Retirement options

One of the biggest challenges facing governments is the ageing of Australia's population and the increasing burden of health care and income support. Governments of all political persuasions are increasingly aware that the onus to fund future retirement is likely to fall more on the individual, rather than the public purse, as has been the case since the World War II.

Centrelink pensions and benefits will most likely take the form of a safety net rather than the assured means of support that they have been in the past. It can be argued that this is the case now.

The Association of Superannuation Funds of Australia (ASFA) and Westpac commissioned an extensive survey of retirees spending patterns, asking the question: How much do you need to spend to have a comfortable standard of living in retirement? It was found that a single person would need to spend around $37,621 pa and couples around $50,414 pa — well above the maximum age pension of $13,315 pa for a single person and $22,240 pa for a couple.

With careful planning and financial advice, individuals will find it more and more important to secure their future through savings. With the growth of employer support, superannuation is the most common savings vehicle in Australian society and for most retiring individuals their superannuation will form their second largest asset after their home. The tax relief afforded to retirement savings accumulated through the superannuation vehicle is one of the system's most prominent benefits.

Many people ask the question: ‘How much money will I need to live on in retirement?’ The answer to this question is the most important part of retirement planning. Your answer depends very much on the lifestyle you ‘wish’ for. Planning can turn your ‘wish’ into reality…not everyone wins lotto!

Will you want annual holidays abroad? How often will you want to purchase a new car? Will you be a two-car family? Will your entertainment needs and hobbies be costly or will you be attracted to the simpler pleasures in life? Do you want the latest in home entertainment, such as the latest plasma television or laptop? Will you be supporting your grandchildren?

Your retirement goals will influence the after tax income you need to live on and it is important you make plans for the retirement you desire as early as possible. Your long-term financial security can usually only be reached by careful planning and by adopting saving strategies. Although planning does not guarantee a trouble-free future, it helps you focus on what you wish for the future and provides you with a possible road map for directions.

Once you have decided how much after tax income you realistically need in retirement you can set your savings plans in motion. Superannuation will provide a tax effective means of possible achievement.

Unfortunately, all our savings plans can come to grief if we have not yet saved sufficient monies to self-fund retirement and we suffer an illness or accident, which interrupts or terminates our working life. ACSRF offers comprehensive insurance packages which go some way to protecting your plans. It is so commonplace to insure our possessions; however our most valuable asset—our ability to produce an income—is often vulnerable and unguarded.

Being a large not-for-profit industry super fund, we are aware that many members rely on us to satisfy their life insurance needs. Paying insurance premiums through your super fund account can be particularly cost effective. A fund of our size has enormous bargaining power in getting cheaper wholesale rates from insurers and most of the insurance premiums are tax deductible to the super fund. Furthermore, if a member salary sacrifices they can effectively pay the premiums with pre-tax salary as this deduction offsets the 15% contributions tax applicable to super contributions.

Unfortunately, the bills do not cease when one chooses to retire. An income stream in retirement can take many of the day-to-day worries out of managing your retirement expenses.

The low-cost ACSRF Allocated Pension Plan is an investment account in your super fund to provide a tax-advantaged income stream (ie a pension) in retirement. For members over age 60, all super and retirement income streams are tax-free.

Similar to the account in which you accumulate your super whilst in the workforce, your retirement super account, the allocated pension, allows you, the investor, the choice of the proportion and class of assets (shares, property, bonds and cash) in which to invest your monies. It offers flexibility in the amount of income withdrawn each year (within limits) and whilst your money is invested in an allocated pension account there is no tax payable on income or capital gains.

Furthermore, an allocated pension is a Centrelink friendly income stream, which allows many people to supplement their retirement income with a full or part Centrelink pension. The ability to withdraw lump sums from the account in addition to the income stream payments gives many retirees the flexibility and access to capital they require.

For more information please contact your local ACSRF office download our Allocated Pension Plan Product Disclosure Statement.