Quadrant Super : News Feed

Super: the low down

10/5/2012

Key super messages

After weeks of speculation and budget leaks, only a small number of super changes were announced.

Despite industry lobbying, the government has, as expected, doubled the super contribution tax rate for people earning over $300,000. The increase from 15% to 30% will kick in from 1 July 2012.

It has also announced that it will defer by two years the higher concessional contribution caps from $25,000 to $50,000 for over 50s with smaller balances.

The bottom line for super

Our key takeout message is that super is still an attractive way to save for retirement. If you’re a high income earner, we suggest you contact our financial experts about your wealth creation strategy. It’s no longer straightforward.

While the Budget delivers some news that might put a small glitch in your retirement planning in the immediate term, the changes are pretty minor in the broader scheme of things and look like panning out in the medium term.

When it comes to retirement, super is still the way to go.

Why super is a great place to park your money

26/4/2012

Alarmingly, 17% of people believe the best place to invest their money is under the mattress! If inflation is 4%, money under a mattress loses 4% per year in value – your money’s value will be cut in half in around 18 years.

What makes super so special is the way your investment returns are taxed. Unlike other investments, which are typically taxed at marginal income tax rates (as high as 45%) the investment returns of your super fund are generally taxed at only 15%.

This low rate of tax means your super can potentially grow in value at a faster rate than other investments invested in the same assets.

Quadrant offers seven investment options, each with its own asset mix. Depending on what options you choose, your money can be invested in Australian and international assets including shares, property, fixed interest and cash. It’s up to you.

So, rather than leave your money at the mercy of inflation (or theft!), consider super as a tax effective investment vehicle in the option of your choice.

For more information about why super works or to find out more about our investment options, call us on 1800 222 209.

Getting your hands on your super early

12/4/2012

It’s good to do many things early – get the worm, for example, or exercise (before your brain figures out what you’re doing). But accessing your super early could cause you no end of grief.

Severe penalties apply if you illegally access your super early. You will have to pay tax on the money you access early and other penalties may also apply depending on your involvement in the scheme. Recently, two promoters were both sentenced to two years imprisonment for a scheme that involved accessing super benefits early.

So, by all means, book your concert tickets as soon as the buzz starts and get to bed at sensible-o’clock but leave your super right where it is until you‘re legally entitled to it.

There are special circumstances where you can legally access your super savings early.

These include:

severe financial hardship
certain compassionate grounds
a terminal medical condition
permanent or temporary incapacity.

If you legitimately need some of your preserved super early, you should start by calling us on 1800 222 209 and we’ll give you more information.

Gen Ys reckon they’ll be rich

29/3/2012

Most Gen Ys have high expectations for their futures, with two thirds expecting to work as hard, if not harder than their parents to achieve the lifestyle they crave.

A new study found more than 75% of Gen Ys expected to live a comfortable or very comfortable lifestyle, with 15% expecting to be rich.

Nearly 70% of those who predicted they'd be on a salary of $100,000 at some point believed it would happen when they turned 30.

But thirty two percent didn't think they would ever earn that amount.

Ninety percent of respondents were highly confident about owning their own home.

From a career perspective over the next 10 to 15 years, 29% of Gen Ys surveyed thought they would build a great career, with 14% predicting they would head up a team and 13% expecting to be the boss.

Around 40% of Gen Ys are in debt due to studies to the tune of between $10,001 and $20,000, with nearly half of those respondents thinking this wouldn't be paid off until they are over 30.

Twelve percent predicted they wouldn't manage to pay off this debt until they've reached 40.

It’s great that Gen Y wants to build bright futures for themselves but many are already carrying debt due to studies and they risk falling short of their longer term goals if they don't act early to ensure they have the money to fund them.

The three quarters of Gen Ys who plan to at least be comfortable in their retirement could make additional contributions to their super via salary sacrifice or the government co-contribution scheme.

The who, where and why of contributions

15/3/2012

Super contributions for the year to June 2011 totalled $104.8 billion. Employers contributed $71.4 billion and members $32.5 billion. Other contributions, which include spouse contributions and government co-contributions, totalled $0.9 billion. Industry funds like Quadrant received about $26.4 billion.

The numbers seem big but, believe it or not, they are not big enough.

One of the basic mistakes people make when it comes to their super is believing that their 9% employer contributions will be enough for a comfortable retirement. If you settle for 9%, you’ll end up with roughly half of what you’ll need to maintain the same lifestyle.

The average person retires with around $140 000 in their super fund for men, and just $70 000 for women. If you want to retire on about 75% of your current income, you’ll need to contribute about 15% of your salary each year for your entire working life.

If you want a comfortable retirement, it’s absolutely necessary to make extra payments into your super, because the compulsory amount going in is not enough.

Chess and compound interest

1/3/2012

There is a story about an Emperor of China who was so excited about the game of chess that he offered the game’s inventor one wish. The inventor replied that he would like one grain of rice on the first square of the chess board, two grains on the second square, four on the third and so on, up to the 64th square.

The unwitting emperor agreed to the modest request. But two to the 64th power is 18 million trillion grains of rice – more than enough to cover the entire surface of the earth. The Emperor, realising he had been tricked, had the inventor beheaded.

What does all this global risotto have to do with super?

Simple. Using the same principle, a comfortable retirement is within most people’s grasp. The trick is to start saving early to maximise the power of compound interest.

So what is compound interest?
Compound interest is all about earning interest on your interest. Compound interest works well in super because it's a long term investment. You can't normally get your hands on your super until later in life, so your super benefits from many years of compound interest.

Just say you have $10,000 and invest it at an annual rate of 6%. Over a year it earns $600 interest, so you then have $10,600. If you invest it again the next year, this $10,600 then earns $636 interest, which makes your balance $11,236. And on it goes. After only 12 years, you would have doubled your money without doing anything!

What to do next?
Bump up your super contributions.

If you’re a low to middle income earner and you make after tax contributions to your super, you may be eligible for the government co-contribution.

If you’re a higher income earner, consider salary sacrificing into super and taking advantage of the tax benefits.

Either way, the sooner you start saving, the more time your money has to grow by harnessing the incredible power of compound interest.

Are you putting your family at risk?

16/2/2012

Young? Old? Married? Single? Male? Female? Doesn’t matter. If someone depends on you financially, chances are you need life insurance because if you were no longer there to provide for your family, the financial implications for your loved ones could be big.

Think through the worst case scenario. If the worst happened to you tomorrow, how would your loved ones fare financially? Would they have the money at hand to pay for the mortgage or other loans? Would they be able to meet their living expenses?

Some people think that arranging life insurance is complicated and expensive but it’s probably easier and cheaper than you think.

Scarily, nearly six in 10 parents with children aged 17 and under probably don’t have enough life insurance cover, leaving their families vulnerable.

Don’t risk your family’s financial wellbeing. Call us on 1800 222 209 and we’ll help you get covered.

Sushi (and insurance) for beginners

2/2/2012

‘I’m thinking tuna,’ said the woman in front of me in the sushi queue and waggled a brochure under her beau’s nose. ‘Maybe we should get some income protection insurance.’

‘I think we have some through our super,’ he said. ‘Tuna? Really? Cooked or raw?’

‘Or maybe a crab and avocado. Through super, you think? We could do, I suppose. Hey, I think I’ll get a Teriyaki chicken, after all. Or maybe a prawn...’

I watched the brochure sail into the bin.

‘Prawn? Yeah, sounds good,’ he said. ‘Two, even.’

‘The prawn. Definitely. Or just an egg roll...’

I couldn’t help thinking this exchange pretty much summed up the typical Aussie ‘she’ll be right’ attitude to protecting our incomes and lifestyles. Eighty three percent of Australians say they have car insurancebut only 31% insure their ability to earn an income.

What would happen to you and your family if you got sick or injured and couldn’t work? Would you survive on welfare?

If you spent as much time choosing the right insurance as you do on lunch, you’d have a lot more peace of mind.