B & L Financial Services - Superannuation Solutions
Helping You Make Your Retirement Dreams Come True
When you retire, would you rather be counting your blessings, or counting your pennies?
Could you fulfil your retirement dreams on $248 a week? In 1996-97, the majority of Australians aged 65 years and over, were relying on government pensions and allowances as their principal source of income. That meant that their average household income was a mere $248 per week (or $12 896 per annum) for singles and $455 per week (or $23 660 per annum) for couples. Like you, many of them probably dreamed about how they would spend their retirement. Perhaps they dreamed of sailing or playing golf? Maybe they considered overseas travel? But with their levels of income, how can these dreams come true?
Superannuation is the cornerstone for fulfilling your retirement dreams. By effectively planning your superannuation contributions, you can plan to have sufficient savings to provide for your daily living expenses plus your special retirement plans (eg. a holiday or buying a boat). Superannuation can seem confusing sometimes, can’t it? Legislation is always changing and you just can’t keep on top of all the rules and regulations. Your financial planner can help you put in place a plan that will assist you to be financially prepared for an enjoyable retirement.
What is Superannuation?
Superannuation is a vehicle for saving money, while you are working, to fund your retirement. There are four main types of superannuation contributions to cater for different people and employment types.
In Australia, the Superannuation Guarantee (SG) Act requires most employers to contribute to superannuation on behalf of employee’s. Through the SG legislation, the government is aiming to have most Australians self-fund their retirement rather than rely on social security. Contributions made on your behalf are called “employer funded contributions”.
Like you, many Australians recognise that in order to live the lifestyle they want in retirement, they can’t rely solely on their employer’s superannuation contributions. When you contribute additional amounts (beyond the amounts that are compulsorily contributed to superannuation by your employer – 9% from 1 July 2002), these contributions are known as “employee funded” contributions.
Self employed person may also make superannuation contributions which may be deductible to them up to certain limits.
A tax rebate may be available depending on the income of the spouse receiving the contribution, under certain criteria. An increase tax rebate may be available, depending on the income of the spouse.
To help you save for your retirement, the Government could give you money to boost your super. If you are a low or middle income earner, you may be able to receive the super co-contribution from the government by making eligible personal superannuation contributions to your fund. You do not have to contribute the full $1,000 to be eligible – any amount up to $1,000 will attract the super co-contribution.
You may be entitled to a Government co-contribution if you fit the following criteria:
- you made voluntary, after-tax contributions to a complying super fund or a retirement savings account (RSA) during the financial year;
- your total income was less than $61,920 (2009/2010);
- you are under 71 years old at the end of the financial year;
- you lodged an income tax return for the financial year;
- you have not held an eligible temporary resident visa at any time during the financial year;
- you earned 10 per cent or more of your total income from running a business if you are self-employed, or from eligible employment, or a combination of both;
What Are the Benefits of Superannuation?
By putting in place a suitable superannuation strategy you can increase the likelihood of doing the things you want to do in retirement.
Superannuation is a tax-effective means of saving.
Tax concessions include:
- tax deductions if you are self employed;
- means tested rebates if you are an employee; and
- favourable taxation (up to a maximum of 15 per cent) on earnings and capital gains of superannuation funds – this is lower than most personal tax rates.
In most cases your employer is required (under the Superannuation Guarantee Act) to contribute to a fund for you – which helps build your retirement savings more quickly.
Superannuation can provide you with benefits beyond savings, like access to death and disability (temporary or permanent) protection at affordable rates. This is particularly attractive where your insurance is paid from pre-tax employer or deductible member contributions.
In addition, most superannuation monies are protected from creditors.
Are Employer Contributions Enough?
The Superannuation Guarantee requires employers to contribute nine per cent (rate effective from 1 July 2002) of their employees salary to superannuation.
However, the simple reality is that your employer’s superannuation contributions alone may not provide you with a comfortable retirement.
Many financial strategists suggest that at least 20 per cent of your salary should be going into superannuation savings, if you want to maintain your lifestyle in retirement.
Other developed countries such as Canada, Italy, Portugal, Spain and Singapore require that double the level of Australia’s compulsory superannuation contribution level be directed into superannuation savings for this reason.
Do You Need Superannuation?
Superannuation is one of the simplest and most tax-effective ways of saving for your retirement.
Consider the following:
- We’re living longer…
Life expectancy of a male born in 1994-96 was 75 while a female was 81 years. That’s a lot of years in retirement for most people. *(Australia Now – A Statistical Profile – Population Deaths”, ABS, www.abs.gov.au, March 2000)
- We’re an aging population…
At 30 June 1998 there were 2.3 million people over the age of 65 in Australia. Whereas older people comprised 12 per cent of the population in 1998, they are projected to form almost one quarter (24 per cent) of the total population by 2051. This means there will be fewer people in the workplace to fund social security aged pensions. (*Older People , Australia, ABS, www.abs.gov.au, March 2000 security aged pensions.)
- Many retirees do not have adequate savings to help fund their retirement…
In 1996-97 government pensions and allowances were the principal source of income for 66 per cent of couples and 80 per cent of singles aged 65 years and over. The average weekly income of these groups was $455 for couples (or $23,660 per annum) and $248 for singles (or $12,896 per annum). (*Australia Now , A Statistical Profile, Income and Welfare (Household Income), ABS, www.abs.gov.au, March 2000)
As a consequence, the government provides significant tax incentives to encourage all of us to use superannuation to save for our retirement. Ensuring that you have adequate superannuation may be the difference between a comfortable retirement and one fraught with financial concerns.
If you would like further information on our Superannuation Solutions please contact our office.