Glossary
Clients generally let fund managers look after their investments, and pay for this to be done. This is usually done by the manager deducting a proportion of any new contribution made to the investments, thus it is called a contribution fee.
All or part of that fee is paid back to the adviser as commission. All My Funds will either request that the fund manager rebates all the contribution fee to your super fund, or if the fund manager insists on paying a commission, All My Funds will rebate them annually to you via cheque less a $25 administration fee.
Simply put this is the amount the insurance company will pay out if you die and have current death cover. If the insurance is taken out through a super fund, then the premiums are tax deductible to the super fund (saving you 15%) and the payout on death will be made to the super fund and then distributed from there.
Careful planning is needed to ensure that minimal tax is incurred by the insurance payout if it is made to the super fund.
The level of cover needed can be complicated to work out, but a rule of thumb may be to multiply your current annual earnings by the number of years to retirement.
These are non-relevant fees in today's environment. They are from an old school structure and don't provide the best possible value to financial providers or their customers.
Simply put this is the amount the insurance company will pay out if you die and have current death cover. If the insurance is taken out through a super fund, then the premiums are tax deductible to the super fund (saving the client 15%) and the payout on death will be made to the super fund and then distributed from there.
Careful planning is needed to ensure that minimal tax is incurred by the insurance payout if it is made to the super fund.
The level of cover needed can be complicated to work out, but a rule of thumb may be to multiply your current annual earnings by the number of years to retirement.
This is the payment made to the insurance company for the insurance cover arranged.
This is the amount that you will elect to receive as a pension from your super fund once you pass the required age and have retired and request a pension be commenced. The Government sets a minimum amount to be withdrawn every year, but no maximum. The reason for setting the minimum is that the government does not want much to be left as an inheritance.
One of the basic approaches to any form of investment is to ensure that you do not put your money into investments which do not match your risk profile. Clients can vary from conservative investors to aggressive investors, and their risk profile is usually obtained through a questionnaire approach coupled with discussions with their adviser.
Peace of Mind is what is desired – sometimes called the “Pillow Test” where you can sleep soundly at night without worrying about your investment.
However, the trade-off is that conservative investments eg cash or term deposits, are unlikely to provide a good return in the long-term and so make it less likely that you will be able to enjoy a comfortable lifestyle.
Generally, risk increases as we progress along the following train of investments: cash & term deposits – fixed interest eg Government bonds – property – Australian shares – international shares. But this comparison is not always the same ie sometimes fixed interest may be more risky than shares, and within categories there are more conservative and more aggressive investments eg mining shares are generally more aggressive than shares in banks.
Most clients end up with a mix of investment types and within the types a mix of individual investments. This is called diversification.
Another type of insurance you can take out through some super funds, this insurance provides for monthly payments if you are unable to work temporarily in your current occupation. Until recently there was a limit of 2 years’ payments available through this type of insurance, but the government has now allowed payments to be made up until age 65 and some super funds now provide this.
Premiums are tax deductible to the super fund.
Basically this is savings for retirement. The introduction of compulsory employer contributions to super in the early 1990’s has meant that retirees will be more and more required to fund their own retirement and not have access to the Aged Pension.
Because of significant tax benefits associated with super, there are strict controls on the amounts that can be contributed and more particularly on when super can be accessed.
Tax benefits include a maximum 15% tax on some contributions (as compared with the 46.5% top tax rate), and lower or nil tax on the earnings of the fund as well as nil tax on withdrawals for members over the age of 60 years.
Super cannot be accessed until you are over the age of 55 and retired – note that the age limit is higher if you were born after 1960.
Basically this is savings for retirement. The introduction of compulsory employer contributions to super in the early 1990’s has meant that retirees will be more and more required to fund their own retirement and not have access to the Aged Pension.
Because of significant tax benefits associated with super, there are strict controls on the amounts that can be contributed and more particularly on when super can be accessed.
Tax benefits include a maximum 15% tax on earnings (as compared with the 46.5% top tax rate), and lower or nil tax on the earnings of the fund as well as nil tax on withdrawals for members over the age of 60 years.
Super cannot be accessed until you are over the age of 55 and retired – note that the age limit is higher if you were born after 1960.
The report provided by All My Funds at your request which provides the following details:
- a breakdown of your current superannuation position
- the amount of superannuation you could receive on retirement
- the percentage of your current annual salary you could receive each year from the age 65
- a comparison of your current superannuation funds with five other superannuation funds
- the effect extra contributions and consolidating multiple superannuation funds could make on the amount of superannuation you can have on retirement
It is important to note that All My Funds is providing information only, including comparisons with alternative super funds, and then gives you 5 options of what you could do.
All My Funds is not authorised to provide advice or recommendations on what you should do.
Because of inflation, the cost of almost everything goes up in time. For that reason most forecasts of pension income are done in today’s dollars so that you get a better understanding of the standard of lifestyle that you will be able to afford.
Usually it is assumed that inflation will be between 2% and 3% - this is the Reserve Bank of Australia’s target range. If fund earnings remain the same and inflation is low, you will be better off than the forecasts indicate. But if fund earnings remain the same and inflation is higher than 3%, you will be worse off.
It is important to note that the forecasts are just that. They cannot be totally relied upon because of the unknowns that may occur over the next 80 years – these would include wars, natural disasters and environmental disasters.
This is a type of insurance often available through a super fund which makes a lump sum payment to the super fund if you suffers an injury or illness that means you are unable to work in any pre-defined occupations. If a claim is made for TPD, you are usually classified by the super fund as permanently incapacitated and may be able to start drawing a pension from the super fund, even if you haven’t reached the normal retirement age.
The insurance is often taken out as combined Death and TPD cover. Premiums for TPD insurance are tax deductible to the super fund.
This is a type of insurance often available through a super fund which makes a lump sum payment to the super fund if you suffers an injury or illness that means you are unable to work in any pre-defined occupations. If a claim is made for TPD, you are usually classified by the super fund as permanently incapacitated and may be able to start drawing a pension from the super fund, even if you haven’t reached the normal retirement age.
The insurance is often taken out as combined Death and TPD cover. Premiums for TPD insurance are tax deductible to the super fund.
Apart from the Contribution Fee, the fund manager will also, on a monthly basis, charge you a percentage of the total investment you have with the fund manager to cover their costs. The fund manager also typically pays some of this fee onto the adviser as a trailing commission.
Again, All My Funds will either request that the fund manager rebates all the trailing commission to your super fund, or if they insist on paying it, All My Funds will rebate them annually to you via cheque less a $25 administration fee.
Apart from the Contribution Fee, the fund manager will also, on a monthly basis, charge you a percentage of the total investment you have with the fund manager to cover their costs. The fund manager also typically pays some of this fee onto the adviser as a trailing commission.
Again, All My Funds will either request that the fund manager rebates all the trailing commission to your super fund, or if they insist on paying it, All My Funds will rebate them annually to you via cheque less a $25 administration fee.
