|
|
Welcome to the February 2009 edition of Your Financial Future. In this issue, we discuss the current investment market turmoil and what you could do about it. We also examine whether it’s still worth sacrificing some of your salary to super.
We question whether a Self-Managed Super Fund is the way to go and reveal how you can protect yourself from identity theft and we review the disadvantages of having lost super or several unnecessary superannuation accounts.
|
As usual, we also include the latest offers from the Fair Go Member Benefits program, and update you on how the different asset classes and investment markets have performed in the past quarter.
Dealing with tough investment markets
As you would already know, we are in the midst of a severe downturn in domestic and international share markets. This market downturn was triggered by the sub-prime mortgage crisis in the US and had massive flow-on effects causing problems in the global banking and business sectors and for many governments around the world. As a result we now see many economies falling into recession.
An important point to make is that the extent of the economic meltdown, which is now commonly referred to as the global financial crisis, was not foreseen by most financial commentators and analysts. It is fair to say that even when the economy and investment markets are relatively stable it is difficult to forecast the returns that members will receive in superannuation. With the unprecedented events that have occurred it has become impossible to predict when an economic recovery might take place and therefore when investment returns might improve.
It should be noted however that Governments and regulators here and abroad are engaging in substantial stimulus measures. The Australian Government recently announced a further stimulus package which may assist investment and employment. On the same day the Reserve Bank of Australia announced a 1% reduction in the cash rate to 3.25% and it is hoped that this will also stimulate the economy.
So what should you do?
Superannuation for most investors is a long-term investment and sticking to a well-diversified, quality portfolio in line with your goals and risk profile remains the soundest long-term strategy. Whilst it may be tempting to be defensive in these times and to reduce exposure to growth assets (e.g. by moving investments to cash), such a strategy is unlikely to meet most investors’ long-term targets.
History has also shown that investors who change asset allocation based on guesswork about whether the market is rising or falling (i.e. timing the market) rarely succeed. That’s because they often crystallise losses by selling when asset prices are low and rejoin the market after asset prices have already begun their recovery.
If you are concerned about your investments or believe that they don’t meet your long-term goals, please contact one of our financial planners by calling 1800 800 002.
Salary sacrificing through thick and thin
With investment markets in such turmoil, you may be questioning whether it’s still worth sacrificing some of your salary to super. The answer for most members is a resounding yes.
Salary sacrificing, which involves contributing some of your pre-tax earnings to super through an arrangement with your employer, pays off through thick and thin.
Remember that when investment markets are down, you are picking up assets at cheaper prices and can buy more with your contribution. You will benefit from this when market conditions improve.
In addition, the tax advantages of salary sacrificing remain the same. It will reduce your taxable salary which means you could pay less tax on your salary. Your super contribution is taxed at a maximum rate of 15%, instead of your marginal income tax rate which is likely to be higher.
If you’d like to find out more about salary sacrificing, contact Member Services on 1800 067 059.
Is an SMSF the way to go?
It’s understandable that when markets get as shaky as they’ve been in recent times and returns start falling, many Australians panic and start thinking of their own DIY or self-managed superannuation fund (SMSF).
SMSFs have some advantages, especially for those who have an interest in investment markets. They have been one of the fastest growing segments of the superannuation industry in recent years and now hold about 26 per cent of Australia’s super savings.
But with your super being so vital in determining how you spend your years in retirement, it’s important to look before you leap. Here are two questions which could help you decide if an SMSF is the right vehicle for you.
1. Have you got the time and skills?
‘Self-managed’ super means you do the work. Have you got the time to keep up with what’s happening in investment markets? And, have you got the skills and experience to do a better job than those professionals whose entire day jobs are spent following markets and investment trends?
The key reason people choose self-managed funds is to gain control over their affairs. But with greater control comes obligations and a mountain of paperwork. Trustees of SMSFs have to submit regular income tax and regulatory returns and comply with a number of super and tax laws.
They also have a host of legal responsibilities, including keeping proper records for 10 years, knowing their fund’s investment strategy and not lending super money to members or relatives. If they don’t comply, the Australian Taxation Office can impose penalties ranging from fines and loss of tax concessions or imprisonment.
2. Will the benefits be worth the costs?
Many commentators suggest you need around $250,000 in super to make the costs of an SMSF worthwhile. They say that with less than this amount, the fund may have difficulty earning enough to cover the set-up and running costs, such as auditing and regular reporting fees. According to the Australian Securities and Investments Commission, SMSFs can typically cost around $1,700 to run each year and often much more. And, that’s before you take investment fees into account.
In contrast, the administration costs of being in this Fund are 90 cents a week. Because of its size and large buying power, the Fund is also able to offer you life and other insurance at rates you’d be hard pressed to secure on your own. It also provides low-cost financial planning advice.
And, don’t forget the cost of your time, which might be better spent elsewhere.
It’s vital to remember that higher costs can eat into your savings balance. Even a small difference in costs can have a large impact over time.
Not sure what to do? If you’d like to talk to one of our financial planners about your options, call 1800 800 002.
Preventing identity theft
There’s a new breed of criminals out there called identity thieves. They use some of your personal information without your knowledge to commit fraud or theft.
They may fraudulently obtain money, loans, finance and credit using your details. Worse still, they may take over your identity, access your bank accounts or operate new accounts opened in your name, damaging your reputation and credit rating in the process.
Skilled identity thieves use various methods to steal your personal information. They may rummage through your garbage looking for bills or personal documents or even steal your credit card number by using a special storage device when processing your card. They may also send you spam or pop-up messages to get you to reveal your personal information or they may divert your statements to another location by completing a change of address form.
Here are some tips to help you avoid falling victim to these criminals:
- Take time to shred or destroy old bank statements, credit card bills, utility bills or other documents to prevent this material falling into the hands of criminals.
- Be careful to whom you give personal information. If you have to reveal personal information, ask some questions about the security of the information and be very cautious giving out any information over the phone or internet unless you know who you are dealing with.
- Secure your mail box.
- Minimise your identification and the number of cards you carry in your wallet or purse to what you actually need.
- Check your bank and credit card statements to make sure there are no unauthorised transactions.
- Never click on links sent in unsolicited emails. Instead, type in a web address you know. Use firewalls, anti-spyware and anti-virus software to protect your home computer. Keep these up to date.
- Don't use obvious passwords like your birth date or your mother's maiden name, and change your passwords regularly.
- Be alert to signs that require immediate attention, such as bills that do not arrive as expected, denials of credit for no apparent reason or calls or letters about purchases you didn’t make.
- Don’t use public computers to complete internet banking because there is no guarantee that security software has been installed.
- Provide only necessary information about yourself.
- Sign all credit and debit cards as soon as you receive them.
- If you move house, immediately tell your bank, card issuer and other organisations that you deal with.
- Consider whether it may be safer to use a separate credit card account for online transactions and when you are overseas.
- Read the privacy policy before providing information to any business to ensure you understand how your data will be protected.
Do you have lost super?
You could be losing out if you have lost super or several unnecessary superannuation accounts. This is because you are paying multiple administration fees on these accounts which eat into your retirement savings balance. Over time, these costs can really mount up.
Your lost super may have also been transferred to a special Eligible Rollover Fund where it may be earning less than it would in the Fund.
Indeed, the level of lost super continues to grow as Australians move home or change jobs. The assets in the Government’s Lost Members Register rose 8.4% to $12.9 billion in the financial year to end June 2008 while the number of lost superannuation accounts jumped 5.2% to 6.4 million.
In addition, a report commissioned by CHOICE reveals that there are 13 million unnecessary superannuation accounts eroding retirement incomes. It shows that the extra fees, missed earnings and lost payments of these cost Australian consumers $1.1 billion a year.
If you believe you have lost touch with your super or would like to discuss the benefits of consolidating your super accounts, contact Member Services on 1800 067 059. You can track down your lost super by:
- Searching online using the SuperSeeker service managed by the Australian Tax Office (ATO).
- Ringing the ATO's Superannuation Infoline on 13 10 20 (for the cost of a local call) and asking them to search the Lost Members Register for you.
- Contacting your State Government as it maintains a State-based unclaimed monies register that can be checked for you.
- Contacting your former employers regarding your personnel records. Your union may also be able to help, as industrial awards often require superannuation benefits to be paid into a particular fund.
To avoid losing your super in the future, remember to keep your super statements in a safe place and to notify us of your new address when you move.
Calling all first home buyers
As part of a $10.4 billion package designed to stimulate the Australian economy, the Government has announced a temporary “Boost Scheme” which will double the first home owner grant to $14,000 for existing homes and triple the grant to $21,000 for newly-built homes or new homes to be constructed. Additionally, first home buyers in NSW who qualify for the First Home Owners Grant and are buying a newly constructed home or building their first home will be eligible for an additional $3,000 payment known as the NSW New Home Buyers Supplement. This latter grant is for a limited period and will be funded by the NSW Government.
But be careful! To be eligible, you must have entered into a contract between 14 October 2008 and 30 June 2009 (inclusive).
The existing arrangements for first home buyers also include free stamp duty on purchases up to $500,000. The NSW Office of State Revenue has an excellent website – check it out at www.osr.nsw.gov.au and see if you’re eligible for the grant and the discount in stamp duty.
The new arrangements will go a long way towards helping you buy your first home. Don’t forget that when you are borrowing more than 80% of what the property is worth, it will be necessary for Loan Mortgage Insurance to be included in the financing arrangements. These days, lenders are looking at applications a little more closely, so the higher the equity you have the better chance of an approval.
Remember, once you’ve accumulated enough for a deposit using the Boost Scheme, you can further boost your opportunities by securing one of the most competitive home loans on the market through Chifley Home Loans.
Chifley Home Loans can provide you with a low interest rate, a choice of loans to suit your circumstances and a simple process that takes all the hard work out of getting and maintaining your home loan.
Some of our Home Loan features include:
- Low interest rate
- Application fee - $0
- Monthly account keeping fee - $0
- Split loan fee - $0
- Electronic redraw fee - $0
- Redraw facility - yes
- Five Star Rating from Cannex, the independent financial services monitoring agency*.
Any intending first home buyers should contact the friendly staff of Chifley Home Loans on 1800 800 002. It’s there for you so you may as well use it! Chifley Home Loans also welcomes enquiries from members who have already bought a home and who want to give their existing loans a health check.
* Credit provider is Select Credit Union
Investment and market commentary
Click here for commentary on how investment markets performed over the December 2008 quarter.
Fair Go
Save 20% on admission to Sydney Aquarium
Nowhere else in the world will you find a larger collection of Australian aquatic life than at the Sydney Aquarium.
There's something for everyone to see with over 11,500 animals, an extensive collection of sharks, the world's largest Great Barrier Reef display and the new Mermaid Lagoon where you can walk through underwater tunnels to see Dugongs racing about at full speed!
As a Fair Go member, you can now visit Australia's #1 attraction and receive a 20% discount off the admission price simply by showing your Fair Go membership card at the entrance to the aquarium!
Sydney Aquarium
Aquarium Pier,
Darling Harbour NSW 2000
Telephone: 02 8251 7800
www.sydneyaquarium.com.au
Come along to a seminar
Are you looking to set aside some money for a house, a holiday or perhaps for your children's education? Would you like to know more about investment options, risk and return and managed funds? Are you wondering whether you will have enough money to retire on?
You could get the answers to these questions, and more, by attending one of the free pre-retirement planning seminars we are running at a venue close to you. To find out more, click here or contact Member Services on 1800 067 059.
Contact us
Chifley Financial Services Limited
Ground Floor
28 Margaret Street
Sydney
Member Services
T: 1800 067 059
F: (02) 9273 0033
Financial Planning
T: 1800 800 002
Please note that the information contained in this document is of a general nature only and is not for personal advice and has not taken into account your personal objectives, financial situation or needs. Any advice in this document is provided by Chifley Financial Services Limited (ABN 75 053 704 706), as an Australian Financial Services Licensee (AFSL 231148). Chifley Financial Services Limited is the trustee of FuturePlus Super (ABN 76 829 356 693). FuturePlus Super is a Registered Superannuation Entity (RSE: R1004366). Chifley Financial Services Limited is co-owned by the Local Government Superannuation Scheme, the Energy Industries Superannuation Scheme and Unions NSW. Members should not rely solely on this information and should consider their own personal objectives, financial situation and needs before acting on this information. Prior to making any decision you should obtain and consider the relevant Product Disclosure Statement (PDS) pertaining to your membership.
UNSUBSCRIBE - Your privacy is important to us, so if you wish not to receive information from this service, please
click here,
enter your email address and we will remove you from the list.
|
