Retirement Income Allocated Pension

Transcription

1 Retirement Income Allocated Pension Information sheet S U P E R A N N U AT I O N This information sheet is intended to provide an overview of the key features and benefits of the Retirement Income Allocated Pension. It is not intended to be a substitute for the Product Information Booklet (PIB) which includes all the information you should consider before making a decision. You should read the PIB and consider seeking professional legal, taxation or personal financial advice before commencing an allocated pension. The PIB is available at or by contacting your Member Services Centre on Options in retirement Most people have access to income from a number of different sources when they retire. Income can come from super, investments, part-time employment or the Age Pension. When you have satisfied a condition of release, you have a number of choices on what to do with your super. This includes leaving your super where it is, or investing in a retirement income stream. GESB manages different retirement products for current and former WA public sector employees. Depending on your situation, you can choose to either: Keep it in super - for those who have not decided what to do with their benefit, but want access to lump-sum withdrawals Open an allocated pension - for those who have retired and want a regular income stream, or those who want to continue working under a Transition to Retirement strategy Allocated pension GESB s Retirement Income Allocated Pension is an account based income stream which provides you with a regular income that is flexible and tax-effective. There are a variety of benefits to investing in an allocated pension: Choose how much income you re paid each year subject to limits set by the Commonwealth government, and your account balance Make lump-sum1 withdrawals of $1,000 or more at any time Receive payments directly into your nominated bank account either monthly, quarterly or annually (this frequency can be changed on your request) You have the flexibility to choose what investment plan your money is invested in The investment earnings in your Retirement Income Allocated Pension account are tax exempt which makes it a tax-effective investment Your pension payments and lump-sum withdrawals are tax free if you are aged 60 or over An allocated pension may have less of an impact on your Centrelink entitlements than other investment alternatives as special conditions apply (but those conditions could change) You have convenient access to your account either online through Member Online, or by calling your Member Services Centre Pension payments and withdrawals Minimum annual pension payments Subject to the payment limits set by the Commonwealth government, you can choose your level of income. The annual minimum pension limits are determined by multiplying your Retirement Income Allocated Pension account balance at the start of the financial year (or on joining in your first year) by the appropriate percentage for your age. This also applies on a pro-rata basis if you are in your first year of joining. Age Percent of account balance (%) Under and over 14 Choosing your pension amount In determining how much you want to receive, you may want to think about: Your lifestyle and annual expenses Other income you may have Your partner s income How long you want your allocated pension to last You can change your pension amount (subject to limits) at any time to meet your changing circumstances. 1 Lump-sum withdrawals are not applicable for Transition to Retirement members.

2 Pension payment considerations You must draw the minimum pension payment amount on at least an annual basis If you open your Retirement Income Allocated Pension account part way through the financial year, your minimum pension amount is a pro-rata of the annual minimum The annual minimum pension amount is calculated on your balance as at 1 July each year. We will advise you of your new minimum pension amount each year, and you may need to adjust your payment to make sure it is at or above this minimum If you open an account after 1 June, you don t have to draw a pension until the next financial year If you want to make a lump-sum withdrawal, you must have received at least the pro-rata minimum pension payment for that financial year If you commenced your pension under Transition to Retirement rules, you cannot withdraw more than 10% of your account balance (at the start of each financial year) in any one year, unless you have satisfied a condition of release with a nil cashing restriction (for example turning 65, or permanently retiring after reaching your Commonwealth preservation age2) How you receive your pension income Just like your salary when you were working, your pension income will be paid into your nominated bank account. Payments must be made into an account in your name and cannot be made to a credit card, third party, business or overseas account. When pension payments are made You can choose to have your pension payments made monthly, quarterly or annually and you may change your payment frequency at any time. Pensions are paid on or before the 15th day of the month(s) you select for payment. Withdrawing additional money The Retirement Income Allocated Pension allows you to withdraw additional money from your account. Whatever the reason, you may withdraw a lump sum of $1,000 or more provided that at least $1,000 remains in your account, unless your account is to be closed. If you are aged under 60, please keep in mind that any lump-sum withdrawals may affect the amount of tax payable on your pension payments. Generally, under Transition to Retirement rules, lump-sum withdrawals are not permissible. How long will your allocated pension last? This will depend on: How much money you initially invest The investment returns of your chosen investment plan(s) The pension amount you choose Any lump-sum withdrawals you make Fees and costs paid Your balance reduces each time you receive a regular pension payment or a one-off lump-sum withdrawal from your account. You will continue to receive payments until there is no money left in your account. There is a risk this will run out before you die. A useful resource is the MoneySmart Retirement planner available at Fees The fees and costs for allocated pensions are often complex, but our fees are below the industry median3. Our one fee covers investment costs and administration costs. It s built into the value of each investment plan before it reaches your account, so no other fees will be deducted from your balance. The cost of managing different investments varies, so the total fee will differ for each investment plan. For example, investment costs for the Cash plan or Conservative plan will be lower than those for the Growth plan because growth assets are typically more complex and expensive to manage. The table overleaf contains GESB s estimate for the Indirect Cost Ratio (ICR) for each Retirement Income Allocated Pension investment plan. The ICR includes all of the investment costs and any additional underlying costs relating to your investment. It is an annual percentage fee which covers the cost of managing the fund s investments including a proportion allocated to risk reserves. Retirement Income Allocated Pension s ICR is not fixed, and is reviewed periodically and adjusted to take into account prevailing investment expenses. The actual ICR can only be determined at the end of each financial year. 2 Your Commonwealth preservation age is dependent on your date of birth. For more information on your Commonwealth preservation age, read the Accessing your super brochure available at 3 SuperRatings Smart database as at 31 March

3 Estimated performance fee 4 Estimated total fee (ICR) Retirement Income Allocated Pension investment plan Estimated cost for managing your investment Included in the estimated cost for managing your investment + estimated cost for managing your investment READYMADE PLANS Cash Conservative Balanced Growth MY PLAN Cash Fixed Interest International Shares Australian Shares Property Performance fees Performance fees are paid to external investment managers when the investment return on the assets exceeds their agreed performance targets. Performance fees are typically calculated as a percentage of the amount by which the investment manager exceeds the performance targets. The estimated performance fees payable to the external investment managers are included in the previous table. Exit fees GESB does not currently charge an exit fee, but may do so in the future. Family Law GESB does not currently charge a fee to provide information to members or interested persons in relation to Family Law matters, or split benefits, but may do so in the future. Fee changes GESB reserves the right to review and change the fees in this document without your consent to ensure the structure and level of fees is appropriate, including any additional costs resulting from any government, tax or statutory charge. We will always inform you of any changes through our website or through our six monthly member statement. If the change is an increase in fees or charges, we will give you 30 days written notice of the change. The ICR and performance fees may change periodically. Tax An overview of taxes relevant to GESB s Retirement Income Allocated Pension is provided below. No tax on investment earnings Unlike most other forms of investment, the Retirement Income Allocated Pension is not required to pay tax on its investment earnings. This means that your investment has more growth potential. Tax on entry to Retirement Income When you transfer your investments into the Retirement Income Allocated Pension, the tax applied on the transfer is the same as if you transferred to any other super income stream. Transferring monies from untaxed schemes When your funds are transferred from an untaxed scheme like West State Super or Gold State Super, tax will be deducted from the untaxed element of the taxable component as follows: Taxable component - untaxed element Amounts up to the untaxed plan cap of $1.395 million5-15% Amounts above the $1.395 million cap - 49% 4 The estimated performance fees shown are calculated by combining the estimated performance fees charged by the underlying investment managers for each of the investment options listed above. 5 For the 2015/16 financial year, indexed annually for future years. 3

4 Example Maria, Michael, Chris and David are all current Retirement Income Allocated Pension members with different balances. They have each invested in the Balanced plan. Here are the fees they pay in one year, assuming their balance remains constant. Retirement Income Allocated Pension Balanced plan Investment fee Maria Michael Chris David Account balance $30,000 $50,000 $100,000 $200,000 Investment fee Nil $0 $0 $0 $0 PLUS PLUS Other indirect costs for the Balanced plan EQUALS Cost of Balanced plan 0.20% pa $60 $100 $200 $ % pa $120 $200 $400 $ %6 pa $180 $300 $600 $1,200 Tax-free component No tax is payable on the tax-free component If you are a West State Super or Gold State Super member with a surcharge liability, before withdrawing or transferring your benefit, you may want to take advantage of a strategy that enables you to pay your surcharge debt in a tax-effective manner. For more information, see the Super Contributions Surcharge fact sheet available at or contact your Member Services Centre on Transferring monies from taxed schemes When your funds are transferred from a taxed scheme like GESB Super, no tax will apply on the transfer. Tax components Your super account may include the following tax components: Tax-free component this is the tax-free component from the super scheme you exited. It generally includes your personal contributions not claimed as an income tax deduction and co-contribution payments. If you transferred from an untaxed scheme like West State Super or Gold State Super, it will also include any part of the rollover that was taxed at 49% because you exceeded the untaxed plan cap Taxable component-taxed element this is the taxable component from the scheme you exited. It generally includes any employer contributions, salary sacrifice and your deductible personal contributions. If you transferred from an untaxed scheme like West State Super or Gold State Super, it will include any part of the rollover that was taxed at 15% up to the untaxed plan cap Tax treatment on income stream or lump-sum payments Income stream No tax if aged 60 or over If you are aged 60 or over, your regular income stream payments or lump-sum payments from your Retirement Income Allocated Pension will be completely tax-free and you will not be required to include these payments in your personal income tax return. Tax payable between current Commonwealth preservation age7 and 59 If you are aged between current Commonwealth preservation age and 59, the taxable component of your income stream will be taxed at your marginal tax rate (plus Medicare Levy8) less a 15% tax offset on the taxable component. No tax is payable on your tax-free component. Your super benefit usually has a tax-free and taxable component, which is set when you transfer your benefit. Each income payment will contain proportional amounts of each component, based on the value of your total super benefit. Tax payable prior to reaching your Commonwealth preservation age Should you meet a condition of release before reaching your Commonwealth preservation age, you will be able to transfer your super into an allocated pension. Tax on income streams will be charged at your marginal tax rate to the taxable taxed component. For more information, please see our Tax and super factsheet available at 6 Estimated total fee for the Retirement Income Allocated Pension Balanced plan. 7 Your Commonwealth preservation age is dependent on your date of birth. For more information on your Commonwealth preservation age, read the Accessing your super brochure available at 8 Includes 2% Medicare Levy. 4

5 Example Frank - aged under 60 Frank is 57 and transfers $250,000 to a Retirement Income Allocated Pension His $250,000 is made up of $210,000 of taxable component and $40,000 of tax-free component He chooses to take monthly income-stream payments of $1,600 His monthly pension will consist of the following components: Tax-free ($40, ,000 x $1,600) Taxable-taxed ($210, ,000 x $1,600) $256 $1,344 Total $1,600 As Frank is 57, he will have to pay tax at his marginal tax rate on the taxable-taxed component. However, a 15% tax offset will be available to reduce the tax he has to pay. No tax is paid on the tax-free component. Lump-sum payments No tax if aged 60 or over If you are aged 60 or over, any lump-sum payments will be tax-free and you will not be required to include these payments in your income tax return. Tax payable between current Commonwealth preservation age9 and 59 If you receive a lump-sum payment, the taxable component will be taxed as follows: 0% up to a low rate cap of $195, Any amount in excess of the $195,000 cap is taxed at a maximum of 17%10 No tax is payable on the tax-free component. Lump-sum payments if you are terminally ill Superannuation lump-sum payments are tax-free when paid to members with a terminal medical condition, as long as members are able to provide GESB with the necessary supporting documentation. More information For more information on GESB s Retirement Income Allocated Pension, read the Retirement Income Allocated Pension Product Information Booklet available at or call your Member Services Centre on Your Commonwealth preservation age is dependent on your date of birth. For more information on your Commonwealth preservation age, read the Accessing your super brochure available at 10 Includes 2% Medicare Levy. 11 For the 2015/16 financial year, indexed annually for future years. Disclaimer: the information contained in this information sheet is of a general nature, and does not constitute legal, taxation or personal financial advice. In providing this information GESB has not taken into account your investment objectives, financial situation or needs. GESB is not licensed to provide financial product advice. You should read this information sheet in conjunction with other relevant disclosure documents GESB has prepared for Retirement Income Allocated Pension members including the Retirement Income Allocated Pension Product Information Booklet available at You may also wish to consult a suitably qualified adviser to ascertain whether the information contained in this information sheet is appropriate for you. How to contact us T Member Services Centre F W gesb.com.au PO Box J 755, Perth WA 6842 Level 4 Central Park, 152 St Georges Terrace, Perth Government Employees Superannuation Board ABN /15 ISS1