Wilson HTM
Investment Group
Transition to Retirement Income
Streams
(February 2012)
Introduction
Overview of Wilson HTM Investment Group • Our Values
• Our History
• Whole of Firm Approach
Michael Börjesson from Wilson HTM
Chris Campbell from Hanrick Curran
Superannuation – The Sole Purpose
A super fund needs to be maintained for the sole purpose of: • providing retirement benefits to members, or • to their dependants if a member dies before retirement 3
Super Fund
Asset Protection Concessional Contributions Non‐Concessional Contributions Insurance Benefits Low / No Tax Environment Personal or Employer Personal or Spouse Income StreamContributions
Contribution Eligibility • Under Age 65 no restrictions (other then legislated limited) • Between Age 65 & 74 subject to the work test • Age 75 and older only mandated contributions Contribution Limits Proposed Changes Concessional Non-ConcessionalCurrent FY 13 Onwards Current
Under Age 50 $50,000 $25,000 $150,000
Tax Deductions
Meet the age related conditions, and made a super contribution Employment accounts for less than 10% of your:
• Assessable Income • Reportable Fringe benefits
• Reportable Employer Super Contributions (RECS) Super Components – Taxable or Tax Free
Income & Estate Implications
5 Concessional Contributions Non‐ Concessional Contributions Taxable Benefits Tax Free Benefits
Preservation / Conditions of Release
Retirement
• Ages 55 – 60 Permanent Retirement • Age 60 and older Retirement Attaining age 65
Incapacity
Terminal Illness or Death
Transition to Retirement (attaining preservation age)
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Date of Birth Preservation Age
Transition to Retirement Pensions
TTR Pensions have been available from 1 July 2005
• Account Based Pensions from July 2007 Pension paid while still employed Limited Income
No commutations
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Why
Cash Flow
• Reduced working hours ( Transition to Retirement ) • Funding contributions
Recycling super
Tax Effectiveness • Specific transactions • Long term effectiveness
Member Tax Free Super Taxable Super
Minimum Pension Standards
The pension must be account based • Each member has defined, account based interest • Does not require the segregation of assets
You cannot use the capital value of the pension, nor the income from it as security for borrowing
You cannot increase the capital value of the pension once the pension has started
• Including by contribution or roll over
The pension can be transferred only if a member dies The pension is classified as ‘non commutable’:
• It cannot be commuted to a Lump Sum
• Can be commuted, or rolled back into an Accumulation Account.
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Minimum Pension Standards
You must pay the minimum amount at least annually
Payments:
• The minimum payment must be met each year (pro-rated for part years) • Pensions started in June do not require a minimum payment
• A minimum payment must be met before the pension can be commuted • The maximum payment is not pro-rated
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Age Minimum Payment
55-64 4%
65-74 5%
75-79 6%
Implications
Investment Strategy Liquidity • Income Requirement • Contribution Schedule Solvency • Long term investment returns Investments High yielding assets• Cash, Fixed Income & Hybrids
• Equities & Franking
• Property
Preservation Capital Gains Tax Segregation of Assets 11
Practical Implementation
Contributions Pension Account Accumulation Account Income Taxable Account Tax Free AccountSuper Fund
Self Managed Super Funds (Trust Deeds) Q-Super
Results (different periods)
13 Fund Allocation Accum. Return PensionReturn Difference Proportion
Legal Super Cash 4.00% 4.80% 0.80% 16.67%
Balanced 7.20% 8.10% 0.90% 11.11%
Equities 11.60% 12.30% 0.70% 5.69%
Q Super Cash 4.02% 4.72% 0.70% 14.83%
Balanced 2.03% 2.51% 0.48% 19.12%
Equities -7.74% -7.79% -0.05% 0.64%