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Understanding super


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An introduction to superannuation and your AvSuper membership.

An introduction to superannuation and your AvSuper membership.

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  • 3. By 2030 all baby boomers will be 65 or older. This means that there will potentially be no age pension in the future and means having an active interest in your superannuation and contribution levels is vital. This should encourage members to make extra contributions. AIM: Increase contributions
    ASFA - Association of Superannuation Funds of Australia
    ABS - Australian Bureau of Statistics
    4. This means that there are millions of working Australians with more than one Superannuation account. This is a major issue as these people could potentially be paying multiple fees, multiple insurance policies and having a negative impact on their retirement savings. AIM: Roll to AvSuper

  • Optional to make a nomination but if you don’t, the Trustee will decide how your super is distributed if you die whilst a member.

    Super law has specific definitions of who can be a beneficiary – nominating ineligible people makes your nomination invalid.
  • Note that income streams have some different tax rules – generally they pay less tax.
  • Transcript

    • 1. Understanding superannuation Presented by Silas Dingiria, Member Services Manager 1
    • 2. Disclaimer The following information is general advice and was prepared without taking into account your objectives, financial situation or needs. Therefore you should consider the appropriateness of the advice in light of your personal situation before acting on the advice. An AvSuper Product Disclosure Statement on any financial product mentioned in this document should also be obtained and read prior to proceeding with an investment decision.
    • 3. A brief history of Australian Superannuation and Retirement Pensions
    • 4. A brief history of Superannuation and Retirement Pensions in Australia 1862 Introduction of superannuation to Australia 1900 NSW introduces a means tested age pension of £26 pa 1973 Only 32% of working Australians covered by Superannuation 1983 The Hawke Government expresses support for the principles of employee Superannuation with employers obligated to contribute 3% rising to 6% over time 1990 AvSuper established 1992 Compulsory Superannuation commenced 1 July 1992 Superannuation assets at $148 billion (estimated by Reserve Bank of Australia) 2013 Superannuation assets estimated at $1,463.3 billion 2013 The Association of Superannuation Funds of Australia (ASFA) statistics - 31.3 million super accounts in Australia
    • 5. A brief history continued… What does this mean for me? 1. Compulsory Super contributions for the entire working life of those starting work after 1991. Thus more in super and, in theory, a more comfortable retirement. 2. In 15 years super assets have grown by over a TRILLION dollars 3. Extreme pressure on social security system (Age Pension) when the baby boomer generation retires. Baby Boomers accounted for 69% of workers in 2009 (5.6 million out of 8.1 million full time employees) 4. ABS statistics at 30 June 2012 – 22.9 million Australians – 8,112,500 full time employees
    • 6. An Overview of Superannuation Rules in Australia
    • 7. Accessing your super Date of Birth Preservation Age Before 1 July 1960 55 1 July 1960 - 30 June 1961 56 1 July 1961 - 30 June 1962 57 1 July 1962 - 30 June 1963 58 1 July 1963 - 30 June 1964 59 From 1 July 1964 60 • when you reach your ‘preservation’ age & permanently retire • when you reach age 60 and cease your current employment • when you reach age 65
    • 8. Accessing your super cont’d You may be able to access super early through • Terminal illness • Financial hardship • Compassionate grounds Note specific criteria must be met to be eligible for such claims.
    • 9. Nominating super beneficiaries Non-binding • Provides direction to the Trustee • Can be changed via Member Online or a form • No expiry date Binding • Legally binding so Trustee must follow it • Must be valid and less than 3 years old • Can be changed by completing a form and having it witnessed Remember to update it periodically and for major life changes
    • 10. Taxation Treatment Tax on contributions Concessional (Employer & salary sacrifice) contributions are generally taxed at 15% Tax on investment earnings Investment earnings of super are taxed at a maximum rate of 15% Tax if you don’t provide your Tax File Number (TFN) By not providing your TFN you may pay up to 45% (plus Medicare levy) contributions tax Tax on withdrawals Tax on withdrawals varies depending on age and other characteristics All super accounts have a taxable and tax free component. Tax on the taxable component is applied as: – 22% for people below preservation age – 17% for people between preservation age and age 59 – Nil tax for people aged 60 and above Note: A low rate cap applies in certain circumstances which may reduce tax on the taxable component
    • 11. Super contributions
    • 12. Types of contributions • Superannuation Guarantee (employer) • Salary sacrifice contributions (pre-tax) • Member voluntary contributions (post-tax) • Spouse contributions (post-tax) • Government low income contribution • Government co-contribution
    • 13. Ordinary time earnings (OTE) Employer contributions are calculated as a % of your OTE, which generally Includes: Examples Awards & agreements Usual hours, casual shift-loadings Allowances Danger, retention, unconditional extra payment Payment of expenses Return to work (under workers compensation) Leave payments Annual leave, sick leave, long service leave Bonuses Performance, Christmas, ‘ex-gratia’ for ordinary hours Other Commissions, termination pay (in lieu of notice) Excludes: Examples Over time amounts Hourly rates, loadings, annualised rates, lump sum payments, casual employees Payment of expenses Reimbursements, unfair dismissal, petty cash Leave payments Parental, jury duty, defence reserve service Bonuses For overtime Other Termination pay (unused sick, annual or long service leave)
    • 14. Contribution type Contribution limit Before-tax contributions (concessional) • employer • salary sacrifice • self-employed $30,000 pa (indexed) $35,000 pa if over 50 (not indexed) After-tax contributions (non- concessional) • after-tax voluntary • spouse $180,000 pa (6 x concessional limit) If under 65 can pay $540,000 in one year, then $0 for next 2 years. Super contribution limits
    • 15. Government Co-Contribution from 1 July 2014 • $0.50 for each $1.00 you contribute after tax, up to a maximum of $500 (where your total income is less than $34,488) • The co-contribution is reduced if your total income is $34,488 - $49,488 • 10% or more of your total income must be from employment, running a business or a combination of both Other eligibility criteria also apply
    • 16. Spouse contributions If you make a contribution for your spouse you may be able to claim a tax offset up to $540 per financial year: • 18% of contributions up to $3,000 • spouse’s total income is $10,800 or less • reduces by $1 for each $1 over $10,800 • is nil if your spouse earns $13,800 or more
    • 17. To be eligible for the Spouse Contribution tax offset • You did not claim a tax deduction for the contributions • Both you and your spouse were Australian residents when the contributions were made • Your spouse’s assessable income + total reportable Fringe Benefits amounts are less than $13,800
    • 18. Contributions splitting • You can split concessional (before–tax) contributions with your spouse • You can only split concessional contributions made to an accumulation account • Contribution splitting is limited to a maximum of 85% of your concessional contributions • Contributions exceeding your concessional limit cannot be split Note: You can only split contributions made in the previous financial year
    • 19. Investments and superannuation
    • 20. Asset classes explained Growth assets • e.g. shares and property • higher risk but also have the potential for higher returns, especially over the long term Defensive assets • e.g. cash and fixed interest (bonds) • lower risk but generally provide lower returns
    • 21. Investment Options and performance As at 30 September 2014 Investment Options Defensive Growth 1 year 3 year* 10 year* Growth (MySuper) 20% 80% 9.0% 12.6% 6.0% Conservative Growth 70% 30% 6.4% 7.4% - Stable Growth 50% 50% 8.6% 9.7% 5.9% High Growth 0% 100% 10.8% 16.3% 6.6% Australian Shares 0% 100% 7.6% 16.4% - International Shares 0% 100% 13.1% 16.8% - Cash 100% 0% 3.6% 3.5% 4.3% * Compound average returns
    • 22. Member Investment Choice (MIC) • Seven investment options available to suit your risk profile and retirement horizon • No switching fees and you can switch as many times as you like • Current balances and future contributions and rollovers can be invested differently
    • 23. Growth (MySuper) investment option The default option for members not making a choice 0.77% investment management fee Primary objective: (a return after fees & taxes above CPI)
    • 24. AvSuper Insurance
    • 25. AvSuper Insurance • 2 units of Automatic cover is provided for Death and Total & Permanent Disablement (TPD) – you can choose to opt out • You can apply for additional cover and Income Protection cover • Premiums – deducted from your account monthly – based on your age and number of units • Pre-approved cover increases for major events Term, conditions and eligibility rules apply
    • 26. Income Protection (IP) Cover • Short Term cover - payable for up to 2 years • Long Term cover – payable up to age 60 • Your choice of 30, 90 or 180 day waiting period • Cover up to 75% of salary • An additional 10% salary can be insured as a super contribution into your AvSuper account You must be working at least 15 hours per week to be eligible for this cover
    • 27. Example insurance cover * Based on a male member at age 35 earning $120,000 in a light blue collar occupation Type of cover Number of units Amount of cover Annual premium* Automatic death and TPD 2 $124,000 $66.56 Death only 8 $496,000 $178.88 Death and TPD 8 $496,000 $266.24 Income Protection short-term cover with 30 day waiting period $8,500 pm $469.20
    • 28. After super…
    • 29. Super Income Streams • Same low fees and strong investment returns as other AvSuper accounts • Withdraw funds once you are retired – tax free if over 60 • Any remaining balance can be paid to your dependants or estate when you die • Counts 100% towards the Centrelink Asset test
    • 30. AvSuper income streams Full income stream Transition to retirement (TTR) Retired Can still be working Can with draw lump sums Can’t withdraw lump sums Withdraw up to 100% of balance each year Withdraw up to 10% of balance each year Same fees, investment choice and member benefits apply to both income stream types • Access once you reach preservation age • Cannot add money once opened • Two types:
    • 31. From super to Income Stream Earn a salary 9.50% employer contribution & salary sacrifice into super Transfer super into an income stream Draw down at least 4% a year as an income stream
    • 32. Qualifying for the Government pension • Centrelink does two eligibility tests • Apply the lower rate to determine your pension eligibility
    • 33. More about YOUR fund
    • 34. Other Features • Anyone can join AvSuper • Online account access • Stay in AvSuper when changing employers – and industries • Monthly investment update on our website • No contribution fees • No fees to switch investment options
    • 35. AvSuper’s Member Advice Solution • Personal advice about insurance, contributions, income streams (including TTR) and investment options available through your AvSuper account • Provided at no additional cost up to three times a year with a nominal charge applying to subsequent requests To make an appointment for personal advice, Call 1800 805 088 or email
    • 36. Changing employers, keeping your super • Stay with AvSuper if you change employers or stop working • New employers can contribute to AvSuper for you • Employer and personal contributions can be made by cheque or direct deposit
    • 37. Rollovers to AvSuper • Rollover amounts from other super funds - keeping your money together can save on fees • No entry fee is charged • Your old fund may charge an exit fee and you may lose other member benefits when transferring • You may be eligible to transfer your existing super insurance over eRollover via Member Online – easy!
    • 38. To find out more…. • Visit • Call 1800 805 088 • Tweet • Like • Visit us in Canberra (off 25 Constitution Ave, opposite Airservices reception)