important information about your NSF Super investment options. Investment guide Personal Division This guide contains important information about your NSF Super investment options. You should read it to help you make an informed investment choice. Contents 1. Investment

More information