budget changes

Advisers not impressed with budget changes

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More than 50% of advisers believe that the federal budget will have a negative impact on their clients but agree that it will drive and increase in the need for advice, according to a survey from Midwinter.

The survey garnered responses from 103 Australian advice practitioners to develop an understanding of the planning industry’s initial responses to this year’s budget and how they believe their clients will be affected.

The majority 87.3% of respondents, said that they felt negative towards the proposed lifetime cap for no-concessional contributions of 500,000 and a further 86.4% said they felt negative toward the proposed lowering of the concessional contributions cap to $25,000. the removal of the TTR pension tax exemption was also unpopular; with a 73.5% of respondents saying it will negatively impact their clients.

Advisers did concede that the increased complexity of the superannuation system may drive more demand for advice, with 51% of respondents believing there will be an increase in people seeking advice. The introduction of the catch-up concessional contributions over a five-year period also gained support from advisers with 76.5% of respondents regarding it as a positive change from a planning perspective.

The survey revealed super splitting with a spouse, insurance bonds and spouse rebates as the top three strategies advisers will look to use to combat the proposed changes to superannuation, citing the 1.6 million cap as a major driver to implementing lesser used strategies.

[via Financial Standard]

Sunsuper

Sunsuper overhauls TPD cover

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Sunsuper has overhauled it’s total and permanent disability (TPD) insurance cover in a move that will see an average premium reduction of 15% for more than 90% of its one million members.

The new product, TPD Assist, will remove waiting periods for a majority of claims as well as a replace lump sum payments with annual support payments. It is part of a wider initiative to encourage members to return to work where possible.

A study of Sunsuper members who had previously been paid a TPD claim found that 36% had returned to work or were actively seeking employment. It highlights that ‘permanent’ is not necessarily forever and many members want to return to work, Sunsuper said.

Sunsuper’s head of product Wanda Britton said TPD Assist focuses on being there for members when they need it most, both financially and emotionally.

Britton added the new tailored product “means that most of our members will see an average reduction of 15% in their combined annual death and TPD Assist premiums.”

This will work by reducing current TPD rates by about 30% and partially offset by an approximate 15% increase in death rates. The increase death rates are from a spike in death claims at the fund and across the entire industry during 2015. If Sunsuper didn’t introduce TPD Assist, combined premiums were likely to increase.

Britton said, as an example, for a member who suffers a back injury, they or their employer can contact Sunsuper on diagnosis to immediately begin the claim process. the member is then referred to a Vocational Rehabilitation Specialist who will work with them, their employer and their treating doctor to support them with a tailored program.

“Once the member is assessed as meeting the definition of being totally and permanently disabled, they will receive their cover in six equal annual support payments over five years – unless they’re able to return to work earlier at which time the payments would have stopped,” Britton  Said.

The new product will launch on the 1st of July, 2016, and was developed based on 18 months of research in consultation with more than 1000 Sunsuper members.

[via FINANCIAL STANDARD]

Retirement lifestyle concerns

Australians pessimistic about retirement lifestyle

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The majority of Australians aged 45 and up (53.1%) believe that they will not have an adequate super balance or income to maintain their desired lifestyle in retirement, according to new research from CoreData.

CoreData’s 2016 Post Retirement Report found that pre-retirees expect to need an average of $1,224 a week (up $100 from 2015 and $209 from 2014) and a super balance of $804,559 to maintain their desired lifestyle.

In a bid to manage the risk they will outlive their savings and combat rising costs of living, 81.2% of pre-retirees plan to keep working in some capacity upon retiring.

The report found that awareness and understanding of the retirement solutions available were low among pre-retirees, with only 31.9% stating they have a good understanding of what an annuity can offer and only 27.3% claimed they were likely to purchase one in retirement.

Kristen Turnbull, head of WA at CoreData, said that the average superannuation balances at retirement of $292,500 for men and $138,150 for women fall well short of the $8000,000 balance the average pre-retiree expects they’ll need.

The reality is that retirees are either going to have to drastically alter their expectations for retirement or start making some serious financial and lifestyle sacrifices now if they have any hope of reaching their financial goals in retirement

Digital engagement emerged as a key way superannuation funds can educate over 45s on their retirement options, with 54.8% of pre and post-retirees stating they would like their main fund to make information available on the funds’ website.

[via Financial Standard]

Redundancy

Redundancy, and income support payments

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[vc_row][vc_column][vc_custom_heading text=”Financial planners have an important role when you lose your job” font_container=”tag:h2|font_size:1.2em|text_align:left|color:%23262626″ google_fonts=”font_family:Open%20Sans%3A300%2C300italic%2Cregular%2Citalic%2C600%2C600italic%2C700%2C700italic%2C800%2C800italic|font_style:400%20regular%3A400%3Anormal”][vc_column_text]Redundancy can be a difficult time, and some Australians experience it at some point in their career.

After being made redundant, the logical next step for most people is to find work again, and this is one area where a Financial planner can provide support.

If you are made redundant we can provide a referral to an employment services provider. This is an important first step to assist you in finding work. In addition, there is a range of income support payments available while you are looking for work or undergoing activities, such as studying or training, to increase your chances of finding work.

These support payments include;

  • Newstart Allowance
  • Parenting Payment
  • Sickness Allowance
  • Youth Allowance
  • Widow Allowance
  • Austudy
  • ABSTUDY

Your application will be assessed against standard eligibility criteria. But any payouts they receive from their former employer can have implications as to the timing of when you can begin receiving income support payment.

The income maintenance period is a waiting period applied to you if you receive a redundancy a redundancy payout. This is a legislative requirement and it varies in length according to the size of the payout you receive.

For example, if you or your partner were made redundant and received a ten week payout, the department is required to assess your income maintenance period to be ten weeks.

This means he or she would have to wait ten weeks before receiving an income support payment from the department, provided the usual eligibility criteria for the payment is met.

If you spend a payout on expenses such as a holiday, a lump-sum mortgage payment, or lump-sum rent payment, it’s important to be aware this does not reduce the income maintenance period.

This is why it is important that you spend your payout in a way that won’t render you unable to cover essential costs during the waiting period.

However, there are exceptions. For example, if you were to spend the payout on expenses that are considered unavoidable or reasonable such as essential repairs to a car or home, or essential medical expenses, the department may be able to reduce the waiting period.

In some cases, you may receive a small payout and may be eligible for a part-payment during the income maintenance period.

It is highly recommended you make contact with the department to have income maintenance period assessed, even before receiving the payout, to effectively plan ahead.

The department can also provide assistance by linking you with employment service providers, social workers and financial information service officers.

For more information, visit humanservices.gov.au/jobseekers and click on the “retrenched or redundant” tab.

[via Financial Planning magazine March 2016][/vc_column_text][/vc_column][/vc_row]

Retirement

More Australians intend to retire later

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The proportion of Australians intending to retire beyond age 65 is increasing rapidly.

According to a research note just released by the Australian Bureau of Statistics (ABS), a survey conducted in 2015 showed 71% of people said they intended to retire at the age of 65 years over, up from 66% in the previous corresponding survey conducted in 2013 which in turn was up from 48% in 2005.

The proportion of people who intend working up to age 70 is up four-fold.

“The survey found that 23% of people aged 45 years and over are intending to retire at the age of 70 years or over compared with only 8% in 2004-05” said Jennifer Humphrys from the ABS.

The average intended retirement age is 65 years; 66 years for men and 65 years for women notes the ABS.

The majority of Australians intend to retire between 65-69 years, but the results show that now over a quarter of males 45 years and over plan to work past 70 years.

The survey commenced a few months after the government last year announced changes to the current qualification age for the Age Pension, said the ABS.

For those in the labour force who intended to retire, the most common factors influencing their decision were ‘financial security’ (40% for men and 35% for women) and ‘personal  health or physical abilities’ (23% for both men and women).

In encouraging news for the superannuation sector, just over half (53%) reported their main expected source of personal income at retirement as ‘superannuation/annuity/allocated pension’.

“While 47% of people aged 45 years and over who had retired reported a ‘government pension or allowance’ as their main source of income at retirement, only 27% of people aged 45 years and over who were intending to retire indicated that this would be their main expected source of income at retirement”

The survey also highlighted the importance of partner’s income as one of the main expected source of funds for meeting living costs at retirement.

[via the Financial Standard]

ING Direct FPA

ING DIRECT inks deal with FPA

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ING DIRECT has signed a referral deal with one of Australia’s top financial planning associations that will benefit customers of its Living Super product.

Professional practices which are certified by the Financial Planning Association (FPA) will provide comprehensive financial advice to ING DIRECT Living Super members who ask for it, under a nine month pilot that starts next month.

“We see professional, independent, face-to-face financial advice as increasingly important to our customers in preparing for retirement,” ING DIRECT national partnership manager of residential and wealth, Tim Hewson said.

“In recent years we’ve seen an uptick in super consolidation and switching and increased demand for transparency and control. Australians want to get ahead with their super, which aligns with our proposition about helping our customers to get ahead through value, fairness and transparency.”

FPA chief executive Mark Rantall said that the partnership has been modeled on the one that the association recently signed with Cbus.

“It will help the FPA open more pathways to connect Australians to quality financial advice,” Rantall said.

The deal “strengthens our ties with the superannuation sector and brings us one step closer to achieving the FPA’s vision that through our members, we stand with Australians for a better financial future.”

The first FPA adviser consultation will be at no cost for Living Super customers and only a limited number of places for FPA Professional Practices will be available in the pilot stage.

Initial participation in the pilot referral program will be limited, based on geographic requirements.

via [Financial Standard]

Aussie consumers

Advice beats direct insurance for Aussie consumers

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The majority of Australian consumers prefer to purchase insurance policies through financial advisers rather than directly.

This is the conclusion of Asteron Life’s Attitude to Life Adviser Insights report, which surveyed 1,515 Australians across every state. It found that 90% of respondents found life insurance too complex to navigate on their own, and consequently 65% were purchasing policies through financial advisers.

The report also showed that generation Y consumers are a high growth area for insurance advice; while only 21% in that category said they regularly saw an adviser, the report argued this presented a major opportunity as these consumers grow older and their financial risks increase accordingly.

“As more Australians move online to research and match their needs, there is, and will continue to be a need for personalised and professional advice,” said Asteron Life executive manager Mark Vilo.

“It’s essential for advisers to have an online presence and be seen where your clients are researching. By factoring this into your business strategy and the way you provide your service, you can use the power of the internet to help grow your business.”

He added, “As advice practices wind down for the holiday season there’s an opportunity for a period of reflection and some time to work on the business plan for the year ahead. Many Australians also use this time to reflect on their lives from both a personal and business perspective.

“Understanding the generational needs of your clients will facilitate meaningful conversations around their individual needs. It’s a good idea to segment your client base according to a combination of risk, income, generation and life stage and build this into discussions.”

via [Financial Standard]

Women in super

Women own less than 40% of super assets: ASFA

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The share of superannuation assets held by women has plateaued over the past four years according to Australian Bureau of Statistics (ABS) data exclusively compiled for the Association of Superannuation Funds of Australia (ASFA).

Women now hold 36.4% of Australia’s superannuation assets but this number has remained steady in the four years to financial year 2013/2014. Women have also experienced a lesser percentage increase than men in average balance at the time of retirement, with the average balance for men increasing by 48.5% over the two years to 2013/14 compared to 31.6% for women.

ASFA chief executive Pauline Vamos said this reflected the different work patterns and earnings levels of men and women in their pre-retirement years.

“Even though account balances are increasing overall for women, the statistics still show that men are more likely to have superannuation than women, and also that men on average have a higher account balance. In many cases, broken work patterns and lower average wages still impede on women’s ability to save for retirement,” Vamos said.

Average superannuation balances have increased for both men and women according to the ABS data.

The average balances in 2013/2014 for all persons aged 15 and over were $98,535 for men and $54,916 for women. This is about a 20% increase from two years’ prior where average balances were $82,615 and $44,866 for men and women respectively.

Average superannuation balances at the time of retirement have also increased, to $292,500 for men and $138,150 for women in 2013/2014 from $197,000 and $105,000 respectively in 2011/2012.

Vamos said gender disparity in superannuation balances is now on the agenda, and the next step is for government, employers and individuals to take action.

“ASFA has proposed a number of options for improving the economic security of women in retirement, including raising and broadening the Superannuation Guarantee, retaining the Low Income Superannuation Contribution Scheme and amending annual contribution caps to enable people with broken working patterns to ‘catch up’ their superannuation contributions,” Vamos said.

For individuals in their early 30s, average balances rose to $36,400 for men and $25,550 for women in 2013/2014, almost two times the average balances of $20,000 for men and $14,000 for women two years earlier.

According to the ASFA Retirement Standard, a single person will need a minimum of $545,000 in superannuation at retirement to live a comfortable lifestyle. This is assuming that they will draw down all of their capital over the duration of retirement, and that they will receive a part Age Pension.

Australians reluctant to seek Professional Advice

Australians more reluctant to seek professional advice

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A global survey shows that Australians are twice as likely to turn to family and friends for financial information as they are to seek advice from a professional.

The survey was conducted by global research firm GfK on behalf of the Financial Planning Standards Board (FPSB) and in conjunction with the Financial Planning Association (FPA).

It found that Australians rely less on planners and websites for financial information, compared to people in other countries.

A total of 70% of Australians did not know who to trust when it came to arranging their financial matters, compared to 66% globally.

While consumers are interested in financial planning services, 41% rely on friends and family, 30% rely on websites for financial information and 23% turn to a financial planner, compared to 31% globally.

When asked about the most helpful services that a financial planner can provide, Australians answered budgeting and debt management first (37%) and retirement planning second (35%).

Globally, retirement planning ranks highest at 50%, while investment planning ranks second, at 38%. Budgeting and debt management rank third at 36%.

Knowing who to trust is the biggest barrier with Australians willing to work with a financial planner. As many as 64% say that trustworthiness is a very important consideration, while 70% say they don’t know who to trust, compared to 66% globally.

FPA chief executive Mark Rantall said: “The survey reaffirms our own findings and validates our strategy of lifting education and professional standards of professional financial planners to help earn the trust of more Australians.”

Overall, 19,092 consumers who were either primary or shared household financial decision-makers participated in 19 territories around the world.

Apples to apples comparison

Beware ‘apples with apples’ super comparisons

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If superannuation funds’ investment performance is to be compared on an “apples with apples” basis there are several key points to consider, according to researcher Rainmaker Information.

This week Australian Prudential Regulation Authority (APRA) member Helen Rowell told an Australian Institute of Superannuation Trustees (AIST) Governance Ideas Exchange Forum that on a number of occasions in the last few years she has “noted that comparisons of investment performance at fund level is not comparing apples with apples.”

Super funds’ investment performance has been a key issue in the debate on proposed changes to super board governance, particularly between retail and industry funds.

Rowell said a more meaningful “apples with apples” comparison is provided if the investment performance for only default assets, or specific similar choice investment options, is considered. She added it is most meaningful to focus on performance against objectives over the long term.

But Rainmaker Information said APRA and other people critical of performance comparisons need to remind themselves what choosing a default MySuper product actually means.

Rainmaker said some critics of performance comparisons use commentary about risk-adjusted returns to explain post-hoc why they underperformed other default funds in the market rather than to explain why they have deliberately chosen very conservative strategies.

For example, the top performing MySuper products in 2014-15 earned 12% but the lowest performing MySuper products earned half that, or 6%.

Rainmaker said that these performance gaps are many times the fee differentials forces the question of whether members are fully aware they are selecting such conservative investment strategies.

This focus on MySuper default products is crucial because the segment accounts for about 33% of the assets held by APRA regulated funds.

In her presentation, Rowell pointed out the proportion of assets in default products versus choice products differs significantly by fund type. She said default assets represent 65% of all assets for industry funds, compared to 17% of all assets for retail funds.

“That means the investment strategy for 83% of the assets of retail funds is chosen by the members, and the asset allocation – and hence investment performance – at fund level substantially reflects the aggregate of the individual decisions made by the choice members,” Rowell said.

Rainmaker Information is part of the Rainmaker Group which owns Financial Standard.

[via Financial Standard]