Robert's Retirement Blog

Like most Australian’s – everyone is shopping around for the best deal on everything from a better phone plan to better returns in superannuation and low superannuation fees.

Now this blog is not advice, it is just general in nature like all my blogs. I reference CBUS superannuation as an example and am not commenting on whether they are a good fund or not as it can be the right fund for some people. I just thought I would highlight a recent article here about them being taken to court due to delays in processing times with death and disablement claims inside superannuation.

Now for me and my client’s – a superannuation fund or insurance provider isn’t always about the best on fees and returns (although fees and returns are considered), but goes deeper into other areas like ease of use of the fund and also a funds promptness when client’s are in need.

Now this could be anything from passing away and how promptly their super fund pays their superannuation to their beneficiary, or a client might need money urgently from their super fund as soon as possible without delay!

When it comes to retirement planning especially and choosing a fund in retirement, you are usually by nature interacting with your fund more as you are drawing …

In Australia, as at the time of writing – the current annual cap for contributing money concessionally to superannuation is $30,000 per year.

A concessional contribution to superannuation is a contribution that is generally a “lower tax” than what you may pay if you receive the income and pay tax at your normal marginal rate. Obviously in most cases if you are only earning let’s say $10,000 of income in a year – then it may not be worth it to you as the tax on a concessional contribution is 15% whereas personally if your only income is $10,000 – you will pay no tax. If your marginal tax rate is 30% or higher it starts to make more sense to concessionally contribute to super. Keep in mind things like what your employer already has put in counts to the annual cap and also amounts contributed can’t be accessed until a condition of release is met of superannuation.

If we rewind time back to 2007/2008 – the annual cap for someone aged 50 or less was $50,000 per year and over 50 was $100,000 per year (so quite generous!). Overtime the rules have changed and from 2017/2018 it was just a blanket $25,000 for all individuals. Since then it has slowly increased and is now at $30,000 for the year. All though the rules have changed over time – …

Financial Information Service Officers provided by Centrelink/Services Australia can help provide factual information in some situations but often get confused with a financial planner. I have highlighted some differences between financial service professionals below:

Financial Information Services Officers (FIS) at Centrelink: They aren’t financial planners, so they can’t necessarily consider all of your financial goals and give you specific recommendations to meet them - nor can they make product recommendations in relation to investments etc. However, they can be a good starting point to get factual information around the age pension system and other Centrelink entitlements at no cost.

Industry fund financial planners: These can be a cost-effective way to receive financial advice, though they typically still charge around $3,000 for their services, which can vary and be more or less. From an investment perspective, they generally only look at the industry fund you are currently in and will likely recommend that option, which might be perfectly fine. However, some of their advice can be limiting and “cookie-cutter” to cater to high demand.

Other financial planners: Some are licensed through companies that own their …

Just like everything else on TV or what we hear in the media, it is important to do your own research, as not everything said applies to each individual in the same way. This is also true for advertised superannuation returns. Not too long ago, many funds released their versions of the June 30, 2024, end-of-financial-year annual returns for their various investments. While these returns are generally correct (based on what they disclose), it is important to remember that each member in each fund has a different investment journey and, therefore, a different investment return. Many individuals are either adding money regularly while they are still working or withdrawing/selling to fund pension payments in retirement.

Let’s say Person A had $100,000 invested in one superannuation product’s “Balanced Investment Option” for the entire year, made no withdrawals, and incurred no administration fees. Person A saw their super fund disclose a 7% return on TV for the financial year. In this case, their return would be 7%. However, if Person B had $100,000 (with the same superannuation product and investment as Person A) but made a withdrawal of $10,000 when markets crashed, they would see the same advertised return of 7% on TV. However, …

Retiring soon then looking to convert your superannuation to an income stream and meet the eligibility criteria? It sounds simple enough, however remember that setting up an income stream means dealing with a product provider (i.e. your super fund) with all different options and ways of doing things.

What I mean by that is they all have different administrative requirements to set one up. Some let you complete the application with no paper (just commencing one digitally online), others may need a wet signature, then for it to be scanned and sent in via email. Some even still require you to physically post the application in.

Then there are the identification requirements, you may be asked to send in certified copies of your identification to prove who you are again. Getting the money out may also require providing the super fund with further identification like bank account statements or even a recent council rate notice!

Now once you have everything ready to go, there still may be hiccups along the way, there could be errors in the documents you completed/provided – or things can always get missed and delays can happen when the superannuation fund tries to process your application. I always get clients to start the process sooner …

The goal posts as everyone knows do shift from time to time. In this blog post I am just highlighting how through the recent years the preservation age has changed and the age pension age. Your individual preservation age is when you can start accessing your superannuation - put simply in full if you retire or access in part through a transition to retirement income stream.

The table below shows how it has increased over time, now essentially from 1st of July 2024 onwards – the preservation age is 60 for everyone. See here for preservation age reference

Noting the preservation age is different from when, if eligible you can claim the age pension from Centrelink. Everyone claiming the age pension now needs to be 67. See here for age pension age reference

It can make it hard to plan at times when the rules do change, however my job is to be up to date with all the applicable rules and just focus on what we can control and build a plan from there – knowing that things may change, whether that be any change (not just legislation changes) such as a client’s health or a client’s goals.

In most cases no. There are some different types of pensions and some older style pensions that have different rules, for example they may have been established prior to 1st of January 2015 and if the other criteria is met, they could be grandfathered for Centrelink purposes which the income does have a different treatment and the amount you draw can affect your Age Pension.

For this blog, I am just referring to a normal account-based pension that are offered on the market today. Again, it is important to get advice specific to your situation as there are many terms for account-based pensions such as “income streams” or “pension funds” and it is important you are referring to the correct product.

So, an account-based pension will be assed by Centrelink in two parts. Part 1 – they will just assess the market value of the total account against your asset test. Noting the value of your account-based pension is generally updated every six months - usually in February and August if it is linked correctly in your Centrelink account. Part 2 – they will then assess the account-based pension based on its value to earn a “deemed” amount of income. The deemed amount of income is calculated based on a variable percentage set by Centrelink. It …

The Association of Superannuation Funds of Australia (ASFA) has published (reflective as at June 2024) that to have a comfortable retirement for a couple, they would need $690,000 of superannuation at age 67 combined to achieve this. They define a comfortable retirement as living off of $73,337 per year, inclusive of things like health insurance to holidays and everything in between.

I think this number is okay as a guide ONLY. This number and situation really looks at retirement as a straight line – meaning that both members of a couple are age 67, both members stop working at the same point being 67 and live off the same amount each year until their statistical life expectancy’s. What you need for retirement I find differs greatly from person to person. Things like someone’s health, life experiences or goals will change what is needed.

Just to throw a scenario that isn’t a straight line which I have tried to put simply (not taking into account returns whether negative or positive) - a couple with $400,000 in superannuation might want to retire at 63 and go on 1 big overseas holiday every year and will spend $100,000 per year inclusive of living expenses and holidays for 4 years (until age 67), which at that age, they might have …

Currently the way the regulations are set for superannuation is that when you meet a condition of release or attain age 65 – you are eligible to create an account-based pension with your accumulated superannuation. The benefits are that the earnings within the fund will now be tax free (0%) whereas currently in the accumulation phase of superannuation they are taxed up to 15%.

Now, regulators such as APRA have suggested in the past years that over 1 million accounts could be eligible to commence an account-based pension and benefit from tax free earnings, however these accounts were still stuck in accumulation phase and paying up to 15% tax on the earnings still.

As an example on a balance of $100,000, if a fund earnt a 7% return for the year (or $7,000) – this could mean up to 15% tax may be paid in the accumulation phase which would be approximately $1,050. Now if this account was held in an account-based pension, then this tax would no longer need to be paid by the fund, resulting in more money in the investors pockets to help provide for their retirement. This is one of the big incentives of superannuation in the first place, it is a concessionally tax environment whilst you are still working/accumulating wealth, then in …

I recently saw an article by 9 news on the 10th of September 2024 – called “Man discovers monumental mistake with superannuation account”. You can view the article here. 

From what I could see from what they wrote was:

• A man – Kevin retired due to a health scare
• He checked his super fund and found 2 random women were listed as his children and beneficiaries of his superannuation fund.
• He doesn’t have any daughters.
• The super fund said it was a manual error – not a result of his account being “hacked”.

The media again like to sensationalise things and calling it a “monumental mistake”. My initial thoughts are that the chance of the superfund actually paying the superannuation benefit to these women in the event of his death was unlikely as superannuation can only be paid to a spouse, or de facto partner, a child, interdependent, other financial dependants or your legal personal representative. These women don’t fall under any of these categories. The super trustee’s when paying a benefit need to check that the beneficiaries are who they say they are and provided the super fund did the correct checking if he did pass away, this would mean that they would find these women ineligible as they are actually not his children or …