Summary of Social Security and Private Employee Benefits AUSTRALIA

Transcription

1 Private Employee Benefits AUSTRALIA 2012

2 Your Local Link to IGP in AUSTRALIA: AMP Life Limited Established in 1849 as a mutual company, AMP has grown to be one of the largest companies in Australasia, listing on the Australian and New Zealand Stock Exchanges in mid Over the past few years, AMP has transformed itself from a mutual society centered on life insurance into an Australasian broad-based financial services company, focused on wealth management. In December 2003, AMP in Australasia demerged from its businesses in the UK, which continued as a separate business under the name of HHG Limited. The demerger allowed AMP to focus on its home market and pursue a strategy consistent with its core strengths and capabilities. AMP Life has been an IGP Network Partner since Principal Activities As professional wealth creators and managers, AMP offers a number of financial solutions through which clients are able to grow their wealth, including: Retirement savings and income solutions superannuation, pensions and annuities Life and risk insurance Banking services Financial planning services superannuation planning, retirement planning, estate planning, risk protection, investment planning, business planning, taxation, social security and other legislative issues Organizational Structure AMP has two business units: one broadly focuses on providing financial services to customers, and one focuses on asset management: AMP Financial Services is an asset accumulator, attracting investments and earning revenue from selling products and services. AMP Financial Services operates in Australia and New Zealand and provides superannuation, managed investments, income streams, banking, insurance, financial planning, and online financial services. AMP Capital Investors is an asset manager seeking the best return on the assets including property, shares, cash, and other investments held by the AMP group of companies. AMP Capital Investors operates in Australia and New Zealand and throughout Asia. Key Products Life Life Accidental Death and Disability Optional Supplemental Life Disability Long-Term Disability Temporary Salary Continuance Temporary Total Disability Total and Permanent Disability 2012 International Group Program 1

3 Your Local Link to IGP in AUSTRALIA: AMP Life Limited Superannuation and Pensions AMP Flexible Super (Retail & Corporate) SignatureSuper (Corporate) CustomSuper (Corporate) SuperLeader (Industry) Flexible Lifetime Superannuation (Retail) Flexible Lifetime Allocated Pension (Retail, Personal Pension) Flexible Lifetime Term Pension (Retail, Personal Pension) Guaranteed Income Plan (Retail, Personal Pension) AMP is located on the internet at: (for shareholders and customers) 2012 International Group Program 2

4 Customary Private Employee Benefit Plans Social Security Overview: Social Security is predominantly structured around a safety net to provide for people that are unable to work and therefore need government support to meet the necessities of life. In addition to this, social security support is also provided to seniors (once certain age is attained) and families with dependant child/ren. Broadly, payments that are received for inability to work are based on mutual obligation, that is the person must enter into a participation agreement to connect with the workforce. The system is financed out of general taxation revenues. Benefits provided are generally subject to income tests and/or assets tests. Workers Compensation: Covers persons employed under a contract of service whether manual, clerical, or otherwise. These individuals are covered by separate State Acts. Liability varies from state to state; however, in general, it includes personal injury arising out of or in the course of employment, or sustained on the journey to or from employment. Medical and Hospital Benefits Medicare: Generally, eligible Australian residents are covered under Medicare, the Federal Government's national health scheme. It provides free medical treatment (if the doctor bulk bills), free accommodations and treatment by a hospital doctor in shared rooms of public hospitals and free out-patient treatment at public hospitals. If the doctor does not bulk bill, Medicare provides a reimbursement of a substantial part of the cost according to a system of scheduled fees. There is a levy of 1.5% on income to pay for the costs of Medicare. Moreover, to protect low-income earners, there are salary and wage thresholds below which the levy is not payable. However, higher income earners are encouraged to use health insurance providers to pay for their health care costs. A medicare levy surcharge of up to 1.5% depending on income is levied on individuals who do not have private hospital cover. The surcharge aims to encourage high income individuals to take out private hospital cover, and where possible, to use the private system to reduce the demand on the Medicare system International Group Program 3

5 Customary Private Employee Benefit Plans Private Employee Benefits Superannuation: Australia has a three-pillar approach to providing retirement incomes. This is based on: A taxpayer funded means tested age pension for people who are unable to fully support themselves in retirement A minimum level of compulsory employer superannuation contributions made in respect of those in the workforce Voluntary private superannuation and other savings. The majority of superannuation plans are accumulation style. Over the recent past, there has been a transition from defined benefit pensions to market linked pensions. Australia has very few active defined benefit pension schemes (those that pay an income benefit after retirement). In spite of legislative changes encouraging pension benefits, it is likely that these will continue to be provided by products separate to the superannuation plan. The customary methods of using a lump sum benefit to provide income during retirement are discussed later. As part of the Federal Government s Retirement Income Strategy, Australia has had compulsory minimum superannuation Superannuation Guarantee (SG) since July 1, Employers are generally required to make superannuation contributions for the following employees who are: Paid more than AUD 450 in a calendar month; Aged 70 years or less 1 ; Under 18 years of age and working for more than 30 hours per week; Not covered by bi-lateral Superannuation Agreements. Currently, an employer must contribute 9% of the employee s salary into superannuation. Note: From July 1, 2013, the superannuation guarantee rate will gradually increase so that it is 12% by July 1, Where an individual makes a contribution to a superannuation fund, the Federal Government may make a matching contribution. This government co-contribution is subject to a maximum amount of AUD 1,000 2 and depends on the individual s income. Superannuation funds provide benefits on retirement (early retirement is usually available from age 55, in line with the minimum benefit preservation age; normal retirement may be age 65, in line with the qualifying Age Pension age 3 ) death, total and permanent disablement or total temporary disablement before retirement. For large superannuation funds, it is common to unbundle the scheme components. Different institutions may carry the plan administration, investment, and insurance. Group life insurance is a cost-effective means of covering non-funded death and disablement benefits. Very large plans would use several investment managers. It is also common for schemes to use legal, actuarial, and financial consulting firms. 1 From July 1, 2013, there is no maximum age restriction. Superannuation Guarantee may be payable for an employee regardless of the age of the individual. 2 In the December 2011, Mid-Year Economic and Fiscal Outlook, it was proposed that the maximum amount of government co-contribution would be AUD 500. The matching rate is also proposed to be reduced from the current 100% to 50 %. 3 From July 1, 2017, qualifying age to receive Age Pension, will gradually increase, so that it is 67 by July 1, International Group Program 4

6 Customary Private Employee Benefit Plans Plan structure is normally of three types, company, industry and private. Company plans are sponsored by one employer and are either written on a stand-alone basis (individual deed) or under an umbrella arrangement (Master Trust). Industry plans have multi-employer sponsorship, are accumulation style, and are usually for particular commercial sectors (retail, building, etc.) or for employees who belong to a particular trade union. Eligible employees have been able to direct their employers under Choice of Superannuation rules to a private fund of their own choice. Where the employee exercises choice, the employer is generally required to contribute to that chosen fund. Most retirees choose a combination of lump sum benefits and income stream products to manage their living expenses during retirement.. Retirement income is normally achieved by the individual by purchasing a life office annuity with the lump sum benefit or using an allocated pension (the lump sum is used to form a balance with a financial institution with a minimum that must be drawn down each year any remaining amount is left to the individual s estate). From July 1, 2007, the Australian Government implemented a plan that swept away a raft of complex tax arrangements and restrictions that applied to people s superannuation benefits. This significantly changed the way super benefits are taxed and placed new limits on the amount that can be contributed to super each year. Private Medical Insurance: Private medical insurance is also available. It provides patients with a higher standard of hospital accommodation, the choice of their own doctor, and covers costs of additional paramedical services as well as lower waiting times for certain medical procedures compared to the public health system International Group Program 5