RETIREMENT November 2012 Put your clients on the TTR track Adviser guide to transition to retirement strategies
About OnePath OnePath is one of Australia s leading providers of wealth, insurance and advice solutions. We have been helping Australians grow and protect their wealth for over 130 years, previously as Mercantile Mutual and more recently as ING Australia. Backed by the strength of ANZ OnePath is a wholly owned subsidiary of Australia and New Zealand Banking Group Limited (ANZ) and operates as part of ANZ s specialist wealth business. By harnessing the scale and strength of the ANZ Group, OnePath is well positioned to deliver the investment needs of our clients.
Contents The transition to retirement (TTR) opportunity 4 Who are your target clients? 5 What are the strategies? 5 Things to consider before implementing a TTR strategy 6 Implementing the TTR 7 Sales support tools Tools for new and existing clients 8 Our Products OneAnswer Frontier 10 OnePath s wrap solutions 11 Please note information contained in this brochure relates to taxed super schemes 3
The transition to retirement opportunity The intention of a transition to retirement (TTR) pension is to enable workers approaching retirement to transition towards retirement by reducing their work hours and to supplement reduced employment income with pension income. However, as there is no requirement for a reduction in working hours to commence a transition to retirement pension, TTR strategies can be just as useful for people who are continuing to work full-time. While the reduction in the concessional contributions cap for people at least age 50 from $50,000 to $25,000 (from 1 July 2012) has reduced the size of the tax savings achievable with TTR strategies, the core benefits of these strategies remain. How can clients benefit from TTR pensions? A core benefit of establishing a superannuation pension account is its favourable taxation treatment when compared to income generated through other means. If you are at least 60 your pension income is tax free. However, depending on the TTR strategy implemented, clients may benefit in different ways. Generally, there are five ways clients can benefit from implementing a TTR pension: 1. Generating tax-exempt investment earnings in the pension environment that would generally be taxed at up to 15% if it was in the accumulation phase. 2. Reducing the tax on their income by paying just 15% contributions tax on pre-tax super contributions (such as via a salary sacrifice arrangement) as compared to personal marginal income tax rates. 3. Before attaining 60, receiving tax-free pension payments on the tax-free component of the pension. 4. Having a 15% tax offset apply on any taxable pension income as compared to salary and wages which is usually fully taxable. 5. Receiving tax-free pension payments from age 60 as compared to income derived from salary and wages which is usually fully taxable. Tax benefits using a TTR strategy Situation Any investment earnings within the TTR Pension Payments received after turning 60 Payments received between preservation age and age 60 Tax payable No tax No tax Tax free portion is tax free. The taxable portion is taxed at their marginal rate, they will receive a 15% tax offset in their income tax return. TTR pension key features Can be implemented by a person who has reached preservation age (age 55 if born before 1 July 1960). Must be purchased with superannuation money. Lump sum withdrawals or commutations are generally not allowed. Pension payments capped at a maximum of 10% p.a. usually until the earlier of retirement or attaining age 65. Same taxation and social security implications as ordinary account based pensions. 4
Who are your target clients? The tax benefits of a TTR generally become more effective as a client s income and super balance increase. As a guide, you are generally looking for clients who: are at least preservation age are still working have an annual salary greater than $50,000 and have more than $200,000 in super. What are the strategies? There are three key scenarios where a TTR strategy may benefit your client: Strategy 1 Super Booster Client works full-time and doesn t need additional income The Super Booster strategy allows your clients to increase their super contributions while tax-effectively drawing down from their pension. Strategy 2 Income Booster Client works full-time and needs additional income The Income Booster strategy allows your clients to receive more after-tax income in their hands today by restructuring their salary payments through their super and commencing a super pension. Depending on the client s financial circumstances, this strategy may or may not involve making pre-tax contributions (such as salary sacrificing) into super. The increased income they receive today can be put to work by reducing non-deductible debt, funding pre-retirement home improvements or as a source of cash flow during trying times. The amount of additional income your client wishes to receive today could decrease retirement savings. Strategy 3 Lifestyle Booster Client works part-time and needs additional income The Lifestyle Booster strategy reflects the Government s original policy intent to assist those scaling back on work activities. Qualifying individuals can transition into their own retirement by reducing work hours and supplementing their reduced takehome pay (in whole or in part) with income from a TTR pension. For employees, the strategy involves salary sacrificing a portion of pre-tax income into super and replacing some or all of the reduced take-home pay using income from a TTR pension. Self-employed people could implement a similar strategy where they make a personal deductible super contribution in place of salary sacrificing. Either way, the strategy relies on pre-tax super contributions being made and is therefore only applicable to those who are under age 75. Note: It s important to monitor your client s contributions to ensure they remain under their allowable contribution caps limits currently at $25,000 for the 2012/2013 financial year. Access OnePath s TTR technical update, case studies and sales support tools To assist you through the advice process we have developed support tools which can be accessed via our website onepath.com.au/adviseradvantage Find out more on page 8. 5
Things to consider before implementing a TTR strategy TTR implementation checklist Salary sacrifice arrangements Ensure a written salary sacrifice agreement is in place. The agreement will only apply in respect of remuneration the employee has not yet become entitled to receive. Confirm with the employer that salary sacrifice payments can be made and if so, how much. Will the employer allow the employee to have these amounts paid into a super fund of choice? Confirm the timing in which the employer will pay the salary sacrificed contributions to the employee s super account. Check that Superannuation Guarantee payments will be calculated as 9% of the original earnings base (that is, income before any salary sacrifice super contributions are made). Confirm that the salary sacrifice arrangement won t impact redundancy calculations or leave entitlements. Ensure the total concessional contributions made during the financial year do not exceed the employee s concessional contribution cap for that year. Personal deductible superannuation contributions Must ensure less than 10% of assessable income, reportable fringe benefits and salary sacrifice contributions come from an employer. A tax notice outlining the deduction to be claimed must be submitted to the superannuation trustee before the earlier of: the end of the financial year following that in which the contribution was made rolling the contributions to a pension (including a TTR pension) or another super fund submitting a tax return in respect of the year in which the contribution was made. Ensure the total concessional contributions made during the financial year do not exceed the individual s concessional contribution cap for that year. PAYG income tax withholding variation (ITWV) As your client s income will be coming from two sources, submitting a PAYG ITWV application form can be used to take advantage of the tax offset from the TTR income portion and effectively reduce the PAYG withheld from employment income (only applicable for TTR strategies implemented before age 60). Transferring from OneAnswer Personal Super (Applicable to OneAnswer clients only) Your clients can transfer their balance from OneAnswer s Personal Super product seamlessly without incurring transaction costs. Maintaining a superannuation account Your clients will need to keep a super account into which Superannuation Guarantee and salary sacrifice super contributions will be made. We recognise that clients need flexibility so we keep their Super account open for 12 months after they ve performed a full transfer into their TTR pension. This allows them to make additional super contributions and retain any protection benefits they hold*. Insurance arrangements Clients need to confirm that there is no adverse impact on their Death, Total and Permanent Disability or Salary Continuance insurance cover through super or their premiums, as a result of salary sacrifice super contributions, or the transfer of benefits into a TTR pension. * Applies to OneAnswer only 6
Implementing the TTR process 1 2 3 4 5 6 Using OneAnswer Prepare the Statement of Advice (SOA) Adviser Prepare SOA Client Review and accept SOA Client Agree on TTR pension start date Open a new OneAnswer Personal Super account Client Receive and review the relevant OneAnswer Personal Super Product Disclosure Statement Client Complete the Personal Super application form including request to transfer existing super account Client Complete Super Choice form for employers to direct future super payments to the new OneAnswer Personal Super account Make the salary sacrifice arrangements Employer Process Super Choice form and direct future super payments to the new OneAnswer Personal Super account Client Lodge salary sacrifice form with employer including amount to be sacrificed and commencement date Employer Process salary sacrifice request and pay future Super Guarantee and salary sacrifice amounts to the new OneAnswer Personal Super account Claim a tax deduction for a personal superannuation contribution (where required) Client Consult tax agent/adviser and submit a tax notice to the fund Adviser Ensure that a tax notice has been submitted to the fund prior to transferring existing super benefits (where applicable) and prior to commencing the TTR pension Open a TTR account Client Receive and review the Product Disclosure Statement. Complete the Application Form and select Transition to Retirement pension, in the section Eligibility to commence a pension. Clients can transfer from OneAnswer s Personal Super seamlessly without incurring transaction costs. Adviser Commence TTR payments on agreed start date and at an agreed frequency Follow up meeting with client Adviser Arrange meeting with client to confirm satisfaction with TTR pension payments and frequency 1 2 3 4 5 6 Using the OnePath wrap platform Prepare the Statement of Advice (SOA) Adviser Prepare SOA Client Review and accept SOA Client Agree on TTR pension start date Open a new Super account Client Receive and review the Product Disclosure Statement Client Complete the Application form Client Complete Super Choice form for employers to direct future super payments to the new Personal Super account Make the salary sacrifice arrangements Employer Process Super Choice form and direct future super payments to the new Super account Client Notify employer of amount to be salary sacrificed and commencement date Employer Process future Super Guarantee and salary sacrifice amounts to the new Super account Claim a tax deduction for a personal superannuation contribution (where required) Client Consult tax agent/adviser and submit a tax notice to the fund Adviser Ensure that a tax notice has been submitted to the fund prior to transferring existing super benefits (where applicable) and prior to commencing the TTR pension Open a TTR account Client Receive and review the Product Disclosure Statement. Complete the Application Form and select Transition to Retirement allocated pension in Step 2. Adviser Commence TTR payments on agreed start date and at an agreed frequency Follow up meeting with client Adviser Arrange meeting with client to confirm satisfaction with TTR pension payments and frequency Disregard any steps not applicable to your client. 7
Tools for new and existing clients A range of sales support tools are available on OnePath s Adviser Advantage to help you take advantage of TTR opportunities with new and existing clients. Below is an overview of the support material available. Lead generation tools TTR client letter A letter to introduce the TTR opportunities to your clients Telephone scripts A script for your support staff to call existing clients and arrange appointments for TTR target clients Client presentation A presentation with speaker notes for you to present at client seminars Editorials Content to use in client newsletters or local newspapers to promote TTR opportunities Your support tools TTR client guide A full colour brochure for your clients to learn more about the TTR opportunities TTR case studies TTR strategy scenarios to illustrate how your clients may benefit from TTR opportunities TTR calculator A comprehensive calculator to personalise and illustrate the benefits of a TTR strategy for your clients. SOA templates Generic SOA words to help explain the features of implementing a TTR strategy. These templates can be tailored to meet a client s individual needs. Access this comprehensive range of sales support tools by logging onto onepath.com.au/adviseradvantage 8
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OneAnswer Frontier your investment, super and pension solution OneAnswer is designed to support you in building, managing and protecting your client s wealth. OneAnswer gives you access to a quality and diversified menu of investments funds, a wide range of adviser remuneration options, competitive pricing, convenient online services and practical product features to service your clients. OneAnswer backs this up with comprehensive business, technical, marketing and client support expertise for your business. Independently recognised and highly awarded While many claim to offer market leading features and services OnePath can demonstrate an award winning track record. In the past five years we have won national awards for our products and our commitment to customer service. Our awards include: Money Magazine Best of the Best Awards Best Featured Pension for OneAnswer Frontier Pension SuperRatings Rising Star of the Year Award for OneAnswer Frontier SuperRatings finalist in the Pension Product of the Year Award for OneAnswer Frontier Pension The Heron Partnership 5 Quality Star rating for OneAnswer Personal Super & Pension and OneAnswer Frontier Personal Super 10
OnePath s wrap solutions OnePath offers a full service wrap platform designed to support you in managing and protecting your clients wealth by streamlining the administration of super, pension and investment portfolios. OnePath offers all the features of a top tier wrap platform with an extensive range of investment options with very competitive administration and transaction fees. It allows you to create tailored advice solutions for clients with sophisticated investment needs. Via OnePath s wrap solutions you can access: Comprehensive investment choice Over 400 managed funds ASX 300 for super, full ASX for IDPS, LICs, LIRs, Preference Share, ETFs^ ANZ Term Deposits (3, 6, 12 month terms) Competitive pricing Competitive administration fees Pricing discounts available Flexible Adviser Service Fee functionality Comprehensive insurance solutions Wholesale (Group) and Retail (OneCare) insurance options available Competitive premium rates Online services Access to MoneyOne a powerful combination of web portal and desktop software Integration with Xplan financial planning software Access to OnePath s Adviser Advantage for comprehensive business, technical, marketing and client support tools ^ From 26 November 2012 To access one of OnePath s wrap solutions contact your Business Development Manager 11
OneAnswer Adviser Services Phone 1800 804 768 Email adviser@onepath.com.au Postal address OneAnswer GPO Box 5306 Sydney NSW 2000 OnePath Custodians Pty Limited ABN 12 008 508 496 AFSL 238 346 RSE L0000673 Oasis Contact Client Services Postal address Oasis Locked Bag 1000 Wollongong DC NSW 2500 Oasis Fund Management Limited ABN 38 106 045 050 AFSL 274331 RSE L0001755 (OFM) Information in relation to OneAnswer Personal Super and OneAnswer Pension in this brochure is issued by OnePath Custodians Pty Limited ABN 12 008 508 496, AFSL 238346 (OnePath Custodians). OneAnswer Personal Super and OneAnswer Pension are products issued by OnePath Custodians, as trustee of the OnePath MasterFund ABN 53 789 980 697. Information in relation to Oasis is issued by Oasis Fund Management Limited ABN 38 106 045 050, AFSL 274331, as trustee of Oasis Superannuation Master Trust ABN 81 154 851 339. This information is for the use of advisers only, and is not to be given to potential or existing investors. This information is current at November but may be subject to change. Updated information will be available free of charge by contacting Client Services. The information provided is of a general nature and does not take into account an investor s personal needs, financial circumstances or objectives. The case studies are hypothetical and are not meant to illustrate the circumstances of any particular individual. Before acting on this information, an investor should consider the appropriateness of the information, having regard to their needs, financial circumstances and objectives. An investor should read the relevant PDS available at onepath.com.au and consider whether that product is right for them before making a decision to acquire or continue to hold the product. The information in this brochure has been prepared as a guide only and does not represent tax advice. An investor should see their adviser for advice taking into account their individual circumstances. L4804/1012 onepath.com.au