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It’s to your credit to read the fine print

All / 30.04.2020

It’s to your credit to read the fine print

When using credit cards for quick personal loans beware of the fine print!

Card loans may offer reduced interest rates, but missed payments can result in interest rates reverting to the card’s higher rate. Credit card balances can quickly blow out and take years to pay off.

Let’s do the maths:

  • Card balance: $5,000
  • Interest rate: 18%
  • No fees or further purchases

By paying the minimum monthly amount ($102 then decreasing), it would take 33 years to pay off at a total cost of $17,181 (including $12,181 interest)!

For more information or to speak to one of our Financial Advisers please contact TNR Wealth Management on 02 6621 8544.

Disclaimer
Past performance is not a reliable indicator of future performance. The information and any advice in this publication does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness having regard to these factors before acting on it. This article may contain material provided directly by third parties and is given in good faith and has been derived from sources believed to be reliable but has not been independently verified. It is important that your personal circumstances are taken into account before making any financial decision and we recommend you seek detailed and specific advice from a suitably qualified adviser before acting on any information or advice in this publication. Any taxation position described in this publication is general and should only be used as a guide. It does not constitute tax advice and is based on current laws and our interpretation. You should consult a registered tax agent for specific tax advice on your circumstances.

 

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Defining your defined benefit fund

All / 23.04.2020

Defining your defined benefit fund

Defined benefit funds are superannuation funds where members’ contributions are pooled instead of being allocated to particular fund members. More common amongst superannuation funds for public sector employees, the benefits paid out of defined benefit funds are determined based on a person’s employment details such as their salary or length of employment. This means the fund takes on the risk and you are entitled to a consistent retirement income stream regardless of market performance.

Many of the funds that have been established since superannuation became a compulsory workplace entitlement for employees are accumulation funds. Defined benefit funds, however, have been around since 1862. Importantly, this doesn’t mean these funds are outdated. In some cases, defined benefit funds can provide more benefits to members than an accumulation fund. We’ve answered some common questions about defined benefit funds below.

Who is entitled to receive defined benefits?

Defined benefit funds are predominantly for public sector and some corporate employees. A lot of these funds are now closed to new members. Some of the biggest defined benefit funds in Australia include TelstraSuper, Qantas Super, Rio Tinto Staff Super Fund, Commonwealth Superannuation Scheme Fund (CSS), UniSuper and Gold State Super.

What happens in the event of death of a member?

If a member who receives income from a defined benefit fund dies, the income stream will revert to a death benefit income stream. This death benefit income stream will be a percentage of the member’s income stream. From 1 July 2017, the transfer balance cap of $1.6 million was enforced. This means that a death benefit paid after this date can’t be retained in the accumulation phase and must be paid as a death benefit income stream or as a lump sum.

What are the different defined benefit options?

Upon retirement, a member’s benefits will be paid as a lump sum, lifetime pension or a combination of these two options. For example, after 25 years of membership in a defined benefit fund, you could decide between the following retirement benefits:

  • a lump sum worth five times your annual salary; or
  • a lifetime pension as a monthly payment worth 75% of your final salary.

Which defined benefit option should you choose?

You’ll need to consider your retirement goals and objectives to determine which defined benefit option is right for you. While a lump sum payment may be tempting to pay off debts, the increased life expectancy of people since defined benefit schemes were established (most in the early 1900s), means you could comfortably service any outstanding debts such as your mortgage, plus live a comfortable lifestyle with the lifetime pension option. Of course, other factors will come into your decision such as your age and overall financial position, so you should discuss your situation with a financial planning professional before you make any decisions about your retirement income.

What are the pros and cons of each defined benefit option?

Each defined benefit option has pros and cons. Perhaps the biggest potential benefit of choosing a lump sum payment is the freedom you have in deciding how that money is used. For example, you could invest the capital elsewhere, make some big purchases, and pay off outstanding debts. The major con of choosing the lump sum payment option is the tax implications. If you withdraw your lump sum before your preservation age, it will be taxed at 22%, including the Medicare levy. Further, once the lump sum is paid, it’s no longer considered superannuation, so you may incur new taxes if you invest the lump sum elsewhere.

The key benefits of choosing the lifetime pension include consistent tax-free income if you start drawing a lifetime pension after your preservation age. With today’s increased life expectancy, a lifetime pension may also be a more reliable form of income if you’re in good health and expect to live well into your twilight years.

Choosing the right superannuation products is important, so seek the advice of a qualified financial planner to understand the right defined benefit fund for you.

For more information or to speak to one of our Financial Advisers please contact TNR Wealth Management on 02 6621 8544.

Disclaimer
Past performance is not a reliable indicator of future performance. The information and any advice in this publication does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness having regard to these factors before acting on it. This article may contain material provided directly by third parties and is given in good faith and has been derived from sources believed to be reliable but has not been independently verified. It is important that your personal circumstances are taken into account before making any financial decision and we recommend you seek detailed and specific advice from a suitably qualified adviser before acting on any information or advice in this publication. Any taxation position described in this publication is general and should only be used as a guide. It does not constitute tax advice and is based on current laws and our interpretation. You should consult a registered tax agent for specific tax advice on your circumstances.
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The true cost of an epidemic

All / 16.04.2020

The true cost of an epidemic

Recent events such as the coronavirus outbreak highlight the far-reaching effects of an epidemic. Following the initial devastation of these events, the true cost of an epidemic takes time to filter through the economy. In this article, we’re taking a look at the economic impacts that epidemics and pandemics have on a local, regional and global scale.

When did the coronavirus outbreak start?

The Chinese Government alerted the World Health Organisation (WHO) of several unusual pneumonia cases in Wuhan on 31 December 2019. In early January, the WHO announced that they had identified a new strain of coronavirus — 2019-nCoV. At the time of this article’s publication, there are over 80,000 confirmed cases and almost 3,000 deaths worldwide.

How do epidemics and pandemics affect industries?

The biggest impact on many industries in an epidemic or pandemic is supply chain delays. Industries rely on specific regions to source parts and products. Using the coronavirus outbreak and assembly lines for technology products, as an example, people in assembly lines typically work in close quarters. To contain the outbreak, factories in China have delayed restarting production after the Lunar New Year break. One smartphone factory, Foxconn, is expecting a 12% decrease in production as a result.

Tourism is another key industry effected by epidemics and pandemics. In Australia, measures to contain coronavirus, including halting incoming flights from China will have significant impacts on the tourism and education industries. An economist at ANZ expects Australia’s economic growth to decline by 0.5% in the first quarter due to fewer tourists visiting Australia and a delayed start to the academic year for international students.

How are individual businesses effected by epidemics and pandemics?

Businesses within the sectors most impacted by epidemics and pandemics experience the effects of an outbreak first. In Australia, for example, travel booking company Webjet experienced a 10% slump in its share price in late-January following the coronavirus outbreak. Other companies such as JB Hi-Fi and Harvey Norman have said their supply of electronics could be disrupted.

Small and medium businesses can often be the hardest hit. Businesses such as restaurants and retailers in tourist hotspots and tourism services companies will be among the hardest hit in Australia over the coming months.

How long does it take for markets to recover after an epidemic?

Market recovery following an epidemic is dependent on a range of factors. Following the SARS outbreak, for example, the Chinese Government deployed fiscal stimulus to aid in economic recovery. At the time of the SARS outbreak (first quarter of 2003), China’s economic growth was 11.1%. By the second quarter, the country’s economic growth fell to 9.1%. As the outbreak was contained, and fiscal stimulus was deployed, China’s economic growth recovered to 10% by the third quarter of 2003. Looking at other markets, the S&P500 posted a gain of 14.59% following the first confirmed case of SARS. The index posted a gain of 20.76% a year after the outbreak.

How will an epidemic or pandemic impact my investments?

The economy has changed since the SARS outbreak. China is now a much larger part of the global economy, accounting for around 17% of global GDP, compared to 4% in 2003, so the economic impacts of coronavirus may be more pronounced. The best thing investors can do right now is exercise caution and make sure their portfolios are defensively positioned.

To discuss how your investments may be impacted by coronavirus speak to your financial adviser. Your financial adviser can help you protect your wealth by implementing suitable hedging strategies to minimise the impacts of these events on your portfolio.

For more information or to speak to one of our Financial Advisers please contact TNR Wealth Management on 02 6621 8544.

Disclaimer
Past performance is not a reliable indicator of future performance. The information and any advice in this publication does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness having regard to these factors before acting on it. This article may contain material provided directly by third parties and is given in good faith and has been derived from sources believed to be reliable but has not been independently verified. It is important that your personal circumstances are taken into account before making any financial decision and we recommend you seek detailed and specific advice from a suitably qualified adviser before acting on any information or advice in this publication. Any taxation position described in this publication is general and should only be used as a guide. It does not constitute tax advice and is based on current laws and our interpretation. You should consult a registered tax agent for specific tax advice on your circumstances.
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Staying the Course – Still

All / 09.04.2020

Staying the Course – Still

We hope you are all staying well and keeping safe. The Team at TNR Wealth is here to assist you at all times and our message during this remarkable time remains unchanged; Stay the course. In the same way we are being asked to work from home and social distance for an extended period of time, we are asking you to stay the course during this extended period of market volatility. Three weeks has passed since we last communicated this message and I can assure your our message has not changed. And if this volatility continues for three, four, five or more months our message will remain the same. As such, rather than providing new information, we ask you to review the following which was previously communicated in March.

It is important to take the following approach to protecting your assets by:

  • utilising existing cash reserves;
  • maintaining and continuing to contribute to your asset portfolio if manageable; and
  • staying the course.

What do we mean by “staying the course”?

The following video and related transcript will provide you with an understanding of “staying the course” as well as some assurance from the Vanguard fund manager on their strategy to protect and grow your assets.

The environment is constantly changing and TNR Wealth welcome any questions you may have. If you wish to discuss your wealth management strategy please contact TNR Wealth at your convenience.

Click on the following image to view the video to highlight the current market conditions.

For more information or to speak to one of our Financial Advisers please contact TNR Wealth Management on 02 6621 8544.

Disclaimer
Past performance is not a reliable indicator of future performance. The information and any advice in this publication does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness having regard to these factors before acting on it. This article may contain material provided directly by third parties and is given in good faith and has been derived from sources believed to be reliable but has not been independently verified. It is important that your personal circumstances are taken into account before making any financial decision and we recommend you seek detailed and specific advice from a suitably qualified adviser before acting on any information or advice in this publication. Any taxation position described in this publication is general and should only be used as a guide. It does not constitute tax advice and is based on current laws and our interpretation. You should consult a registered tax agent for specific tax advice on your circumstances.
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The upside of a market downturn

All / 09.04.2020

The upside of a market downturn

Most people view share market downturns as unequivocally bad events. Suddenly, hard earned savings aren’t worth as much as they were yesterday. It seems as if our money is evaporating, and in the heat of the moment selling up can look like the best course of action.

The alternative view

But on the opposite side of each share sale is a buyer who thinks that they are getting a bargain. Instead of getting 10 shares to the dollar yesterday, they might pick up 12 or 15 to the dollar today. When the market recovers, the bargain hunters can book a tidy profit.

So why do share markets experience downturns, and what are the upsides?

A range of natural and man made events can trigger market selloffs:

  • Terrorist attacks.
  • Infectious disease outbreaks such as SARS and COVID-19.
  • Wars, the possibility of war, and geopolitical issues such as threats to oil supplies.
  • Economic upheavals, the bursting of speculative investment bubbles, and market ‘corrections’.

In short, anything that is likely to reduce the ability of a broad range of companies to make money is likely to trigger a market sell off.

The common thread that runs through the causes of downturns is uncertainty. In the immediate aftermath of the 9/11 attacks nobody knew what the size of the threat was and markets dropped. As the fear of further attacks receded, markets soon recovered.

However, the initial drop in market value occurred quite rapidly. By the time many investors got out of the market the damage was already done. Paper losses were converted to real losses, and spooked investors were no longer in a position to benefit from the upswing. After the initial sell off it took the ASX200 Accumulation Index just 36 days to completely recover from 9/11.

Other downturns and recoveries take longer. The Global Financial Crisis began in October 2007, and it wasn’t until nearly six years later that the ASX200 Accumulation Index recovered its lost ground. This caused real pain to investors who bought into the market at its pre-crash peak, but for anyone with cash to invest after the fall, this prolonged recovery represented years of bargain hunting opportunities.

If? Or when?

Of course much hinges on whether or not markets recover. While history isn’t always a reliable guide to the future it does reveal that, given time, major share market indices in stable countries usually do recover. It’s also important to remember that shares generally produce both capital returns and dividend income. Reinvesting dividends back into a recovering market can be an effective way of boosting returns.

Seek advice

Of course, it’s only natural for investors to be concerned about market downturns, but it’s crucial not to panic and sell at the worst possible time. The fact is that downturns are a regular feature of share markets. However, they are unpredictable, so it’s a good idea to keep some cash in reserve, to be able to make the most of the opportunities that arise whenever the share market does go on sale.

For advice on how to avoid the pitfalls and reap the benefits offered by market selloffs, talk to your financial adviser.

For more information or to speak to one of our Financial Advisers please contact TNR Wealth Management on 02 6621 8544.

Disclaimer
Past performance is not a reliable indicator of future performance. The information and any advice in this publication does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness having regard to these factors before acting on it. This article may contain material provided directly by third parties and is given in good faith and has been derived from sources believed to be reliable but has not been independently verified. It is important that your personal circumstances are taken into account before making any financial decision and we recommend you seek detailed and specific advice from a suitably qualified adviser before acting on any information or advice in this publication. Any taxation position described in this publication is general and should only be used as a guide. It does not constitute tax advice and is based on current laws and our interpretation. You should consult a registered tax agent for specific tax advice on your circumstances.

 

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Quarterly Economic Update: January – March 2020

All / 02.04.2020

Quarterly Economic Update: January – March 2020

The first quarter of 2020 will forever be remembered for delivering one of the greatest health and economic shocks of all time. The economic damage was an inevitable consequence of governments worldwide taking unprecedented action to curb the spread of the novel coronavirus that emerged in China in December 2019. Never have so many people in so many countries experienced such major upheaval to their daily lives at the one time.

With numerous countries enacting harsh measures to reduce person-to-person spread of the virus, many sectors of most economies effectively ground to a halt. Tourism, travel, entertainment and hospitality were particularly badly affected, but the fallout will be felt far and wide for some time to come.

By the numbers

Financial markets (and many governments) were slow to appreciate the magnitude of the coronavirus threat. Major share markets rose steadily, setting record highs on 20 February, then, as the likely economic consequences of tackling coronavirus became apparent, markets plunged. From its peak of 7,163 the S&P/ASX 200 index fell to 4,546 on 23 March. A rally then saw the index rise to 5,077 at the end of March, 24% down from the start of the quarter.

In the US, the S&P 500 fell 34% from top to bottom. The MSCI All-Country World Equity Index dropped 35%. Both indices recovered ground at the end of the quarter to limit January to March losses to 18% and 21% respectively.

The Reserve Bank moved quickly to further cut interest rates to 0.25%. This is as low as the RBA is prepared to go, with the Governor indicating this rate will be with us for several years come. Partly in response, and partly due to investors seeking the relative safety of the US dollar, the Australian dollar plunged from US$0.66 US to US$0.55. It then staged a partial recovery to end the quarter at US$0.61. Falls against other currencies were less severe.

Massive stimulus

Governments around the world responded with programs that will, over time, pump almost unimaginable sums of money into the economy – hundreds of billions of dollars in Australia, trillions in the US. Banks have deferred some loan repayments, and many landlords will forgo rent payments.

The focus is on helping employers retain staff, to provide income support to people who do lose their jobs, and to assist pensioners. One aim is to minimise economic disruption now to facilitate a quicker recovery once coronavirus is brought under control. However, despite these economic initiatives, escalating public health measures saw thousands of businesses close in March, with job losses estimated to be more than one million.

While most of the economic stimulus measures were widely applauded, some concern was expressed over the ability of eligible people to withdraw up to $10,000 from superannuation this financial year, and again in 2020/2021. Withdrawing money from super at a time of depressed prices will likely have a major adverse impact on future superannuation savings, leading a number of observers to suggest that this option only be considered once all others have been exhausted.

Few silver linings

It’s difficult to find any silver linings in the clouds of the current crisis. While motorists may welcome the drop in petrol prices, due to oil falling from over US$60 per barrel to near US$20 per barrel, this is a sign of how hard the pandemic is hitting the economy. One small positive: with airlines grounded, people staying home and many industries closed, air pollution and carbon dioxide emissions are down.

For more information or to speak to one of our Financial Advisers please contact TNR Wealth Management on 02 6621 8544.

Disclaimer
Past performance is not a reliable indicator of future performance. The information and any advice in this publication does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness having regard to these factors before acting on it. This article may contain material provided directly by third parties and is given in good faith and has been derived from sources believed to be reliable but has not been independently verified. It is important that your personal circumstances are taken into account before making any financial decision and we recommend you seek detailed and specific advice from a suitably qualified adviser before acting on any information or advice in this publication. Any taxation position described in this publication is general and should only be used as a guide. It does not constitute tax advice and is based on current laws and our interpretation. You should consult a registered tax agent for specific tax advice on your circumstances.
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Staying the Course

All / 26.03.2020

Staying the Course

The Team at TNR Wealth is here to assist you at all times. In times of uncertainty it is important to take the following approach to asset your protection by:

  • utilising existing cash reserves;
  • maintaining and continuing to contribute to your asset portfolio if manageable; and
  • staying the course.

What do we mean by “staying the course”?

The following video and related transcript will provide you with an understanding of “staying the course” as well as some assurance from the Vanguard fund manager on their strategy to protect and grow your assets.

The environment is constantly changing and TNR Wealth welcome any questions you may have. If you wish to discuss your wealth management strategy please contact TNR Wealth at your convenience.

Click on the following image to view the video to highlight the current market conditions.

For more information or to speak to one of our Financial Advisers please contact TNR Wealth Management on 02 6621 8544.

Disclaimer
Past performance is not a reliable indicator of future performance. The information and any advice in this publication does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness having regard to these factors before acting on it. This article may contain material provided directly by third parties and is given in good faith and has been derived from sources believed to be reliable but has not been independently verified. It is important that your personal circumstances are taken into account before making any financial decision and we recommend you seek detailed and specific advice from a suitably qualified adviser before acting on any information or advice in this publication. Any taxation position described in this publication is general and should only be used as a guide. It does not constitute tax advice and is based on current laws and our interpretation. You should consult a registered tax agent for specific tax advice on your circumstances.
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The Importance of Staying Invested in Volatile Times

All / 20.03.2020

The Importance of Staying Invested in Volatile Times

TNRWealth utlises MorningStar as one of its investment research partners due to its size, expertise and capability.

Please click the following article/and video to highlight the current market conditions.

For more information or to speak to one of our Financial Advisers please contact TNR Wealth Management on 02 6621 8544.

Disclaimer
Past performance is not a reliable indicator of future performance. The information and any advice in this publication does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness having regard to these factors before acting on it. This article may contain material provided directly by third parties and is given in good faith and has been derived from sources believed to be reliable but has not been independently verified. It is important that your personal circumstances are taken into account before making any financial decision and we recommend you seek detailed and specific advice from a suitably qualified adviser before acting on any information or advice in this publication. Any taxation position described in this publication is general and should only be used as a guide. It does not constitute tax advice and is based on current laws and our interpretation. You should consult a registered tax agent for specific tax advice on your circumstances.
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3 things you may have forgotten to plan for in retirement

All / 12.03.2020

3 things you may have forgotten to plan for in retirement

Retirement can be an exciting phase in your life. But all the recent changes to superannuation bring with them lifestyle and financial issues you need to be aware of as you plan your retirement.

Retirement means different things to different people. For some, it’s an opportunity to travel, to begin that project they’ve been putting off for years, or to just relax, spend time with the grandkids and dabble in their favourite hobbies. Retirement should be a time to relax and be free.

Plan smart for a stress-free retirement

Your retirement should be a time to free yourself from financial stress. Planning and good advice from a qualified financial adviser is the key to a trouble-free retirement.

If you’re considering retirement, there are issues you need to think about and plan for before you take the plunge. Here are 3 decisions retirees commonly miss in planning for their retirement:

1. Have a re-contributions strategy

Few prospective retirees have heard about a ‘re-contribution strategy’ but you do need to know what it is and how it works.

Your superannuation entitlements comprise both taxable and tax-fee components. A re-contribution strategy is one where you withdraw your money from your superannuation account and re-contribute that cash back into your fund.

Why a re-contributions strategy is important

Re-contributing all or part of your withdrawn funds back into your superannuation as a tax-free non-concessional contribution increases the level of tax-free funds in your superannuation account.

This reduces the tax payable on your superannuation pension if you dip into that pension while under 60 years of age. A re-contribution strategy can also lower the tax payable on benefits paid to your beneficiaries when you direct your superannuation benefit to your non-dependent beneficiaries following your death.

2. Death nominations

A lot of retirees often forget death benefits are payable to your dependents or your estate from your superannuation fund upon your death.

There are four forms of death nominations. You can make a binding death benefit nomination while you are alive. This is a written direction to your superannuation trustee establishing how you wish your superannuation death benefits to be distributed.

Secondly, a reversionary beneficiary is where a superannuation fund member receiving an income stream nominates a beneficiary to receive those payments upon their death.

Thirdly, you can make a non-binding death benefit nomination guiding how you wish some or all of your superannuation death benefits is be distributed following your death.

Lastly, you may make a non-lapsing binding death benefit nomination directing your superannuation trustee to distribute some or all of your superannuation death benefits. This nomination, if allowed by your fund trust deed, remains in place unless the member cancels or replaces it with a fresh nomination.

Why a Death Benefit Nomination is important

If you don’t dictate how your superannuation death funds are to be distributed, the trustee of your fund has discretion as to who should receive your superannuation death benefit in the event of your death.

3. Ensuring your money will last and maximising Centrelink

Australia’s social security system is means tested. It is designed to act as a safety net. So, the higher your income or assets you have on retirement, the lower your Age Pension entitlements may be.

If your income or assets exceed the set cut off limits, you will not be eligible to an Age Pension at all. Hence Australians are expected to use more of our own savings to fund our retirement.

Currently, for every $10,000 of assets above the allowable Age Pension threshold your pension drops by $390 per year each if you’re a couple or $780 per year for single.

Why ensuring your money lasts is important

The more heavy lifting your pension does, the less you’ll draw on your retirement savings. This is important as our increased life expectancies coupled with a turbulent investment environment make it challenging to ensure your retirement savings will go the distance.

Final observation

Planning your retirement can be complicated. As you can see from the above three issues, the various legislative frameworks are complex. While it pays to understand how retirement works, contact a qualified financial adviser to discuss your personal situation and retirement needs.

For more information or to speak to one of our Financial Advisers please contact TNR Wealth Management on 02 6621 8544.

Disclaimer
Past performance is not a reliable indicator of future performance. The information and any advice in this publication does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness having regard to these factors before acting on it. This article may contain material provided directly by third parties and is given in good faith and has been derived from sources believed to be reliable but has not been independently verified. It is important that your personal circumstances are taken into account before making any financial decision and we recommend you seek detailed and specific advice from a suitably qualified adviser before acting on any information or advice in this publication. Any taxation position described in this publication is general and should only be used as a guide. It does not constitute tax advice and is based on current laws and our interpretation. You should consult a registered tax agent for specific tax advice on your circumstances.
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Will there always be an age pension?

All / 05.03.2020

Will there always be an age pension?

With all of the talk about the need to be self-sufficient in retirement it’s not surprising that many people assume that the government-funded age pension will be phased out altogether sometime in the future. But will it?

Both sides of politics have committed to retaining the age pension “for those in need”. The age pension is means tested using both an income and an assets test – the test that pays the lowest pension is the one that is used.

Conclusion – The age pension will remain, but not for everyone

There are two other aspects to the government’s retirement income policy – compulsory superannuation and tax-concessional voluntary superannuation. Following the increase to the assets test thresholds in January 2017, many people now qualify for only a part pension. Meaning, the general rule still holds – as you build more super, you will qualify for less age pension.

One aspect that people don’t consider is the age when a pension becomes payable. Historically, it has always been age 65 for men, and since 1995 the qualifying age for women progressively extended to age 65.

With people now living longer lives, the age pension may be payable for 20 to 30 years – a very long-term commitment for governments. This raises the question “why 65?”

The answer to this question suggests another key issue in the provision of the age pension. It all goes back to Otto von Bismark, the German Chancellor in the 1880s. He introduced state funded “accident and old age insurance” – the first pension scheme in the world. This standard was followed throughout the rest of Europe and eventually the world.

His actuaries nominated age 65 as when the “old age insurance” would be payable. This was at a time when the average life expectancy of a German male was 44. A very small percentage of the population could expect to receive the pension and they were not likely to receive it for long.

In 2010 the government considered the question of ‘why 65?” and the age pension age was increased. Starting from 1 July 2017, the qualifying age for both men and women increases by six months every two years. From 1 July 2023, the qualifying age will be 67.

With increasing “grey power” as our population ages, it would be political madness for any government to even consider abandoning the age pension. Instead, fewer people are likely to qualify at a later age for a shorter period.

This is all the more reason to continue to build your own superannuation nest egg and become self-sufficient in retirement.

For more information or to speak to one of our Financial Advisers please contact TNR Wealth Management on 02 6621 8544.

Disclaimer
Past performance is not a reliable indicator of future performance. The information and any advice in this publication does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness having regard to these factors before acting on it. This article may contain material provided directly by third parties and is given in good faith and has been derived from sources believed to be reliable but has not been independently verified. It is important that your personal circumstances are taken into account before making any financial decision and we recommend you seek detailed and specific advice from a suitably qualified adviser before acting on any information or advice in this publication. Any taxation position described in this publication is general and should only be used as a guide. It does not constitute tax advice and is based on current laws and our interpretation. You should consult a registered tax agent for specific tax advice on your circumstances.
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