super tips for your 40s - apss.com.au · for the 2014-15 financial year, there is a concessional...

Super tips for your

40s

InsightAUSTRALIA POST SUPER SCHEME

INSIDE THIS EDITION

• Investment results for the quarter ending 31 March 2015

• “Behind the numbers” analysis of the quarterly investment returns

• Important considerations for different life stages: Super tips for your 40s

• Super tips for tax time

News from the Australia Post Superannuation Scheme Quarter ending March 2015

The first in a series of helpful articles to guide members on important considerations about super at different ages.Many members don’t give their super much thought until they hit “a certain age”. That age will be different for different people, but for most of us it will be somewhere in the 40’s. Retirement may still seem like a long way off, but it’s not, and retirement planning starts to become more important. The thing to remember is that whilst it is never too late to start thinking about superannuation, the sooner you do, the better. The APSS recommends that you seek the input and advice of a licensed financial planner to help you understand your personal super decisions, and the long term impacts that a decision you make now might have on your retirement outcomes.

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News from the Australia Post Superannuation Scheme – Quarter ending March 2015

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Will I have enough super when I retire? The kind of lifestyle you have in retirement greatly depends on your level of superannuation savings, so it is vital to start with the question “how much will I need in retirement?”Once armed with that information, you can then determine if you have enough; and if you don’t, you can take steps to improve your retirement outcome.The Association of Superannuation Funds of Australia (ASFA) defines a “comfortable” retirement lifestyle as a good standard of living, that enables you to purchase a broad range of leisure and recreational activities, household goods, a reasonable car, electronic equipment, and domestic and occasional international holiday travel. To enjoy a “comfortable” retirement lifestyle, single members would need to retire on a balance of approximately $430,000 and $510,000 for couples (these figures are based on the ASFA Retirement Standard as at 31 December 2014 and certain assumptions, including your eligibility for the Age pension, and that you retire at Pension Age). If your living standards are more modest, then the lump sum requirements may be lower.

Should I be making personal contributions?Although you have peace of mind that your APSS Defined Benefit super can never go down if you are an employee member, you will need to consider whether this will be enough for you to retire on. Making additional contributions is a useful way to boost your super but be aware, there are annual limits to the amount you can contribute to super without paying additional tax. Refer to Contributions at apss.com.au for more information.

Should I be making before-tax contributions?If you make contributions to your super from your pre-tax salary (also known as “salary sacrifice”) tax benefits may result. It’s important to understand your options and the impact this will have on your take home pay, and later on, how it might affect your eligibility to Government benefits, such as the Age Pension.

Would I benefit from contribution splitting?This is a way to boost the superannuation savings of a partner with a low account balance or lower income. You don’t have to be married to benefit from this option.

Super tips for your 40s Whether you are married or single, with or without children, by the time you are in your forties you may be wondering if you will have enough to look after yourself and your family in retirement. You may not be expecting a lavish lifestyle, but may want to be comfortable in retirement and have enough for the occasional holiday and maybe a new car. Some of the things you should ask yourself are:

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Super tips for your 40s (continued)

Important If you need assistance with any of the tips listed above, please contact the APSS SuperPhone on 1300 360 373 and one of our highly trained representatives will be able to assist you.

Are my investment choices suitable?In your forties, retirement may still be a fair way off, so you want to check that you’re in a suitable investment option to grow your super until you retire. In the APSS there are currently two choices: The Market Return and the Cash Return (or a combination of the two). Remember that you may need to live off your savings for well over 25 years after you stop working, so you will need to earn a sufficient return. Historically, an investment option with a higher allocation to riskier assets will, over the long-term, outperform a more conservative investment strategy, such as cash (but remember that past investment returns are not necessarily indicative of future investment returns). In your 40s, you still have a very long term investment horizon so you

may want to aim for higher returns and a higher balance at retirement. If you’re unsure about your investment choices, you should speak with a licensed financial advisor.

Have I nominated my beneficiaries?Have a say in how your money is distributed in the event of your death. Nominating your beneficiaries and keeping them up to date, makes your wishes known to the APSS Trustee.

Can I consolidate my super?If you have more than one superannuation fund, you might be paying too much in fees, not to mention the added complication of keeping track of multiple accounts. The APSS can help you to bring your super together to make keeping track of it easier.

Super tips for tax time


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Make before-tax contributions to your super

For employee members, making before-tax contributions to your super via salary sacrifice may be tax effective – 15% tax is deducted from your before-tax contributions, which is lower than most people’s personal tax rate (which can be as high as 49% including the Medicare and the Temporary Budget Repair levies). But there are also caps on the concessional or before-tax contributions you can make each financial year without incurring significant additional tax.

The Government’s co-contribution scheme

If you (or your partner) earn less than $34,488 in the 2014-15 financial year, consider making an after-tax contribution to your super (or your partner’s super) in the APSS and the Government will match your contribution at the rate of 50 cents for each dollar you contribute, with a super co-contribution – up to a maximum of $500 for the 2014-15 financial year. The co-contribution gradually decreases as your annual income goes up from $34,488 until it ceases at $49,488 for the 2014-15 financial year. For more information on co-contributions including eligibility, visit apss.com.au.

With the end of the 2014-15 financial year approaching, here are some things you may want to consider to help you make the most of your super.

Limits on contributions For the 2014-15 financial year, there is a concessional contribution limit of $30,000 if you are aged under 50, or $35,000 if you are aged 50 and over. For employee members, your concessional contributions include your before-tax contributions via salary sacrifice and the amount of notional taxed contributions to provide your Defined Benefit. For more information, refer to the ‘A guide to your Defined Benefit’ Product Disclosure Statement relevant to your membership (14.3% or SG). So remember to check your annual limit carefully – the APSS does not do this for you!

Super tips for tax time (continued)


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The spouse tax offsetIf you’re a low income earner or you take a break from working for a while, your spouse can help you continue building your savings by contributing to your super.

There’s a benefit for the person who makes the spouse contributions too – the maximum tax offset is 18% of $3,000 worth of spouse contributions – a handy $540. The full offset is available if a spouse’s assessable income is $10,800 per year or less. This rebate reduces by $1 for every assessable dollar over $10,800 and stops when the spouse’s income reaches $13,800.

Split before-tax contributions with your spouse

You may be able to split your personal before-tax super contributions (in certain circumstances) with your spouse at the end of the financial year. The maximum amount that can be split for a particular financial year is 85% of your before-tax contributions in that year. (The amount to be split is net of the 15% contributions tax.)

Depending on your situation, it may be beneficial for employee members to share a portion of their before-tax contributions across two accounts in the APSS – yours and your spouse’s.

For more information on splitting, including which contributions you can split, and who can split, please refer to Splitting your contributions at apss.com.au.

Transition to retirementFrom 1 July 2015, if you are aged 56 and over and still working you can start accessing some of your super early using a “transition to retirement strategy” like the APSS Pre-retirement Pension. There may be tax advantages in starting a pre-retirement pension as once you turn 60, payments you receive from a pension become tax free.

For more information visit Publications & Forms at apss.com.au to download the fact sheet “Getting ready for retirement”.

Get advice Before deciding what’s right for you, we recommend that you speak to a licensed financial adviser because tax and super can be a complex area.

Market ReturnPortfolio

CashPortfolio

Defined Benefit(employer funded)

Member Savings(your investment choice)

The Market Return Portfolio

Market Return Member Savings Crediting Rates to 31 March 2015

Actual asset allocation for the quarter ending 31 March 2015

* This asset class is made up of 28% public market shares and 27% private market shares. Remember, the Trustee intends to scale down the private equity investments in the Market Return Portfolio over time and this asset class will ultimately consist of public market shares only.

The crediting rates for Market Return Member Savings are determined by reference to the investment returns of the Market Return Portfolio. The APSS Market Return Portfolio invests in a broad range of shares, real estate and bonds comprising both listed (public) and unlisted (private) global assets. The Market Return option has a higher relative risk and volatility than the Cash Return investment option with an expectation of higher returns over the long term. The APSS adopts strategies aimed at reducing the impact of volatility in financial markets and currency markets.

3 mths 12 mths3 yrs (p.a.)

5 yrs (p.a.)

Employee and Spouse Member Savings

3.41% 14.23% 10.35% 9.17%

APSS Rollover 3.41% 14.23% 10.35% 9.17%

APSS Pension 3.89% 16.18% 11.56% 10.56%

The compound crediting rates shown above are after investment costs and tax (where applicable). Pension members do not incur tax on investment earnings of their APSS Pension Accounts.


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Market Return Member Savings gained 3.4% over the March quarter to bring the cumulative Market Return Crediting Rate for the first nine months of the financial year to 11.3%. The crediting rates for APSS Pension Accounts are slightly higher because investment earnings of these accounts are tax free. Solid share market gains and a strengthening US dollar were the main factors behind the positive March quarter result. World share markets gained nearly 5%

in total over the quarter, while the Australian share market delivered a 10% return. These gains would be impressive at any time, but are more remarkable when measured against the low-key global and domestic economic data in the last few months. There is a wide consensus that low interest rates, rather than fundamental economic data, are playing a key role in current share market performance. With the exception of certain economically distressed countries, interest

Private market assets10%16%

55%

19%BondsShares*Property

Behind the numbers

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Important reminder: Past investment returns are not necessarily indicative of future investment returns.

Reminder * In June 2013, the Trustee amended the investment strategy for Market Return Member Savings and the assets held in the APSS to pay defined benefits (both of which are currently invested in the Market Return Portfolio), increasing the Market Return Portfolio’s target allocation to public market investments and reducing the portfolio’s target allocation to private market investments, without reducing the long-term expected investment returns. The transition is expected to take several years and is designed to ensure that the APSS has liquid assets to pay benefits now that it is closed to new Australia Post employees, while continuing to meet the long-term growth objectives of members who choose Market Return Member Savings.

The Market Return Portfolio

rates on cash and government bonds are extremely low, encouraging investors to seek better yields in riskier asset classes, such as shares, driving their prices up faster than corporate earnings or economic growth alone might warrant.In the US, economic growth slowed in the March quarter, with a cold winter likely to have contributed, but the unemployment rate continued to edge downwards. US consumer sentiment was measured at an 11-year high in January, before easing slightly. Low oil and gas prices helped to boost consumers’ spending power. The US Federal Reserve indicated that interest rates were likely to increase sometime in 2015 if the economy continues to strengthen. In Australia by

comparison, the economic tone was set by weakening Chinese demand for commodities and expectations that interest rates may need to fall further to support domestic demand. Accordingly, the Australian dollar declined by almost 7% against the US dollar and also fell against other overseas currencies. This had a positive impact on the APSS’ private market investment returns, the majority of which are in overseas markets.The APSS public market debt investments, which consist of a mix of cash and government and high-quality corporate bonds, earned a positive, but low, return, constrained by low interest rates.

Behind the numbers (continued)

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$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

1-Jul-07 1-Jan-08 1-Jul-08 1-Jan-09 1-Jul-09 1-Jan-10 1-Jul-10 1-Jan-11 1-Jul-11 1-Jan-12 1-Jul-12 1-Jan-13 1-Jul-13 1-Jan-14 1-Jul-14 1-Jan-15

APSS Market Return Member Savings Australian Share Market * World Share Markets

$1,000

* Australia Share Market reflects returns from Russell Australian Shares for period prior to 30 September 2014 and Russell After-Tax Australian Shares Unit (for Superannuation Investors) thereafter.

1-Jan-08

Values used in this chart are based on Russell Investments’ Australian Shares and International Shares (Hedged) PST sector funds.

How we compareHow $1,000 in APSS Market Return Member Savings would have changed in value since 1 July 2007 compared to the same amount invested in publicly-traded Australian and overseas share markets.

World economy staged a slow recovery. Business profits improved but government debt problems emerged in Europe.

Share markets have exhibited growth since June 2012 as economic concerns have eased.

Problems in the US sub-prime mortgage markets started to emerge.

Global bank losses accumulated, culminating in the collapse of Lehman Brothers. The Australian dollar dropped sharply, giving a temporary gain on overseas investments.

World recession caused asset write-downs. Public market share prices recovered when the US Federal Reserve announced “green shoots of recovery”.



Market ReturnPortfolio

CashPortfolio

Defined Benefit(employer funded)

Member Savings(your investment choice)

The crediting rates for Cash Return Member Savings are determined by reference to the investment returns of the Cash Portfolio. The APSS Cash Portfolio invests in high quality cash deposits or bills and short-term interest bearing securities. The Cash Return option is therefore relatively low risk, with a capital guarantee that means no negative crediting rates, but with an expectation of lower relative returns in the long term.

The Cash Portfolio

Behind the numbers Cash Return Member Savings are invested so as to deliver crediting rates similar to the official cash interest rate set by the Reserve Bank of Australia (RBA), less investment fees and tax (where applicable). The RBA lowered the cash rate by 0.25%, to 2.25% per annum, in February. In an announcement following its April board meeting, the RBA signalled that it was prepared to reduce the official rate further in the period ahead if that was necessary to support sustainable economic growth in Australia. For members with Cash Return Member Savings, it appears that very low crediting rates are here to stay in the foreseeable future.

Cash Return Member Savings Crediting Rates to 31 March 2015

3 mths 12 mths3 yrs (p.a.)

5 yrs (p.a.)

Employee and Spouse Member Savings

0.55% 2.23% 2.40% 3.04%

APSS Rollover 0.55% 2.23% 2.40% 3.04%

APSS Pension 0.65% 2.63% 2.91% 3.63%

The compound Crediting Rates shown above are after investment costs and tax (where applicable). Pension members do not incur tax on investment earnings of their APSS Pension Accounts.


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Actual asset allocation for the quarter: Cash 100%

Remember When comparing the official cash interest rate to the APSS Cash Return crediting rates, keep in mind that, with the exception of the APSS Pension Accounts, the crediting rates are shown after tax is paid on investment earnings.

Australia Post Superannuation Scheme (ABN 42 045 077 895) Issuer: PostSuper Pty Ltd (ABN 85 064 225 841) RSE Licence Number L0002714 APSS Registration Number R1056549. Important Note: All investments carry risk and may rise and fall. International investing involves additional risks, including the risk of currency fluctuations. Diversification does not ensure a profit or protect against a loss in a declining market. Past performance is not a guarantee of future returns or crediting rates. APSS’s crediting rates are calculated fortnightly and are published on apss.com.au. The information contained in this publication is of a general nature, is not intended to be financial product advice and does not take your personal financial circumstances into account. Before acting on any information contained in this document you should first consider its appropriateness to your financial circumstances. If you have any doubt or required further assistance you may wish to seek the advice of a professional financial adviser. The APSS Trustee does not hold an Australian Financial Services Licence and therefore is not licensed to provide you with financial product advice. Issued: 30 April 2015.

How to contact the APSS Call SuperPhone on 1300 360 373 between 9am and 5.30pm (AEST) Monday to Friday or visit us online at apss.com.au. Write to APSS, Locked Bag A5005, Sydney South NSW 1235 or Fax (02) 9372 6288.


super tips for your 40s - apss.com.au · for the 2014-15 financial year, there is a concessional...

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