New study exposes poor advice on retirement

The financial advice you get, to help you plan for retirement, will be very important for your future.

Yet a study, just completed, suggests that most of the professional advice, available in Australia, is “adequate” at best.

The Australian Securities and Investments Commission, which conducted the survey, concludes that the industry has room for improvement.

ASIC Commissioner Peter Kell said: “The results of ASIC’s shadow shopping research demonstrate that there is scope for significant improvement in the provision of good quality retirement advice in Australia.

“Our research found there are several areas where the financial advice industry needs to lift its game,” Mr Kell added.

ASIC’s research found that:

*      over a third of the advice examples were poor (39%)

*     there were only two examples of good quality advice (3%)

*      the majority of advice examples reviewed (58%) were adequate.
“Advisers are important gatekeepers who have a key role to play in helping consumers plan and manage their finances,” Mr Kell said.

“ This underlines the importance for the industry to remove conflicts of interest and improve overall professional standards to ensure that their client’s trust is not misplaced, “ he added. he said.

ASIC said said financial advisers need to provide realistic and client focused advice.

This should include discussion of people’s retirement prospects, including how long their money will last.

It said this topic should be fully discussed,”even if this can on occasion be a challenging conversation.”

“‘Too much poor advice provided to our shadow shoppers was overly product focused and not strategic enough to help clients develop a realistic and achievable plan for their retirement,” Mr Kell said.

He said people planning for retirement need to make the most of their financial resources, given their resources, and likely risks,

Want more information?

That’s available at moneysmart.gov.au.

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Protecting yourself against organised crime

On the latest estimates, organised crime is now  costing Australia between $10 and $15 billion a year.

So how can you protect yourself against it?

The Australian Crime Commission which produced those staggering estimates, also gives some pointers on staying safe.

The Commission says  that organised criminal networks are always on the lookout for profits.

It warns, too, that they “are flexible, innovative and resilient.”

Your security should be, too.

Our political leaders are trying to do their part.

As evidence, the Commission points out that Australian laws have been changed to:

- introduce new criminal offences targeting those involved in organised crime

- strengthening criminal asset confiscation and anti-money laundering provisions

- requiring people who have unexplained wealth to demonstrate that it was legally acquired

-enhancing money laundering, bribery and drug importation offences

- broadening access to telecommunications interception for the investigation of organised crime offences, and

-providing protection for undercover law enforcement officers who infiltrate criminal organisations.

The authorities have also spelt out their priorities for fighting organised crime.

These include targeting the production and sale of amphetamines, money laundering and identity crime.

Nothing, though, works as well as the precautions you can take yourself.

These should include:-

-           Locking all personal documents in a safe container when you are not using them

-           Keeping copies of key documents in a secure place.

-           Carrying only essential information

-           Destroying any personal information before you put it in a bin and

-            Using strong passwords on your accounts.

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Scammers target the over 50s

Australians have more than $1.2 trillion tied up in their superannuation.

That’s one of the biggest pots of money anywhere in the world.

So it always was going to attract the attention of criminals.

But that money has  a very important job to do.

That is to look after you – and other Australians – in retirement.

So you have to protect your super, while you can.

The Australian Crime Commission warns that the scammers usually start with the – but still effective -

technique of cold calling.

Their victims, typically,  hear a very persuasive person asking them for details of their  financial affairs..

The scammers will then  encourage their victims to transfer money into “sham or worthless” investments.

These “investments” do look good.

So good, the Commission says, that even experienced, intelligent investors have been deceived.

At least 2,400 Australians have already been tricked, in this way.

And they have lost more than $93 million.

So who gets caught?

Men, aged over 50, are prime targets.

So are all Australians approaching retirement.

So the Commission’s warning is timely.

“In the next 20 years, a large number of Australians are expected to retire from active work and will have superannuation investments to manage,” it says.

“ Raising awareness of fraudulent serious and organised investment scams is important in preventing people falling victim,” the Commission adds.

So how can you protect your retirement savings?

There are a few rules.

The most important, perhaps, is simply hang up on unsolicited telephone callers, offering overseas investments.

The Commission also says that you should always seek independent advice before making an investment.

Want to know more?

Visit www.moneysmart.gov.au  or call 1300 300 630

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Spreading the wealth:the winners

Young Australians – and small business owners – will be among the biggest winners from the redistribution of wealth, that will come with the new super profits tax on Australia’s resource giants.

These changes will be the biggest in years – and they have come at a high political price.

Miners, objecting to an earlier version of this tax, for example, played a significant part in Kevin Rudd’s downfall, as Prime Minister.

So all involved, in the latest changes, were well aware that this has always been a high stakes game.

But that’s them.

What about you?

The first thing to remember is that, essentially, there is nothing new about the tax system being used to redistribute wealth.

That’s been happening for years.

All Australian taxpayers, for example,  help pay the pensions of older people, who are no longer able to work.

That’s part of a system called civilization.

A young woman, we might call Kate, will do particularly well, from the latest changes.

Kate, a 20 year old hairdresser, will get an extra $110,000, when she eventually retires, as a result of the gradual increase in compulsory contributions to her superannuation  pot, from the present rate of 9 per cent, to a new rate of 12 per cent.

Kate will be delighted, also, to learn that the sums, behind those figures, were done by highly numerate Treasury officials, who do that sort of thing for a living.

Small business owners, too, will be early winners.

From July 1 this year, they will get an immediate cut from 30 to 29 per cent in their company tax rate,  and immediate tax write offs, of up to $6,500, for new equipment they buy for their businesses.

Big business will have to wait until July 1 next year, for a comparable tax cut.

The Treasurer, Wayne Swan, was delighted when the Senate passed his mining tax  bills last night.

He said that would: “allow us to share the benefits of the mining boom and deliver a fair return to Australians from the resources that we all own.”

Tony Abbott was not.

The Opposition Leader said the government had simply “hit Australians with yet another big tax.”

Australia’s superannuation funds “hailed” the new arrangements, describing them as “historic.”

Employers, though,were guarded.

Heather Ridout, of the Australian Industry Group, said claims for future wage rises must be assessed against the bigger superannuation entitlements that are now in sight.

And Peter Anderson of the Australian Chamber of Commerce and Industry, described those rising entitlements as “a bitter pill” for the nation’s employers.

The government did manage to win reluctant agreement from most of Australia’s miners, for its plan.

Not, though, from Clive Palmer.

The Queensland coal baron is still deeply opposed to the new plan – and remains a dangerous opponent of it.

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Future fund gets two new guardians

You might like to know a little more about David Gonski and Steven Harker.

That’s because the Federal government has just named them as guardians of the Future Fund, which managed assets of more than $73 billion, at the end of last year.

The Future Fund was established in 2006 to help the Federal government meet the cost of  its public sector superannuation liabilities in the future.

The Fund has generated average returns of 4.2 per cent a year over that time, but its earnings  have come under pressure over recent months, from both the European debt crisis and global instability.

The two men come well credentialed.

The Federal Treasurer, Wayne Swan, and Finance Minister, Penny Wong, boasted of  that, when they announced the new appointments.

They said the two men “…will bring a unique combination of experience and strategic insight across business, corporate governance and investment markets, and will position the Board well for the opportunities and challenges ahead.”

Both are well known in the financial world.

Mr Gonski , who will chair the Future Fund Board of Guardians,  for five years, has a very impressive CV.

As Mr Swan and Ms Wong noted he “has extensive experience in business, law, investment banking and corporate governance.

“Mr Gonski is currently the Chair of ASX Group, Investec Bank (Australia) Ltd, Coca-Cola Amatil Ltd, and Ingeus Ltd, and is a Director of Singapore Airlines Ltd. Mr Gonski was appointed an Officer of the Order of Australia in 2002 and a Companion of the Order of Australia in 2007,” they said.

He will replace David Murray, who is perhaps best known as a former CEO of the Commonwealth Bank.

Mr Harker has also been appointed to the Board for a five-year term.

The two ministers said  he “brings a deep understanding of global financial markets, with substantial expertise in investment and asset management.”

Mr Harker is currently the Managing Director and CEO of Morgan Stanley Australia and a Director of Australian Financial Markets Association Ltd and Investa Property Group.

Both men will be standing down from their present positions to take up their new roles.

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A better super payout? Here’s how, in detail

Like an extra $40,000 in your superannuation pot when you retire?

Bill Shorten, the Federal Superannuation minister, says that’s possible, for 30 year old full time workers on average wages.

Others, of course, could expect proportional improvements, depending on age and wage levels.

So what do you have to do?

Look out for the MySuper accounts, which should be available from July 1.

The idea, essentially, is to create low fee superannuation accounts, managed with excellent investment strategies.

Mr Shorten says he has had a lot of help from the superannuation industry, employers and unions, in getting this proposal ready.

But don’t take our word for it.

Here’s what Mr Shorten, himself, has to say about it.

Because this is a matter which requires very careful consideration – above all from you  – we are reproducing Mr Shorten’s statement in full.

He published it under a bold banner, declaring:-

A Better Deal for Superfund Members

And he says:-

The Gillard Government’s election commitment to deliver a better deal for superfund members is a step closer following the release of the final details of the Government’s Stronger Super reforms.

Assistant Treasurer and Minister for Financial Services and Superannuation, Bill Shorten, said “A thirty year old worker on full-time average wages can expect up to $40,000 more in retirement when the Gillard Government’s Stronger Super reforms are implemented. For such a person this could be broadly equivalent to a 1 percentage point increase in contributions.”

The key elements of the Stronger Super reforms are:

• Creating MySuper, a new simple, low cost default superannuation product from 1 July 2013;
• Providing APRA, ASIC and the ATO with the tools they need to improve their oversight of superannuation; and
• Improving the administration and management of super accounts through our SuperStream reforms, making the processing of everyday transactions easier, cheaper and faster for members and employers.

Once fully implemented, these reforms could reduce the fees paid by members by up to 40 per cent.

“It’s in the national interest to encourage Australians to save more for their retirement. But it’s also fair the superannuation industry contributes to higher retirement savings through greater efficiency and lower fees,” Mr Shorten said.

“I’m very pleased to see the great work done by Paul Costello and the consultation panel has resulted in the majority of recommendations being agreed to by the superannuation industry. I would also like to acknowledge the strong contribution from the union movement and ACCI, who have a shared interest in ensuring the super system is as efficient and user-friendly as possible.”

Key new elements

Fees

MySuper products will have a single, diversified investment strategy. They will have to be offered at a standard set of fees generally available to all members. However, funds will be able to offer discounted administration fees to employees of particular employers, reflecting the administrative efficiencies for the fund in dealing with the employer. Any discounted fee will be reported to APRA and published by the fund. MySuper public offer funds will be able to be compared on fees.

In addition, funds will be able to offer employers with more than 500 employees a MySuper product tailored to the needs of the particular workplace including the investment strategy, member services and fees. The details of all separately tailored MySuper products will be required to be reported to APRA.

Transition

From 1 October 2013, employers must make contributions for employees, who have not chosen their fund, to a fund offering a MySuper product. All new superannuation payments will be commission free.

By 1 July 2017, funds will need to transfer the existing default balances of members to a MySuper product. This will see the orderly transition of existing billions of retirement savings to a commission free environment. However, the Government will consult further on a mechanism to allow for this period to be extended in certain, limited circumstances, recognising there may be instances where existing obligations affect a trustee’s ability to transfer balances.

“By 2017 the vast majority of super balances will be commission-free,” Mr Shorten said.

Consolidation

The Government will help superannuation funds and their members locate and consolidate multiple member accounts. New processes will see lost and inactive accounts, with balances under $1,000 and in eligible rollover funds, consolidated into the member’s current active account, unless the member opts out. This reform will reduce the amount of fees paid on multiple accounts and maximise retirement benefits.

Reporting of contributions

The Government will ensure workers get better information about when their superannuation is being paid. Employers will disclose on payslips when contributions are due to be paid. This will provide an early warning if superannuation entitlements aren’t being paid.

The use of e-commerce and data standards will enable money to be allocated to member accounts in a more timely manner and reduce the likelihood of member accounts being lost due to incomplete or incorrect information being provided to funds. The SuperStream working group will continue work on the data and e-commerce standards, with a view to having the proposed contributions and rollovers data standards available in early 2012.

The data and e-commerce standards will be mandated for superannuation funds from 1 July 2013. The Government will extend the data and e-commerce standards to large and medium sized employers from 1 July 2014.

“I’m mindful of the implementation issues this raises for small employers. We’ll continue to consult with employer groups on the feasibility of bringing small employers within this framework from 1 July 2015,” Mr Shorten said.

Further details on key design issues for Stronger Super can be found in the information pack at http://strongersuper.treasury.gov.au.

The outcomes of the Stronger Super consultation process, chaired by Mr Costello, can be found at http://strongersuper.treasury.gov.au.

Given the breadth of the Stronger Super reforms, legislation will be introduced in several tranches, over the coming months and in the first half of 2012. Consultation with stakeholders will be undertaken on each tranche of legislation.

“I expect the exposure draft legislation on the core elements of MySuper will be released in the next few weeks,” Mr Shorten said.

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Super tax breaks “fair:” report

Middle-income earners get the greatest benefits from tax concessions on superannuation, according to a new report.

The report, produced by the peak body for the superannuation industry. the Association of Superannuation Funds of Australia (ASFA), rejects claims that high-income earners are the big winners.

It concludes that:-

• Many figures and statistics being used in the current debate on equity in the super system are wrong or out-dated.
• Tax concessions for superannuation are predominantly equitable.
• The proposed increase in the Superannuation Guarantee and the low-income earners contribution tax rebate, combined with the contribution caps, will make the application of the tax concessions even more equitable.
• Tax expenditure estimates for superannuation (what tax concessions on super cost Government/taxpayers) are grossly overestimated.

Drawing on previously unpublished data, the ASFA report shows current and proposed measures for the tax treatment of superannuation are considerably fairer than recent debate on the issue would suggest.

“A commonly quoted statistic in public debate, about Australia’s top five per cent of income earners receiving 37 per cent of total superannuation contributions, relates to 2005-06 when much higher contribution caps applied,” said Pauline Vamos, chief executive of ASFA.

“Since then, tighter contribution caps (on the amount of super contributions attracting the concessional tax rate) and other factors have seen this drop to less than 20 per cent.

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Your living costs:How they have changed

The living costs of Australia’s working families rose by 3.3 per cent last year.

That is slightly above the nation’s adjusted inflation rate of 3.1 per cent.

Although directly comparable wage figures are not yet available,  the best indications suggest that wage growth, over the same time, would have covered that rise.

The latest available wage figures show average weekly earnings in Australia rose by 4.7 per cent in the 12 months to the end of August.

The Bureau of Statistics also reported today that the average cost of living for Australian pensioners rose by 3 per cent in 2011.

Both groups benefited from lower fruit and vegetable prices in the final three months of last year.

The main price rises, for working families, were in the cost of domestic holiday travel and accommodation, rents and interest charges.

The living costs, faced by pensioners, fell by 0.4 per cent in the December quarter.

They made some savings on lower pharmaceutical charges but, like other Australians, pensioners also faced higher rents in that time.

Self funded retirees saw their living costs fall by 0.1 per cent in the final three months of last year, but their costs, too, rose by 3.3 per cent over the year.

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