Consumers lose in super war, SMSF fraud, older women dying younger, new life tables, how much is enough, fees.
Welcome to the November 2009 edition of SuperGuide newsletter, a free and independent source of superannuation information for consumers.
Here’s the highlights of this month’s SuperGuide newsletter:
- THE SOAPBOX: THE 25-YEAR SUPER WAR. Commissions are alive again, and consumers are merely collateral damage in the war between retail funds and industry funds. Trish argues, advisers are already breaching fidicuriary obligations by accepting commissions as payments. For more, click on the links below.
- UPDATED LIFE TABLES: ARE OLDER WOMEN DYING YOUNGER? Revised Australian Life Tables have just been released. Nearly all Australians are living longer except for older women. Is this a statistical blip or a sign that life expectancies have peaked? For more on this story, and to find out how long you can expect to live, click on the newsletter links below.
- HOW MUCH MONEY IS ENOUGH (REVISITED)? A reader queries the different lump sum amounts for a comfortable retirement quoted in newspapers, SuperGuide and by financial advisers. Who is correct? Click on the newsletter link below to find out.
- SMSF FRAUD: A CASE OF MISTAKEN IDENTITY. No, legitimate SMSF trustees are not defrauding the Government or anyone else. Large funds, and the ATO, are letting scammers withdraw millions of dollars from member accounts, and blaming the decent trustees simply trying to independently save for their retirement. Now that’s not right. Click on the link below to find out more.
In this month’s newsletter, you also can discover what super funds charge in fees, an emerging DIY super club, how to maximise the after-tax contributions cap, heaps of Q and As from readers and more, by clicking on the links below.
DECEMBER EDITION: The last SuperGuide edition for the year will be a bumper edition covering the latest news on super including an update on the Government’s super reviews, in particular, the Cooper Review (Review into the governance, efficiency, structure and operation of Australia’s superannuation system). For those readers who use the Summer holidays to plan for the following year, we will be outlining some of the more popular strategies available to boost your super accounts. We will also be providing an expanded Q and A section to cater for the many questions our readers send to us, including a special feature for our overseas/expats readers who want to find out how to access Australian super benefits or move benefits back to Australia.
SUMMER EMAILS: Although, we won’t be sending out a January newsletter, we may be sending out irregular emails to subscribers when any significant super news arises over the Summer. Also, I am trying to catch up on the many questions that I have received over the year. I can’t answer every question (although I read and acknowledge all emails), but I know that for anyone taking the time to send a question to SuperGuide, that receiving a considered answer is very important.
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.
Consumers don’t matter. They really don’t. In case you thought superannuation was about the fund members and that the 9% Superannuation Guarantee was all about your retirement savings, then think again. In the heat of the battle, sometimes civilians get hurt and anyone who has followed the Afghan and Iraqi conflicts knows that when innocent people get hurt in the wake of a war, such carnage is called ‘collateral damage’.
Updated life tables: Is the tide shifting for Australian life expectancies?
Australians born today are expected to live longer than Aussies born five years earlier, on average, according to the Australian Life Tables 2002-2007 released by the Australian Government Actuary – unless you’re woman in your eighties or nineties. In what may be a statistical aberration, or perhaps a sign that life expectancies are set to peak, for the first time since records started, a female aged 81 years or over, will live a shorter life than a female aged 81 years or over five years earlier (more on this later).
Latest data: Find out how long you can expect to live
Now that super funds, fund managers and other financial service providers have (nearly) survived the GFC, the next big issue concerning the super industry is ‘adequacy’, that is, the worry that Australians will outlive their retirement savings. Okay, the industry is pretty obsessed with the current Government reviews into super, and the ridiculous debate on the merits of commissions for financial advice (ban them!), but the hottest topic is the risk of Australians running out of money in retirement and relying solely on the Age Pension.
Moving targets: come on, how much do I really need?
You’re thinking about your retirement and worried about whether you’ll have enough money to live the life you want, or perhaps you’re more worried about not having enough money to even live the life you don’t want! Uncertainty can create a lot of stress, and doing some research (see article How to plan for your retirement) can often allay many of your fears even if your financial situation is not as strong as you hoped.
SMSF fraud: A case of mistaken identity
If you read the business section of the newspapers recently, or keep track of the financial news on the television, you may have heard about the push by a few industry groups within the superannuation sector to tighten the entry requirements for self-managed super funds (SMSFs) because of the incidence of SMSF fraud.
HOW SUPER WORKS
Maxing the after-tax contributions cap
Q: If you turn 65 and retire after 1 July 2009, can you still make the $450,000 bring-forward non-concessional contribution as long as it’s before June 30th 2010? Or do you have to satisfy the work test to do so?
A comfortable retirement: how much super is enough?
So, the big question is: how much money do you really need for your retirement? Lifestyle is a very personal thing — luxury living for one person is a modest existence for someone else. I don’t intend to suggest the exact lifestyle you must choose for your retirement years but I can offer you some guidance on the amount of money you need if you want to cover your basic living costs and support a hobby or active social life. For example, do you expect to take frequent holidays and are you planning to enjoy regular glasses of wine or beer?
FEEding frenzy: super fund fees
When superannuation funds are delivering strong returns, you don’t see much written about the costs of investments, including the costs charged to member accounts by super funds. When returns are poor however, fees become more obvious. Along with investment performance, can be an important factor in determining the size for your final retirement benefit.
Unrestricted access to super, sometimes
Q: I was an Australian citizen, age 37, and had been part of a super fund from about 1993/4. I left Australia in 2001. I see from your 12 legal ways to withdraw your super benefits that I may be able to access my restricted benefit. You write: “Cease employment. If you’ve been a member of a super fund since before 1 July 1999, you can cash your restricted benefit only when you cease employment with your employer”. As I said earlier I left Australia and my employer, does this mean I can access my super? Also I am in the early stages of changing my citizenship to British what are the super rules governing ex-Australians and their super fund.
Looking for a DIY super club? Join the AIA
Q: Did the Self Managed Superannuation Members Association (SMSMA) ever get off the ground. I noticed it mentioned in one of Trish’s books and would be keen to find out more if it exists.
SMSFs: Commercial property and borrowing
Q: My wife and I purchased a licensed post office and freehold in 1995 from Australia Post. In addition to the licence, we acquired one title with one building (part is leased to a commercial tenant and part we use to run the post office) a freestanding shop was added in 2000. Value of property is now about $1.25 million ($600,000 mortgage) and $750,000 licence. In general terms, can the freehold be transferred/sold to a SMSF in our names, assuming the bank will loan for such a transaction? Thanks for this great web site and look forward to reading your book.
Q and As
Repay debts with super: then claim the Age Pension
Q: I work for the government and I belong to the PSS scheme (a public sector super fund). My question is, can I pay my superannuation into my mortgage and then receive the Age Pension? I am over 55.
Does shift work count for SG entitlements and insurance cover?
Q: Hi, I’m a shift worker and have a question about whether my ‘Super fund salary’ figure which my employer gives to my super fund should include both my base and shift loading salary. At the moment it only includes my base even though my employer does pay super for both my base and shift loading. What I’m concerned about is that they only give my base salary to my super fund which is what is used to calculate my life insurance and income protection.
Super for beginners, part 4: My son’s super account is bleeding fees
Q: Hi, I am inquiring on behalf of my son who is unable to work at this stage of his life. It has been three years since he worked. He doesn’t have much in the fund and it is going down every year. Is there any way to stop the bleeding of his funds? I will be ever grateful if you could help.
I’m retired. Can I make super contributions?
Q: If I have retired from work and later on inherit a reasonable sum of cash, can I make a non-concessional contribution into my superannuation fund? OR is that only permitted while I am working, regardless of my age?