Superannuation Discussion + market volatility

[TomVexille]

Re: The totally off-topic thread

So which DB funds still open for membership in Australia?

Universities for one. I'm not aware of others but I'm no expert in the field.

 

[blackcat20]

Re: The totally off-topic thread

Not being an expert on all this, but I think joining a DB fund was ended in about 2000. Members of a DB scheme before this cut-off retain their DB.
And I think non-government DB schemes have rules about changing the formula for the DB if the fund pool falls below certain levels (so they are not really unfunded).

I'm in a DB scheme through my university.

 

[GarrettM]

Re: The totally off-topic thread

My husbands super, he is only allowed to change Sal Sac % and/or $ within a certain date period.

His employer also matches dollar for dollar what he Sal Sac AND, which I dont get, his employer super contribution % goes up per year so hes currently getting something like 17.5%

I dont get it but hes on a good wicket

I thought I was going ok at 15%, but that is quite good.

I rolled all my other funds - about five in total - into my current one a couple years ago. Was a bit of a process, and really only one of them had any significant monies in it. The others had balances below $500 or so. But still that was mine so why let it all be eroded away on fees.

MrsGM has been through a similar process, although as she moved around from job to job for many years she only had small balances trailling around behind her. And now as a self-employed/freelance businesswoman she won't be building any massive super balance in the future.

 

[Spongbob]

Re: The totally off-topic thread

Universities for one. I'm not aware of others but I'm no expert in the field.

Thanks for the information, as it is news to me.

But I think this is rare, as it is noted on page 29 of the DB scheme PDS: https://www.unisuper.com.au/~/media...uments/dbd/unis000007-dbd-and-accum-2-pds.pdf

 

[blackcat20]

Re: The totally off-topic thread

Thanks for the information, as it is news to me.

But I think this is rare, as it is noted on page 29 of the DB scheme PDS: https://www.unisuper.com.au/~/media...uments/dbd/unis000007-dbd-and-accum-2-pds.pdf

Yes, there are particular conditions. You must be ongoing, not on a fixed term contract. You must also be contributing additionally from your income. And once you opt out, theres no getting back in.

 

[Gold60]

Re: The totally off-topic thread

John K - I hope you, the good wife, and your newly arrived are making slow, but solid progress on rebuilding your lives after the recent troubles you have all had. My very best and sincere wishes to you all for the future.


FWIW - if you are in BNE, it could be worth a trip over to see the good folk at QSUPER - I have a DB and Accumulation account in the accumulation phase with them - and have had for just over 30 years. QSUPER used to be mainly for public servants.

I believe they have opened their doors up to anyone who is interested in trying another way- and is not just for public servants and spouses/families.

The DB fund is closed to new members- so you have to go into the accumulation account - in either the super accumulation or pension paying phase, if you decide to give them a go.

I have always found QSUPER to be professional, offer an excellent service with reasonable fees. You can get basic and good financial advice for about $300.00 to $ 500.00 - up to a couple of grand for complex matters. N.B. - I don't work for QSUPER or get any financial payments from them, aside from my investment returns – which have been OK by me so far.


I have tried a SMSF (we called it a smerf - LOL) for our mother - not really enough money to make it work, and it took a lot of effort to make it run properly - even if you have a professional manager, auditor, investment guru, etc to help you out.

I have made a few good financial decisions in my life. I think the best one was in 1990 +/-. We could either stay in the DB fund we were all in at the time - or move to one of these new fang dangle accumulation accounts that were coming in. I chose the DB option.

Atta boy - as bigal0 gives himself a gentle pat on the back AND head for a job well done there.

As others have said - super is only a VEHICLE - and a very effective tax vehicle - to get you to your financial destination in life. If you service and maintain your super account - and don't panic, you might do ok out of things in the long run. The money/returns - come from where and when you invest the money that you have in your super vehicle.


Hope some of this may help you.


Rant done..... Over and out..............

 

[Renato1]

Re: The totally off-topic thread

Superannuation in Australia becomes great fun when one meets preservation age, but before age 65.
Just before the 30 June, complete the appropriate ATO declaration form to claim a tax deduction and put $35,000 into superannuation, and pay the 15% tax.
On 1st July, withdraw from the fund what is left after the 15% tax.
When you complete your tax return, claim a $35,000 tax deduction.

Unfortunately, the Treasurer has just cut the $35,000 to $25,000.
Regards,
Renato

 

[cove]

Re: The totally off-topic thread

Politicians who qualify do the best of all with their superannuation packages along with some much longer term university staff.
Defined benefit schemes in both these groups tend to be unfunded so the impact in later years is a significant hit to their annual budgets.
With pay rates not moving much and interest rates falling Australia is close to deflation rather than inflation so defined benefit superannuation is currently less of a runaway train than before.
If you already have in excess of $1.6 million in your accumulation super fund it will be a good idea to consider whether you need to withdraw some funds if you are facing a 49% tax rate that may apply.
The problem with superannuation is the Government keeps messing with it because the size of our combined nest eggs is so large.

 

[JohnM]

Re: The totally off-topic thread

Superannuation in Australia becomes great fun when one meets preservation age, but before age 65.
Just before the 30 June, complete the appropriate ATO declaration form to claim a tax deduction and put $35,000 into superannuation, and pay the 15% tax.
On 1st July, withdraw from the fund what is left after the 15% tax.
When you complete your tax return, claim a $35,000 tax deduction.

Unfortunately, the Treasurer has just cut the $35,000 to $25,000.
Regards,
Renato

This can be still done from 65-75 as long as you meet the work test. After 75, no contributions can be made to super, irrespective of work status.

I'm no accountant or financial adviser; there are plenty of others on this forum that are professionals, but some care may be needed making the contribution before 30 June, claiming the tax deduction and then immediately withdrawing the full amount of what remains after the 15% tax (under your stated scenario even before finalising your tax return - which I personally find a bit hair-raising). The ATO may see it as a contrivance.

If you can lay your hands on last weekend's Australian, see the answer by The Coach to the reader's question in the Wealth section of the business pages that specifically deals with this matter.

The adviser's answer ends with the following:

"The problem with this strategy is the ability to claim a tax deduction on superannuation contributions is based on the superannuation benefit being for retirement.

Based on legislation, I believe the ATO may likely have an issue with your strategy as by withdrawing the funds a short time later, the contribution is clearly not being made for retirement purposes."

 

[cove]

Re: The totally off-topic thread

We have recommended to our two sons that they increase their employer sponsored superannuation contributions to a combined 20% using salary sacrifice.By starting at a young age the compounding of money will assist in getting to that current $1.6 million target. It is tax effective if you can afford to do this.
Getting all the funds into one superannuation account is the other biggie to avoid extra admin charges.

 

[Gold60]

Re: The totally off-topic thread

something worth noting , super is not designed, or was originally intended in the early '90's, as an estate planning device so you could pass a heap of bread onto your kids at favourable rates.

as i recall, and understand, super was designed to head off the then and now looming budget problem by getting as many people as possible to support themselves in retirement, at a comfortable level. Ideally they would fully support themselves, or at worst would only need a small govt pension supplement.

All this takes time of course and and ongoing inflow of cash to let compounding interest work its magic.

 

[cove]

Re: The totally off-topic thread

The age pension is not meant to be enough to cover cigarettes and booze. You will need to use your own accumulated pile to cover extras like running a car and overseas holidays.

 

[penegal]

Re: The totally off-topic thread

Sovereign risk is huge with Super.

Say what you may, the rules will change many times before many on AFF get to access their funds.

I actually worry that they will erode the benefit of the superannuation vehicle c.f. keeping your money out of Super (and thus much higher investment and consumption flexibility). We can actually see this starting to happen already.

 

[Renato1]

Re: The totally off-topic thread

This can be still done from 65-75 as long as you meet the work test. After 75, no contributions can be made to super, irrespective of work status.

I'm no accountant or financial adviser; there are plenty of others on this forum that are professionals, but some care may be needed making the contribution before 30 June, claiming the tax deduction and then immediately withdrawing the full amount of what remains after the 15% tax (under your stated scenario even before finalising your tax return - which I personally find a bit hair-raising). The ATO may see it as a contrivance.

If you can lay your hands on last weekend's Australian, see the answer by The Coach to the reader's question in the Wealth section of the business pages that specifically deals with this matter.

The adviser's answer ends with the following:

"The problem with this strategy is the ability to claim a tax deduction on superannuation contributions is based on the superannuation benefit being for retirement.

Based on legislation, I believe the ATO may likely have an issue with your strategy as by withdrawing the funds a short time later, the contribution is clearly not being made for retirement purposes."

Thanks John, but the legislation dictates what can be done. And financial advisors advise on what can be done within the dictates of the legislation. And lots of people decide to contribute to Superannuation, and then change their mind the following financial year about leaving the money there.
Regards,
Renato

 

[JohnM]

Re: The totally off-topic thread

Thanks John, but the legislation dictates what can be done. And financial advisors advise on what can be done within the dictates of the legislation. And lots of people decide to contribute to Superannuation, and then change their mind the following financial year about leaving the money there.
Regards,
Renato

Sure - letter/spirit of the law stuff. But, arguably, it's perceptions or reality of gaming systems that may eventually get them chopped or restricted.

I think it could be done with a little more subtlety than contributing in the last week of June and withdrawing the lot in the first week of July.

 

[Renato1]

Re: The totally off-topic thread

Sovereign risk is huge with Super.

Say what you may, the rules will change many times before many on AFF get to access their funds.

I actually worry that they will erode the benefit of the superannuation vehicle c.f. keeping your money out of Super (and thus much higher investment and consumption flexibility). We can actually see this starting to happen already.

The Daily Reckoning newsletter keeps suggesting to their readers that they put the bare minimum into Super, as it is just too big a target for governments.

Here is their article from 2014. Note the reference to the Deloitte’s Superannuation report, recommending that one's excess super on one's death be made available to other needy pensioners.

Regards,
Renato

[FONT=&amp]ItWon’t Be Your Super for Long[/FONT]
[FONT=&amp]By Bernd Struben, Melbourne,Australia[/FONT]
[FONT=&amp]Originally Published 18July in [/FONT][FONT=&amp]TheDaily Reckoning[/FONT]
Today I’d like to focus on superannuation. Specifically, whether you shouldcontribute any extra salary into your super to take advantage of the taxbreaks.
Tuesday’s release of the Financial System Inquiry Interim Report — or Murrayinquiry — offers some relevant insight into why, in fact, you should not.
One of the recommendations made by the report is to [FONT=&amp]mandate[/FONT] the use of‘retirement income products’ like annuities. Annuities, by the way, pay out astream of payments over time. If you think of your super as water in a bathtub,an annuity would be like allowing a fixed amount to trickle through into yourcup each month.
Currently, you already have that choice. And it’s not a bad option if thatsuits your needs. But currently you also have the [FONT=&amp]choice [/FONT]of dumping out theentire bathtub the day you reach the magic — and ever-changing — age whenyou’re allowed to access your super funds. It is your money, right? You workedyour entire life for that payout. Whether you choose an annuity or a lump sumpayment is no one’s business but your own.
Oh, and the government’s. They, of course, will be deciding how much watercan trickle from your tub of savings into your cup each month.


Even before the release of the Interim Report, the mainstream press has beentrumpeting that most Australians don’t have enough money in superannuation tofund their retirement. And this has the government running scared.
Why? Because Australia is ageing. The coming decades will see a surge in olderpeople retiring, with fewer younger people paying taxes to fund their pensions.And if too many retirees leave the workforce without enough money put away insuper, the pension burden will be crippling.
Now hopefully you’re not planning to depend on the rather meagre governmentpension to fund your golden years. But if you are, and you were born after1957, you’ll be waiting until you’re 67 for your first payment — under currentlaw. Of course, that’s almost certain to rise to 70…if not under this government,then under the next one. And if they can raise it to 70, why not 75?
The government, by the way, is also hoping you don’t come to depend on thepension. With the changing demographics, they simply can’t afford it. So what’stheir solution? Ramp up your super funds.
Under the Super Guarantee, your employer currently pays 9.25% of your salaryinto your super fund. This will gradually increase to 12% by 2019. That money’slocked in. You have a say in how it’s invested, but not how much. There’s notmuch you can do about it, except hope that someday some of it will come backyour way.
But even with the increase to 12%, most Aussies will still find themselvesfalling back on the pension during part of their retirement years. According toDeloitte’s superannuation adviser, Wayne Walker, you should contribute at least17–19% of your salary to super for 40 years while working, if you want toretire comfortably.
So what do the government, Deloitte, and the mainstream financial servicesrecommend? Topping up your employer’s super contributions from your own salary.You’ve probably heard this called salary sacrificing.
At the moment, you can ‘sacrifice’ up to $150,000 per year. And this willlikely go up to $180,000 next year. The incentive here is that the governmentoffers you a low tax rate of only 15% on your ‘contribution’.
Now this doesn’t sound like bad idea, on the surface. But I put the commonlyused industry terms ‘sacrifice’ and ‘contribution’ in quotes for a reason.
Here are a few synonyms for ‘sacrifice’: forfeit, surrender, lose.
And here are some for ‘contribution’: donation, gift, subsidy.
Interesting. Who do you suppose your hard earned, surrendered money is goingto subsidise?
Make no mistake, the tax breaks the government offers you to put more moneyinto super are nothing more than a well-baited trap.
Just as the pension age is going up — and up — so too is the age at whichyou’ll be allowed access to your super.
Under today’s rules, if you were born before 1959, you can access your superwhen you turn 55. This, by the way, is known as the preservation age, becausethe government generously preserves your money until then. But that’s alreadygoing up. If you were born after 1964, you can’t access your money until youturn 60.
And, also like the pension age, that’s almost certain to rise to 65. It’salready been proposed by this government in order to maintain the five year gapbetween the pension age and the preservation age.
If the government can move the goal posts this late in the game, who’s tosay they won’t shift them again? It’s like dangling a carrot at the end of astick to keep an old donkey plodding along. You keep working away, but thatcarrot never gets any closer.
Is it starting to sound less like [FONT=&amp]your[/FONT]super yet?
Now don’t forget the annuity ‘proposal’ from the Murray inquiry. This‘recommendation’ was echoed in the Deloitte’s Superannuation Report.
If you’re under 40, the government will almost certainly keep you fromgrabbing hold of that carrot once you hit the magic preservation age. Insteadof giving you the entire carrot at once to do with as you please, they willgenerously continue to manage it until…well until you die. Until then, theywill decide how much of that carrot to slice off for you each month.(Admittedly, Deloitte didn’t use the carrot analogy.)
But that’s not all…
The Deloitte report, certain to be scrutinised by the cash strappedgovernment, also recommends taking any remaining super from you after you die.Rather than being able to pass this money — your money — on to your dependentsor whomever you choose, this will go into a pension pool to fund thegovernment’s pension scheme. That’s wealth redistribution at its finest.
And don’t think the way you vote will affect this almost inevitable outcome.This isn’t a Liberal or Labor issue. It doesn’t matter who’s sleeping in TheLodge. The writing has been on the wall for some time now.
Back in 2011, when Bill Shorten was the federal Assistant Treasurer, he hadthis to say (emphasis mine): ‘[FONT=&amp]Overthe long term, superannuation remains a solid investment. Moreover, [/FONT][FONT=&amp]Australia is better off as a nation[/FONT][FONT=&amp] with this trillion-dollar pool ofsavings [/FONT][FONT=&amp]thanif we had to raise $1.3 trillion in taxes to fund our retirement[/FONT][FONT=&amp].[/FONT]’
To steal a line from [FONT=&amp]MontyPython’s Holy Grail[/FONT], ‘[FONT=&amp]Ohwhat a giveaway![/FONT]’
Now, as I mentioned, you can’t do much about the fixed percentage of yoursalary that you ‘contribute’ to super each payday. (Although my mate and yourregular [FONT=&amp]DR[/FONT] editor,Nick Hubble, is working on ways to legally get this out of the country.) Butyou can control where you invest your extra savings.
If you want to sacrifice your money and contribute it to super, thegovernment will give you a generous tax break today. (And, if I haven’t made mypoint yet, that generosity alone should raise suspicions.)
Or, if you want to keep control over your own wealth, you can choose toinvest it wisely…well away from the sticky hands of federal treasurers. If youcan leave it to grow until you turn 65 or even older, great. But if you do needit earlier for whatever the reason, then it’s there for you to do with as youwish, when you wish.
And when your time is finally up, it will be there to pass on to your kids,friends, or charities of your choice.
It’s your money, after all.
[FONT=&amp]Regards, [/FONT]
[FONT=&amp]Bernd Struben[/FONT]
[FONT=&amp]Port Phillip Publishing[/FONT]

 

[bismarck]

Re: The totally off-topic thread

Sovereign risk is huge with Super.

Say what you may, the rules will change many times before many on AFF get to access their funds.

I actually worry that they will erode the benefit of the superannuation vehicle c.f. keeping your money out of Super (and thus much higher investment and consumption flexibility). We can actually see this starting to happen already.

Tell me about it. At least 35 years (probably longer) until I get access. Even with the tax breaks, it's hardly compelling to contribute more to it because they keep changing the damn rules.

Most people are also far too conservative considering the time horizons. Even if you're 40 now, that money potentially has to last another 40 years. I'm perplexed that I have peers who are in "balanced" funds. I'm entirely in high growth funds. Who cares if it goes up or down 50% in the next 10 years (in fact I do care....I want it to go down lots so I can buy units more cheaply).

Worth having a play with this tool - Crowdsourced Financial Independence and Early Retirement Simulator/Calculator

Does monte carlo analysis of your portfolio, risk profile etc to determine how long your assets will last under any time period over the last 100 years or so.

 

[GarrettM]

Re: The totally off-topic thread

The age pension is not meant to be enough to cover cigarettes and booze. You will need to use your own accumulated pile to cover extras like running a car and overseas holidays.

Mum is going to have to quite the cancer sticks, as she simply can't afford them. Especially as she won't even qualify for the aged pension for another six years.
Good thing she doesn't drink.... yet.

 

[Buzzard]

Re: The totally off-topic thread

I'm a bit surprised that nobody has mentioned (unless I missed the post) "SMSF Lite", a super fund that also allows you to invest part of your super balance directly into shares that you choose yourself. Funds also call this a "Direct Investment Option".
I know of at least 7 funds that allow you to do this, big name funds too, with an annual fee ranging from about $180 - $395.
Brokerage can be as low as $19.50 on a $10,000 trade.

There are plenty of options out there, people just need to be prepared to pay for advice.
What I never understand is why people only focus on the cost of advice and not the returns from the advice.

One of the things I did back in 1996 was stop contributing to super and get into real estate. I lost confidence back then with constant changes to super rules and figured nobody could stop me selling an investment property. Later I did start making contributions into super again in order to have a mix of asset classes as part of my super strategy.

I'm not a financial advisor, and like penegal said, this is not financial advice.

 

[coles525]

I'm lucky, no fees and savings keep growing.

This super fund is no longer available to new staff; but still has good features.