Superannuation & Pension

Superannuation & Pension

Superannuation

Superannuation is an important consideration for everyone no matter at what stage of life you are at. By the time that you are ready to retire your superannuation could have grown into your largest asset.

Superannuation is an investment designed to provide money for your retirement. The superannuation system provides many tax concessions making it a very effective way to save for your retirement.

How your superannuation is invested will have an enormous impact on whether you can achieve your retirement goals. It is therefore important to seek advice early to ensure that you can achieve the best long-term outcome.
 

How can a financial planner help?

A financial planner can help you with creating a tailored strategy to build your retirement nest egg.

As part of our financial planning process we can provide advice and develop strategies around:

  • Reviewing your current superannuation arrangement to ensure they are appropriate for you

  • Rollover and superannuation consolidation to simplify your super and make it easier to manage

  • Develop tax effective strategies to build your superannuation, including salary sacrifice

  • Superannuation contributions and advice regarding the Government co-contribution and the superannuation contribution limits.


What actually is Superannuation?

 

Understanding what superannuation actually is will help you take the first steps towards a comfortable retirement.

Stewart French explains this in a quick video.

 

 

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FAQs

Below are common questions often asked regarding Superannuation & Pension.

Am I eligible for the age pension?

The Aged Pension was put in place to support older Australians who are in need of income support and other concessions during their retirement years. Benefits are offered to Australian residents who are age 65 or over and meet the income and asset test requirements. The aged pension system provides a wide range of support for older residents during retirement.

Your eligibility to the age pension depends on when you were born.
 

Date of Birth

Qualifying Age (Male)

Qualifying Age (Female)

1/1/1949 to 30/6/1952

65

65

1/7/1952 to 31/12/1953

65.5

65.5

1/1/1954 to 30/6/1955

66

66

1/7/1955 to 31/12/1956

66.5

66.5

1/1/1957 onwards

67

67

Note that women who were born prior to 31 December 1948 have already reached their qualifying age.
 

The Aged Pension offers several other elements. This can include:

  • work bonuses

  • health cards

  • Concession cards

  • other supplemental payments.
     

These programs are set into place to assist seniors with the aging process. It provides funds for seniors who are in need of financial assistance as they reach retirement. There are specific rules and qualifications for each program and they may change frequently. It is recommended that you seek professional advice to ensure that you receive the Age pension benefits that you qualify for. 

When can I access my super?

There are restrictions on when you can access your super for a lump sum withdrawal or to start a retirement income stream.

Generally, you can access your superannuation once you have:

  • Reached your preservation age and retired from the work force.

  • Reach your preservation age and commence a transition to retirement pension

  • Termination of employment after turning 60 years of age

  • Reached 65 years of age.
     

The superannuation system was established to assist you in building savings to help fund your retirement lifestyle. There are restrictions on when you can access your super for a lump sum withdrawal or to start a retirement income stream.

 

What is the preservation age?

Your preservation age is the minimum age you can access your super – currently 55 years of age for people born before 1960. The below illustrates your preservation age based on your date of birth.

Before 1 July 1960 
55 years old

01 July 1960 – 30 June 1961
56 years old

01 July 1961– 30 June 1962
57 years old

01 July 1962 – 30 June 1963
58 years old

01 July 1963 – 30 June 1964
59 years old

From 1 July 1964
60 years old

What is the role of a financial planner?

A financial planner is your financial coach who will assist you in deciding what you want to achieve and set strategies to help you reach your goals.

A financial planner can help you with the following:

  • Save money

  • Debt management

  • Insurance – to protect against risk

  • Grow your assets

  • Make the most of your superannuation

  • Plan for retirement

  • Discuss strategies to reduce tax

  • Make the most of redundancy payments and early retirement

  • Maximise potential government benefits 

What are the payment rates?

Your age pension entitlement is based on the assets and income tests. The test that results in the lower entitlement determines your pension entitlements. The threshold for each test is adjusted for single and for couples.

Payments are determined by a few factors. This includes whether you are single or a couple. It also accounts for couples that must live separately due to health reasons.

Other payments are also available and will have separate requirements as far as income and asset tests. These include Widow B Pensions, Bereavement allowances, carer payments, and disability support pension payments.

What are the income and asset tests?

In order to qualify for The Age Pension you must meet income and asset tests.

The asset and income tests apply each year in March and September to determine if there are any changes in the recipient's financial situation. A change in financial situation may result in the pension entitlement being adjusted.

If the pensioner exceeds the assets and/or income limits the pension can be reduced in staggered amounts based on the amount the individual or couple are over the established limits. There are also strict rules about disposing of assets, in order to qualify for the Aged Pension.

Are there any conditions where my superannuation may be released early?

There are limited circumstances where you can apply for an early release of your superannuation benefits.

Your superannuation may be accessed early in the following circumstances;

  • Death (benefits are paid to your dependants or personal legal representative)

  • Permanent incapacity*

  • Diagnosis of a terminal medical condition*

  • Termination of employment with an employer-sponsor where your preserved amount is less than $200

  • Permanent departure from Australia if you are an eligible temporary resident

  • Satisfying any other condition of release as specified in superannuation law.
     

*In order to access your super on medical grounds, you must satisfy the definitions of Permanent incapacity or Terminal medical condition as defined by the Federal Government. These definitions may be different to the definitions that apply to insured benefits.

Limited access to your superannuation benefits may be available in the following circumstances:

  • Severe financial hardship (limited access

  • Eligibility for approval on compassionate grounds
     

The federal government has set strict conditions which must be met to access your super under financial hardship and compassionate grounds.

How can a financial planner help me?
A financial planner can help you with the following:
  • Save money

  • Debt management

  • Insurance – to protect against risk

  • Grow your assets

  • Make the most of your superannuation

  • Plan for retirement

  • Discuss strategies to reduce tax

  • Make the most of redundancy payments and early retirement

  • Maximise potential government benefits

What are the residency requirements?

Essentially being a long time resident of Australia will qualify you for the aged pension. When you lodge a claim you must be a resident and currently living in Australia.

You also need to have been an Australian resident for a continuous period of at least 10 years, or for a number of periods that total more than 10 years, with one of the periods being at least 5 years. Unless you:

• Are a refugee or former refugee

• Were getting Partner Allowance, Widow Allowance or Widow B Pension immediately before turning Age Pension age, or

• Are a woman whose partner died while you were both Australian residents, and you have been an Australian resident for  two years immediately before claiming Age pension.

How do I select my financial adviser?

The value of financial planning advice can be priceless. Locating a financial planner that you feel comfortable with and trust can seem a daunting task.

Selecting an advisor who understands your needs and what is important to you will lead to a higher level of satisfaction than numbers on a chart. The best way to find an advisor that understands your needs and goals includes doing a little legwork.

The first step to finding a great advisor is to ask friends and family members. Pay particular attention to those in similar life situations. Recommendations from people with similar ages and financial goals will lead you to an advisor that understands your demographics.

Once you have a list of a few potential advisors, look at their web pages. Information found online will give you an idea of what market they are targeting and their investment philosophy. Call the ones you like and schedule a meeting. As you meet with each potential advisor prepare questions that will help you understand what is important to them, and what they will be able to provide for you.
 

Questions to Ask a Potential Advisor

  • What qualifications do you have?

  • What experience do you have?

  • What area of financial planning do you specalise in?

  • What services and products are you licensed and authorized to provide advice on?

  • What is your approach to investment?

  • Are you a member of the financial planning association?

  • How often do you contact and/or meet with your clients?

  • What are your fees and how are they charged?
     

After you meet with the advisor, evaluate the meeting. Did they answer questions in a way that built your confidence? Did they ask questions to better understand your situation? Selecting an advisor is a very personal decision. You will trust this person with your most intimate information.

Taking the time upfront to select an advisor should be the beginning of a long term relationship. They will help you build a retirement plan, pay for your children’s college and most other important aspects of your life. They will be a part of most major decisions. A financial advisor will help you put forth a plan that will enable you to reach your financial goals. This is a very important person in your life. 

What are the contribution limits within super?

The Australian Government has set limits on the amount that can be contributed into superannuation each year. The Government has imposed limits on both personal contributions (which are made with your after tax income and known as non-concessional contributions) and concessional contributions (such as contributions from your pre-tax salary).

For Super the age definition is as of July 1st of the given year. Super contributions are established for 2014.

What is involved in the financial planning process?

We seek to build lasting relationships with our clients. We take the time to clarify what’s important to you and to understand your situation and values. We want to work with you over the long-term to create a plan that works for you now and in the future.

Our financial planning process ensures that your financial goals are our highest priority. We have a structured process which ensures that our advice is collaborative, simple and transparent.

We seek to build lasting relationships with our clients. We take the time to clarify what’s important to you and to understand your situation and values. We want to work with you over the long-term to create a plan that works for you now and in the future.

Our financial planning process ensures that your financial goals are our highest priority. We have a structured process which ensures that our advice is collaborative, simple and transparent.

Our financial planning process involves the following:
 

Initial consultation

The first appointment is about getting to know each other and is free of charge.

The purpose of the meeting is to allow you and your financial planner to get to know each other, assess your general needs and decide whether you feel comfortable with your adviser to proceed into an advice relationship.

To make the most of the of your discussions, make sure that you bring any relevant documents, such as details of your income, superannuation, debts, assets and insurances so we can work out how we can help you.

If you decide to proceed to the next stage, we will discuss all fees and charges with you at this point.
 

Strategy recommendations

We will present and explain our recommendations to you in a written document known as a Statement of Advice. This forms the basis of your financial plan.

We take you step by step through the plan, answer any questions you have, and make any modifications you require.
 

Implementation

Once you have agreed with the advice and given us the go-ahead, together we will help you implement your chosen strategies.
 

Regular Review

Your financial plan is not a set and forget solution, it is a living document that can adapt to change. It is therefore important to seek regular check-ups to ensure that the plan continues to meet your needs and identify any changes in your circumstance.

How much will it cost?

Our initial consultation is both cost and obligation free.

During our initial meeting we will determine whether or not we are able to assist you. If there is a match we will agree on the fee for our Statement of Advice (based on the complexity and strategies explored) with you prior to commencing any work. We will also provide you with a copy of our Financial Services Guide (FSG), this document contains the services that your financial planner is authorised to provide and clearly defines our fees for those services.

The Statement of Advice that we provide to you will detail all fees and charges to the financial planner should you agree to proceed with the advice.

What are concessional super contributions?
Concessional contributions broadly comprise contributions with are a'before tax' contributions and are therefore assessable to the fund. Common examples of concessional contributions are:

• Superannuation Guarantee contributions made by your employer
• salary sacrifice contributions made from your pre-tax salary
• personal contributions for which a tax deduction is claimed

How do I pay for your service?

You can pay in the following ways:

  • as a fee for advice that will be deducted from your investments as a one-off payment or in instalments;

  • by direct invoice from us for initial and ongoing advice;

  • via commission we may receive from a financial product provider when you commence an insurance contract, or loan product;

  • or a combination of the above.

Are concessional contributions taxed?

Concessional contributions are taxed at 15% on entering super. From 1 July 2012 an additional tax of 15% (total tax of 30%) has been applied to individuals who earn in excess of $300,000 p.a.

What happens if I exceed the concessional contributions cap?

If you exceed the Concessional contributions cap the amount in excess of the cap will be included as your assessable income and taxed at your marginal tax rate. Furthermore, the excess concessional contribution will be counted against your non-concessional contributions cap.

As a result of exceeding the concessional contributions cap, you will be liable for the Excess concessional contributions (ECC) charge on the increase in your tax liability. When determining your tax liability, the tax office will take into account the 15% contributions tax which has already been paid on the concessional contribution.

You may nominate to withdraw up to 85% of your excess concessional contributions from your super fund to pay your increased income tax assessment. In this event any excess concessional contribution withdrawn from your super fund will no longer be counted towards your non-concessional contributions cap.

What are non-concessional contributions?

Non-concessional contributions are made from your after tax income. These are voluntary personal contributions that you make into your super fund. Non-concessional super contributions are not taxed.

The cap for non-concessional (personal contributions) is $180,000 for 2015/16 for those under 75 years of age.

Who can make non-concessional super contributions?

You can make personal after-tax contributions to your super fund or retirement savings account if you’re not working, provided you’re under 65 years of age.

If you’re 65 years of age or over, you can only make personal after-tax super contributions if you:

  • aren’t yet 75 years of age and

  • have been gainfully employed for at least 40 hours over 30 consecutive days during the financial year. This is known as the work test.

What is the bring-forward rule?

Legislation allows those under 65 years of age to bring-forward up to two years of non-concessional contribution. The bring-forward rule is automatically triggered in the year that you make a personal contribution in excess of the contribution cap in a year.

Once the bring-forward rule has been activated, the normal contribution cap does not apply, you are instead limited to personal contributions of $450,000 over a continuous three year period ($540,000 from 1 July 2014).

Non-concessional contribution cap examples are included below:

Example 1
2013/14 - $450,000
2014/15 - Nil
2015/16 - Nil
2016/17 - $180,000

Example 2
2013/14 - $450,000
2014/15 - Nil
2015/16 - Nil
2016/17 - $540,000

Example 3
2013/14 - $200,000
2014/15 - $100,000
2015/16 - $150,000
2016/17 - $180,000

Example 4
2013/14 - $200,000
2014/15 - $200,000
2015/16 - $50,000
2016/17 - $540,000

Example 5
2013/14 - $300,000
2014/15 - $150,000
2015/16 - $Nil
2016/17 - $180,000
 

Note if you have activated the bring-forward rule prior to 01 July 2014, you are restricted to total non-concessional contributions of $450,000 over a three year period.

 

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