Transition to Retirement. Do you have questions? Case Study: SEPTEMBER 2012

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1 SEPTEMBER 2012 Case Study: Transition to Retirement Julie wants to reduce her working hours so she can spend more time with the grandkids. But she doesn t want to dramatically reduce her income. Julie is 55 and works in the administration department at a meat processing plant. She currently earns $60,000 per year before tax. While she thoroughly enjoys her job, she also wants to have the freedom to spend time with her three grandchildren, so she plans to cut back to a four-day week. When she does this, however, her income will drop to $48,000 ($12,000 a year less). Find out what Julie can do to improve her situation on the next page. Income Protection helped Colin recover All members of AMIST Super are provided with automatic income protection insurance. Here s an example of just how valuable that insurance cover can be. Colin Smith is a reasonably fit and healthy man who had just turned 50. A non-smoker and social drinker, Colin generally looked after himself and enjoyed his work at Barossa Fine Foods, a leading manufacturer and retailer of quality smallgoods, based in Adelaide. Out for a swim in March 2011, Colin noticed a lump on his right side and immediately went to see his doctor. An ultrasound and a biopsy confirmed Colin s worst nightmare: a malignant tumour. It was the shock of his life. People need to understand that this can happen to anyone, Colin says, it s totally random. I was relieved to have income protection. It was a great help For the following nine months, Colin endured a rollercoaster ride of surgery, 28 sessions of radiation therapy and ultimately, chemotherapy every 21 days. He hoped to be back at work by Christmas (he had left work in June 2011) but as it turned out, he did not return until late March With all of this going on in his life, the last thing Colin needed was to worry about money as well. Colin Smith Fortunately, Colin had his Income Protection Insurance with AMIST Super to look after him while he was absent from work. Colin lodged his claim, and following the standard 30 day wait period, his Income Protection payments commenced, which really took the pressure off. Had Colin decided not to accept Income Protection Insurance cover when it was provided automatically a few years ago, his only other option would have been to apply for a disability support pension through Centrelink. But that would only have paid him $220 per week. Under AMIST Super s Income Protection cover, a claim requires the completion of paperwork by your doctor, your employer and yourself that clarifies what has happened to you and the extent of your condition. The claim is then assessed and if approved, your payments commence 30 days later. Following approval of the claim, you need to continue ongoing > continued overleaf Do you have questions? If you have any questions about your AMIST Super membership, call the AMIST Super Hotline

2 Income Protection helped Colin - continued medical treatment for the condition and we will ask for progress reports from your doctor. Colin sometimes found it difficult to provide these reports due to the availability of his specialist. But progress reports are important because we need to know that you are receiving the treatment required for recovery. However, longterm, serious illness such as cancer, the requirement for these reports may be less frequent depending on the doctor s opinion of the condition and the likely recovery period. People need to understand that this can happen to anyone, Colin says, it s totally random. I was relieved to have income protection. It was a great help. During Colin s time off work, the people at Barossa Fine Foods kept him involved and invited him to attend meetings when he was able. Established in 1991, Barossa Fine Foods is a family business run by Franz Knoll and his four sons. AMIST Super Income Protection at a glance Automatic benefit for all eligible AMIST Super members under age 70 and you re covered anywhere anytime. Unlike some insurance policies, you are covered with no questions asked. Standard cover costs just $3.00 per week and allows you to claim up to 75% of your pay or up to $2,000 per month (whichever is less) if you become sick or injured and are unable to work. If you earn more than $32,000 per year (but less than $400,000) you can increase your level of cover with no questions asked. Benefits are limited to 75% of your normal average income earned from employment during the 52 weeks prior to the last pay period before any injury or sickness resulting in a claim under the Policy. Injuries incurred prior to the commencement of cover do not attract a benefit. The Income Protection benefit is payable for up to 2 years unless you are able to return to work sooner or until you turn 65, whichever happens first. If you are aged between 65 and 70 years, the benefit payment is payable for up to 52 weeks for injury or 12 weeks for sickness or the date you turn 70 (whichever occurs first). Benefits commence after only a 30 (calendar) day waiting period. For more information, go to our website and download the Fact Sheet. Income Protection Insurance Income Protection is a type of insurance that could replace up to 75% of your pay if you become sick or injured and can t work helping to protect you and your family from financial hardship while you recover. AMIST Super members automatically receive this insurance with no questions asked. How it works AMIST Super Hotline It s an automatic benefit for all eligible AMIST Super members under age 70 and you re covered anywhere anytime. Unlike most insurance policies, you are covered with no questions asked even if you have a pre-existing sickness. Standard cover is 4 units, at a cost of $3.00 per week for manual workers 1 or $2.12 per week if you work in an office 2. Under this standard cover, you can claim up to 75% of your pay or up to $2,000 per month (whichever is less) if you become sick or injured and are unable to work 3. If you earn more than $32,000 per year you also have the option to increase your level of cover. And if you do so within 60 days of receiving your Welcome Letter from us, the increased benefit will be automatically approved including cover for a pre-existing sickness. This applies to members who earn up to $400,000 per year. Benefits are limited to 75% of your normal average income earned from employment during the 52 weeks prior to the last pay period before any injury or sickness resulting in a claim under the Policy. The Income Protection benefit is payable for up to 2 years unless you are able to return to work sooner or until you turn 65, whichever happens first. If you are aged between 65 and 70 years, the benefit payment is payable for up to 52 weeks for injury or 12 weeks for sickness or the date you turn 70 (whichever occurs first). Benefits commence after only a 30 (calendar) day waiting period. This is exclusive to AMIST Super members This Income Protection Insurance is exclusive to AMIST Super. It is a great opportunity to give you and your family genuine peace of mind. For full details of this Income Protection Policy, please refer to the Member Guide, visit our website at or call the AMIST Super Hotline on A manual worker is a member who is employed to perform manual and or physical duties in an abattoir, processing plant, butcher s shop or similar environment. 2. An office worker is a member who performs only non-manual duties and works at least 75% of the time in an office environment and has done so for the last 12 months. Office workers pay a lower premium because they are less likely to be injured while working. 3. Members can cancel the policy within 60 days of receiving their Welcome Letter from us. Any premiums paid will be refunded. No refunds will be provided on policies cancelled outside the 60 day special offer window. [email protected] Locked Bag 5390 Parramatta NSW 2124 Issued by Australian Meat Industry Superannuation Pty Ltd (ABN , AFSL , RSE Licence L ) as Trustee of the Australian Meat Industry Superannuation Trust (ABN , RSE Registration R ). The material provided is for information purposes only and is not intended to be considered as advice. The Trustee has not taken into account your personal financial circumstances when developing this communication. Before making any decision regarding your superannuation it is recommended that you seek advice from a qualified financial adviser. Transition to Retirement - continued Annual Current situation Reduction to 4 days Difference Gross Income $60,000 $48,000 $12,000 Less tax $11,847 $7,587 $4,260 Net Income $48,153 $40,413 $7,740 As you can see from the table Julie s take-home pay or net income will reduce by $7,740. But Julie wants to maintain the same after-tax income as she has when working full time, so she seeks an appointment with an AMIST Super financial adviser to find out what she can do. Julie has $105,000 in super so her adviser suggests a Transition to Retirement (TTR) strategy and shows her how this would work to her advantage. The TTR strategy involves transferring $100,000 of Julie s super into the AMIST Pension which she can then draw on to top up her income. Let s look at the numbers to see exactly how this works: Gross Pension Payments $9,556 Less tax (with 15% tax offset) $1,816 Net Pension payments $7,740 Plus net income from work $40,413 Total income $48,153 Julie can draw a pension payment of $9,556 per year from her AMIST Pension, and once 15% tax is deducted, this tops up her income by $7,740. Add this to the net income from working 4 days per week and her total income is $48,153! Exactly as it was when she was a full time worker. The pension payment receives favourable tax treatment even at Julie s current age, but it will be completely tax free once she turns 60. In addition, Julie s employer is continuing to make Super Guarantee Contributions (SGC) of $4,320 per annum into her superannuation account so it continues to grow. So Julie got exactly what she wanted: 20% less work, the same income and more time to spend with the kids. She has her cake and can eat it too, you might say. Want to be like Julie? Then why not call us on to find out if a Transition to Retirement strategy is right for you. The person depicted in this example is fictional and the circumstances outlined are for illustrative purposes only. Assumptions: Calculations based on taxation rates and include Medicare Levy of 1.5%, entire balance is made up of taxable (concessional) components, pension tax rates assumes 15% tax offset. This case study is for illustrative purposes only. A change in one or more of the variables and assumptions will produce different results. This is general information only and does not take into account your individual objectives, financial situation or needs. The content of this article was provided by Money Solutions Pty Limited (AFSL ). Money Solutions has been contracted by The Trustee to provide members with personal financial advice. Any financial product advice given by Money Solutions is provided under their own AFSL. Just call AMIST Super on for some simple qualified financial advice.

3 Life after work with the AMIST Pension. Market Update with Megan Pham There are dozens of reasons why it pays to belong to AMIST Super. There s the low fees, the solid and industry-competitive returns, the fact that all profits go back to members and all the extra benefits like automatic life insurance, automatic income protection as well as financial advice over the phone. But just as important is the fact that AMIST Super is here to look after you throughout your entire life. So when it comes time to hang up the work gear, you can remain an important part of the AMIST family by moving to the AMIST Pension. AMIST Pension is an account-based pension for people aged 55 and over who have retired from the workforce. Or you can use it to ease yourself into retirement with a Transition to Retirement (TTR) strategy (you can download the TTR fact sheet from our website for more information). There are several things that make AMIST Pension special. First, AMIST Pension invests in the same investment options as AMIST Super, so you know you ll be getting the same solid returns. But because AMIST Pension is not required to pay any tax on earnings, the returns are even better! And just like AMIST Super, our Pension s fees and charges are very low. In fact, AMIST Pension has been judged as having some of the lowest fees around by Money magazine for the past three years in a row. We ve won other awards too, for outstanding value in But in the end the point is to give you an income stream that makes your retirement more comfortable. And when you consider that after age 60, all income drawn from your AMIST Pension is completely tax-free, it s no wonder our pension members are happy. So, when you start to think about your life after work,remember, AMIST Pension is here to help look after you. AMIST Super s Chief Investment Officer examines how the slowing global economy impacted financial market sentiment. Financial market sentiment dipped sharply in May 2012 with increased concern of a potential collapse in the Euro zone. A short period of relief across markets followed the election of the pro-austerity party in Greece, but underlying economic weakness remained a concern....the labour market has been a source of strength over 2012, with the current unemployment rate at 5.2% as at 30 June Recent US data has also been disappointing adding additional concern that the US recovery will take longer than hoped. And the Chinese slowdown is also feared to have gone further than expected. This could have negative effects on the Australian economy through our trade arrangements. In an effort to counter these effects and provide support to growth, Governments around the world have continued to deliver fiscal and monetary stimulus to their economies. In Australia, business conditions remain mixed between mining and non-mining sectors. Consumer sentiment picked up slightly in May 2012, but is still below the long-term average. Interestingly, the labour market has been a source of strength over 2012, with the current unemployment rate at 5.2% as at 30 June As a consequence of all of this, investors became increasingly risk-averse, resulting in falls in local share markets and a rise in demand for safe-haven bonds. The Reserve Bank of Australia (RBA) has cut the cash rate by a total of 1.25% since June 2011, reflecting mixed domestic conditions and a softening international growth outlook. The cash rate now sits at 3.50% as at 30 June Megan Pham is Chief Investment Officer at AMIST Super and is responsible for managing the day-to-day investment activities of the $1 billion fund. This includes monitoring and managing the investment strategies, investment managers, cash flows, asset allocation, risk assessment and research. Megan has a vast understanding of the financial services industry, in particular Australian Superannuation, drawn from her previous experience at Non- Government Schools Superannuation and Mercer Investment Consulting. Her background covers a wide variety of key disciplines including investment management, investment risk management, strategy, compliance, and operational management. Megan holds a Bachelor of Mathematics and Finance and has also completed a Master of Actuarial Studies at University of NSW. Performance for this financial year AMIST Super Investment options As at 30 June year return (p.a.) 10 year net compound average return Secure 5.45% 4.86% Capital Stable 5.41% NA* Balanced 0.88% 6.46% Growth -1.19% 5.57% High Growth -4.28% NA* * The AMIST Super Capital Stable Option and the AMIST Super High Growth Option were introduced on 1 April 2010.

4 Megan Pham explains the Capital Stable Option. 5% 2% 13% 25% AMIST Super offers members the choice of investing in any of the 5 different investment options. These options vary in terms of the returns they generate and their associated risk levels. Low return options are generally lower in risk, whereas the higher the potential returns, the more likelihood of a negative return on occasions. The Capital Stable option was introduced in April 2010 and is designed for members who are looking for returns that are better than Cash but with lower risk than the Balanced Fund. The assets held in this option will be diversified with some small exposure to Australian and International shares. However the majority of the investment will be in Fixed Interest (target allocation 55% and cash up to 15%). Fixed Interest investments are things like Government or Corporate Bonds. The Capital Stable option aims to provide a return of 1% more than the rate of inflation over any three-year period. Over the two full financial years since inception the Capital Stable Option has provided a net compound average return of 6.0%. The pie chart below shows how money in the Capital Stable option is invested as at 30 June 2012 and the types of investment vehicles it uses. As you can see, the money is spread between a variety of sectors, rather than a single investment type. This helps to improve the security of your money by not having all the eggs in one basket. Cash AMIST Super s cash investments are managed in-house. We generally use term deposits offered by the major banks, including ANZ, nab, Commonwealth, Bank of Adelaide and Bank of Queensland. The average length of a term deposit is 4 months, but because we don t need to keep a great deal of cash at hand, we can invest for longer periods and therefore obtain more favourable returns. Australian and Overseas Fixed Interest Fixed interest investments generally take the form of bonds. A bond is essentially a loan contract between two parties where the amount paid for the bond will be repaid plus interest after an agreed period of time has passed. Corporations and governments issue bonds in order to raise money. AMIST Super invests in bonds both in Australia and overseas. Australian Shares We use five investment managers to invest in companies listed on the Australian Stock Exchange. These investments could include well-known companies such as Westpac, ANZ, Rio Tinto, Telstra, BHP and Woolworths. Alternative Investments Investments that don t fit into any of the other categories are referred to as alternatives. These can include a diverse selection of opportunities such as toll roads, airport and bridges as well as social infrastructure including retirement homes, prisons etc. Examples could include Melbourne Airport, Port of Brisbane and Pacific Hydro. International Shares We use five investment managers each of whom specialises 5% in a different part of the world. At any one time, your money in International Shares could be invested in companies 25% like Walt Disney, Apple, Nestlé, Johnson & Johnson or L Oreal. Direct Property We use three specialist property funds managers to help us with this allocation. AMIST Super is invested in properties such as the Doncaster Shopping Centre, 500 Bourke Street Melbourne as well as Forest Lake Village Shopping Centre as well as high grade buildings in the CBD in most capital cities. AMIST Super Hotline

5 The Government Co-contribution Scheme has changed. The Government Co-Contribution is a scheme where the Federal Government will match the after-tax contributions to super made by members whose assessable income is below $46,920 per annum for the financial year commencing 1 July The maximum co-contribution the Government will now pay is $500. Under the Co-contribution Scheme, the Government will contribute an additional $0.50 for each $1.00 contributed by a member from their after-tax pay. It s a great way to boost the retirement savings for members who qualify. Low income superannuation contribution (LISC) could help some members. From 1 July 2012, the Government has introduced the LISC. Eligible members will receive a super contribution of up to $500 from the Government which is effectively a rebate of the 15% contributions tax paid on the compulsory Superannuation Guarantee contributions that your employer makes for you. Members with an adjusted taxable income of less than $37,000 p.a. may benefit from the LISC. Eligible members will not need to apply for this benefit after the annual taxation assessment is finalised, the Australian Taxation Office will make the payment to eligible members superannuation funds. We encourage you to seek financial advice to see whether you may benefit from either of these concessions. Just call our Money Coach on Tanzanian proverb. We re here to help you maximise your super At AMIST Super, we know everyone is different. That s why we try to offer as many options as possible to help members get the most from their super. Get some advice We now offer members professional financial advice over the phone, where you can get answers to all kinds of tricky questions such as: How does salary sacrifice work? How can I plan for my retirement? Can I get the Government co-contribution? Are there benefits in having just one super fund? Which investment option is best for me? Should I be putting more money into my super? Just call the AMIST Super Hotline and ask to speak with one of our financial advisers. It s all part of your AMIST Super membership. Member Services Meet our team of service professionals. Remember our Member Services Managers are here to help you get the most from your super. Feel free to contact them. Melinda Gibson is the manager of the Member Services team. Royston Bennett on or [email protected] for Vic, SA, WA, Tas and southern NSW. David Ashton on or [email protected] for QLD, NT and northern NSW. Issued by Australian Meat Industry Superannuation Pty Ltd (ABN , AFSL , RSE Licence L ) as Trustee of the Australian Meat Industry Superannuation Trust (ABN , RSE Registration R ). The material provided is for information purposes only and is not intended to be considered as advice. The Trustee has not taken into account your personal financial circumstances when developing this communication. Before making any decision regarding your superannuation it is recommended that you seek advice from a qualified financial adviser. Money Solutions (AFSL ) has been contracted by AMIST Super to provide members with simple financial advice as part of their membership. Any financial product advice given by Money Solutions is provided under their own AFSL. Just call AMIST Super on for simple qualified financial advice at no additional cost.

6 Before-tax contributions cap reduced for over 50 s Excess before-tax Contributions Tax Refund From 1 July 2012 the Government has halved the before-tax (concessional) contributions cap for those over age 50 from $50,000 p.a. to $25,000 p.a. This means that the total amount of employer contributions, such as Superannuation Guarantee, Salary Sacrifice and any additional contributions made by your employer, cannot exceed $25,000 p.a. If the limit is exceeded, the Australian Taxation Office will charge additional tax which may either be deducted from the member s superannuation account or paid as part of their personal income tax assessment. The Government has identified that a number of people were inadvertently charged additional tax due to circumstances of which they were unaware, such as the timing of the actual payment of contributions by their employer to their superannuation fund. Please note that this cap does not apply to contributions from your after-tax income (which have an annual limit of $150,000, or $450,000 over three years if you are under age 65 years) unless you are self-employed and claim a tax deduction against after-tax contributions. To remedy this, members assessed as having excessive before-tax (concessional) contributions in the financial year ending 30 June 2012 will be allowed to have excess contributions of up to $10,000 removed from their superannuation fund and treated as assessable income (taxed at their marginal tax rate). This concession may only be claimed once in any financial year ending on or after 30 June 2012 and only applies to concessional contributions. Where the non-concessional contribution cap (e.g. voluntary after-tax contributions) is exceeded the additional taxation will be applied without exception. 30% contribution tax for very high income earners From 1 July 2012, the Government has effectively increased the tax on before-tax (concessional) contributions to super from 15% to 30% for people who earn more than $300,000 p.a. At the time of writing the Government has not indicated how it intends to collect this additional taxation. The art is not in making money, but in keeping it. Proverb Take our quick quiz and you could win $200! AM/AR/50+/NEWS /12 ISS2 How well do you know your super? You ll find the answers in this edition of AMIST Super News. In what year was automatic Income Protection Insurance introduced for AMIST Super members? What does SG stand for? What does LISC stand for?... What is the current maximum annual Government Co-contribution amount?... Entries close 31 December Just send your answers and details below to: AMIST Super Words GPO Box 4293 Sydney NSW 2001 or Fax to: What is Australia s current rate of unemployment? Please be sure to write your name and contact details clearly. Name:... What percentage of the Capital Stable investment option is invested in cash? AMIST Super Member No:... Address:... Amongst other things, the Capital Stable investment option invests in Australian shares. Name one of the companies involved.... What university did Megan Pham go to? A concessional contribution is one made from before-tax income or after-tax income? State:... Postcode:... Phone: AMIST Super MAILING ADDRESS Locked Bag 5390 Parramatta NSW 2124 AMIST Super Hotline: AMIST Super Fax: [email protected] AMIST Pension Locked Bag 5042 Parramatta NSW 2124 AMIST Pension Hotline: AMIST Pension Fax: [email protected]