Your guide to. retirement planning. I ve been transitioning to retirement for four years. It gives me tax savings and access to extra cash.

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1 Your guide to retirement planning I ve been transitioning to retirement for four years. It gives me tax savings and access to extra cash. DANIEL CLIFFORD, COMBINED SUPER MEMBER

2 Contents > Plan your retirement well ahead 03 > Live comfortably in retirement 04 > Start making a difference now 06 > Combined Super offers you super for life 07 > Easing into retirement 08 > Moving to full retirement 11 > The age pension 12 > Frequently asked questions 13 > Talk to a financial adviser 14 > About Combined Super 15 2

3 Plan your retirement well ahead For most people retirement planning should start well ahead of retirement. While there will be many decisions to make as you move closer to retirement, it s a good idea to put a strategy in place much earlier. At Combined Super we are committed to supporting our members as they plan for and move into retirement. This booklet is designed to provide general information on planning for retirement and the Combined Super Pension options. For more information or advice regarding your super and retirement options call us on Did you know, with Combined Super s pension options you can stay with us right through your working life and into retirement? Combined Super offers you super for life. Retiring with financial stability is for most people the great Australian dream. I take confidence in the fact that Combined Super makes wise investment choices, ensuring that I will achieve that dream. CLAIRE WALTER, COMBINED SUPER MEMBER 3

4 Live comfortably in retirement How much will you need when you retire? A common question many people ask is how much they ll need to live on when they retire. Research by the Association of Superannuation Funds of Australia (ASFA) shows that to achieve a comfortable retirement a couple would need $56,339 a year, compared to $32,555 a year for a modest retirement lifestyle. Single Couple Modest Comfortable Modest Comfortable $22,641 $41,169 $32,603 $56,317 Source: ASFA Retirement Standard, March 2013 The figures in each case assume that the retiree(s) own their own home and relate to expenditure by the household. A modest retirement lifestyle is a no frills lifestyle, better than the Age Pension but still only able to cover basic activities. A comfortable retirement lifestyle would enable you to be involved in a broad range of leisure and recreational activities and to have a good standard of living, providing for the purchase of such things as household goods, private health insurance, a reasonable car, good clothes, a range of electronic equipment and domestic and occasional international travel. Be aware that these figures were current at 31 March 2013 and do not allow for inflation over time. The cost of living may be higher by the time you retire. 4

5 How much will you need to save? What kind of lifestyle would you like to lead when you retire and how much would you need to save in order to fund it? The table below provides an estimate of how much men and women would need to save to achieve ASFA s comfortable lifestyle, using average life expectancies. For an annual retirement income of: You need to save Male Retire at 55 Retire at 60 Retire at 65 $41,169 $569,000 $451,000 $308,000 Female Retire at 55 Retire at 60 Retire at 65 $41,169 $607,000 $502,000 $372,000 Source: ASFA Super Guru Retirement Projector Assumptions: Based on a life expectancy of 81 years (male) and 85 years (female) Note, the above provides general information only. You may need to consult with a financial adviser to discuss your specific needs (see page 14). For financial help or advice call us on Some things you might want to consider when thinking about the retirement lifestyle you want: Will you continue living where you are, move or even downsize? Do you want to fully retire, work part-time or take on volunteer work? Do you want to spend more time with family and friends? Do you want to travel and what leisure activities or hobbies will you pursue? What household goods might need replacing and what other purchases would you like to make? Will you stay healthy? The answers to these questions will help you determine your ideal retirement. 5

6 Start making a difference now You can start making a difference to your retirement savings right now by building up your super. Over a number of years, small changes can add up. 1 Check for any lost super Visit SuperSeeker on the Australian Taxation Office website 2 Reduce fees by consolidating your super into one fund If you have more than one super fund you may be paying higher fees than you need to. Call us on and we ll help you consolidate your super. 3 Top up your super with extra contributions You may be able to add to your super by making additional contributions before tax through salary sacrifice or after tax. 4 Make spouse contributions and take advantage of the co-contribution These can be effective ways to build up super if you qualify. 5 Review your investment options, choose the option(s) that best suit your needs. Choosing an investment option that suits your appetite for risk and return can make a difference to your account balance over the long term. For more information call us on or visit Retirement s a long way off but my Combined Super means I ll have something when I get there. MITCH POVEY, COMBINED SUPER MEMBER 6

7 GARY TYLER, Combined Super member Combined Super offers you super for life Combined Super offers flexible pension options for members moving into retirement. As a member, you will have the opportunity to transfer money from your super account to establish a tax effective, flexible pension. A Combined Super Pension means you can stay with us right through your working life and into retirement. Combined Super offers two pension options: Option Combined Super Transition to Retirement Pension (TRP) Retired Person s Pension Account Applies if You re 55 or over and still working but you d like to access some of your super. You re about to retire. For detailed information about these options, refer to the Product Disclosure Statement. You can obtain this by contacting Combined Super on or by visiting our website at 7

8 Easing into retirement Many people choose to ease into retirement by reducing their working hours. Others continue to work full time beyond retirement age. With a Combined Super Transition to Retirement Pension (TRP) eligible members can access their super while still working. If you re 55 or over and still working, a TRP could let you: PIncrease your retirement savings: You can continue to grow your savings by making salary sacrifice contributions to your Combined Super account while drawing from a TRP. PPay less tax: A Combined Super TRP can be an effective tax-planning tool as investment earnings are tax-free. PReduce your working hours: If you want to cut back your working hours to ease into retirement, you could top up your income by drawing on your super. PTake care of loved ones: On death, the amount remaining in your account can be paid to your dependants as a lump sum or as a pension to your spouse. How does a TRP work? A TRP account is established in addition to your current account with Combined Super. When you set up the TRP, money is transferred into the TRP from your existing Combined Super account and from other super funds. Your TRP balance is determined by the amount invested in the TRP, investment earnings, fees deducted and how much pension is paid back to you out of the TRP. Payments will continue until your account balance is exhausted. Superannuation account Combined Super TRP Money invested, investment earnings are tax-free. Pension paid to you 8

9 Case study 1: Helen reduces her work hours to ease into retirement Helen has just turned 60, earns $60,000 p.a. ($47,550 p.a. after tax) and has a super balance of $160,000. She decides to work only three days a week so that she can ease into retirement. This means her income from work will drop to around $31,000 p.a. after tax. While Helen can afford to reduce her takehome pay to some extent, by using a TRP she can draw money from her super to replace some of the lost income. Helen transfers $155,000 of her super balance to a TRP and begins drawing a pension of around $9,000 p.a. tax free. This supplements Helen s income of $31,000 p.a., giving her a total after-tax income of $40,000 p.a. While Helen continues to work part-time, her super balance continues to grow and she saves around $8,700 in tax each year. If she had chosen to retire completely instead of cutting back to part-time work, her super balance would be dropping by large amounts each year. The table below shows Helen s financial situation if she sets up a TRP. Current Transition to retirement strategy Gross income $60,000 $36,000 TRP income $0 $9,040 Taxable income $60,000 $36,000 Minus tax and Medicare levy* ($12,450) ($5,040) Take-home pay $47,550 $40,000 Super contributions: employer contributions $5,400 $3,240 Investment returns** $11,200 $11,200 Minus contributions tax ($810) ($486) Minus TRP drawdown $0 ($9,040) Minus tax on earnings** ($1,008) ($31) Net gain in super $14,782 $4,883 Total tax paid $14,268 $5,557 Combined tax savings $8,711 Assumptions: * 2012/13 marginal tax rates. ** Investment returns based on earnings of 7% and an average tax rate of 9% on superannuation fund earnings. Source: Australian Securities and Investments Commission, Helen can enjoy her extra days off knowing that her super will continue to grow until she is ready to retire. 9

10 Case study 2: Phil keeps working full-time and boosts his super Phil is 55, earns $100,000 p.a. and has a super balance of $220,000. Phil intends to keep working full-time. He wants to continue to earn his current net income but maximise the effectiveness of his super. Phil decides to transfer most of his super to a TRP. This saves money because he no longer pays tax on investment earnings. He also salary sacrifices $16,000 p.a. into super. This saves income tax but reduces his take-home pay. Then Phil withdraws 10% of his TRP balance each year, which boosts his overall income back to the current level. Phil s take-home pay stays the same. Overall he saves over $2,000 tax in the first year. This means Phil will have more money in super when he finally stops work. The table below shows Phil s financial situation. Current Transition to retirement strategy Gross income $100,000 $100,000 Minus salary sacrifice $0 ($16,000) TRP income $0 $12,863 Taxable income $100,000 $96,863 Minus tax and Medicare levy* ($26,447) ($23,310) Take home pay 73,553 73,553 Super contributions: employer contributions $9,000 $9,000 Super contributions: salary sacrifice $0 $16,000 Investment returns** $15,400 $15,400 Minus contributions tax ($1,350) ($3,750) Minus TRP drawdown $0 ($12,863) Minus tax on earnings** ($1,386) ($31) Net gain in super $21,664 $23,756 Total tax paid $29,183 $27,091 Combined tax savings $2,092 Assumptions: * 2012/13 marginal tax rates. ** Investment returns based on earnings of 7% and an average tax rate of 9% on superannuation fund earnings. Source: Australian Securities and Investments Commission, Phil is happy with his tax savings and the boost to his super. 10

11 Moving to full retirement LEIGH ABERCROMBY, COMBINED SUPER MEMBER If you re about to permanently retire, consider a Combined Super Retired Person s Pension Account. With a Retired Person s Pension Account, you could: P P P P P Receive a regular income in retirement. You can choose to receive payments monthly or yearly (in advance or arrears). Defer lump sum tax on retirement. By transferring your super to a Retired Person s Pension Account you can continue to invest your savings with Combined Super and defer any lump sum tax payable. Draw down lump sums. You can draw down lump sums or the entire account value when it suits you. Pay less tax. No tax is payable on your pension income if you are 60 or over and investment earnings are tax-free. Take care of loved ones. On death, the amount remaining in your account can be paid to your dependants as a lump sum or as a reversionary pension to your spouse. 11

12 How does a Retired Person s Pension Account work? A Retired Person s Pension Account can include amounts transferred from your existing account with Combined Super or from other super funds, as well as any additional amount you contribute when your pension account is established. Your Retired Person s Pension account balance will be determined by the amount invested, investment earnings, fees deducted and how much pension is paid back to you. The amount of pension you can receive out of a Retired Person s Pension Account in each financial year is subject to minimum payment limits set by the Government. There is no maximum payment limit and you can at any time make lump sum withdrawals from your account in addition to your pension payments. Payments will continue until your account balance is exhausted. Will the Retired Person s Pension Account impact my social security benefits? A Retired Person s Pension will usually be counted for both the Assets Test and Income Test. As the rules for social security entitlements are complex, we recommend you contact Centrelink on or you may want to consider accessing Combined Super s free limited advice service or talk to one of our financial planners (see page 14). The Age Pension DR ROSS BROOKS, COMBINED SUPER MEMBER 12 Often the Age Pension alone does not provide sufficient income to enable retirees to maintain the standard of living they are used to. Payments under the Age Pension will vary depending on your circumstances. For information on the Age Pension, refer to the Department of Human Services website at Some members may find that they qualify for a part Age Pension and are entitled to a Health Care card. This can be of great benefit as it provides help with the cost of some prescription medicines, Australian government funded medical services and access to state, territory and local government concessions.

13 Frequently asked questions How much do I need to save to live comfortably in retirement? How much you need depends on your lifestyle needs and that can vary from one person to the next. The ASFA research on page 4 provides a good indication of how much a couple or single person would need to live in retirement. Retirement s still a long way off, why plan now? Planning early for retirement can make a big difference to your long-term savings. There are a number of things you can do now to build up your super. See page 6. You may also want to consider accessing Combined Super s free limited advice service or talking to one of our financial planners. Can I make lump sum withdrawals from my pension account? You can at any time make lump sum withdrawals from a Retired Person s Pension Account in addition to your pension payments, but not from a TRP. Can I choose where my pension account is invested? You can select one or a combination of any of eight investment options and you are able to switch between the options at no cost as your needs change. You can also choose the option from which your pension payments are made. When can I start withdrawing my super? You can start accessing super from age 55 through a Transition to Retirement Pension (TRP). For more information go to page 7. 13

14 Talk to a financial adviser Combined Super offers a range of financial advice services to accommodate different needs. Our limited advice service can assist with specific queries relating to your super. Through this service you can find out about choosing an investment option, making additional contributions, taking death and disability insurance cover and moving into retirement. This service is available at no cost to you. If you need a detailed analysis of your personal circumstances, we are required under law to provide you with a financial plan. Financial plans we provide are generally of two types: Simple financial plans may cover: detailed transition to retirement planning specific tax related issues retirement projections based on certain assumptions and outcomes. Standard financial plans would also cover issues like: strategies that take into account your spouse s or partner s circumstances advice on non-super assets such as shares, managed funds and family trusts tax related strategies estate planning matters such as preparation of a Will. Your initial consultation with a Combined Super financial planner is free of charge but a fee will apply to the preparation of your financial plan. This fee varies depending on whether a simple or standard financial plan is required. Your financial adviser will discuss fees with you upfront. I got good advice from Combined Super and I know my money s being looked after. ANTHONY HAMILL, COMBINED SUPER MEMBER 14

15 Before talking to a financial adviser: 1 Find out if the financial adviser or the business they work for holds an Australian Financial Services Licence (AFSL) 2 Check how fees are charged and ask for a copy of their Financial Services Guide (FSG) 3 Prepare for the meeting. Have information about your income, assets and debts on hand. Did you know you can pay for super-related advice from your Combined Super account, rather than being directly out of pocket? About Combined Super Combined Super is the super fund for workers in the education and related sectors. We ve been around for over 50 years. As an industry fund for the education sector, we re run only to profit members. We pride ourselves on delivering leading investment performance with a personal service to all our members. Contact us for more information For more information or advice regarding your super and retirement options: Call us on your enquiry to admin@combinedsuper.com.au Visit our website at 15

16 The fund has been around for 50 years. It s built on good foundations and allows people to build a good foundation for their retirement. CAROLYN MATTHEWS, COMBINED SUPER MEMBER This brochure is intended to provide general information only and not advice. It should not be relied upon as advice or take the place of professional advice. This brochure has been prepared without taking into account your individual objectives, financial situation or needs. Before acting on the contents of this brochure, you should consider whether it is appropriate for you, having regard to your objectives, financial situation and needs. You should consider obtaining professional advice from a licensed financial adviser. You can contact Combined Super on Combined Super uses Greenhouse Friendly ENVI 50/50 ENVI 50/50 is an Australian Government certified Greenhouse Friendly Product. Combined Super Level 9, 155 Queen Street, Melbourne Vic 3000 GPO Box 4559, Melbourne Vic 3001 Telephone: (03) or Fax: (03) admin@combinedsuper.com.au Issued by SuperBPO Pty Ltd ABN (Australian Financial Services Licence ) on behalf of Combined Fund Pty Ltd as Trustee for Combined Super Fund (Combined Super).