YOUR SUPER Your quarterly news talking all things super...

MAY 2011

Industry Super Fund Retail Super Fund

Set up by industry bodies to provide for their members in retirement

Set up by financial institutions to generate revenue and profit.

Profits go to members (non-profit organisation) Profits go to shareholders

Accounts for $6.1 billion in contributions1 Accounts for $4.9 billion in contributions1

Lower administration fees and investment costs Can offer wider range of investment options

Offers members access to a low cost allocated retirement pension

Retirement pension products are usually more expensive

Limited investment options to keep costs low More investment options available

Provide members with financial seminars and information

Can provide access to financial planners and advisers

Lower premiums for income, life and death/disability insurance cover

Higher insurance premiums generally but often with more options

No commissions to sales representatives or financial advisors

New business driven by commissions from within or arrangements with adviser network

Industry vs Retail Fund. Which way to go?

There has been some publicity about the retail superannuation sector of late, which prompts me to reflect on the benefits of industry super funds. We’ve all heard the jingle on the industry super funds ad… ‘from little things, big things grow’. But what are the key differences between these two fund options for members?

Here’s a brief comparison I’ve put together to help you navigate your way around the world of superannuation. I trust you will find this helpful information and take comfort from knowing that your retirement savings are receiving all the benefits of being invested with an industry super fund. Better yet, a fund that invests in line with your Christian values with benefits that reach far beyond your investment returns and actually changes lives.

Peter Murphy Chief Executive Officer

1 Australian Prudential Regulation Authority (APRA) Data, June 2010

Ask Gavin My accountant recommends I start my own super fund, should I?

Accountants often recommend starting Self Managed Super Funds (SMSFs) but you need to determine if it is really the right thing for you. During the 2009/10 financial year

27,393 new SMSFs were started. 1,541 were also closed down. Here are some things to think about.

Consider the cost

It generally costs between $1,000 and $2,500 to set up a SMSF. If you start a fund and then find running your own fund isn’t for you, you will have blown a couple of thousand dollars and wasted a lot of time.

Apart from the initial set up cost there are annual fees. ASIC suggests it cost about $1,700 to administer a SMSF each year but often it is $2,500 - $3,000 p.a. That’s the annual fee you will need to pay your accountant. It might be more (and sometimes less) depending on what investments you hold and how much work is involved in the administration of the fund.

If you have $1,000,000 to invest, $1,700 in administration fees is pretty cheap (0.17%) but if you have $150,000 to invest through your proposed SMSF, then $1,700 is a lot (1.13%). So you need to make sure you have sufficient funds. The ATO in the past has suggested a minimum balance of $200,000 but others in the industry suggest it should be $400,000 and others suggest $1,000,000. According to the Cooper Review, SMSFs with balances under $500,000 were more expensive than industry funds. The point being, you need sufficient assets to make it worthwhile.

Unlike family trusts, SMSFs require the trust deed (legal document) to be updated regularly. That’s another $220-$550 every 2 or 3 years. An investment strategy (another required legal document) also needs to be kept up to date.

You may also need to engage a financial planner. While some accountants have the qualifications to wear two hats (accounting and financial planning) usually they don’t, and that can mean needing financial planning advice as well.

How much time do you want to spend on it?

Do you have the time and do you want the responsibility of managing your own super fund? Your accountant and other professionals can do much of the work but you will still need to do your part and make sure you know all your responsibilities as a trustee (or director of the trustee company) of your fund.

Flexibility and control

The main reason for commencing an SMSF is the flexibility and control over your investment choices. In particular, if you want to invest your super in direct property (a house or unit you can rent out for example) you will need a SMSF. Public offer funds like Christian Super cannot facilitate owning direct residential property.

Lumpy assets

If you are drawing a pension or about to draw a pension from your super fund you need to be careful when holding direct property. If the rent generated from the property is not sufficient to pay the pension, you cannot sell off part of the garage or one of the bedrooms, you need to sell the whole property.

Is a SMSF for you?

If you have sufficient funds and want to invest in direct property or a direct share portfolio, an SMSFs can be useful. But you need to make sure the cost, extra responsibility and effort is worth it. If you don’t want to invest in direct shares or direct property, then you are better off in a public offer industry fund like Christian Super.

Gavin Martin Cornerstone Wealth

ECONOMIC COMMENTARY MARCH 2011Over the quarter, the Australian dollar remained strong.  Potential for further appreciation remains, particularly given the likelihood that demand for Australian steel will increase as Japan reconstructs, however we continue to believe that there is substantially more currency downside risk than potential upside.

This will particularly be felt if a slowdown in China’s growth starts to be seen. We are concerned that early indicators suggest that the Chinese economy might be overheating, and any sudden slowdown is likely to have a significant impact both globally and domesti-cally. Australia’s dependence on the commodities boom, caused largely by increasing Chinese demand, is a blessing only for as long as China wants to buy our mining and agricultural produce.

The financial aftershocks of the March earthquake off the coast of Japan continue to be felt. The long term costs of rebuilding are likely to reach into the hundreds of billions of dollars.  It is possible that this forced reconstruction will kick-start a Japanese economy that has been in stagnation for decades. The financial impacts, however, pale in comparison to the significant human tragedy. 

Political circumstances in the Middle East and North Africa are also causing uncertainty, and the oil price remains high on the back of concerns about ongoing risk to supplies, despite Saudi Arabia increasing exports to compensate for the loss of production with civil war breaking out in Libya.

Since the end of the quarter, the big news has been Standard and Poors publication of a Negative Outlook on the United States’ Sovereign Credit Rating.  S&P’s assessment is that there is a one-third chance that, in the next two years, the US Credit Rating will fall below AAA. This is based on concerns about the extent to which US Government Debt continues to increase, with only sketchy plans to bring their budget deficit under control. 

We have also finally seen recognition by Portugal that it, like Greece and Ireland, is in need of financial support from the European Monetary Fund. Concerns about the ability of sovereign nations to repay the extensive amounts of money they have borrowed remain strong, given the demographics are not favourable, and we remain concerned that other countries may be negatively affected.

Tim Macready Chief Investment Officer

Member Story Barrie Sutton, Pastor & Chaplain

Please give us a snapshot of your life so far.

My earliest memory is of my mother crying as my father went off to PNG in World War II. Thankfully he returned safely after two years. I was raised in a Christian family and at the age of eight was sent to elocution, as I was a stutterer. This led me to do some work with Melbourne radio station 3DB on a children’s program with Bert Newton. Following school I became a clerk and studied accountancy. I was soon called to ministry and studied at the Baptist Theological College in North Melbourne before beginning pastoral ministry. I married Julie in 1965 and we had four children.

Having completed National Service (1958/59), I joined the Army as a Chaplain in 1969 during the Vietnam War. In 1975 I returned to Pastoral Ministry and was based in Townsville, followed by various churches in Victoria. I have also been a Community Corrections Officer and involved in prison ministry through Prison Fellowship. Over the years there have been further interim pastorates, as well as my time as Chaplain to the Victorian Shield Cricket team for 15 years.

What does retirement look like for you?

I have been retired for over 10 years from full time work, due to a serious operation in 1999 which saved my life but left me deaf in one ear, but continue in a range of interesting and enjoyable activities and ministry areas. Living in a Retirement Village provides time for me to continue to serve in the areas where I have invested many years.

I am currently Chaplain to the Nashos* at Whitehorse (Box Hill) and act as Tour Guide at the MCG every Wednesday. I hold fortnightly Church Services at our Retirement Village, am involved with our nine grandchildren who all live nearby, play golf weekly (very weakly) and assist in Pastoral Care of Retired Baptist Ministers (and ministers’ widows). I try to attend one game of AFL each weekend at the MCG where I am a member (Bomber supporter for over 60 years!), and am the ‘greeter’ on the verandah every Sunday morning at the Collins Street Baptist Church.*The term ‘Nashos’ applied to all those who did their National Service Training in the 50’s and 60’s, which at that time was compulsory. The Nashos are all getting pretty old now, in their 70s and 80s and I am kept busy with hospital visitation and conducting funerals.

What are some of the highlights of your ministry?

My first church in Ballarat where I umpired Australian Rules Football in country leagues; army Chaplaincy at Balcombe Army Apprentice School, Kapooka training Nashos and Regulars for Vietnam; an assignment with the Task Force in Townsville; my time as Youth Pastor and Church Administrator at Blackburn North Baptist (now Newhope). There was also a period of prison ministry, visiting every prison in Victoria, as well as sports chaplaincy over 10 years in a voluntary capacity.

My wife is a classical pianist. She has supported me and been my greatest asset in the 46 years of ordained ministry. She is a highlight! We are still in ministry together, most recently for an appointment as Chaplain on the Volendam (Holland America Cruise ship) around New Zealand.

Any special memories that still make you smile?

The practical jokes at Theological College with the Professors and fellow students. The characters I met in the Army – the RSM’s were a special breed! Ministering with married couples as we led youth camps, when we shared the antics of the young people in post day reviews. Laughter has always been important to me. I enjoy humour and seek to help other people laugh, and sometimes even cry with them.

What is the biggest lesson that God’s taught you?

That attitude is vital. It ’s so important to be positive, look for the good, keep learning, always be forgiving (of others and yourself), love and keep laughing. Be thankful for every day and the joy it holds!

Barrie & Julie Sutton

FINANCE FOCUS Contributions SplittingContributions splitting was a strategy that enabled couples to utilise both spouses, superannuation thresholds. It was useful under old superannuation laws that no longer exist. Now the strategy is coming back into vogue.

The Federal Government announced that from July 2012, people over 50 with a superannuation balance less than $500,000 will be able to utilise a $50,000 p.a. concessional contribution limit. Whereas people over 50 with a superan-nuation balance over $500,000 will have their contribution limit reduced to $25,000 p.a.

To keep your superannuation balance below $500,000 (in order to access the higher $50,000 contribution limit) you can split (transfer) your annual superannuation contribu-tions to your spouse, who may have a balance well below the $500,000 threshold.

The contributions splitting strategy can also be used to access superannuation benefits tax free earlier, by splitting (transfer-ring) super contributions from a spouse under age 60 to a spouse over age 60 years.

Similarly, the strategy can work in reverse by splitting super contributions to a younger spouse. The idea here is getting a higher age pension until the superannuation assets in the younger spouses, name become tested under the Centrelink asset test on reaching pension age.

Gavin Martin Cornerstone Wealth

Contact detailsHelpdeskP 1300 360 907 (local call cost)E helpdesk@christiansuper.com.auW www.christiansuper.com.au

M Christian Super Locked Bag 5073 Parramatta NSW 2124

DISCLAIMER The information in this newsletter is of a general nature and is provided in good faith - the Fund does not guarantee its accuracy. Readers should seek advice specific to their situation.

Issued by Christian Super Pty Ltd ABN 68 065 040 619 AFSL No. 244117

UPCOMING WEBINARSTop 10 tax tipsDon’t miss this next Member Webinar presented by Financial Advisor, Gavin Martin. Gavin will provide you with some useful end of financial year tax planning strategies. He will also comment on any Federal Budget changes released in May 2011 that will impact your super.

Where: Your place (online)

When: 8.30-9.30pm EST, Monday 23 May 2011

Register: HERE

Planning for your retirementLearn all about planning for your retirement, including: How much superannuation do I need for retirement? What is Transition to Retirement and will it work for me once I’m over 55? How can Salary Sacrifice boost my super balance and save me tax? How can I reduce capital gains tax on the sale of investments?

Where: Your place (online)

When: 8.30-9.30 EST, Tuesday 26 July 2011

Register: HERE

SteWARdSHIP FoundAtIonSCounsel: A Triple Braided CordThe second stewardship foundation that we will look at is seeking counsel. In order to do this effectively, it is important to seek counsel from the right places. The Bible encourages us to seek counsel from different sources:

1. Scripture

The first place we should seek counsel from is the word of God. “All scripture is God-breathed and is useful for teaching, rebuking, correcting and training in righteousness” 2 Timothy 3:16. If scripture clearly answers our question, then we have no need to seek further counsel.

2. Godly People

A spouse is the primary source of human counsel for those who are married, while parents can also be a helpful source of counsel. A multitude of counselors would include those who care for and love us, plus those whom we can respect for their advice, insights, alterna-tives and constructive criticism.

3. the Lord

Pray and ask for direction, and listen for His still small voice.

Remember that there is also counsel we should steer clear of:

Avoid the counsel of the wicked – While we can seek technical assistance such as legal and accounting advice from non-Christians, our final decisions should be based on the counsel of those who know the Lord.

Never seek the counsel of fortune tellers or mediums (Leviticus 19:31) and avoid their methods such as horoscopes, Ouija boards, and all practices of the occult.

Be careful of the counsel of the biased. If the person offering counsel will profit, seek a second unbiased opinion.

Our society says that we don’t need anyone to tell us what to do - we should be our own person and stand on our own two feet. Scripture however tells us to seek wise counsel; “The wise man is glad to be instructed, but a self-sufficient fool falls flat on his face” Proverbs 10:8.

Source: ‘Your Money Counts’ by Howard Dayton.

Sausages & Super in SydneyOur first Sausages & Super Breakfast in Melbourne was a great success – strong attendance, informative presentations, robust discussion and tasty food. It was a pleasure to meet our members and answer their questions, while we talked all things super, and maybe a little sport!

So now it’s our Sydney members’ turn to roll out for breakfast with Christian Super’s CEO, Mr Peter Murphy, and Financial Advisor, Mr Gavin Martin, from Cornerstone Wealth. Ask those questions you’ve long been wondering, learn about financial and retirement strategies, hear about how your investments have been performing and enjoy breakfast on us. We’d also love to show you around the Christian Super office and introduce you to the team.

When: 7.30-9.30am, Friday June 24 2011

Where: Link Offices, Rhodes Corporate Park, 1A Homebush Bay Drive, Rhodes

RSVP: By 17 June to marketing@christiansuper.com.au