Robert's Retirement Blog

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 …

When I hear this statement and ask a client what it means to them. They usually think of the “Balanced” option like a seesaw, such that if you are sitting on one end of a seesaw and someone of equal weight is sitting on the other end – the seesaw doesn’t move. This is because they are equal 50/50 weight and are truly “balancing” each other out.

However, when we look at what the AustralianSuper Balanced option is invested in (as per the image above) – it to me has growth assets of approximately 76.5%. Some people identify growth assets differently, my calculation/interpretation to get to 76.5% is taking into account Australian Shares, International Shares, Private Equity, Infrastructure and Property – which I consider “growth assets”. These are generally but now always more volatile than “defensive assets” such as Credit, Fixed Interest and Cash. So, with 76.5% in growth assets this leaves only 23.5% in defensive assets.

This differs from some consumers who are thinking their “Balanced” option is like a seesaw with a 50/50 split between growth and defensive assets. It is important that regardless of which fund you are in, you have an investment strategy that aligns with YOUR needs. When you are trying to compare – just remember a …

NO. Well not really no… superannuation isn’t actually an investment so the question doesn’t make sense. It is a common misconception that superannuation is an investment. It is though a place/entity where you CAN hold investments within. Superannuation is just another environment to hold investments just as you can hold investments in your own name, a company’s name or a trusts name.

When it comes to holding investments inside superannuation it does come with certain rules and regulations around it. These are but not limited to, restrictions on when you can access your money personally, rules around what you can invest in and how much you can contribute to the superannuation environment.

It is not all restrictions though, given these restrictions – it also then comes with tax concessions that are available to you when you are working and also in retirement. The general idea is that superannuation is there for the sole purpose of funding your retirement when you are 60 onwards - the government gives you these restrictions and also these benefits to help maximize what is actually left for your eventual retirement.

With the funds inside your superannuation, you do have control to a certain extent as to what you invest in – it’s …