Super:a better count

Tax hits the savings you have in your superannuation account harder than anything else.

Yet, as always, it is the after tax figure that matters most, in your retirement calculations.

So far, the benchmarks that have been developed, to help with your calculations, have not included capital gains tax.

That, too, though is a big part of the mix.

This fault gap will soon  be filled.

The London based FTSE group – and the Association of  Superannuation Funds of Australia – have just announced new benchmarks that will take capital gains taxes into account.

That should, ultimately, help with your own calculations of what you can expect, on retirement.

In their joint announcement, the two organisations said:”These unique indices include the effects of capital gains tax, in addition to the effects of franking credits and off-market buy-backs.”

They build on previous work.

Back in 2009, the two bodies produced  tax-adjusted indices which included franking credits and off-market buy-backs,.

Since then, though, several  superannuation funds have sought  a benchmark which also includes capital gains tax.

ASFA’s CEO, Pauline Vamos, said: “The continued development of the benchmark is an example of what the industry can do to help drive reform.

“After-tax reporting is of growing importance, given the Government’s Stronger Super proposals.”

These proposals encourage strategies that target after-tax outcomes.

“This additional set of after-tax benchmarks bring further clarity to market performance and will assist trustees in providing better investment performance for members,” Ms Vamos added.

The superannuation industry welcomed the development.

David Hartley, Chief Investment Officer, Sunsuper said: “….when everyone is talking about fees and costs it is worth remembering that the biggest amount of money that goes out of members’ accounts is in the form of tax.

“Managing tax outcomes is essential,” Mr Hartley said.

“…I welcome the moves of FTSE and ASFA to develop this useful benchmark to help trustees achieve this aim.”

Related stories:

1. Don’t wait up. It could be a long count
2. The perils of cashing out your super

Super? Mixed outlook

The days of set and forget super are over.

The heavy losses that came with the global financial crisis saw to that.

Now, smart investors will keep a close watch on the progress of their superannuation.

So, how has yours been going?

We can’t tell you exactly, without having all the details.

However Jeff  Bresnahan of SuperRatings, once again, has some very useful advice on broad trends.

And – as you might expect – the news is a bit mixed.

Or, as Jeff, himself, says recent catastrophes are likely to have some impact on your retirement savings.

Mr Bresnahan notes that there were, indeed, “yet further gains”  in February.

Despite that, he warns, ” the impact of world events in Japan and the middle east look set to wind back some months returns for Australian super funds.”

“These world events show how swiftly and on what scale markets will react to negative global events, swinging from one extreme to another on a daily basis on the back of never ending news flow,” he added.

Naturally, all that took “our super fund returns along for the ride,” Mr Bresnahan said

” After approximately 1 per cent gains in both January and February, the median balanced fund in March is down by as much as 2.0 per  cent,” he added.

This had “effectively erased the gains made this calendar year,” he said.

However Mr Bresnahan remains hopeful.

“This is looking  a lot better than a few days ago, when March losses looked like erasing returns right back to November,” he said.

Besides long super term returns are still looking better than their three and five year equivalents, which Mr Bresnahan admits ” continue to look decidedly sick.”

So what are SuperRatings balanced fund results?

They are set out below:-

12 months ended 28 February 2011                             +    8.21%

Rolling 3 year return to 28 February 2011                 +    0.66% pa

Rolling 5 year return to 28 February 2011                 +    2.94% pa

Rolling 7 year return to 28 February 2011                 +    6.40% pa

Rolling 10 year return to 28 February 2011               +    5.10% pa

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2. Share plunge hits super, but….

Tax:Have your say

Want to have your say on Australia’s tax system – and have the government listen?

You can, when the government sets up a new website later this year.

The details haven’t been released yet.  But keep reading.  We will let you know when they are.

The Treasurer, Wayne Swan, says  there will be a two day  Tax Forum in October, to discuss tax reform.

“Over two days in October, the Gillard Government looks forward to hosting approximately 150 representatives of community groups, businesses, unions, and governments, as well as academics and tax practitioners, at a forum to discuss ways to build on our ambitious tax reform agenda.” Mr Swan said.

The Forum will be held at Parliament House in Canberra on  October 4 and  5.

” More details will be announced and invitations will be issued in the coming months, and I’ll also release a discussion paper in the middle of the year to help foster the debate,” Mr Swan said.

He said the Government is planning  “substantial tax reform.”

Its aim would be  strengthen and broaden the economy and maximise the opportunities of the mining boom by cutting small business taxes, boosting super and building more regional infrastructure.

The government knows, all too well, that it is treading a perilous path.

Angry protests over its now abandoned plan for a super profits tax on Australia’s miners played a critical role in the downfall of Kevin Rudd, as Australia’s Prime Minister last year.

Despite that, Mr Swan said the Forum would “continue the decade-long conversation we started with the release of Australia’s Future Tax System (AFTS) Review last year.”

“It will focus on the broad sweep of topics in the Review, with sessions to discuss personal tax, transfer payments, business tax, state taxes, environmental and social taxes, and system governance,” he added.

“We look forward to engaging with the community and hearing what the representatives of millions of Australians have to say about building on our ambitious tax reform agenda.

“We will also explore ways for participants and the general public to make submissions and comments, which can be uploaded onto a dedicated website, prior to the Tax Forum,” Mr Swan said.

“The Tax Forum will assist the Government in prioritising our agenda for further tax reform,” he added.

In response to the AFTS Review, the Government last year announced a comprehensive plan to get a fairer return for the nation’s non-renewable resources and promote growth across the economy.

The Government also announced measures to simplify tax for small business and individual taxpayers, and reward savings outside of superannuation through a tax discount on interest income, Mr Swan said.

“These are significant reforms, but in the years ahead Australia will continue to face important decisions to ensure our tax system shares prosperity fairly and maximises the opportunities that will flow from the growth of our neighbouring economies in this, the Asian Century,” he added.

“We are particularly focused on the need to better reward the hard work of Australians who participate in our workforce and help make our economy such a standout performer,” Mr Swan said.

The Tax Forum will be followed by a debate in Parliament to give all MPs and Senators the chance to have their say on these significant issues for Australia’s future prosperity.

“I thank the crossbenchers and others in the community for their constructive suggestions about the organisation and structure of the forum, and I look forward to this important debate on the future priorities and challenges for Australia’s tax and transfer system,” the Treasurer said.

Enquiries ? Go to taxforum@treasury.gov.au.

Financially literate?

Are you financially literate?

If not, there is something you can do about that.

And there are great gains to be made.

These all spring from better management of your financial affairs.

The first step is to visit a new website called MoneySmart.gov.au

That site has been set up by the Federal government, to help Australians make good financial decisions.

It was launched by the corporate watchdog, the Australian Securities and Investments Commission.

And it has the full support of Australia’s superannuation funds.

That’s understandable.  The superannuation affairs of too many Australians, are in a mess.

They might, for example, have several small funds, reflecting where they have worked, over the years.

These should be consolidated into one fund, and brought under good management.

How?

Start at that website and ask the experts the right questions.

They are eager to help.

The Chief Executive of the Association of Superannuation Funds of Australia,,Pauline Vamos, said ASFA is proud to support the MoneySmart website.

“Maximising retirement income is vital to ensure Australians can retire with dignity and MoneySmart provides a valuable resource in aid of achieving this,” she said.

Ms Vamos said the site encourages people of all ages to better understand, engage with, and take control of their savings through the provision of free, simple and independent information relating to a number of financial areas, including superannuation.

“It has been a key part of ASIC’s brief for a long time to provide information to consumers,”  Ms Vamos added.

So what are you waiting for?

Related stories:

1. Super literate yet?
2. Retirement:not so super for women

Money:What women must do

With interrupted employment patterns and heavy family responsibilities, many women still struggle to keep their finances in order.

That task isn’t made any easier, either, by the fact that women still tend to be trapped in lower wage jobs.

So financial management makes extra demands on women.

One is keeping up with what they need to know.

We can’t let the 100th Anniversary of International Women’s day pass, without offering a little help in two critically important areas.

The first is to remind women of a new scheme, called paid parental leave.

Predictably, the scheme,  that  provides eligible working parents with parental leave pay for up to 18 weeks at the minimum wage – of $570 a week  before tax – has been taken up enthusiastically.

Already, 6,700 Australian families have taken advantage of it.

Check your entitlements.

Women’s interrupted employment patterns can also make it particularly hard for them to keep track of their superannuation.

Keeping control, though, is essential, if you are to have a happy retirement.

But how should you go about doing that?

Pauline Vamos, of the Association of Superannuation Funds of Australia, has some advice on that matter.

She urges women to:-
* Consolidate their super to avoid paying double fees, saying, it’s a pain, but it’s worth it.
* Ask their employers to pay the superannuation guarantee (SG), even if they don’t meet the $450 a month threshold.
* Push their employers to allow them to salary sacrifice into super.
* Do everything they can to scrape together the $1,000 additional contribution per year to receive the Government co-contribution.

If you’re in a Self Managed Super Fund, she says:-
* Ask questions about how your money is invested, and what the fees are.
* Insist you are involved in setting the investment strategy.
* Find out what will happen if your husband or partner dies.

“The bottom line is: women live longer than men and they are going to need to look after themselves,”Ms Vamos  said .

“My message to women is: it’s your retirement – take control.

Related stories:

1. How super fails women
2. How – and when -Australia’s married women take jobs

Super safe?

Australians are not putting as much money  – voluntarily – into their superannuation as they once did.

In fact a new report shows that discretionary contributions, through salary sacrifices, are now at their lowest level for several years.

The report, by the AMP, also notes that the biggest falls in private contributions are occurring among people whose retirements are not that far off.

That is 45 to 49 year olds and the 50 to 54 age group.

The sharp fall in superannuation balances, which followed the global financial crisis, should have been a sharp wake up call.

It was, for a time.

It would be a mistake, though, to let echoes of that call fade.

That might be happening.

The AMP also reports that overall contribution rates for customers under 50 are at their lowest levels since 2007.

”Contribution rates for members aged 20-24 years have fallen 1.3 per cent,” it says.

And ”1 per cent for members aged 25-29; 1.3 per cent for members aged 30-34; and 2 per cent for members aged 35-39.

Those falls occurred between June 2007 and June 2010.

At the very least, they reflect a growing complacency, which might well be dangerous.

Especially at a time when Australia’s still, relatively young, superannuation industry, itself, is facing a major overhaul, after the Cooper review of its performance.

Remember this.

No one can – or will -  ever look after your interests as well as you could, yourself.

Being broke, or even short of cash, in retirement is no joke.

Your car may still, occasionally, require major repairs.

Or your  gas oven might die, and need replacement.

So what can you do?

Ask where your super fund is investing your money.  If it is in blue sky mining, further action might well be required.

Get good advice, regularly.  Be prepared to pay for it.

You should also watch your Federal MP.

Pauline Vamos, of the Australian Superannuation Funds Association, is worried about ”continued uncertainty around superannuation rules.”

She fears that these doubts might be discouraging people, who would otherwise be putting more into their super.

Ms Vamos says MPs, from all parties, need to back the positive changes that Mr Cooper – and others – have proposed for Australia’s super system.

She says three policies, in particular, should be legislated as soon as possible.

These are:-

-A 3 per centage point increase in the superannuation guarantee levy (now 9 per cent).

-Higher contribution caps for over 50s and

-A rebate for people on low incomes.

Related stories:

1. Super benefits to rise as costs are cut
2. Super industry facing another shakeup

Super literate yet?

You will need good advice to get the best out of your superannuation fund.

There are new dangers ahead.

The biggest, perhaps, is complacency.

A new report shows that Australia’s superannuation funds have, mostly, made strong recoveries from the shocking losses that followed the global financial crisis.

Jeff Bresnahan, of SuperRatings, says the value of $100,000 invested in a typical Australian superannuation fund back in 2006 peaked – before the crisis – at $122,405.  That happened in October 2007.

It plunged to just $91,770, in February 2009, in the wake of the crash.

By January this year, though, it was back to $116,138.

On paper, that looks like a 95 per cent recovery, in the value of that investment.

It isn’t of course, because these figures ignore inflation.

A good performance, nevertheless.

There’s the rub.

These gains, themselves,  suggest that ”…the global financial crisis is slowly moving to the back of people’s minds as they see their super investment returns moving to within 5 per cent of the peak reached in October 2007…” Mr Bresnahan warns.

He is worried.

Many Australians were not really aware, before the crash, that their superannuation funds were investing their money in the stock market.

Those who retired in 2008 learnt that  the hard way.

The recovery,  since then, has also been largely achieved through investment in the share market.

It is real enough.

SuperRatings also reports that Australia’s big super funds have just chalked up their fifth positive monthly result this financial year with a further 1 per cent gain in January.

Despite small losses in two months, this has left the average Australian, in a balanced fund some 8 per cent better off, since the end of June last year.

That follows – and builds on – the 9.8 per cent gain seen last financial year.

But is the ”balanced option” best for you?

Mr Bresnahan, himself, warns that what is good for one person might not be, for another.

That’s why you need good advice, on your individual situation.

Especially as the entire superannuation industry in Australia is currently being overhauled.

The government is now trying to work out the best ways of introducing the many changes recommended by the Cooper Review.

No-one knows, just yet, what those changes will be.

But they will be sweeping.

So if you, like many other Australians, still have an untidy clutch of small superannuation accounts, that you acquired in your last five jobs, the time has definitely come to consolidate them.

The coming changes will, almost certainly, make it even more urgent than ever for you to keep a close watch on the money in your super fund, so that you will know, at all times, how it is being invested.

It is, after all, your money.  And it will finance your retirement.

Related stories:

1. Super:don’t neglect your investment
2. A super tax subsidy – of almost $25 billion a year

Plugging gaps in super

Most Australians won’t get a decent retirement income under the present superannuation,  a new study says.

It is quoted in a pre-budget submission the superannuation industry is making to the Federal government.

The study concludes  that only 35 per cent Australians will get the standard of living they want in retirement, under the present system.

It  was undertaken by the Research Centre of the Australian Superannuation Funds Association.

The Association says this means that the Federal Government must proceed with its decision to increase the Superannuation Guarantee levy from 9 to 12 per cent.

The Prime Minister, Julia Gillard, has already promised that it will do so, but just when that will happen is not yet clear.

The Association also wants to see a contributions tax rebate for low-income earners in the May Budget.

It says, too, that new  measures are needed to finance better retirements for women.

”The 2011-12 Commonwealth Budget provides a perfect opportunity for Canberra to commit to legislating an increase in the rate of compulsory contributions, and to introduce a contributions tax rebate for contributions made on behalf of low-income earners,” the Association’s chief executive, Pauline Vamos, says.

“These two measures will deliver both higher take-home pay and higher retirement savings and … incomes than the measures proposed by the Henry Review,” Ms Vamos adds.

“They also have a substantially lower cost to the budget than the Henry Review proposals.”

Ms Vamos says research indicates most Australians strongly support the promised increase in compulsory superannuation contributions.

”Australians also want certainty in arrangements for superannuation as repeated changes, especially if adverse, substantially reduce the confidence of Australians in being able to save for the future,” she says.

“Moving to 12 per cent contributions and maintenance of current tax treatment of superannuation will mean many more Australians will have a dignified and financially stable standard of living (in retirement),” Ms Vamos says.

The Association said the special challenges women face, in saving for retirement, must also be recognised.

It said these arise both from family responsibilities that force many women  to be absent from the paid labour force, at times  and the higher levels of  part-time work  that women face.

It also recommends abolition of  the $450 a month earnings threshold for receiving Superannuation Guarantee  contribution

The Association is pressing, too,  for the introduction of superannuation contributions in periods of   paid parental leave.

“The payment of paid parental leave is a major social advance and this should be complemented by the provision of superannuation contributions linked to these payments,” Ms Vamos says.

”Another recommendation which would assist women is for the contribution caps for concessional contributions to be fixed at $50,000 for those under 50, and at $100,000 for those aged 50 and over,” she adds.

Many Australians now aged 40 and over have not had the opportunity to receive the benefit of a steady stream of superannuation contributions.

”With a return to full-time work, many women in their 40s and 50s have both the capacity and the desire to make substantial catch-up superannuation contributions,” Md Vamos says.

‘W’e know there is widespread support for better retirement outcomes for Australians,” she adds.

“Now is the time to allow people, particularly women, with lower account balances and lower incomes to start to catch up.

”Policy makers need to be mindful that there is significant community interest and awareness of adequacy and superannuation and the need for the Budget to address this,” Ms Vamos  adds.

Related stories:

1. Retirement:not so super for women
2. Swan takes a razor to retirement savings