1. Slides download from :www.ncba.com.au/downloads
InvoCare
Tweaking Your Super
Nick Bruining
CFP, B Com, Dip FP, CPL(H), FFPA, FAICD, APMESA
Authorised Representative
N.C. Bruining & Associates Pty Ltd
AFSL
Slides download from :

2. WARNING The information provided in today is of a general nature only.
It is not personal specific financial advice.
You should not:
Take any action
Dispose of any investment or asset
Purchase any investment or asset
Rely on the information contained in this presentation without first seeking professional advice based on your own specific situation.
The information may contain errors or omissions which could significantly impact your position.
Single Blokes
Head Spin
Complicated System
Educating you
BG Nick
Who ?
DIY Planners
Looking for a planner
Keep existing one honest
Based on 25 years
Clients
Millionaires
Few Under $100K
Majority between $100K - $500K
Tricks and Tips
Insight on how the industry Works

3. SUPER and account based pensions
History
Govt Large Corps
83 Age Pension
88 3%
92 ATO
$1,800,000,000,000

4. What is super ? A series of rules which, if followed,
Super and account based pensions
What is super ?
A series of rules which, if followed,
provide relative tax and Centrelink benefits
Rules set out in a Trust Deed
Comply with the SIS Act (and others)
Two Components
The “Box” that holds the investments
The underlying investments in the fund
Trust Deeds Vary

5. Investments and how they “work”
Dealing with relatively simple structures
Extra Complexity usually means extra costs
Extra Complexity often equals extra risk
Your Super invests into these areas
Deposits
Cash, Term Deposits, Bonds
Real Estate
Residential
Commercial
Business Investments
Direct
Shares

6. Measuring Return The components
Income - where a payment is received in the year
Interest
Sometimes expressed as yield
Growth – where the value of the asset grows
Gold
Vacant Land
+ 1 Year, expressed as compound return
Most investments combine both
Property
Shares
Animated Screen

7. Deposits Online Accounts Cost Savings § Security Introductory Rates ∆
Getting the best deals

8. Debentures Spread the risk
Investments and how they work
Debentures
Loans from the general public
Rates generally higher
Much higher risk
Need to understand where the money ends up
Is the loss of every last cent of your money worth an extra percent or two?
Spread the risk

9. Investments and how they work
Bonds
Loans to governments and corporations Primary and Secondary Markets More Bonds than shares More developed market in the US Determinants Coupon rate Prevailing Rates Duration Risk
Demonstration

10. Investments and how they work
Real Estate
Direct Residential Larger Market – more customers On costs carried by owner Yield typically 3 – 5 % Commercial Smaller Market – fewer customers On costs passed onto tenants Longer term leases Yield typically 7 – 9 %

11. Pros Cons Real Estate Tangible Easily understood Set and forget
Highly developed support industry
Has shown good growth over time
Cons
Large Capital Outlay
Concentration Risk
Illiquid
Inefficient Market
Growth is not consistent

12. Investments and how they work

13. Business Investing/Shares
Investments and how they work
Business Investing/Shares
What is a share?
Pays out profits as dividends ∆
Value of share moves up and down with value of company
Many, many influences
Australian
International
Specific and Systemic Risk
Managed through diversification
Minimum 8 stocks in portfolio
Franking Credits

14. Shares Pros Cons Small holdings possible Generally liquid
Investments and how they work
Shares
Pros
Small holdings possible
Generally liquid
Efficient market
Cons
Intangible
Risks
Efficient Market
It IS a business with assets

16. Alternate Vehicles to invest
Investments and how they work
Alternate Vehicles to invest
Trusts (or how your super invests your money)
Significant Diversification
But can have specialisation
Trustee/Manager
Open Ended ie: they issue more units
Flow through of benefits §
Active or Passive Management
Costs of Trusts
Retail
Wholesale

17. Cost of Trusts / Managed Investments
Investments and how they work
Equally applies to superannuation funds Asset allocation, Fees, Then competence determines returns All transaction costs are immediately recoverable Trustee Fee 0.1% – 0.3% (Usually in Invest Mgt Fee) Investment Management fee 0.25 % (cash) – 2.5% per annum ∆ 1.8% Retail 1.0% Wholesale

18. Cost of Super / Managed Funds
Investments and how they work
Platform Fee Typically 0.3% - 1.5% (1.0%) ∆ Adviser Fee (can be inc above) Typically between 0.2% - 1.0% (0.55%) So what’s it costing ? Platform Cost 1.0% Investment Fee 0.8% Adviser fee 1.0% Total Cost 2.8% Australian Super ? ~ 1.2 % per annum

19. Investments and how they work
Asset Allocation
The amount you allocate to each investment sector Varies as your priorities and life expectancy changes

20. Investments and how they work
Time Frame v Risks
Short Term 0 – 2 years Cash & TDs Medium term 0 – 5 years Blend of deposits and growth Longer Term 5 years plus Growth, shares property

22. Look at the underlying asset allocations
Investments and how they work
Diversified Funds
Look at the underlying asset allocations
One person’s balanced is not another’s
Strategic and Tactical Asset Allocations
Strategic: Benchmark
Tactical: Ability to deviate from benchmark
Can shift your exposure dramatically

23. Aus Super abt 54 % Defensive, CFS 74% Defensive
Aus Super 35% Growth, 26% Growth

25. The biggest mistake.... Markets Up? Markets down?
Investments and how they work
The biggest mistake....
Basing an investment decision on what’s just happened
You must assess the current and future conditions not what’s happened. It may have an influence, but won’t define
Markets Up?
Inflow significant
Markets down?
Out it goes!

26. Tricks of reporting

27. Measuring Returns $ T

28. Measuring Returns $ T

29. Measuring Returns $ T

30. Measuring Returns $ T

31. Measuring Returns $ T

32. Measuring Returns $ T

33. Measuring Returns $ T

34. Measuring Returns $ T

35. Measuring Returns $ T

36. Measuring Returns $ T

37. Tax explanations The two phases of operation Accumulation Pension
Super and account based pensions
Tax explanations
The two phases of operation
Accumulation
Money goes in
Money is Parked
Earnings taxed at 15%
Pension
Money comes out
Earnings tax - nil
gearing

38. Putting Money In Age up to 65 Over 65-74 Over 75 No Breathing
Super and account based pensions
Putting Money In
Contribution Rules
Eligibility
Age up to 65
Breathing
Over 65-74
40 hours in a consecutive 30 day period
Over 75 No

39. Someone’s getting a tax deduction
Super and account based pensions
Concessional
Someone’s getting a tax deduction
= 15% tax on contributions
Compulsory 9.50%, Super Guarantee
Salary Sacrifice
Redirecting pre-tax to super
eg.earning $70,000 pa
Redirect $20,000 to super
Boss calculates tax on $50,000
Not compulsory to be offered
Beware of contributions under $18,200
July 1 14, goes to 9.5%
0.5% each year until 12 by July 19
300K plus 15% extra
Taxable Income, Concesion Super, Adj FB, net inv loss, pensions less child support
Be carefull when cont hits
GESB Untaxed

40. No Tax deduction claimed = No Contributions tax Age Still Limits apply
Non Concessional
No Tax deduction claimed = No Contributions tax Age Still Limits apply

41. Contribution Caps Non Concessional $180,000
Super and account based pensions
Contribution Caps
Under 50 = $30,000 concessional #
Over 50 = $35,000 concessional
Excess returned less marginal tax rates
Non Concessional $180,000
Bring forward 3 years if under 65

42. Other Contribution Incentives
Super and account based pensions
Other Contribution Incentives
Co Contribution §
$34,448 for each $1, max $500
Reducing at 3.33c per dollar
$49,448 – must be non concessional
Links up with Tax Return
Spouse Offset
18% up to $3,000 =
Reduces over $10,800 to $13,800

43. Super and account based pensions
GETTING IT OUT
Conditions of release Death TPD Severe Financial Hardship Reaching Preservation Age 55 if born before 1/7/1960 – Taxable Exempt – Exempt Lifetime $185,000 #
13 fortnighs on centrelink supprt
Preservation
55 born before July 60 then increasing by 1 year per year After june 64 – 60

44. Super and account based pensions
GETTING IT OUT (cor)
60 if job ceases - Exempt 65 if fund permits No compulsory cashing Transition to retirement Account Based Pension

45. Account Based Pensions
Super and account based pensions
Account Based Pensions
Reverse of Super- What we do at retirement Frequency, what you want Take out rate + earnings determines how long it lasts. Tax Free on Earnings Tax Free if over 60 Tax under 60 Exempt/Taxable X Payment (at start date)

46. Super and account based pensions
eg. $200,000 fund, $50,000 exempt
Payment of $1,000
50/200 X $1,000 = $250 exempt
150/200 X $1,000 = $750 taxable
But 15% tax credit

47. Must Take out minimum amount
Super and account based pensions
ABP Drawdown
Must Take out minimum amount
< % % % % % %
95 or more 14%

48. Transition to Retirement
ABP Drawdown
Transition to Retirement
Max 10% of Account Balance
Restriction relaxed on Condition Of Release
Income from ABP effectively funds increased Salary Sacrifice to super.
Pros
Nil Tax on ABP’s Earnings
Cons
Requires you to draw-down ABP

49. Use Account Based Pension Under Centrelink Income test
In Retirement
How much do you need?
Example John and Mary, both 65
Need $45,000 pa
Have $260,000 in super, $7,000 savings
$130,000 car and contents
Use Account Based Pension
$250,000 x 5% = $12,500
Under Centrelink Income test
= $250,000/18.54 (life expectancy) = $13,484
deducted from actual payment received.
$12,500 - $13,484 = NIL

50. How much do you need?
Below $284 per fortnight allowed Income Test – Nil Asset test, Under threshold of $284,000 ? ABP = $250,000 + Money in the Bank $7,000 + Car and Contents $20,000 (Use Scrap value Not replacement) Total Centrelink Assets $277,000 Asset Test - Nil Full Pension of $33, per annum Add ABP Payment of $12,500 per annum Total = $1, pfn or $45,535 pa & No tax! ($55,940) Or same as 4%