Superannuation
Superannuation is one of the most complex areas of any
financial plan and many don’t understand the true benefits superannuation
offers. This isn’t helped with constant changes to superannuation law, contribution
limits and other restrictions, however over time superannuation has become
simpler, more equitable and is still the best long term investment vehicle
available. Superannuation still attracts many tax concessions that will help
you accumulate wealth, over the long term for your retirement.
Changes are still afoot and on the horizon though and superannuation
will be boosted with more products, so that everyone is better prepared for a
self funded retirement and less reliant on the age pension.
To provide
clarity and certainty about the future treatment of these products, the
Government will introduce a retirement income covenant in the Superannuation
Industry (Supervision) Act 1993, requiring trustees to offer Comprehensive
Income Products for Retirement (CIPRs) that provide individuals with income for
life, no matter how long they live. Supporting this initiative, the
announcement included new means test rules for lifetime retirement income
stream products that provide clarity and certainty about the future treatment
of these products.
The new
Centrelink Means Test rules will enable the development of new retirement income
products, including deferred lifetime annuities, to give retirees more choice
and flexibility. These products are an essential building block for CIPRs.
Using superannuation, you cannot only accumulate wealth, once
you meet a condition of release (at retirement), you can start a tax-free
income in the form of a lifetime income stream or an account based pension for
more flexibility.
To make the most of your super, it is best to start early and
make contributions in conjunction with your employer, however one of the most
beneficial things you can do, is to get advice from a professional financial
adviser, who can work with you to create a plan for your future and ensure you
make the most of the years leading up to retirement.
Other Alternatives?
Sometimes it may not be possible to contribute to super? It
may be that you are over age 65 and no longer working, whereupon, you may
not meet the eligibility work test, enabling you to make a contribution to
super.
Alternatively, you may be saving for a deposit on a home, a
car or your children’s education and may wish to access your savings prior to retirement.
In these situations, another option is to invest in Savings or Insurance Bonds. An Insurance Bond is where the investments are held and managed within a life insurance company instead of a superannuation fund. The insurance company will pay tax on the earnings, at the company tax rate and after 10 years any withdrawals you make will be 100% tax-free. There is a limitation in that, each year, you are only able to contribute up to 125% of the contribution made in year 1,
Insurance Bonds are often used for saving towards the funding for Children’s education and other long-term goals and you have the tremendous advantage of being able to change the owner at any time without there being any Capital Gains Tax implications.
To get more information or advice on your superannuation, saving for retirement, insurance bonds or anything else mentioned above, please CLICK HERE and phone or email us.