Andrew Williams

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  1. Sources of Income in Retirement

    Switching from earning an income through employment to generating an income in retirement can require some careful planning. Often income will come from many different sources and the combination that works for you will depend on your individual circumstances. It pays to seek financial advice to help determine which sources of income will best meet your needs and living costs and support you through your retirement.
  2. What is a Managed Fund?

  3. When investment strategies are implemented to build and maintain wealth, they are centred on an understanding of your financial situation, goals and objectives. The utilisation of superannuation is often a major component of this due to reasons such as the variety of investment options available and the favourable tax treatment of income and capital gains in both the accumulation and pension phase. Depending on your personal circumstances, there may be situations where it’s also beneficial for you to grow and hold a portion of your wealth outside of superannuation. Reasons that can prompt this may include: Savings for future expenses that will be incurred in the medium to long-term, but prior to your ability to gain access to superannuation. These expenses may comprise such things as saving for a long-stay overseas holiday or your child’s education or wedding. Alternatively, you may find that you wish to continue building wealth, however you are unable to make further contributions to superannuation due to reasons such as your age and employment situation, or having exceeded your contributions cap limits. Due to the above considerations, you may find that an investment bond (also commonly referred to as an insurance bond) forms a component of your overall investment portfolio. What is an investment bond? An investment bond is a non-superannuation investment vehicle commonly offered by insurance companies and friendly societies. It has similar features to a managed fund (e.g. your money is pooled with other investors and is managed by fund managers) combined with an insurance policy (e.g. with a life insured and a nominated beneficiary). This type of investment has been around for some time now, and it’s one way to build wealth outside of superannuation in a tax effective manner if the relevant investment bond rules governing contributions and withdrawals are followed and the strategy is appropriate to your financial situation, goals and objectives. Below we have provided you with some of the key points surrounding investment bonds. Investment options As with any investment, your risk profile is an important consideration. Although investment options may vary between bond issuers, generally an investment bond gives you the ability to invest in a variety of different investments and construct a portfolio that has asset weightings appropriate to your risk profile. For example, you may have the choice to invest in conservative assets (such as cash and fixed interest), growth assets (such as shares and property), or a diversified mixture of both. Tax treatment Investment bonds are tax paid investments. This means that tax is paid by the bond issuer and not you as the investor. The maximum tax paid on earnings is 30% before being reinvested back into the investment bond; however, depending on the underlying investments in the investment bond, you may find that franking credits and other offsets may further reduce this effective tax rate. In addition, generally you do not need to declare earnings in your tax return. As such, investing in an investment bond may be of benefit to you if your marginal tax rate is higher than 30%. In terms of withdrawals, if you decide to redeem your investment after 10 years, subject to the 125% rule (discussed below), then there is no additional tax payable on earnings; however, if this is done within the first 10 years, then the following rules apply. Investment bond - Tax treatment of earnings upon withdrawal Withdrawal made Tax treatment Within the first 8 years 100% of earnings assessed at your marginal tax rate (MTR)* In year 9 Two-thirds of earnings assessed at your MTR* In year 10 One-third of earnings assessed at your MTR* After 10 years No additional tax payable on earnings *Less a 30 tax offset. Given the tax treatment on earnings when making a withdrawal, you will typically find that this type of investment is generally held for the long-term, namely, more than 10 years. Initial contribution and future contributions (the 125% rule) When it comes to investing in an investment bond, there is no cap on your initial contribution, however some bond issuers may require a minimum initial investment amount. Furthermore, you can usually make additional contributions in future years. Provided these additional contributions are no more than 125% of the previous year’s contributions, they are treated for tax purposes as if they were made in the first year. For example, if you make total investments of $2,000 in the first year, your future contributions could increase each year as shown below, without breaching the 125% rule: Investment bond - 125% rule Years Contributions 1 $2,000 2 $2,500 3 $3,125 4 $3,906 5 $4,883 5 $6,104 7 $7,629 8 $9,537 9 $11,921 10 $14,901 However, there are two important things to consider regarding contributions and the 125% rule: If you make contributions that exceed 125% of the previous year's investment, the start date of the 10 year period will reset to the start of the investment year in which the excess contributions were made. If you don’t make a contribution to the investment bond in one year, any contributions in following years will reset the start date of the 10 year period. Fees payable The fees applicable to the investment bond will depend on the relevant bond issuer and the investment options that you have chosen; however, common fees that you may pay can include establishment fees, contribution fees, withdrawal fees, management fees, switching fees and adviser service fees. Estate planning An investment bond may provide estate planning opportunities. For example: Death benefits from an investment bond can be directed to a nominated beneficiary tax-free regardless of who receives the benefit or how long it has been held. You can invest for the benefit of a child, with the option to have the ownership transferred automatically to them once they reach a nominated age. Furthermore, the 10 year period generally doesn’t reset upon the transfer of ownership. Moving forward As you can see, an investment bond may be an important consideration in situations where it’s also beneficial for you to grow and hold a portion of your wealth outside of superannuation in a tax effective manner; however, the use of an investment bond will be based on your financial situation, goals and objectives. Consequently, depending on your personal circumstances and the reason for growing and holding wealth outside of superannuation, alternatives to investment bonds that may also be considered are direct shares, managed funds, online savings accounts or mortgage reduction (and then withdrawing the required amount when needed via a redraw facility). If you have any questions about investment bonds then please contact us.
  4. The Pension Protection Fund

    The Pension Protection Fund (PPF) protects millions of people throughout the UK who belong to defined benefit, eg final salary, pension schemes. If their employers go bust, and their pension scheme can't afford to pay what they promised, the PPF will pay compensation for their lost pensions.
  5. Running the retirement planning race

    A pleasure Ross.
  6. Running the retirement planning race

    For those who have taken part in a marathon or other endurance sport, you’ll already know that to reach the finish line you need: 1. Preparation, 2. Flexibility, 3. And, perseverance. In many ways, retirement planning is quite similar. Below we take a look at some of the key considerations. Getting clear on why you’re doing it and making the commitment When it comes to taking that first step, one of the biggest obstacles to retirement planning is shifting one’s mindset. Understandably, it can be hard to engage with the topic of retirement, especially if it’s far off and you have competing priorities right now. One place to start is by considering what kind of lifestyle you’d like to lead in retirement and how you might fund it. The Age Pension is a safety net for those who don’t have enough superannuation or other financial resources behind them to generate a reasonable minimum retirement income. The maximum Age Pension alone allows for a very basic lifestyle – the current full payment rate (including the pension supplement and energy supplement) is $23,096 pa for singles and $17,410 pa each for couples. From 1 July 2017, those at least 65.5 years may qualify, however the age is set to increase by 6 months every 2 years and will be 67 years by 1 July 2023. If you are striving towards a better lifestyle in retirement and/or want to retire before the Age Pension kicks in you will need to build your own personal financial fitness, to either supplement the Age Pension or self-fund your retirement. This may involve ramping up your debt repayments and/or savings. For example, paying off your home and growing your superannuation (over and above your employer’s Superannuation Guarantee contributions) and/or other investments outside of superannuation to reach your goal. Taking a proactive approach to retirement planning earlier, means you can benefit from the power of compounding and give yourself flexibility if things change along the way. This may enable you to move towards your goal at a more comfortable pace. If you leave retirement planning for later, you may find yourself under more pressure to reach the same goal or your expectations for retirement may need to be revised. See our article “It’s Never Too Early or Too Late To Save For Retirement" for a good example of this. Here, we show how much money you need to set aside each month (assuming a 6% return pa) to reach $1 million by age 65 if you start at different ages during your lifetime. For example: Age 20 = $361.04 pm Age 30 = $698.41 pm Age 40 = $1,435.83 pm Age 50 = $3,421.46 pm Building your support team, assessing your existing situation and cross-training An important part of retirement planning is building a team of relevant people around you. For example, your financial adviser is here to help you map out an appropriate path and support you on your journey. This will initially be based on an assessment of your baseline financial fitness and the establishment of a plan that focuses on the steps that need to be taken to achieve your goal. Depending on your circumstances, the plan can encompass many areas of your personal finances. For example: Creating a budget and monitoring your cash inflows and outflows Managing your debt levels and making extra debt repayments Saving and investing for the long-term Reviewing the use of superannuation as a vehicle for wealth accumulation Establishing a contingency plan with personal insurances. Together these things can help you reach your goal. For example, budgeting can help you tap into surplus income, which can then be used to pay down debt faster. The extinguishment of debt, frees up further income, which you may choose to contribute into superannuation and/or build other investments outside of superannuation. Having appropriate personal insurances in place can help you stay on track to reach your goal when an unexpected event such as a sickness or injury occurs. Milestones, reassessing your progress and blasting through the wall Retirement planning is not a sprint. It’s a long-distance run. So, working towards smaller milestones, reassessing your progress and making adjustments where needed along the way can help you stay motivated and keep on track to achieving your goal. A milestone can be extinguishing debt by a certain date, reassessing your progress can include an annual review of your financial situation, whilst making adjustments can involve tweaking your plan to cater for changes in legislation over time. Nevertheless, at a certain stage in your race whether it be at the beginning, halfway through or nearing the finish line, you may find yourself hitting a “wall”. This may be due to one or a combination of factors, for example, competing priorities and/or unexpected events. To manage your way through this, it’s important to assess the situation with your support team, make adjustments where required, and then refocus your attention to the goal at hand. Digging deep, crossing the finish line and post-planning Nearing the finish line, may be the point in your life where you have paid off your debts, accumulated a reasonable superannuation account balance, have additional investments outside of super and are in the highest income earning years of your career. This is where you can start to think about building on what you have already achieved to date. For example, by doubling down to further boost your superannuation in the time remaining, which may involve maximising your concessional and non-concessional contributions whilst still considering the limits. Crossing the finish line is often accompanied by a feeling of relief and accomplishment. Your preparation, flexibility and perseverance has culminated into your goal becoming a reality. At this stage, it’s time to reassess your current situation and manage your recovery and relaxation. The next chapter of your life is upon you, although it may not be as physically and mentally demanding, it’s still important to stay on top of your new baseline financial fitness. We hope you have enjoyed our look at some of the parallels between retirement planning and running a marathon. If you need help with your retirement planning, remember we are here to help you map out an appropriate path and support you along the way. Access this and many more articles and videos like this here: Vista Financial Knowledge Centre
  7. What is a Managed Fund?

    When it comes to investing, there are various investment methods available to build and maintain wealth over the long-term. For example, depending on your circumstances, you may invest directly (e.g. share portfolio), indirectly (e.g. managed fund), or a combination of these. Managed funds are professionally managed investment vehicles that allow investors to pool their money together to invest. They may differ in the way they invest (e.g. asset allocation, investment philosophy, risk tolerance and investment time horizon) and the fees and charges attached to them can differ. Watch our animation for further insight into what a managed fund is, how it works, and the pros and cons of investing in one: Managed Fund Video
  8. U.K. Pension query

    Hi Epson Yes correct in your thinking regards the UK State Pension. Private Health Cover is personal preference, some believe in it some don't...........I do and have it with Bupa, also if you are a high earner (https://www.ato.gov.au/Individuals/Medicare-levy/Medicare-levy-surcharge/Income-thresholds-and-rates-for-the-Medicare-levy-surcharge/ it typically makes sense to have it otherwise an additional tax is levied. Andy
  9. Multiple super accounts and you

    Regardless of your age, one of the ways to help you grow your wealth and prepare for retirement is to take an active interest in your superannuation sooner rather than later, especially when considering the impact that having multiple superannuation accounts may have on your end ‘retirement nest egg’. You’ll notice from your superannuation statement, that your super grows from contributions and returns less tax and costs (such as contributions tax, administration/member fees, investment fees, adviser fees and insurance premiums). With this in mind, consider what impact several sets of deducted costs may have on your overall superannuation balance if you have multiple superannuation accounts running simultaneously. Not to mention all the extra paperwork come super statement time. As at 30 June 2016, over 14.8 million Australians have a superannuation account* – great news for people looking to have a lifestyle above what is provided by Age Pension entitlements! But did you know that almost half currently hold their superannuation in more than one fund? What’s more alarming is that many of these people are nearing retirement in the 61 to 65 age bracket. That could mean they may have been paying duplicate sets of costs throughout their working life, potentially reducing their ‘retirement nest egg’! Fees aside, it is also important to be aware of how this impacts asset allocation. In many instances your additional superannuation accounts may have been established under what is called a ‘default investment option’, which in some instances coincides with a balanced investor, on average this equates to roughly 70% growth assets (such as shares and property) and 30% income assets (such as cash and fixed interest). You might find that this is exactly how you would like to be invested based on your financial goals and objectives and risk tolerance. But if the default investment option does not align with your needs it may mean that you’re not getting an optimal result from your superannuation. Before you go rolling one superannuation balance into another it is important to understand that in some instances it may make sense to retain multiple superannuation accounts. For example, you may be in a position where: one superannuation account needs to be retained with the minimal account balance because you have personal insurance cover within it that was established prior to a medical condition developing; whereas, the other superannuation account is receiving your personal and employer contributions due to its potentially better quality investments. If you are unsure about which path to take, then remember it is ok to seek professional advice from us before you consolidate your accounts because we can help you make an informed decision regarding fees, insurance offerings (and insurance cover established prior to medical conditions), defined benefit schemes, as well as diversification, risk tolerance and much, much more. Lastly, as at 30 June 2016, there were roughly six million lost and ATO-held superannuation accounts with a total value of roughly $16 billion*. Is some of it yours? Read our article on how to find your lost super because it could mean more money for you in retirement!
  10. Vista Financial Knowledge Centre

    e have recently launched a financial knowledge centre which can be found here: http://www.vista.financialknowledgecentre.com.au/kcarticles.php and it's FULL of informative and educational articles and videos on all things finance, here’s a video to explain it. I should also mention that it is free to sign up even if you are not a client of Vista and you will receive a 2 month trial period.
  11. Its a government pension, 'Devere' applied to move it and that was fine, I was just against all the chargers.

     

    1. Andrew Williams

      Andrew Williams

      Thanks Mark.

      Might be easier to have a quick chat.................have you got a number I can contact you on? 

    2. Andrew Williams
  12. Recommendations - UK pension

    Hi Mark So is your existing UK Pension a defined benefit or defined contribution scheme..............if defined benefit who is it with? Andy
  13. Recommendations - UK pension

    Hi Kieran Happy new year. No using the bring forward rule means that you are using 3 contribution years up in one hit so the neat transfer would then be year 4, it may be possible to bring in another $300k at this point. The SIPP option with the ability to convert to Aussie dollars at an agreeable future point is certainly something that should be considered. Does your Adviser has experience of UK Pension Transfers to Australia? Depending on how long you have been here (in Australia) partial transfers to Australia from the SIPP (if that is the way you go) may need to be done by creating further SIPPs with sideways transfers beforehand to avoid unnecessary tax charges. KR Andy
  14. Recommendations - UK pension

    Hi Kieran Yes there are contribution limits in place being $100,000 each financial year however a bring forward rule exists (effectively utilising 2 future years allowance) allowing a person to contribute up to $300,000 in one go if under age 65. In addition it also may be possible to transfer any Applicable Fund Earnings (AFE) however great care needs to be given if doing this as there are complex rules surrounding it. Are you Australian based?
  15. Recommendations - UK pension

    Hello Andrew The UK pension transfer landscape has changed dramatically over the last few years with changes to the UK and Australian system. Offshore transfers now very rarely make sense due to a newly introduced UK tax charge of 25% of the pot if a person living in Australia transfers a pension to a country other than Australia. So simply put Australia is now usually the only consideration to transfer a UK pension too however another change fairly recently means that only people over the age of 55 can transfer a UK pension to Australia due to another set of UK rules. Therefore in summary if you are over age 55 then a transfer to Australia may be worth exploring. If you are under age 55 then a transfer to Australia cannot occur at this stage however there may be merit in reviewing your current UK pension arrangements for a number of reasons. I hope this helps Andrew, feel free to ask any further questions you may have. Kind regards Andy