August 2009 Newsletter

Kudos to a special pollie, Age Pension changes, Pension Bonus Scheme closes, 200 super funds exposed! AND MORE

Welcome to the August 2009 edition of our SuperGuide newsletter, a free and independent source of superannuation information for consumers that can help you plan for your retirement, and potentially save you money in the process.

• DID YOU SAY POLITICAL LEADERSHIP? In THE SOAPBOX this month, I give credit where credit’s due and recognise a politician who should be remembered for helping change the way consumers receive financial advice.
• AGE PENSION: INCREASE IN PAYMENTS BUT STRICTER INCOME TEST. We have been inundated by readers with questions about the Age Pension changes. In this edition, we explain the September boost to the Age Pension rates, and the introduction of a stricter income test. We also answer some questions relating to the Age Pension rules.
• GOODBYE PENSION BONUS: HELLO WORK BONUS. Due to popular demand we have included a special feature on the Pension Bonus Scheme. If you plan to take advantage of the scheme then be quick because the scheme closes to new members on 20 September 2009.
• EXPOSING THE PERFORMANCE HISTORY OF AUSTRALIA’S LARGEST 200 FUNDS. Read all about it! You can reminisce about what super returns looked like before the Global Financial Crisis hit….Oh, and be reminded that industry funds outperformed retail super funds. In a separate article, I provide some tips on how a consumer can check whether a super fund is a strong performer.

In this month’s newsletter, you also can find a handy summary of the super and retirement rules for over-65s, the super significance of turning 50, 55, 65 or 70 years of age, and Q and As from readers, and more, by clicking on the links below.

COMING UP!

SEPTEMBER EDITION: Next month, we have a special edition focusing on SUPER RETURNS, COMPARING SUPER FUNDS and CHANGING SUPER FUNDS coinciding with millions of Australians receiving member statements (reporting negative returns) from their super funds. Note that I will be answering readers’ questions on all super matters.

OCTOBER EDITION: Coinciding with the October release of my book, DIY Super For Dummies (Wiley), I will be devoting a significant part of the October edition to DIY SUPER and related matters, including how DIY super fund trustees can benchmark their returns.

If you like this newsletter and our website, then please pass on the newsletter to your friends and encourage them to sign up for SuperGuide newsletter. As consumers, we have more influence with decision-makers when we speak as a group.

Trish Power

THE SOAPBOX: Let’s raise our glasses to Sherry
… that is, Nick Sherry, the Assistant Treasurer, and former Minister for Superannuation and Corporate Law. Senator Sherry has stood his ground against the mighty force of the financial services industry and it appears… hopefully, eventually… if the planets align, that his courage and leadership will dismantle the outdated and inappropriate structure of commission-based remuneration for financial advisers.
Read more

FEATURES

Exposing the performance history of Australia’s largest 200 super funds
Before the Global Financial Crisis (GFC) hit in October 2008, around a third of Australian super funds delivered returns averaging at least 9% per annum over the five-year period from 2004 to 2008, while 10% of super funds were delivering double-digit returns over this same period, according to performance data released by the superannuation industry regulator.
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Age Pension set to increase from September 2009
Age Pensioners are set to receive three pay rises from 20 September 2009; a one-off increase in the fortnightly single Age Pension payment of $60; additional increase due to the six-monthly indexation of Age Pension payments; a $2.49 per week (or $4.98 per fortnight) boost in the pension supplement for singles, and $10.14 per week boost for couples.
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New income test for Age Pension
Although the Government has increased Age Pension rates, the income test for determining whether you can receive the Age Pension is set to become tougher for some Age Pensioners. You can expect two major changes to the Age Pension income test, taking effect from 20 September 2009
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Goodbye Pension Bonus: hello Work Bonus
Hurry, hurry! Deadline approaching! If you’re working and you’re aged 65 or over (or 63.5 or over if you’re a female), or will turn 65 (or 63.5 if a female) before 20 September 2009, then you need to read this article, and the Q and As following this article.
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HOW SUPER WORKS

Is my super fund’s investment performance good enough?
Q: What you do is very important, thank you. I am 62 years, retired and draw an allocated pension from a public sector super fund in Queensland. For a year I have had all of my funds in their ‘cash’ option because I feared a significant market correction (as happened). As a result of that conservatism I lost little or nothing in the 2008 crisis.
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Concessional contributions: turning 50 is all about the timing
Q: I was born in April 1960. Can you explain which financial year I am considered to be over 50 in relation to the $50,000 concessional contributions cap?
Read more

Accessing super: turning 55 is not enough
Q: I am 57 years old, born 1951. I thought I could access my super funds from age 55 but I have been told I can’t access my funds until age 60. Is this correct? If I withdraw my super benefits, is there any tax payable?
Read more

What are the super and retirement rules for over-65s?
Q: My wife (age 63) and myself (age 65) have a small business. I was told by an organisation that at 65 or over I could put money into super, pay 15% tax on the way in and then draw it out when I wished and pay no tax. In fact I have been told to pay myself $30,000 or less and “launder” the rest of my income through my super fund.
Read more

No SG for over-70s: now that’s not fair
I have received a lot of encouraging emails from readers commenting on my top ten problems list, including a timely email from one reader about the fact that Superannuation Guarantee ceases when an employee turns 70.
Read more

DIY SUPER

Frustrated with frozen investments
Q: I’m writing to see if you have any view on the fact that Colonial have frozen the Income funds belonging to a SMSF, and I have no idea when the suspension on redemptions will be lifted. Since the freeze the share market have increased about 35%.
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Updating SMSF trust deeds
Q: I (my wife & I) have had a self-managed super fund (SMSF) since 1996. As rules concerning income streams etc have changed since the date of my deed, can we simply sign a current trust deed to make it effective for our requirements, or do I need to amend the relevant clauses in the old deed?
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Q and As

I’m leaving Australia: Can I access my super?
Q: I really found your web page very informative as I am just about to retire. I wish I had read it years ago. You certainly take the mystery out of super. My son, 42 yrs old has moved permanently to the USA. He has married an American lady and purchased a house etc. He does not intend to return to Australia.
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Age Pension: Deemed income rises with interest rates
Q: As I understand the position for the Age Pension income test, income from financial assets is worked out by deeming (capital value times rate) The rate is currently 3% per annum (although 2% on first $42,000 for a single person, and first $70,000 for a couple).
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Age Pension: Is my super benefit counted towards the Centrelink assets test?
Q: Can you please confirm whether the assets held in a self-managed super fund (SMSF) count towards the Centrelink asset test/income test?
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