Top five superannuation myths busted

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1 December 2015 Top five superannuation myths busted We want to help you make good decisions about your super, and to do that it s important to know the facts. So we thought we d bust some of the common myths and strange assumptions that litter the super landscape and set the record straight. Myth #1: Retirement is so far away I don t need to think about it yet. You have time and compound interest on your side use it! Just as time can create a diamond from a decomposing fern, it can turn today s spare change into a cash jackpot. You also have the power to make a real difference to your life savings without putting your hand in your pocket. Simple things like consolidating your accounts or reviewing your investment strategy cost nothing but can pack a punch by the time you retire. Myth #2: The government sets the super rate, so I will definitely have enough super when I retire. Rather than waiting for someone else to decide how much you will save, take control of your own destiny. Ask yourself: What does my ideal retirement look like? How much money will I need to achieve this? Am I on track? Your answers will help you work out if your super is in good shape or needs some TLC. Use your PIN and member number to log in to use the Fund Savings calculator ( to guide you through these questions quickly and easily, and help you create a personalised plan for the future. Myth #3: I don t need to worry too much about super. I can get by on the Age Pension. It s important to understand that the Age Pension, which is money you get from the Australian Government if you can t fund your retirement yourself, isn t enough to live well. If you re single, the maximum Age Pension is $867 a fortnight. For a couple, it s just $1,307 a fortnight between you. Will there even be an Age Pension when you retire? Probably, but the amount and pension age is almost guaranteed to change. Your assets and income will determine whether you get a full or part pension. Regardless, it s likely to be much less than you ll need to live comfortably. If you want to know what a basic lifestyle in retirement looks like, you can refer to the Super Guru Super Guru provides the ASFA retirement standard which explains the annual budget needed by Australians to fund either a comfortable or modest standard of living in the post-work years Super News Update December

2 Myth #4: I need to keep my super in more than one fund in case one goes bust. There s no need. There is a complex regulatory safety net in place to protect the $2.02 trillion in Australian retirement savings and your money will be safe in a reputable fund (like Nestlé Super Fund). Plus you may be missing out on some of the upside of having your super in one place. Having several super accounts means you will pay multiple sets of fees and insurance premiums while juggling lots of paperwork. When you add it up, cutting out these extra fees and costs could make a thousands of dollars difference to your retirement savings. Myth #5: Super s nothing special, it s just like any other investment. Not quite. Super has a tax structure with significant tax advantages designed to encourage saving for retirement. Super contributions are usually taxed at a lower rate than your salary, particularly contributions made with pre-tax dollars through salary sacrifice. This means that more of each dollar you invest in super stays with you and less goes to the Australian Taxation Office. Super is a great option when you re building an investment portfolio or planning for retirement. Of course, the tax effectiveness of investing through super will vary depending on your personal situation and the value of contributions you ve made in the financial year. Myths busted now what? We offer some simple, easy to use tools to help get your super sorted. To help you set a savings goal for retirement use the Savings calculator ( au > calculators). You will need your Member number and PIN handy to log in. 2 APRA Statistics Quarterly Superannuation Performance (June 2015) It's always a good idea to plan ahead One of the biggest pitfalls for our members when planning is considering what can happen when the unexpected happens. If you die while you are a member of the Fund, your account balance will generally be paid to your dependants or your Legal Personal Representative. It takes just a few minutes to tell us who you want to nominate. Use the checklist below to tick this off your list. Who do you want to nominate for your death benefit? If you die, generally the Trustee can only pay your death benefit to: one or more of your dependants; and your Estate (i.e. your Legal Personal Representative). The people who may qualify as your dependants are specified by superannuation law, refer to your PDS or the Nomination of Dependants Form for more information about dependants. Decide what type of nomination works for you There are two types of nominations, those that are legally binding and those that are not. Refer to the table on the next page for a summary and instructions about how to make or update your nomination. Make or update your nomination Depending on what type of nomination you decide you can make or update your nomination online or by completing a new Nomination of Dependants Form. It does not take long but the rewards can be huge. Get started today, simply login at using your member number and PIN. 2 Super News Update December 2015

3 Non-binding nomination Trustee is guided by your nomination but not legally bound by it. Even through a non-binding nomination does not have an expiry date, you need to remember to consider if it is still relevant to your needs. This means that the Trustee may take into account your personal circumstances known at the time of your death if they differ from the details you provided in your non-binding nomination. It is important to update your non-binding nomination with your circumstances. A non-binding nomination can be made or updated online or by completing a Nomination of Dependants Form. Binding nomination Trustee is required by law to abide by your nomination provided it is valid at the date of your death. A binding nomination is only valid for 3 years from the date you signed it, after which time it expires and becomes invalid and non-binding on the Trustee. To maintain a valid binding nomination it is your responsibility to be aware of the expiry date and re-confirm or amend your binding nomination for a further 3 years. A binding nomination can only be made by completing a Nomination of Dependants Form and returning it to the Fund. What happens if you have not nominated your dependants? If you don t have any dependants, the Trustee will normally pay your benefit to your Legal Personal Representative who will then distribute your assets according to your Will. If you die without a Will (i.e. intestate ), your assets will be divided according to the laws operating in your State or Territory. This may mean your assets are not distributed as you would have wished. Therefore, it is very important to make a Will and keep it up to date. Here s what it looks like for Nestlé Super members as at 30 June 2015: 58% of members have made a binding or non-binding nomination. This is split up with 18% having made a binding nomination and the remaining 40% of members with a nonbinding nomination. 42% of our members have no nominated benefciary at all. Changes to the Nestlé Super Fund Investment Options During the year, in accordance with industry best practice, the investment objectives of the Nestlé Super Fund Options were reviewed to assist members choose between the different Options. As a result, we have maintained each objective to exceed CPI by the expressed percentage, but have removed references to earn a return after tax and fees in excess of the median of relevant peers in the relevant funds universe. This change impacts the following options: Conservative, Growth and High Growth. There is no change to the investment objective of the Cash Option. All Options will continue to strive to deliver competitive returns to members, as they have always done. 3 Super News Update December 2015

4 Investment market commentary to 30 September 2015 Highlights this quarter Global share markets fell sharply in the third quarter, returning 0.3% on an unhedged basis and -7.3% on a hedged basis. The declines came largely on the back of increasing fears that slower growth in China could derail the global recovery. Stocks began the period well, rising strongly on the back of news Greece had finally reached an agreement with its creditors that would see it remain in the euro-zone and some encouraging US and European earnings results. However, these early gains were quickly overshadowed by further heavy selling in Chinese stocks and increasing fears that slower growth in the world s second-biggest economy could derail the global recovery. One of the catalysts for the selloff was the People s Bank of China s decision in August to devalue the country s currency; a move interpreted by investors as a sign that the slowdown may be worse than previously thought. Both developed and emerging share markets tanked as a result while commodity prices plummeted to multi-year lows. Stocks were also pressured by the US Federal Reserve (Fed) s decision to leave interest rates on hold in September. Whilst stocks did move higher immediately following the Fed s announcement, they soon reversed direction as investors worried the bank s decision to wait signaled a lack of confidence in the US recovery. Domestically markets also had a very poor quarter. The biggest driver of market decline was also increasing concerns that slowing Chinese growth could derail the global recovery. The domestic share market was also impacted negatively by renewed selling across the Big Four banks due to disappointing earnings results in the quarter. The US Federal Reserve s decision to leave interest rates on hold in September continued to weigh on the domestic share market as this signaled a lack of confidence in the US recovery. The RBA left the Australia cash rate unchanged at 2.0%. What s Ahead Russell s core views about the global economy have been broadly unchanged since the beginning of We re still looking for moderate growth in the U.S. We think the European recovery is gathering pace and that Japan is gradually improving. Emerging economies remain under pressure and the China slowdown has further to run. We also expect one rate rise before year-end and another four during Domestically, markets continue to trace out a somewhat downbeat economic growth path. Growing pains in China, commodity headwinds, as well as unconvincing momentum in Japan are combining into an unexciting overall picture. As a result, we are broadly neutral on equity markets. 4 Super News Update December

5 Asset classes at a glance Asset class Summary Return Australian shares International shares Global listed property International bonds Australian bonds Cash The Australian share market had a poor third quarter. Early gains in the quarter were quickly overshadowed by increasing concerns that slowing Chinese growth could derail the global recovery, which sparked a major selloff across developed and emerging share markets and sent commodity prices tumbling to multi-year lows. Stocks were also negatively impacted by renewed selling across the Big Four banks. Global share markets fell sharply in the third quarter. Unhedged returns were buoyed by the sharp fall in the Australian dollar. Stocks began the period well, rising strongly on the back of news Greece had finally reached an agreement with its creditors. However, these early gains were quickly overshadowed by further heavy selling in Chinese stocks and increasing fears that slower growth in the world s second-biggest economy could derail the global recovery. Stocks were also pressured by the US Federal Reserve (Fed) s decision to leave interest rates on hold in September. Global listed property experienced a highly volatile quarter. This volatility was driven largely by instability in emerging markets, with those companies with either a direct exposure to China or an indirect exposure to the sector s growth outlook the worst affected. Global bonds were stronger in the third quarter. Longer-term government bond yields fell (prices rose) as investors spurned risk assets amid concerns slower Chinese growth will negatively impact the global recovery. European bonds benefited from speculation the European Central Bank may expand its asset-purchase program. The yields on longer term US, UK, German and Japanese bonds were also lower for the quarter. Australian bonds were stronger in the third quarter. Longer-term bond yields fell (prices rose) throughout the period as investors sought the relative safety of government debt amid early fears over Greece s future in the euro-zone, Chinese and global growth concerns, sharp declines in commodity prices and the US Federal Reserve s decision to leave interest rates on hold in September. The yield on 10-year Australian government bonds closed the quarter lower. The Reserve Bank of Australia (RBA) left the official cash rate unchanged at 2.00% throughout the period and it was the first time in almost 18 months that the RBA didn t make reference to the AUD being too high. -6.5% Unhedged 0.3% Hedged -7.3% -0.3% 1.9% 2.2% 0.5% 5 Super News Update December

6 Performance of your Fund s investment options Investment returns Pension categories Investment option 3 months to Sep year to 3 years return to 5 years return to Cash 1 0.4% 2.0% 2.3% N/A Conservative -0.5% 4.6% 7.0% 7.0% Growth -2.2% 5.3% 11.8% 9.3% High Growth -3.0% 8.4% 15.1% 10.5% Please note Pension categories include Account Based Pension and Transition to Retirement Pension members. Returns are net of investment fees, tax and 0.20% administration fees. In accordance with Trustee policy a deduction of 0.13% p.a has been made from the returns from August 2013 to fund the operational risk reserve. Please note past investment performance is not indicative of future performance. 1 The Nestlé Cash option was introduced on 1 July Investment returns Super categories Investment option 3 months to Sep year to 3 years return to 5 years return to Cash 1 0.3% 1.6% 1.8% N/A Conservative -0.1% 4.3% 6.0% 5.9% Growth -1.8% 4.7% 10.1% 7.9% High Growth -3.1% 5.8% 12.8% 8.7% Please note Super categories include Defined Benefit, Insured Accumulation, Temporary, Retained and Spouse members. Returns are net of investment fees, tax and 0.20% administration fees. In accordance with Trustee policy a deduction of 0.13% p.a has been made from the returns from August 2013 to fund the operational risk reserve. Please note past investment performance is not indicative of future performance. 1 The Nestlé Cash option was introduced on 1 July Contact details Like to know more? If you would like to know more about the topics covered in Super News Update, please contact us by any of the methods detailed below. Nestlé Super Hotline toll free on , or write to us at the Nestlé Australia Group Superannuation Fund: Locked Bag A5025, Sydney South, NSW 1235, neslreps@russellsuper.com Important Notice: This newsletter contains only general financial product advice. In preparing it, the Trustee has not taken into account the investment objectives, financial situation and particular needs ( financial circumstances ) of any person. Accordingly, before acting on the advice contained in this newsletter, you should assess whether the advice is appropriate in light of your own financial circumstances or contact your financial adviser. Issued by the Trustee, Total Risk Management Pty Limited (ABN , AFSL , for Nestlé Australia Group Superannuation Fund ABN NES_Newsletter_V1F_ Super News Update December