Page 1

An early start on it will have less financial impact on your lifestyle today while buying you time to build more savings for the future.

Because we’re living longer, retirement could last for over 20 years, so having enough income for your desired lifestyle is paramount.

According to the ASFA Retirement Standard, to fund a comfortable retirement, a home-owning couple will need $57,195 a year or $33,120 for a modest lifestyle.1

A home-owning single will need $41,830 a year for a comfortable retirement or $23,032 for a modest lifestyle.

The capital you’d need to generate that income will depend on a range of factors. These include your own savings, the impact of financial markets on your savings, and whether you’re eligible for a Part Government Age Pension to supplement your income.

What’s a comfortable retirement? It usually means having enough income to be involved in a broad range of leisure and recreational activities and to live comfortably. It takes into account the cost of household goods, private health insurance, a reasonable car, good clothes, a range of electronic equipment, domestic travel and occasional international holidays.

A modest retirement is considered to be better than one the Age Pension could provide but with far fewer lifestyle choices than the comfortable option.

Key considerations include:TimingGoals should be set roughly 10-15 years before you retire so you can start any strategies as early as possible with minimal financial impact today. Consider how many years from now and how old you’d prefer to be when you retire. If you have a partner, will they be retiring at the same time?

FundingWill you have enough to retire on? Try using a retirement calculator2 to make some rough calculations on what superannuation savings you may end up with based on your current level of contributions. Consider the difference any voluntary contributions could have, what impact career breaks may have and how long your savings may last.

Strategies for a comfortable retirementMost of us have retirement dreams where we can live comfortably, travel widely and spend time pursuing our interests. The key to achieving them is to have a clear retirement plan.

Adviser Details

Telephone

Fax

Email address

Continued on Page 2

Financial FocusSummer 2013

Page 2

Strategies for a comfortable retirementContinued from Page 1

Continued on Page 3

StrategiesStrategies in the early years of planning for retirement include:

• Consolidating your super accountsYou may be able to save money in fees by combining multiple funds into one account.

• Salary sacrificing This is where you make voluntary pre-tax super contributions as part of an agreed salary packaging arrangement with your employer.3 These contributions are taxed at 15% rather than your marginal tax rate which could be up to 46.5%.

You could salary sacrifice a dollar amount or a percentage of your income. The earlier you start, the smaller the amounts that need to be sacrificed and the lesser the impact on your take home pay.

• Using co-contributionsIf you earn less than $48,5164 a year, the Government may add to the contributions you make to your super.5 The amount of the Government co-contribution will depend on your income and how much you contribute to super from your after-tax income.

For 2013/2014, the maximum co-contribution you can receive is $500 (for those earning $33,5164 or less and contributing $1,000).

Strategies closer to retirement could include:

• Transitioning to retirement (TTR)A TTR strategy can be a tax-effective way for older workers to boost their nest egg without reducing their current income.

To benefit from this strategy, you need to be 55 years or over and arrange to make salary sacrifice or personal deductible super contributions.

To maintain your income, you invest some of your existing super in a TTR pension and then draw down income from the TTR pension to replace the salary that’s been sacrificed to super.3

• Clearing your debtsAim to clear major debts like mortgages before you retire.

• Making decisions about location If you think you want to retire to the coast or the country, consider likely timing and costs. Consider renting in your desired location first to ensure it provides what you expect. If you intend to downsize your family home

and contribute some of the proceeds to super make sure you’ll still be legally able to contribute at that time.

It’s also worth seeing a financial planner to help you work out a timetable, recommend any super savings strategies and highlight potential social security entitlements.

As always, consider any consequences, such as exit fees or loss of insurance held, before making changes to your super.

1 Association of Super Funds of Australia (ASFA) Retirement Standard July, 2013

2 mlc.com.au/SuperannuationCalculator

3 The concessional contribution cap for 2013/14 is $25,000 for taxpayers aged 58 or under on 30 June 2013. Taxpayers aged 59 or over on 30 June 2013 have a concessional contribution cap of $35,000.

4 Includes assessable income, reportable fringe benefits and reportable employer super contributions.

5 Subject to conditions of eligibility: see ATO.gov.au/individuals/super/other-contributions/Government-super-contributions

Maximising social security benefitsQualifying for the Age Pension is not just a welcome addition to household income, but a way to access a wide range of concessions and benefits that support a retiree’s lifestyle.Age Pension thresholds marginally increased from 1 July 2013, so it may be worthwhile seeing whether you qualify now, if previously you had too much income or too many assets.

Men can receive the government Age Pension from age 65, and women from age 64½ or 65, depending on their date of birth.

About 70% of retired Australians rely on a full or a part Age Pension. The part Age Pension supplements income received from private superannuation savings.

Income and assets testsEligibility for the Age Pension is based on the income and assets tests. Both tests are applied and the one that results in the lower entitlement is the one that will determine the benefits you receive. The income and asset test threshold amounts are indexed on 1 July each year. This means some people currently not eligible for benefits may be entitled to benefits eventually.

Under the assets test, your entitlement to Age Pension gradually reduces once your assessable assets exceed the low threshold. You have no entitlement under the assets test once your assessable assets reach the upper (disqualifying) threshold. The upper threshold for single non-home owners is $890,750 for singles and

$1,253,000 for couples. For home owners, the upper threshold is $748,250 for singles and $1,110,500 for couples.

Under the income test, your entitlement reduces once your income exceeds the income free area and cuts out when it reaches the upper threshold. For singles, the upper threshold is $1,810.20 per fortnight and couples $2,769.60 per fortnight.

Remember, the test that produces the lowest entitlement determines if you are entitled to a pension and the pension amount.

Be wary of trying to reduce your income or assets to qualify for more pension if you already get a Part Pension as the result is often too insignificant to be worth it.

Page 3

Maximising social security benefitsContinued from Page 2

Pensioner Concession cardOf course, Age Pension eligibility isn’t just about extra money, it also has many benefits.

If you’re eligible to receive just $1 a week of Age Pension, you qualify for a raft of benefits including a Pensioner Concession Card which entitles you to lower-cost medicines under the Pharmaceutical Benefits Scheme (PBS). You may also be entitled to:

• bulk billing for doctor’s appointments

• more refunds for medical expenses through the Medicare Safety Net

• assistance with hearing services and discounted mail redirection through Australia Post.

The value of the card varies for each person depending on how much the concessions are used.

You may also be entitled to concessions from state and territory governments and local councils. These could include discounts on property and water rates, energy bills, public transport and car registration.

Commonwealth Seniors Health CardIf you’re of Age Pension age but you don’t qualify for the Age Pension, you may qualify for the Commonwealth Seniors Health Card (CHSC). This entitles you to discounts on:

• PBS prescription medicines

• cheaper out of hospital expenses through the Medicare Safety Net

• and some transport, health, household, education and recreation concessions at the provider’s discretion.

This card is specifically targeted at those who don’t qualify for income support (a pension) from Centrelink or the Department of Veterans Affairs because they have too many assets or too high an income.

There’s no assets test for this one but your adjusted taxable income must be under $50,000 a year for singles and $80,000 a year for couples (combined).

Bear in mind that the means test to qualify for the CSHC includes certain income from superannuation income streams,

salary sacrificed to superannuation and net financial losses (such as a negatively geared investment property).

However, more income is allowed in certain situations such as where a couple is separated due to illness.

Seniors SupplementIf you qualify for the Seniors Health Card, then you should also qualify for the Seniors Supplement. The cash payments from this may help you pay regular bills such as energy, land and water rates and car registration fees.

Seniors CardAnother benefit is Seniors Card, targeted at those over age 60 who work less than 20 hours per week. This one offers discounts with a range of commercial businesses and on public transport. Rules vary as this scheme is run by state governments, however, in general, the scheme is free to join, is not assets-tested and you don’t have to disclose your income.

For further informationLaws change regularly, so visit the Department of Human Services’ Older Australians webpage www.humanservices.gov.au/customer/themes/older-australians to work out what you may be entitled to.

Page 4

Important Note:This advice may not be suitable to you because it contains general advice that has not been tailored to your personal circumstances. Please seek personal financial and tax and/or legal advice prior to acting on this information. Before acquiring a financial product a person should obtain a Product Disclosure Statement (PDS) relating to that product and consider the contents of the PDS before making a decision about whether to acquire the product. Past performance is not a reliable guide to future returns as future returns may differ from and be more or less volatile than past returns. The material contained in this document is based on information received in good faith from sources within the market, and on our understanding of legislation and Government press releases at the date of publication, which are believed to be reliable and accurate. Opinions constitute our judgement at the time of issue and are subject to change. Neither, MLC or any of the National Australia Group of companies, nor their employees or directors give any warranty of accuracy, nor accept any responsibility for errors or omissions in this document. From time to time members of the National Australia Group of companies, associated employees or agents may have an interest in or receive monetary or other benefits from the financial products and services mentioned in this document. MLC Limited is associated with issuers of MLC Investments Ltd, MLC Nominees, WealthHub Securities Limited, Jana Investment Advisers Pty Ltd, PFS Nominees Pty Ltd, Navigator Australia Ltd, NULIS Nominees (Australia) Limited and National Australia Bank Ltd products and services. The information contained in this publication prepared by GWM Adviser Services Limited ABN 96 002 071 749 an Australian Financial Services Licensee trading as ThreeSixty, registered office 105 –153 Miller Street North Sydney NSW 2060. This company is a member of the National Australia Group of companies.

6705

1M11

13

Managing redundancy Redundancy has become a familiar part of Australian working life. During the year to February 2013, 218,000 Australians were retrenched or lost their job when their employer went out of business.1 And with governments around the country tightening their belts, and the global economy still in the doldrums, there’s every possibility that the trend will continue.

Here are tips to help you protect yourself financially in the event of redundancy.

What are you entitled to?If your job is no longer available and you are under 65, you may receive a redundancy payout and an employment termination payment (ETP), along with payments for any unused annual or long service leave.

The good news is that genuine redundancy payments may be partly tax free, depending on your situation. In the 2013–14 financial year, the tax free component is $9,246, plus $4,624 for each full year you worked for your employer. Anything left over is treated as an ETP and taxed.

If you’ve been made redundant or you think you’re at risk of redundancy, check your employer’s redundancy policy and your employment contract to make sure you get everything you’re entitled to. If in doubt, consult your tax adviser or financial planner.

Putting your payout to workA redundancy payout can be an opportunity to boost your retirement savings by making extra personal contributions into super. Under current rules, people under 65 can contribute $150,000 each year or up to $450,000 in total over three years. But while contributing to super can be a great strategy, be careful not to lock up money you’ll need to live on while you’re looking for work or waiting to access your super.

If you plan to apply for a Newstart allowance, remember there’s a waiting period based on the size of your redundancy payment. While Centrelink makes allowances for unavoidable spending like medical expenses, they won’t reduce the waiting period just because you’ve used your redundancy payout for your super. That’s another good reason to consider keeping money at call.

Taking care of your superIf your super is in an employer sponsored fund, you may be automatically transferred to a personal plan. Personal accounts often have higher fees than employer funds, so check the investment option to make sure it suits your needs.

If you’d like to switch to another fund and you have more than one account, it could be an opportunity to save on fees by consolidating them into a single account

paying one set of fees — and avoid losing touch with your super in the future. Of course, it’s important to consider any consequences, such as exit fees or loss of insurance held, before making any changes to your super.

Don’t skimp on your insuranceIf you have income protection insurance, check your policy to see if it covers you for involuntary redundancy. If it does, you could be eligible for regular payments while you’re job-hunting. If you’re still working but you think you’re at risk of being made redundant in the future, this could be a good time to take out a policy with redundancy cover.

While money may be tight if you’re between jobs, it’s important not to let go of essential protections like insurance, leaving you and your loved ones at risk. One money-saving option might be taking out life insurance through your super, rather than paying for it directly out of your savings.

Transition to retirementIf you’re 55 or over and you’re ready to slow down, a redundancy could be an ideal opportunity to start a transition to retirement (TTR) pension. Your pension can help cover costs while you look for another job, or give you the financial freedom to go part-time without compromising your lifestyle.

With a TTR pension, you can earn a regular, tax-advantaged income from your super, and once returned to work, can continue to build your retirement savings through salary sacrifice, potentially lowering your tax bill even further. Depending on your situation, that could help you ramp up your super without affecting your take-home pay. But you do need to check the numbers carefully to be sure it’s the right strategy for you, so seek appropriate financial advice before you act.

1 Australian Bureau of Statistics, Labour Force Mobility, February 2013, Release 6209.0.