If nearing retirement now, it is essential you receive extremely well-informed advice to explain possible options and scenarios to manage your future financial needs. You may choose to manage your own retirement savings, maintain funds you have accumulated in superannuation, commence a new superannuation fund, or choose any combination of these. If you maintain funds in superannuation you may wish to use your superannuation fund provider, change providers or commence a Self Managed Superannuation Fund. Superannuation continues to provide the most tax-effective form of managing your retirement savings.

A.I.R. is active in dealing with government on retirement income issues. Major changes to superannuation from 1 July 2007 have raised many ongoing issues for members. Some Branches have Investment Groups that discuss investment and retirement income matters and raise retirement income issues for advocacy by A.I.R. The Retirement Incomes Research Group has a subgroup interested in Self Managed Superannuation Funds.

There are three sections in this overview of superannuation: Accumulation of superannuation, Drawdown of superannuation, and Self-managed superannuation funds. Please click on the section that interests you for an overview including further sources of information.

Our Committee hopes you find these sources useful. Our aim is to regularly add information of value. Please email any suggestions to Barry Ritchie, britchi1@bigpond.net.au. The Members’ section of this website contains more detailed information on superannuation issues.

General information

Contributions to superannuation (the accumulation phase) can be made up to the age of 75.

Superannuation Guarantee Contributions are mandatory for working people up to the preservation age (between 55 and 60 depending on date of birth), and may be mandatory above that age in some cases.

After-tax voluntary contributions can be made from your own financial resources up to the age of 65. There is no need to be working (no work test). Between 65 and 75 you can make voluntary contributions provided you have worked for 40 hours in a 30 day period during a financial year.

Voluntary contributions can be made 'before-tax' if you are an employee by agreement with your employer up to the age of 65; between 65 and 70 you must have worked for 40 hours in a 30 day period during a financial year.

You may choose the superannuation fund or funds where your voluntary and compulsory contributions (there are some restrictions on choice for compulsory contributions) are kept. You may set up a Self Managed Superannuation Fund for this purpose. Funds may be rolled over from one superannuation fund to one or more other funds. It is worth considering rolling over small amounts in different funds into one larger amount in a fund of your choosing to avoid loss of small amounts over time because of administratioin fees which may be greater than the earnings on small amounts.

Funds can be drawdown after your preservation age is reached (between 55 and 60 depending on date of birth). Some or all of the funds may be taken as a lump sum or as a retirement income stream product (pension). Four different types of retirement income stream products may be purchased either from the superannuation fund or by rolling over funds to another provider.

Since the 1st January 2006, you may split superannuation contributions to your spouse's superannuation account.

Check the following websites for related information:

www.nicri.org.au

The Australian Government National Information Centre on Retirement Investments (NICRI) is a free, independent, confidential service whose role is to provide up to date independent information to assist people make the best possible investment decisions they can. Check their range of plain English, informative leaflets covering General Information, Financial Planning, and Investment Products. 'A Super Guide' is an excellent 36-page guide to superannuation. NICRI's freecall telephone information service is 1800 020 110 (9-5 Mon to Fri).

www.fido.asic.gov.au

The straightforward, user friendly consumers site of ASIC (Australian Securities and Investment Commission). FIDO's wealth of information is impartial and designed to give you the facts so you can ask the right questions. Check out all home pages under 'Financial Tips'.

www.seniors.gov.au

An online source for all Australians over 50. Check out Your Finances and especially Super and Financial Planning.

www.superannuation.asn.au

An industry website. SuperGuru has clear information, including definitions. There are some intelligent fact sheets for women and men on Superannuation and Retirement Income.

www.taxpayer.com.au

Taxpayers Australia is a not-for-profit independent educational institution, which aims to educate taxpayers via the media, educational publications, and seminars on issues relating to tax and superannuation. Membership is available (for a fee) to either Taxpayers Australia, Superannuation Australia or combined, and includes extensive manuals, fortnightly journals, and a help line.

Other useful sources of knowledge/advice

Most local libraries have the latest copy of the Australian Tax Office's Handbook, and the Fitzroy Legal Centre's Law Handbook in their reference section.

Accumulation of superannuation

If you are working, you may need to choose a Superannuation Fund in which your employer will place your mandatory Superannuation Guarantee contributions. Your employer will provide you with information. Ask for the fund's Product Disclosure Statement. Do check:

• What are the fees and charges?
• Will you get death and disability benefits and insurance premiums?
• What are the funds previous returns over at least 5 years?
• What investment options are there? Find out the risks or type of investment.
• What are the fund's features and services?

Full consideration of the tax advantages is essential for maximizing your income in retirement from Superannuation, especially in the following situations:

• If you are made redundant or have an Eligible Termination Payment you may consider rolling this over into your superannuation fund.
• You may consider making additional voluntary contributions from your own assets on which you have already paid tax.
• You may find it useful to seek financial planning advice and you would need to expect to pay a fee.
• You need to identify a good professional adviser who will give you unbiased professional advice.
• Make sure that the adviser you choose has a good track record and is definitely experienced in advising about the area in which you are seeking help.
• Make sure you are fully aware of all fees and charges before employing a professional adviser and before making any investment decisions.

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Check the following websites for related information:

www.nicri.org.au

The Australian Government National Information Centre on Retirement Investments (NICRI) is a free, independent, confidential service whose role is to provide up to date independent information to assist people make the best possible investment decisions they can. It has a number of useful leaflets''Introducing Superannuation','A Super Checklist', 'Tax Considerations', 'Introducing Rollovers', are useful ones.

www.fido.asic.gov.au

The straightforward, user friendly consumers site of ASIC (Australian Securities and Investment Commission). FIDO's wealth of information is impartial and designed to give you the facts so you can ask the right questions. A DIY Superannuation Calculator is available from the Website. It lets you see the long term effects of:

• the most common fees charged by various funds
• making extra contributions
• receiving government co-contributions if you are eligible
• breaking or reducing contributions as a result of time out of the workforce
• switching your investment strategy or changing funds.

Super Choices booklet

The straightforward, user friendly consumers site of ASIC (Australian Securities and Investment Commission) has a detailed booklet on Super Choice.

www.superannuation.asn.au

The Association of Superannuation Funds Australia for consumer fact sheets, calculators, and a superannuation dictionary.

www.ifsa.com.au

The Investment and Financial Services Association for consumer fact sheets and financial services glossary.

www.fpa.asn.au

The Financial Planning Association of Australia provides a range of services to consumers. Type in a postcode to find a list of certified financial planners near you.

Drawdown of superannuation

Between your preservation age (between 55 and 60 depending on your date of birth) and age 65 you may choose to retire and move into the drawdown phase of your superannuation. You may also choose to drawdown some of your superannuation and continue working. At age 65 you must commence to drawdown your superannuation.

Some or all of your superannuation may be taken as a lump sum or as a retirement income stream product (pension). Two types of account-based products and three of non-account based products may be purchased either from the superannuation fund or by rolling over funds to another provider. Your choice(s) depend on the degree of financial security you want during your retirement. Your choice may affect any claim you may have for a part-aged pension or the Commonwealth Seniors Health Card.

There is no tax on your pension or on earnings from your super, including any capital gains made when it is used to pay a pension, provided you meet the superannuation regulations. For example, you must drawdown a minimum percentage of your assets as a pension(s) (including any lump sums) annually depending on your age.

You may continue to work while retired and may continue to add contributions, either through an employer or from your own savings. There are age limits and conditions as to the amount you can contribute each year. Under present Regulations you cannot add contributions to an existing pension. To avoid payment of tax you must either commence a new pension using the contribution or commute your existing pension, add the contribution, and then commence a new pension with the total assets. You may expect to pay a fee to your superannuation fund for adding a contribution to your superannuation assets that support your pension(s).

Check the following websites for related information:

www.nicri.org.au

The Australian Government National Information Centre on Retirement Investments (NICRI) is a free, independent, confidential service whose role is to provide up to date independent information to assist people make the best possible investment decisions they can. It has a number of useful leaflets- 'Retirement Income Stream Products: A Comparison', Superannuation Tax Considerations' and leaflets on each type of retirement income stream product.

www.facs.gov.au

The Department of Families, Housing, Community Services and Indigenous Affairs(FaHCSIA) provides a statement on 'Understanding retirement income streams'.

www.fpa.asn.au

The Financial Planning Association of Australia provides a range of services to consumers. Type in a postcode to find a list of certified financial planners near you.

Aged Pensions and the Commonwealth Seniors Health Card

Financial Information Service at Centrelink - This is an independent face to face service that gives you information to help you make the right decision about your financial affairs. This service can be used regardless of your age or whether you receive, or will ever receive, a Centrelink payment. For an appointment call 13 23 00.

Self-managed superannuation (DIY funds)

Self managed superannuation funds are popular with people who have an interest in managing their own funds. Control of your own SMSF often gives a sense of 'empowerment'.

From one to four members, who must also act as trustees, manage the fund within a formulated investment strategy.

A trust deed, Tax File Number and Australian Business Number (ABN) are required.

The ATO is responsible for compliance.

Strict rules apply ensuring that funds are kept separate and invested solely for the purpose of accumulating superannuation assets and paying retirement pensions.

A SMSF is suitable for those with superannuation funds that are large enough so as to keep fixed costs down to a tolerable level when looked at as a percentage of the fund's assets and earnings. Generally, a balance of $200,000 is the minimum to absorb costs effectively.

The time management of a SMSF can vary enormously depending on the types and number of investments, but with a sound understanding of decisions and effects, it requires much less time than many investment advisers would have you believe.

The ATO has an online news letter SMSF News, which is available to trustees on a free subscription basis. It is a particularly valuable information document for trustees. To subscribe go to the ATO website below, go to ‘Self Managed Super Funds’, then ‘News for SMSFs’, and then complete the online subscription form

The members’ section of this website contains detailed information about the various issues affecting SMSF’s and their Trustees. This is accessible to members of A.I.R.

Check the following websites for related information:

www.ato.gov.au/super

The Australian Taxation Office site is a must for keeping up to date with key superannuation information, resources and services. Check glossary of superannuation terms, and fact sheets and publications. Download two important documents'A Guide for trustees running a self managed superannuation fund' and 'DIY Super - it's your money ... but not yet!' (a comprehensive 25 page document setting out all regulatory requirements).

www.taxpayer.com.au

A subscription service. Taxpayers Australia is a not-for-profit independent educational institution, which aims to educate taxpayers via the media, educational publications, and seminars on issues relating to tax and superannuation. Membership is available to either Taxpayers Australia, Superannuation Australia or combined. A DIY super Manual is available.

www.cch.com.au/onlineStore.asp

CCH Australia Pty Ltd provides a number of services and sells books including a Guide to Self Managed Funds.

Investing

www.fido.asic.gov.au

The straightforward, user friendly consumers site of ASIC (Australian Securities and Investment Commission). FIDO's wealth of information is impartial and designed to give you the facts so you can ask the right questions. Check out all home pages under 'Financial Tips'. It doesn't matter whether you are interested in investing $500 or developing a major diversified investment strategy for the rest of your life; the issues you need to consider will fundamentally be the same.

www.asx.com.au

The Australian Stock Exchange site is useful for obtaining up-to-date information on equity investments.

Financial Planning Advice

www.fpa.asn.au

The Financial Planning Association of Australia provides a range of services to consumers. Type in a postcode to find a list of certified financial planners near you.

Keeping up-to-date

www.fido.asic.gov.au

The straightforward, user friendly consumers site of ASIC (Australian Securities and Investment Commission) provides an up-to-date source of changes to all aspects of superannuation.

www.facs.gov.au

The Department of Families, Housing, Community Services and Indigenous Affairs (FaHCSIA) provides up-to-date changes to retirement income streams and income and asset conditions for accessing the Age Pension and the health card.

Social Equity Standing Committee

Members: Elaine Muir (Chair), Merle Carmichael, Joan Heard AM, Neville Lester and Ray Thompson.

A busy year for the Committee, talking to providers of residential aged care facilities (RACF), considering information received from members and others; also paying a great deal of attention to issues of concern to our members who hold a 410 Visa.

Accommodation Bond and Minimum Permissible Asset

Not for profit RACFs need a great deal of financial assistance to assist with refurbishment and extension of existing premises, or construction of new buildings. We need them to comply with the high standards required for accreditation. AIR wants to be assured that its members and other retirees will have good aged care accommodation available should they need it. There is a good case now to have Accommodation Bonds in all levels of Aged Care, since Government now protects residents’ Accommodation Bond monies with The Aged Care (Bond Security) Act, 2006.
However, we do believe that, after paying the Accommodation Bond, the care recipient’s minimum permissible asset (the amount the resident can be left with) should be increased to almost double the present rate. To be around $50,000 instead of around $30,000. There are many incidental expenses for retirees in residential care.

The August 2007 A.I.R. Board Meeting Resolved as follows :

1. That A.I.R. should not now have discussions with Federal Government Ministers regarding abolition of the Accommodation Bond.
2. That A.I.R. believes the Accommodation Bond requirements, as set out in The Aged Care Act 1997, should be amended to include payment of the Bond in both Low and High Care in residential aged care facilities.
3. That, in terms of The Aged Care Act 1977, 57-12, Subsection (3) (b) A.I.R. requests the Federal Government to increase a care recipient’s minimum permissible asset value to be an amount equal to 4 times the basic age pension amount at the time of the care recipient’s entry to the residential care service.

Subclass 410 Retirement (Temporary) Visa

Resolutions of the A.I.R. Board still stand:

1. That Subclass 410 Retirement (Temporary) Visa holders who have been in residence in Australia for ten years, should be eligible to apply for permanent Visas.
2. That a new category of Contributory Visa should be established, with financial conditions similar to those of the Parent Contributory Visa, but without the requirement to meet the Balance of Family (BOF) test. Subclass 410 Retirement (Temporary) Visa Holders who have been in Australia for six years, should be eligible to apply for this proposed new category of Contributory Visa.

Issues regarding the Visa 410 were accepted by the Board at its August 2007 Meeting as one of the issues to be pursued with parliamentarians.

Earlier in 2007, the Board requested that the President, accompanied by Director Ron Davenport, should seek a meeting with the Minister for Immigration and Citizenship. This meeting now will be arranged following the Federal Elections in November.

Elaine Muir(Chair)
Social Equity Standing Committee
September 2007