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- Good evening, everyone, and welcome.  Again, we find ourselves in uncertain times when we come together.  We've got a market and an economy that is changing almost on a weekly basis and we still are feeling the pressure on our savings and on the way that we are spending money.  Cost of living is biting.  But what we're wanting to do tonight is really start to talk to you about positive steps and really talk to you about how we can help you with building your confidence.   

 

For some of you, you might still be years out from retirement and only now starting to think about it, while for others, you might be well into your retirement journey and what you are actually here for is just to know you're on the right track or you want to think about how to adjust.   

 

My name is Josh van Gestel. I'm the Senior Manager of Strategic Education at Australian Retirement Trust, and I'm very lucky to have alongside me one of my favourite people, Ruth Weaver, one of our wonderful educators. 

- How are you? 

- I'm very well. And delighted to be with you this evening. 

- Ruth and I are both presenting tonight from the lands of the Yuggera and Turrbal people in this place now known as Brisbane.  I pay respects to Elders past and present as well as to any First Nations people with us tonight.  If I could also just make a special mention of the Dharug people, in the place I call home in the northwest of Sydney, and those who protected me on my journey here.   

I would like to acknowledge all of you for taking your time to either join us live tonight or perhaps you are watching the recording.  Thank you for taking that first step in engaging with your retirement journey.  Before we do get too far into it, though, I'll hand over to Ruth just to do another very quick acknowledgment. 

- Thank you, Josh. It is important to remind you all that tonight we are going to be talking about lots of different aspects of retirement and planning for retirement, but we are doing it in a very broad and general nature.  So, that's my way of saying we have not factored in what your personal circumstances or goals and objectives are.  So, just be mindful of that as we work through the conversation this evening.  Obviously, there are lots of channels for you to get more information to talk to us and we encourage you to do that.  Now, we also want to acknowledge for those of you who are linked in this evening or watching this as a recording you are very likely starting to think about - or maybe you're thinking is quite mature at this stage - your retirement or planning for retirement.  That might mean you are becoming a little bit more mindful of the superannuation fund looking after that money and who will be on that retirement journey with you.   

I thought I'd start with a quick introduction to Australian Retirement Trust.  Just a reminder, we are a profit-for-member super fund and what that means is we do not need to generate a profit off our members.  Where we do generate any revenue, it will come back to you as a member in the form of lower fees and of course better services.  We don't have to think about paying a dividend to shareholders, so our only focus is on our members and their journey into retirement.  Regardless of which superannuation fund you're talking to, I would like to think all super funds have a very strong focus on investment, but at Australian Retirement Trust it is absolutely fundamental to everything we do.  We know the importance that investment returns in the long term make to your balance.  Just because you're getting close to retirement or may be already retired doesn't mean that's less important.  For many of you, if you're lucky enough to have a long and healthy retirement you might find that superannuation may continue to be invested for 25 or 30 years during that retirement journey.  So, it is still a really important consideration of your super fund.   

Lastly, please remember that even though tonight we will talk about lots of information regarding retirement and we'll be planting some seeds in your minds around strategy, which we'll cover more next week, it is important to remember there is a lot of support available to you.  As a member of Australian Retirement Trust, you do have access to our financial advice team, which means if you want support or guidance or help to apply tonight's information to yourself more personally that is something that is included in your membership and we'll touch on it a couple of times throughout tonight, Josh.   

I think we'll start by giving a precursor to everyone on what to expect over this three-part series.  Thanks, Ruth.  And maybe before I do that, to remind you all that you can, if you've got any questions throughout tonight, in the web page you've actually joined this webcast through you can put questions in there.  We do have a team who is working behind the scenes monitoring those and providing those to Ruth and I.  And also acknowledging that 300 of you took the time already to presubmit questions for tonight. So, Ruth and I will be covering off a good deal of those tonight.  As Ruth said, tonight is the first of a three-part series.  What we'll do over the coming weeks is discuss a number of things with you.  First, the basics.  And knowing the fundamentals, the options you have, the choices you can make, but also the things, the questions that we get that we know will provide you with confidence.  We'll come back to what we'll actually cover off tonight in one moment.  Next week, we'll then go into a bit more detail on things like contribution strategies, and Ruth and I will also be joined by our Chief Economist, Brian Parker, who will provide an investment and economic update for all of you.   

At the end of tonight's session, we'll provide details as to how you can register for that event next week, if you haven't already done so.  In our last session, living your best retirement, in early December, what we'll do is go into a bit more detail again and think about that now you've made additional contributions to your super or invested it in the way that is appropriate for you, how do you then start turning that into a retirement income and also thinking about things like estate planning, insurance and a number of other strategies that you could use.  So, we'll see a lot of tonight's themes weaved throughout the coming few weeks as well.  But to assist you, you would have also received from us when you registered for the program a copy of our workbook, this workbook, of which I've got a printout here, Ruth, that I will refer to during the night.  Wherever you see the symbol on the screen of the open book, wherever you see that in the presentation slides know there is a reference to that in the workbook.  Ruth and I would encourage you after tonight's event to take some notes throughout, but after the event go back and work through those elements of the workbook as we progress throughout the program.   

Now in thinking about how we'll progress throughout the program, really there are three stages of superannuation that we will be discussing and the products that are available to you throughout these stages.  So, we will over the course of the next three weeks talk about what you can do while you're still working, if you are in that stage, and how you can put additional money into your super and also think about your investments.  We will then give some focus around how you may want to then transition into retirement where you can both be working but also starting to access your super, and there are some wonderful strategies you can be taking note of and applying depending on your circumstance.  We will then also focus, which we will do in a moment, on the Age Pension and some things you've really got to think about in qualifying for that and then using your super ultimately in retirement, which might be in the form of a lump sum that might be in the form of an income stream or it may be a number of different ways, but what again I say to you is it will all be about choice.   

Tonight is really to try to give you an idea of what's available to you, the options you have, and the choices that you can make.  Superannuation is your money.  It is your savings for retirement.  So we want you to walk away from this program knowing how to best use that for your own circumstances.   

So, Ruth just before we do that, though, it’s probably a good idea to focus on what we're actually going to cover off tonight. 

- Sure.  I think we have a busy three weeks ahead of us, by the sounds of that, Josh.  Tonight, though, we are going to talk, as Josh said, in high-level thinking, trying to encourage you to start thinking about retirement, trying to get you to think about what might that retirement look like, what kinds of questions should you be asking at the moment as you're preparing and considering those retirement years.  A really important consideration is where the income that you land on is going to come from.  Will it come from a blend of superannuation plus Age Pension, will you qualify for the Age Pension, is this something you might be eligible for, and we will talk about that tonight.  We also want to address when you can consider accessing superannuation and whether or not that's even relevant to your retirement plans.  Many people make assumptions on when they can touch their superannuation and they actually work their whole retirement plan on when that superannuation unlocks.  Sometimes they don't know the right ages or they might be barking up the wrong tree.  It's important tonight we put to bed any concerns people have around access, in particular once you get to age 60 and putting away worries about tax as well, which often comes up. And then, lastly, we'll have a chat about some positives steps you can take once you have started to blend those thoughts together. 

- On that point, yesterday I had the experience where I was presenting to a group.  It was an online presentation.  There was a chat going on amongst the participants.  I found it incredible not that they were giving each other financial advice but people were putting into the chat, ‘I heard you could access super at this age or heard you could do this.’  We know a lot of people talk about their retirement at barbecues. 

- I think we have all been subjected to ‘barbecue financial planning’. 

- Hopefully tonight will tell you where maybe some of the things might not be completely accurate.  As Ruth said, it might open up more opportunities for you that you weren't aware of. 

- We would like to start with considering your retirement goals and objectives.  We have the little footnote up the top which suggests, if you refer to your booklet - if you don't have it already you can minimise your screen; there's a link on the bottom.  It was also sent to you in the reminder email that went out before we went live tonight.  One of the questions Josh and I will field very often is, ‘How much super do I have?’ In actual fact, we looked through the question sent in by you in advance and a lot referenced, ‘I'm this age. How much should I have if I want to retire in two years time?’ Unfortunately the question is wrong.  Because without knowing what you're wanting to do during retirement we're not able to answer it.  If we can get a good feel for what it is you're trying to do based on how much income you want to pull from super, we have some hope of answering how much superannuation you need. So, it's important to start at the beginning and give some consideration to the income you might need to live on during retirement, and that's going to be a really different amount for everybody here tonight.  It will depend on lots of different things.  There's a lot of personal factors that come into play.  I will share a few you might be mindful of.  

No. 1 is whether you're entering retirement as a couple or as a single person.  Because if you are part of a couple maybe you are combining assets with someone else and it takes the pressure off what your balance needs to be as opposed to somebody who is maybe retiring as a single person.  Whether you're retiring as a home-owner or a renter will be another big factor based on the income you need to bring in during those years.  Also, whether you still have dependants during that time, and when I say ‘dependants’, I don't just mean younger children, of course, I mean children who might be financially reliant on you for various reasons, perhaps a disability or elderly parent that you might be supporting.  There can be dependants around you during the retirement years and that will vary per individual.   

Also things like the age at which you retire, which could be determined by your health.  Obviously, the longer you are in retirement the more money you will need.  There are a lot of personal factors there.  That's one thing.  If you're looking at your workbook now, on page 5 there are a couple of notes you could pop in that might be relevant to you.  Then when it comes to figuring out the actual numbers and thinking about the income, we do need to recognise there are two places our income will actually go and two sorts of sources of income we need. One will be for the actual needs. I think the variants between retirees’ needs will be relatively small.  We're all paying similar rates bills and similar electricity, we all pay the same for fuel, et cetera.  I think when most of us sit down and do that, we'll find that those sorts of daily utilities and things - the variance between them can be relatively small.  But where we see an enormous variance with retirees is through the wants, what is it you want to do during retirement?  Do you want to travel?  Do you want to eat out?  Do you want to sign up to your very exclusive golf club?  This is where it will be very different for people.  This is why the income needs can be grossly different depending on who you are, and it's very much around what sits in that wants bucket.  It's important you're not lying to yourself on what is a want and what is a need. Because it is the wants that we'll work with you on and that we can work on reducing or maybe giving you a bit more freedom to work with. But it is a difficult task. 

- We will talk a little bit about those wants versus needs.  But I think again it's important to reiterate what you said, that a lot of times people ask us what they need.  What number they need.  And they expect this magic number.  And I think based on what you said it rarely makes it clear.  It will be different for everyone. 

- I think it's also worth reminding the audience that just because you have a lot of superannuation doesn't mean you will land on a big income need.  Just because you have a small superannuation balance doesn't mean you are gonna land on a small number.  It's not always directly correlated to what you actually have. 

- Let’s unpack it a little bit more and actually step back a bit and think about how people do think about their retirement.  We did some research in this area or commissioned some research to actually find out how Australians feel about retiring and what they actually want to do with it.  Not surprisingly, people told us they want to be able to relax and they want to spend time with their family and friends.  But what was really surprising was that most people, it was the things that worried them that really came to the forefront.  Yes, they want to relax, but they're scared about it.  They are scared they don't have enough.  They're scared their health won't last out.  They're scared, which is becoming true for a lot of us as we're living for much longer, that we just won't have enough; that we'll outlive our retirement.   

Just to a point that Ruth made, often health may dictate when we're going to retire.  What we have also noted in research that was conducted by the Productivity Commission a couple of years ago is that under the age of 65 most people who are retiring are actually having that retirement forced upon them.  It's usually because of their own health needs or the needs of a partner or of a parent that they're having to leave the workforce early.  The consideration there is obviously the sooner you retire, particularly if it's under Age Pension age and you're not getting that allowance, you'll be spending your super much sooner.  What we then see is that over the age of 65, retirement does become more of a decision that people are making themselves.  It's not being forced upon them.  The only other reflection I'd say here is, again, picking up on the situational piece that Ruth was talking about, what we often see in Australia is typically women on average retire younger than men.  And not that I want to try to oversimplify or be too generic, but what we often see is in relationships that the female spouse or partner is generally younger and so when their older spouse or partner retires, usually at their chosen retirement age, the younger person is actually retiring early.  It feeds into this situation that we've got in Australia where women currently have savings that are lower than men's leading into retirement, but they're also going into retirement much sooner than male counterparts.  So, just something else to consider there for your situation.  But then how do we think about our preparedness for retirement?  And do we actually think we have enough?  Again, going to some comments that Ruth was making, that we did have a number of people -- about 40 per cent -- say in the research that they felt they were okay in having enough for retirement.  But, again, fear trumped that.  We saw people felt they would need to keep working, they felt that they would have to move back their lifestyle.  They just felt they wouldn't have enough to get the retirement that they wanted.   

Now that research asked them the question -- and Ruth will come back to this in a moment -- how much do you think you need to live on in retirement?  I don't know the basis for this, but people came back with on average they need $53,000.  Now, it's really interesting when you ask a person how much do you think you need. There was a piece of research released two or three days ago and it asked - in the research it states the average Aussie thinks they need $641,233 to retire comfortably.  That's according to the research what people think.  Now it's actually not too far off the mark, okay?  What we know is -- Ruth will come to this -- when we're trying to target what we call a comfortable retirement, and although we don't like giving these sorts of targets to people, that a single person will probably need close to about $600,000 to retire comfortably.  A couple combined will need close to about $700,000.  As Ruth said, couples in a partnership can share costs and that's why it's a bit cheaper than twice a single amount.  But, again, you need to think about those numbers.  They may not be the number you need.  The amount that we said of $53,000 may not be how much you need to live on.  Or it could be considerably more. 

The last thing to think about before I hand back to Ruth is think about the fact that although we're talking about numbers year on year here, in retirement your circumstances will change.  Those needs and wants that Ruth was talking about will fluctuate.  There will be years where you're enjoying your holidays.  I know in retirement Ruth will be going back to Ireland, if you didn't detect her accent.  Do you love potato? 

- That's a bit stereotyped. 

- There will be years where those wants will be higher, like with the overseas trip but then there will be other years where those needs, such as medical expenses particularly closer to old age, are really going to become the more dominant factor.  All right.  So, let's actually unpack it a bit more, Ruth.  That question you and I get asked constantly. 

- I know why we get asked it constantly.  I see it constantly myself.  I won't lie.  I do love scrolling on my phone when I get five-minutes peace.  I love to get on socials and scroll.  I can't tell you how many times recently in particular I have seen ads pop up, ‘Did you know you need $1.1 million in retirement?’  I'm seeing it a lot.  I don't know if the phone is listening to me and knows I work in super, but I see it a lot.  I know the rhetoric is out there.  The answer is of course you don't need $1.1 million in retirement.  It will depend on what you want.  Most of us will need less, some of us will need more.  But as humans we do like a benchmark to work off, where is the starting point?  What would be a rough guide for an income level to live on in retirement?  You mentioned your figures, which are something to work off for the average person.  But there are other numbers out there as well.   

One thing I would say if you are looking at our own household, there are a couple of cheat sheets -- the two-thirds rule.  I like this one.  It's an instant recognition of what might work as a good retirement amount for you or an income need in retirement.  The two-thirds rule is you look at 65 to 70 per cent of the existing income in the household and then at retirement we would expect to need a third less.  That might be because you're doing things during accumulating super like putting money into super you wont need to during those retirement years.  The next one is to prepare a budget.  I know you're probably all eye-rolling. It's not a fun exercise, I can't stand doing it myself, but in reality you need to do one if you want to get a feel for where your money is going.  But also use your lifestyle as a guide.  We all know what we're earning, spending and doing.  Your own particular lifestyle at the moment would be a good guide, as will using forecasters and getting a feel from retirement forecasters as to what kind of income you could generate depending on what exactly is sitting in your superannuation at the moment.  If we think about the lifestyles, we do like to benchmark ourselves off the average.  We all know the average is a guide.  But I like averages, too; it gives me a starting point to work with.  I like to know what other people are doing, just to make sure I'm not doing everything wrong. 

- There is a pack mentality. 

- There is a pack mentality.  That's because we're human.  Let's look at what different lifestyles we currently have recognised.  We're all familiar with the Age Pension, and we tend to call that a budget lifestyle.  That's because it's not necessarily a lifestyle but almost like a survival.  You will be able to do certain things on the Age Pension if that's the only source of income you have but you will be incredibly restricted and your full retirement will be around budgeting, finding the bargains and cheap ways to do things.  It's not going to be an overly flexible lifestyle for you. And Josh will touch on the Age Pension. We know somebody who is relying wholly and solely on the Age Pension, if you are a couple who are homeowners, that full retirement Age Pension entitlement would be just over $43,000 a year.  If you are a single person that's coming up to nearly $29,000 a year.  That's what that income amount is.  If you do happen to have a little bit of superannuation, maybe you were late to the party and maybe you haven't managed to accumulate very much, maybe you took big gaps in your working life and have a very small amount. You might be someone who is able to achieve a modest lifestyle.  It's not much more than $3,000 or $4,000 a year above the Age Pension, but even that does gives you that little bit more flexibility and room to move.  It might be the difference between being able to have private health and not having private health.  It might be the difference between being able to have a holiday a year and not doing it.  That modest lifestyle is a little balance that super could actually afford you.  Then the comfortable retirement, which is what a lot of data is modelled from.  These lifestyles are modelled from the Association of Super Funds Australia, who talked to existing retirees around the country asking them what would you class as a comfortable lifestyle.  They're looking at it through the lens of wellbeing; how can we live a fulfilled and well retirement when we factor in our health, social wellbeing and physical and emotional and financial wellbeing?  To be able to have good wellbeing during retirement we think a comfortable lifestyle is needed to be able to tick all those factors of wellbeing.  So, to be on a comfortable lifestyle during retirement they're suggesting as a couple a combined income of about $70,000 and as an individual about $50,000.  Going back to Josh's numbers.  If you are loving the look of the $70,000 a year as a couple, that number wasn't too far off the mark as the balance needed to do that.  The balance needed based off the ASFA number is around that $700,000. 

- $690,000. 

- Yes. It's not far off the $700,000. For the individual who likes the look of the $50,000, that's obviously, as Josh said, it's more but it's sitting at $600,000 as an individual person, if you want to be comfortable. 

- The other thing to be aware of with the numbers is they assume you retire -- 

- At 67. 

- at 67.  They also assume you die at life expectancy -- 

- Yes. 

- which in Australia for women at the moment is probably nudging about 85.  And for men it's nudging about 83.  The reality is for the vast majority we are going to outlive that.  That's the other consideration. 

- One of the big considerations that is becoming less common is you need to own your own home as well for that to be classed as comfortable.  So just sort of getting a guide. Let's be honest, most of us will probably sit somewhere between modest and comfortable.  That's perfectly fine, too.  You may not have to compromise too much on the comfortable lifestyle even if you decide to drop the income levels down a bit.  You've landed on your income.  You'll maybe think about a nice income level to achieve, and how we have to decide where it will come from.  There are different sources of income you might generate throughout your retirement.  The fundamental source of income we all think about when we think of retirement is the Age Pension.  That's where many Australians are currently getting a chunk of their retirement income from.  It's the safety net.  It keeps the lights on and food in the belly for many retirees at the moment.  However, it's not very flexible. Josh will touch on it in a moment, but you're not able to negotiate how much you are entitled to, how often you get paid or even at what age you get paid the Age Pension.  You're not in control of that, which is why superannuation is a great fallback for people. It allows you to retire maybe a bit earlier, particularly if working to age 67 is tricky if you're in a manual job, for example.  Like my own husband, I don't think he will be able to sustain his role until 67.  His superannuation will be the source of replacement for those first couple of years until potentially he could get some Age Pension.  It's thinking about the role that superannuation will play.  It allows you to maybe control the age you retire.  You might be able to then have a much better control over the lifestyle you have.  Many Australians will have both sources coming through.  If you're lucky you might have sources of income from other assets.  Maybe you have an investment property or listed shares outside or maybe you're somebody who might work here and there.  It's common for retirees to maybe do some seasonal work.  Maybe during election season -- I think you said, Josh, your mum used to do that.  If you were a teacher you might do a day or two a week, here and there. Your mum was a teacher, was it? 

- That's it. She would go back to exam marking. 

- They're all worth factoring in, though, when it comes to trying to achieve that income. 

- The other thing is again you should think that these things can ebb and flow. Your Age Pension isn't something you either get or don't.  It might be something you don't get this year, but you might get it next year, and maybe not this month but maybe you do get it next month.  Employment income -- we're seeing more and more people as they go into retirement might work a few months or weeks here or there.  So, I think have the expectation that your income will come from different sources and there will be peaks and troughs. 

- It's quite common for the reliance of superannuation to be heavier in your earlier years of retirement.  That pendulum can swing to being a bit more reliant on the Age Pension as you get more into the retirement years.  Speaking of Age Pension, let's cover off some of the rules of the Age Pension. 

- Maybe we won't talk about my mum tonight.  My son Jonah is watching and anything I say will go straight back to grandma! 

- All good things. 

- You're wonderful, mum!   

So, the Age Pension - there is space in your handbooks to write down these figures.  The reason why we don't publish the figures in the handbooks is they change quite regularly as Ruth alluded to already.  The Age Pension as we've already covered off is about $28,000 a year for a single person and for a couple combined it's about $43,000.  It's important to note that this is the best rate you could possibly get.  Okay?  So if I put that into some numbers for you, about 80 per cent of Australians over the age of 67 receive some Age Pension.  And about 60 per cent of them receive the full amount.  So those numbers we're showing here.  There is a large proportion that receives none or less than those amounts.  There is also a very important entitlement that comes with the Age Pension and that is the concession card, which gives you access to discounts on utilities, it also gives you access to benefits through the pharmaceutical benefits scheme and a whole range of other areas that can help those who are age pensioners save money.  As Ruth said it helps in drive being down some of the cost on those needs you might have.  Where you don't qualify for the Age Pension, you can still receive concessions but they're just not as generous.  But they're still important concessions for you to think about.  In terms of how the Age Pension works, well, first, it's a matter of you turning the right age.  The Age Pension used to be paid to women at the age of 60 and men at the age of 65.  It increased gradually for women to also match them to men, to age 65 and then both increased and are on their way to approaching 67.  Which has been pretty much reached.  If you're not yet receiving the Age Pension, just assume that Age Pension age for you will very likely be the age of 67.  So you have your 67th birthday.  Congratulations.  You can actually -- that's your entitlement requirement there.  You can at that point go into Centrelink and actually have assessment done.  The assessment will occur through two means tests.  The first is called the income test which I will go through a moment.  The second is called the assets test.  The income test looks at everything you earn, including what you're assumed to earn and the assets test looks pretty much at everything you own.  Which ever one of those tests gives the worst result will determine the Age Pension you go home with.  So let's look at how both of those are calculated.  Firstly, the government will assess everything that you have.  Okay?  We often get asked -- I can remember once a lovely gentleman coming up to me and saying, "That property I have in the Greek islands, it's not worth a lot, will the government know about it?" assume they will.  There are certain things the government will ask you to provide information on such as financial balances and the like.  There are other things they will make assumptions about.  For example, they won't have you disclose right down to the letter every piece of furniture you own.  They will also make assumptions on the value of some of the things you have.  But the long and short of it is the government will assess everything except really one of two things.  If you have a Principal residence that you own including one you a mortgage on, the government will ignore it.  It doesn't matter whether you are living in a half million dollar house or a $5 million big house; it really makes no difference.  The government will ignore it.  That is your Principal property you live in.  The other thing the government will ignore is part of the employment income you make each year.  This has increased over recent years and has become far more generous for as Ruth said those people who might move in and out of seasonal work.  I remember in my mum's case -- I said I wouldn't talk about her but I will -- there was a period where she would do exam marking each year for the higher school certificate and the Age Pension would be cut off because she was deemed to earn too much. That has now become much more generous.  Mum is not young enough now to be doing that but in today's terms Mum would have been able to earn a lot more income that way before the Age Pension was cut off.  It's part of the government wanting to have older people remain productive in the work force.  So as I said, those two things are what is pretty much ignored.  There are some rules and requirements around the others and there is a lot of information on our website, we encourage you to go there.  Links are available in your work book to give you some further insight there.  But how does the test unfold?  First they will do the income test.  The simple math of it is here.  If you are a single person, and you earn income less than the threshold each fortnight you will receive the full Age Pension.  Okay?  If you are single person and you earn over that cut-off you will receive no Age Pension.  The journey stops there.  If you earn in between those two you will get a part pension.  You will see the thresholds for couples -- and the cut-off for couples -- is slightly higher.  Okay?  Recognising you have got those combined incomes coming in from both.  The assets test then actually recognises, well, do you own your own home or not?  And starts to recognise that there are different needs there in terms of where you may have your money.  Okay?  Again the theory is that if all of your assets combined is under the threshold, you will receive the full Age Pension.  If your assets are over the cut-off you will receive nothing.  If they're between the two you will receive a part-pension.  Remember they will do both the income test and the assets test and which ever one gives you the worst result is what you end up getting in Age Pension at the end of the day.  But importantly as I said earlier, that isn't a set and forget. If you don't get the full Age Pension today it might be something you are reassessed for down the track and you receive it.  If you have a part pension today you might get a full pension in time based on your circumstances and income and assets.  Over time you will be drawing down your super.  We often have people with large super balances who may not pass the assets test.  Over time your super balance, you will be drawing down on that.  There will be a stage where that gets to a level you may qualify for the Age Pension.  Please keep that in mind as you go through this.  Ruth, let's move away from the Age Pension and that being that fixed income -- 

- Yes. 

- And thinking more about where your super comes in. 

- The beauty of the super element of the income is far more flexible than the Age Pension as we said which is quite rigid.  The superannuation is what will give you a lot more flexibility on when you retire but also how you retire and what the retirement will look like.  Let's talk a little bit about getting your hands on that super. When can you first consider accessing super, and in theory, the first milestone you will meet when it comes to accessing super is a term we use in superannuation called preservation age.  Effectively that's the age you can start to access your superannuation.  If you are still working you can potentially access a portion of it through a transition to retirement and we'll cover that particular product in the third series.  But if you're not working and you have retired and there are some other ways you can get that fundamentally once you reach the age 60 there is an unlocking of that source of superannuation.  For anyone that was born after 1 July 1964, that age is 60. Now if you happen to be born before July 1964, it might have been a little bit younger.  We're fast coming up towards everybody needing to be 60 before they can access super. Now, there's a couple of other interesting ages, though.  I think on the work book, go to the workbook page there and jot down a couple of ages that are relevant to you.  Number 1, your preservation age.  That's the age that you need to start talking to us, because there are certain opportunities, including transition to retirement if you do want to explore them.  They can all start to be looked at once you reach preservation age.  60 is an interesting age.  There are other things that happen at the age of 60. There's a really quirky unlocking of superannuation that a lot of people aren't aware of. 

- I call this the Bunnings clause. 

- I will put this in so people know where it came from.  Let's supposing you were to terminate your existing employment arrangement and do so after the age 60.  Effectively you have unlocked all of the superannuation you've accumulated to that point. Even if you get bored during retirement and you decide maybe to take up a part time job at Bunnings. 

- Which was a question we got asked. 

- You don't have to technically retire permanently but just acknowledge at this moment in time I think I'm permanently retired but I might change my mind and go back to work again.  Or maybe I have no intention of declaring retirement.  You have just left one employer and going to another. You have unlocked that superannuation.  That's something a lot of people are not aware of. 

- It's important to note, that's the superannuation you have saved to that point. Anything you continue to build after that does in itself -- 

- Will be conditioned to retirement.  You would like to think by 60 you would have had access to most of it and can continue to accumulate.  The beautiful part of all of that is once you reach the age of 60 regardless of how or why you are accessing it, it will be tax-free.  Any withdrawals you are taking out of the superannuation system regardless of whether you are still working and use a transition to retirement system, regardless of whether you are going back to work and you're wanting to take a lump sum, it will be tax-free.  That's to put to bed some of the questions we have had about paying tax when getting superannuation before retirement.  It's got nothing to do with retirement and everything to do with reaching the age of 60. 

- I'm 10 years, 6 months and 2 weeks away. I haven't worked out the days. 

- I'm glad to say I'm a a lot further away than you.  It's another very interesting age.  I want you to jot these down and that's 65.  65 means you have full access to your superannuation in any format or method you want even if you're still working at the same employer you have been at for the past 40 years.  65 means all bets are off, there's no conditions needed to be met.  You've just got access to the superannuation. Then of course you have the Age Pension which is 67, and that's when you can approach CentreLink.  The question we get asked a lot is what is retirement age?  The reality is there is no such thing.  Retirement age is the age you decide to retire.  For a lot of people it's not on the screen. It may be 63 or 64, and if you are deciding to go at 64 this is where having superannuation is really pivotal to funding those couple of years in those early years of retirement.  That's what super gives you -- choice. 

- Absolutely, so let’s talk about choice.  This is the other question we often get: what do I have to do with my super?  Well, the answer is, it depends on what you eat to do with it. 

- Nothing, don’t have to do anything. 

- That’s exactly right.  So your first choice might be to just leave it as is.  There are a few pros and cons which we will come to a moment. But you decide to leave it in what we call accumulation or super savings phase.   

 

The second option is you might decide to withdraw all of it or some of it or you might decide to take regular withdrawals every now and then. Again, it is really up to you. We often see -- this is what I saw with my parents -- Dad retired and Mum and Dad actually took a withdrawal to pay off their mortgage. And then the remainder is what then they used as an income stream. It comes to the third point. You might decide to actually commence a retirement income stream. As Ruth said, we will talk about these a lot of detail in our third session in two weeks time. Fourthly, you might do a mixture of all three of those. It's really up to you. Again, it's really important to be careful about the barbecue conversations. We get a lot of people who often tell us, "But I thought I had to or I thought I couldn't or I was told ...". You do have choices. As Ruth said, the first milestone is the ages and what they permit you to do. The second is what you want to do with it and how it will work best. That's where getting some advice or doing your own research can really be important and again where some of the information in your workbooks can help you.   

 

Now, in terms of the pros and cons -- and is not to try to kick the can to a few weeks time but it's what we will unpack in our third session. There are pros and cons firstly with deciding to commence a retirement income stream. Probably the biggest pro I can give here is that it is the most tax effective vehicle, investment vehicle, in Australia. If you start a retirement income stream, the investment earnings you make are completely tax free. Think about it in terms of what was discussed earlier.  Maybe you have turned 60 which means any income or withdrawals you are taking out are tax-free, but now any investment earnings you make are also tax free. You are getting gross earnings on your account basically after fees; that's it. Probably the flip side, though, and we will talk a bit about this in a couple of weeks -- because I think it's both a good and a bad thing with how people use it -- is retirement income streams have a minimum amount you must withdraw from them each year. What we tend to see is a lot of people get scared of taking more than that minimum. That minimum increases as you age. A lot of people just don't want to take more. They pretty much think that minimum a required amount they have to take. What is important for you to think about and going back to some of the discussion we have had up to this point is how much income do you need. If that's above the minimum, that's great. If that amount is below the minimum, then just know that you will have to ratchet that up a bit just to meet that requirement. We will come back to that in a couple of weeks time. As we said the other advantages with retirement income streams is you have choice, they are flexible when it comes to investments and if you want to withdraw. 

 

- They're not permanent. If you did decide to open one and you don't need the flow of income, you can always reverse it back. 

 

- Certainly with account based income streams. 

 

- Yes. 

 

- Okay so let's think about, well, I just want to park it in super. Again, no real disadvantages to call out here except for one in comparison to what I have just outlined. If you just kept it in normal Super Savings, the investment returns you receive are having 15 per cent tax deducted from them. That's probably the biggest difference. The only other thing is with the retirement income stream, it's providing you a regular income, where it's just in your Super Savings you decide if and when you want to take any money out. So there is no regular income there. We tend to see a lot of people like starting a retirement income stream because it just helps them transitioning from employment where they have got that regular pay packet every week or fortnight or month for the last 40 years or so of their working life and now they're receiving that from their super. It allows them to have some continuation. As I like to say it's now when you have become the boss of your own retirement. You are paying yourself a wage. 

 

- It's important to remind everybody that if that's a product that's interesting for you, join the third session. We get a lot of questions and I did see questions:  Can I take a lump sum out of that? Yes. You are not just restricting yourself to an income, you get to determine the income.  If you do have Christmas or you need to up grade the car or caravan, you can take some out. Lovely and flexible. 

 

- The third was you decide to withdraw it. For some people, you might only a small amount in your super and you do decide to take it out to help pay off the mortgage or other debt. We did have a lot of questions saying should I pay off the mortgage first or put it in super? We will come to that at the end if we have time. If you withdraw it, it is very hard to put that back in. The reason why I make that comment is remember that superannuation gives you tax effectiveness you can't get anywhere else. Tax-free income payments. Tax-free withdrawals over the age of 60. Tax-free investment earnings. Once you withdraw your money from the super environment, all of those get cut off from you. If you decide to withdraw it and chuck it in a bank, your bank interest, which will probably be far lower, is going to be taxed, if you chuck it in shares, the same thing. So just know that once you take it out of super you have basically closed off that avenue.   

 

In thinking about bringing this altogether -- and Ruth talked about different ways you can make sure -- or assess whether you are on the right path, assess what you might need, this is a really great way to think about it. Most superannuation funds as well as the government provides income forecasters or retirement forecasters. You put in some basic information and although it won't spit out a guaranteed number you will receive, it gives you a really great idea of knowing am I on track, am I okay or do I have to do something about it? To give you an example -- there are links to the forecaster in your handbook, but if we give you an example here, we a couple and we're saying they are typical. One person is age 60 and the other age 58. They are earning $120,000 in income between the two of them -- still paying employer contributions and still have Super Savings of $100,000. Their intention is to retire at the age of 67. What they are wanting to really achieve is that comfortable lifestyle we talked about earlier of about 71,000 dollars a year. By putting all of that into the forecaster, what the forecaster shows us is that really that money that they've got in super is going to be exhausted quite quickly. They will receive Age Pension and there is also some years there where employment income from the younger spouse is still coming into the equation, but you can see the super really running out in their late 70s. Okay? They then become fully dependent on the Age Pension. Now, this couple is close to retirement but what we're going to do over the course of both tonight but also next week is really show you how they can improve their superannuation. I'm not going to give it away. Ruth. 

 

- Before we jump to how they could improve their situation, if someone does use that forecaster, and you don't like what you see, remember, it isn't just about getting more super. How do I get more money? That's going to be an important element but remember you also have other levers in there. Maybe try it with retiring one year later. Maybe try it with reducing down the income by a couple of thousand a year. There are other factors you have control over as well. This is all based on certain factors but if you use the calculator you can play around with the retirement age and income and that will a significant difference in how long the asset will last you. If you feel like you're not in control or there is no ability for you to build your superannuation or you think you are doing as much as you can, the other choices will be to play with the income level you are using, drop it a bit and see what happens or the age at which you retire. 

 

- The other thing we should point out is you will see intentionally we have made it that the person spends all of their super. That's what it's there for. I don't like quoting Joe Hockey, but once he made the comment about your super isn't an inheritance to pass on, it's an income for you in retirement. Don't be fearful of that. It's making sure your super fulfils your wants and needs but we will discuss that more next week. 

 

- You have a play on the calculator and worked out the income level and retirement age and you think there is work to do -- let's be honest, there are two main strategies we all have available to boost our superannuation balance. The first will be to think about the contributions going into the account. Is there opportunities to maximise what is going into the account and then once the money is in the account, what can we do to maximise the returns on that money once it lands there? To be quite frank, they are your most powerful levers, to boost that superannuation balance. If you recognise through the calculator you are falling short, there is a bit of work to do.   

 

If we think about what is going through to your account we know for anyone under the PAYG system you are receiving 11 per cent in addition to your income paid into that account each year and that is gradually going to continue to increase until we get to 12 per cent, by 2025-26. If you are using the forecaster -- most of the forecasters will have already modelled that little general increase -- that's the foundations of what is coming through into your account.   

 

But of course, you can also contribute money in. There are two main channels in which money comes through to superannuation. The first is through the concessional channel, that includes what that employer contribution is coming through. We looked at that, the 11 per cent. You might have also heard of salary sacrifice or the ability to put money into super and claim it as a tax deduction. The reason these kinds of contributions are called concessional is because they are taxed at a tax rate of 15 per cent. That, let's be honest, is probably more friendly of a tax rate than most of us are paying through the PAYG system. There are limits to be mindful of when it comes to contributing in this method. We will talk in far more detail on contribution strategies next Thursday night when we do that particular session. But that's the first channel that's available to you.   

 

The other channel is to put money into your account after tax. I will pick up on something Josh mentioned earlier. He talked about the possibility of withdrawing money from your superannuation when you have retired. He mentioned it's quite difficult to get it back in. Again, the difficulty is very much again based on your age. It's not as difficult, believe it or not, as it used to be. There has been some loosening there whereby you can still effectively get money a superannuation account up to the age of 75 now through this after-tax method, this is where you are not looking for any concessional tax method to get the money in.   

 

These are funds that, very often, we see coming through, maybe an inheritance you might have received from the death of an elderly parent or maybe you have sold an asset. Maybe you love the idea of having the money in this tax-free haven and you’re going to tidy up a few assets. Maybe you want to start directing some of those funds in.  Again, there are limits and considerations and all of that will be discussed in our next session next Thursday night. 

 

- Just because it was a question that came through -- you can use the different contributions and taking money out and putting it back in -- it's called a recontribution strategy -- you can use that to reduce tax you or your dependents might have to pay in the event of your passing. That's something we will cover off next week. 

 

- Lovely teaser.  Trying to get you all to link in next week. 

 

- Before we push on, I know that we're both a bit verbose tonight. Can I ask, if we think about Russell -- 

 

- My husband? 

 

- Your husband. He is self-employed. 

 

- Yes. 

 

- So if you were a self-employed person you don't necessarily have the superannuation guarantee. You may be putting a lot of money into your own business or into your workers. Where does your contribution opportunity come into here? Is it claiming a tax deduction? 

 

- It depends. For Russell, it's the light blue bubble. Russell doesn't have a payroll department. I'm the administrator for the business.  It’s a very small business. 

 

- Full declaration. 

 

- There is no payroll department as such. He is self-employed. We put money from our bank accounts straight into his superannuation and claim it as a tax deduction. Many people were excluded from doing that if you were under the PAYG system, but now everybody can do that. It was something that only self-employed people could do. Now, even if you are under the PAYG system, you can put money straight from your bank account into your super and claim it as a tax deduction. 

 

- Again, in that case for people who are self-employed running small businesses, they do have to take the step of thinking about, well, I'm not covered by superannuation guarantee, what should I do? 

 

- It's a big gap in the retirement levels for people who are self-employed. We're noticing self-employed people are vulnerable when it comes to retiring. My husband is lucky having me there to guide and push him. 

 

- As chief financial controller. 

 

- I'm forcing him to put money into superannuation. I have seen the data and I know self-employed people, particularly tradies in those manual jobs, they don't tend to put money into superannuation until very late in the piece. You can be feeding it in and getting a tax deduction, but all will be revealed next week in more detail on those contributions. There is something called the down-sizer contribution that is becoming more commonly known out there. It's an extra ability for you to put more money into superannuation in the event you sell your principal place of residence and want to put in extra money. There are limits for both channels. The down-sizer is an extra amount you can put in. You can put in an extra 300,000 into your superannuation if you sell your principal place of residence. Lots of rules and criteria. We have a great page on our website that goes through the eligibility factors. I recommend you look at that.   

 

The point is to show you getting money into superannuation can be done differently and it will depend on your circumstances. There are lovely tax effective ways to get that in through salary sacrifice and claiming tax deductions, but there are limits that might restrict you as well as opportunities so be mindful of that.   

 

Speaking of limits, one of the considerations you need to have when it comes to putting money into superannuation is also your age. The down-sizer rule I mentioned is something you can think about once you reach the age of 55. If you had looked at it previously, that age has dropped. It's something available to you now at a much younger age than previously. 67, I mentioned already, was a lovely age because that's the age you have got full access to superannuation, you also have access to CentreLink if you are eligible. But if you are wanting to put money into superannuation at 67 or beyond, and then you are wanting a tax deduction on that, you will have to meet a work test. I think the only people who would be looking for that type of process anyway are people who are working. Because you can't claim a tax deduction on a contribution to super unless you are paying tax, in which case, you’re getting income somewhere, so you’re probably working.  So not overly relevant but just something to be mindful of if you are older and closer to those years. 75 is the cut-off point for getting the money back into super. That's the point Josh alluded to earlier. If you do decide to take a big lump sum out of superannuation because you were not sure and then change your mind, if you are over 75 you are not getting that money back in. The door is closed. I do want to highlight the age used a lot younger. If you are in your late 60s, early 70s, you may have over the last few years wished you could have taken advantage of extra contributions into super and you weren't allowed. The age used to be as low as 65 and then as far up as 67. But now we are up to 75. Revisit it if you are in your late 60s, early 70s, you might have been told no before but the window may be open again for you. 

 

- I just want to reiterate a point we will will discuss next week -- I don't want to keep putting in spoilers for next week but as Ruth said, there are limits to how much you can contribute in. If you are thinking about putting large amounts into super, particularly if you want to take money out and put it back in, there could be limits that stop you. We will cover those off next week. 

 

- I will let everybody know if it is an after-tax contribution -- as an Irish person, I feel obliged to share this number with you. If it’s an after-tax contribution, you have three years to work with.  If you average out three years, you can get $330,000 over a three year average period. 

 

- My favourite number to get Ruth to say is 333 and a third. 

 

- For some reason every slide I present has a 3 in it. Lastly, before we move on, we’ll talk a little bit about investments before we start to wrap up and get into some Q&A.  There is no age limit when it comes to getting SG contributions or employer contributions. As long as you are working, you are entitled to get paid superannuation. That’s getting money into the system, and we also have to think about what we do with the money once in the system and the control we can have over that as well. 

 

- Absolutely. That is where we talk about investments. Investments is a very big lever. We make the point that when you get to retirement, more of your superannuation balance is actually made up based on the investment returns you have achieved over your years rather than on the contributions that have gone in. It's compound interest working on top of itself. When you get to retirement we often see a lot of people almost close the shutters when it comes to investments. They get conservative and they worry, we understand that. You might be in retirement phase with your super for 20-30 years. That's a very long period where you can still be thinking about the way you invest your money.   

 

There are three main things we really call out when it comes to investing in super. The first is that your superannuation is market exposed. Unless you choose otherwise you will have exposure to the property market and shares and to a range of different assets which we will cover off in a moment. The second thing is to remember that superannuation is a long-term investment. We very often talk to people who are worrying about what the markets are doing today. And although yes it's important to have an eye on that, what we will show you shortly is the global financial crisis, when we look back on it now in superannuation terms and the long term nature of super, it actually didn't have a significant impact. In fact, it actually drove a huge investment return boom that actually followed it. We will come back to that point in a moment.   

 

The third thing for you to think about is that you do ultimately have choice. Where your investments are in retirement and throughout your superannuation life has to come down to two things: the risk that you are comfortable in taking and the return that you want to achieve. Unfortunately, those two things often don't meet. So it really becomes a question of how you balance that out. That's where discussion, again, with a financial advisor or using some of the tools in your work book can help out here.   

 

Next week, we are going to be joined by Brian Parker, our chief economist, who will provide you with a much deeper investment and economic update than we're doing tonight. But just to steal some of his thunder a little, Brian will cover off the fact that when we invest your super, it's not just in one or two different assets, it's actually a whole range. Things like the share market where if you don't make an investment choice -- probably about half of your money is here. Cash and fixed interest which historically were major safe havens for people when it came to their super, but the reality is they really in historical terms haven't provided the strong returns that our members, that you, actually want. We have also invested in a whole range of diversified or or alternative assets including infrastructure, property and and private capital. As I said, Brian will cover these off in significantly more detail next week.   

 

But then think about how does this all flow through to you. This is where you have choice. Currently, at Australian Retirement Trust, our Super Savings members have access to 19 different investment options. The one that the majority of our members are in is called our balanced option. You can see about half is invested in shares and about another 15 per cent or so is in what we call other growth oriented assets, things like property, for example, and private capital. About 70 per cent of your money is exposed to aggressive assets. You can then move into our retirement option which has very much the same asset mix, but different weightings. Instead of half its money being in shares, about a third of it is. Instead of 70 per cent being in aggressive assets, about half is. It has a lot more exposure to things like fixed term investments and also cash assets that really try to smooth out some of the highs and lows you get through things like shares. On the extremes, we then have our growth option, very high exposure to more aggressive assets -- and our conservative option, which obviously has a much higher exposure to things like cash and fixed interest.   

 

Now, as you move into retirement at Australian Retirement Trust, our Super Savings members who do not make an investment choice -- if that's you, don't worry, it's about 80 per cent of members -- what we do from the age of 55 to 65 is if you have not told us that you want to be invested some other way, we will derisk you. We gradually move you from the age at 55 in our balanced option to by the age of 65 into our retirement option. Over 10 years, 120 times. Every month we take 120th of your balance and move it from balanced to retirement. We do that gradually to increase your protection as you get closer to retirement from market volatility. We also do that gradually to make sure you still have exposure to important assets like shares and property -- things that help drive your balance further.   

 

How does this play out over the long term? This is the money side of why we say superannuation is a long term investment. This is showing you what $1,000 invested would be like today depending on where you invested it. We've got the bottom line there is just keeping up with inflation. So we've got CPI there as a benchmark we like to measure against. How much are we giving you in real return above inflation? You can then see there the conservative option, retirement option, balanced and growth option. As you go up those options you can see that they have provided stronger outcomes the more aggressive you are. You also see there is much more volatility as you go up the chart. There is that trade-off. If you are in the growth option with exposure to things like shares at a higher level than the conservative option, the trade-off is you will have to ride out periods of volatility, those are going to be periods that are uncomfortable. We saw it through the GFC way back in 2008, this huge growth period that followed in the 15 years after that, and then we had the COVID downturn and we have also had the recent volatility borne post COVID through what has been happening in Ukraine and is now playing out in the Middle East, all of which Brian will talk to in his update next week. To pull that together, Ruth, it's a bit to take in. 

 

- It is. If we bring back our lovely couple who felt like they were not at the level they wanted to be with their superannuation, maybe they had a phone call and got some advice. The two strategies they implemented in the last years leading up to retirement to really boost their superannuation was to both contribute $10,000 each -- that's not a small amount but it does make a significant difference if you can have $10,000 each year going through to super. That might have been done through salary sacrifice for example. Also looking at the investment portfolios they're in and switching them from a retirement option back to the balanced pool which we know did have a bit more exposure to shares and yes in the short-term was a little more volatile, but let's see what both of those two strategies after implementation meant for the couple.   

 

This couple now are actually well and truly going to be on track to be able to achieve the income levels they wanted to achieve. What we are seeing here in the dark colour up the top and green in the middle is the Age Pension. We're not ignorant of the fact that the Age Pension will still be contributing a huge amount of the income for this couple. You are able to see the superannuation is the two blue colours on the bottom and how beautifully correlated they are. You can actually generate a relatively good income throughout those retirement years by combining the income from both the Age Pension and of course the superannuation. And you can live a comfortable retirement. 

 

- Dare I say, it's in those years of flexibility where you still have your health hopefully and still got your desire to a lot of those wants and that's where you have the flexibility in having your own super to help you. 

 

- You can also see in the graph the reliance on the Age Pension gets heavier as they get older. That's as you are reducing your assets in superannuation. But for this particular couple, they can almost assume they will be able to achieve somewhere close to that income amount right up into their 100th year which is great news for them to have. That involves some aggressive moves with their superannuation in the last few years, getting as much money in as they could and revisiting the investment strategy, but it did mean a very different retirement outcome for them. 

 

- If we reflect on that, in the first example their superannuation balances ran out not long after the age of 75. This is providing just some of that degree of flexibility right the way through. 

 

- Finally, before we move on from that slide, just think about it as well from the context of once you are fully reliant on the Age Pension, there is no emergency funds anymore. Sometimes people do like to a little bit of superannuation and to call it the emergency fund. That's another reason why trying to boost the superannuation -- any way, we will move on. The last thing from me before we do wrap up, Josh, is to remind people to connect with their accounts regularly. A lot of what we talk about and the options you have with superannuation, if you are good at self-serving, maybe you will be on the road and need to implement things when you are traveling for example -- most of the things you need to do with your superannuation are now able to be done digitally. It's important you are connected with your account digitally. And that's through your online access and if you can and you haven't already, download the mobile app. It's an incredible tool. Really simple to use, and allows you instant viewing of your superannuation account.  Even things like opening up an income stream product can be done through your dashboard online. We have incredible digital services available for our members. Take advantage of them.   

 

We're getting close to Christmas. This will be a very popular one. 

 

- I'm on JB Hifi tonight. 

 

- I have been on it a couple of nights over the last few nights to see what I can source. If you are a member of Australian Retirement Trust you have access to the rewards program. That means you may be able to get discounts on items from some of Australia's leading retailers. But also experiences and holidays, et cetera, just by being a member. If you do have the app, just look through the reward system and see what items are popping up. They're always different. It's not always the same things. There are different items that will come up on specials. So have a look. You can get some incredible discounts there. 

 

- You think about the reason why we do this is as you approach retirement, if you are saving money on every day items it gives you a bit more flexibility to think do I want to put that into my super. 

 

- That's your spin; I like to get a bargain. 

 

- The other more important consideration is it reflects when you are in retirement and really wanting to manage your money, this can give you really great discounts, including on every day items, occasionally, there will be discounts on petrol and grocery store cards. It's a great way especially in the current cost of living crisis just to help you that little bit. 

 

- Agree. You look after the pennies and the pounds will make themselves. Isn't that what they say? Let's wrap up. 

 

- As Ruth was saying, we encourage you now to take some steps with self-help. It's the reason we have provided the work book, for you to reflect on things tonight. If you are watching this a partner, have the conversation together. Download the app as Ruth was pointing out, if you haven't done so already, and then just care of some of the housekeeping of your super. We encourage you to think about bringing your super together if you have got multiple super accounts and also checking in -- there is still a lot of lost superannuation out there. You can check online through the ATO or we can assist you to help you track it down if you do have any.   

 

We also encourage with the workbook that you think about your income needs. Go through the process that's in the workbook. If you were to sit down with a financial adviser, that's the process they would work through with you as well to help you understand your needs and requirements and to understand what your budgeting may be. So take the time to just put down some of those numbers and think it through. Think also around your Age Pension age and eligibility and how those numbers that we talked of being the cut-off, if you have assets and income less than those you will get the Age Pension -- sorry, under the threshold. If you have more than the cut-off you will receive nothing, but if it's somewhere in between you will get a part pension. Go through the process of just thinking about we have a lot of people who say -- I won't get the Age Pension or how much will I get? That's a good starting point just to make this assessment and a retirement modeller can help to start you go down the path as well.   

 

We have flogged it a lot, the session next week. We will be looking at a number of core things next week. If you haven't registered already for next week's session, just scan the QR code or register through the email you will receive from us after tonight's session. What we are going to do is have Brian Parker, our chief economist, actually go through investments in a far more detailed way and looking at performance. If you have got questions for Brian please submit those and we will have Brian go through a Q&A with those next week.   

 

We will also be covering, in a lot more detail, contributions, how you can put money in, how you can think about recontributing, which we talked about, the limits that apply and the tax considerations you may need to make. We will also reflect a little on insurance needs. Many of you have insurance in your super. How do you think about that as you approach and lead into your retirement.   

 

As Ruth and I have said a number of times, a wonderful part of our service is also our great financial advice team based here in Brisbane and also down in Melbourne and our face to face advisers we have with us. Take the opportunity to reach out to them. But what I would probably suggest first is take the time to go through the workbook, make some of the notes yourself because that's exactly what an adviser would be asking you. Perhaps think about registering for our next webcasts over the next fortnight, which may answer a lot of the questions you will otherwise be asking. The other thing we would also ask you to just be considerate of is we are coming into Christmas, it's a very busy point of year. Think about are there conversations you need to have now? Are there things you want to weigh up yourself? Maybe is that is a discussion you want to start fresh in the new year. Think about how you want to go about that process. In the website here, you can request an appointment a a financial adviser through a call back function, but again, maybe think about the other steps you can just go through first. Anything to add there? 

 

- No, I think you have done very well to wrap us up. Leaving us with enough time for some Q&A. 

 

- We have been seeing questions coming through.  Ruth hasn't been rude, looking at the chat. 

 

- I have been watching the questions come through. One thing I will reflect on is the pre-submitted questions we went through, there were hundreds of them.  We know that we have covered a lot of those already tonight. Ones we haven't covered, we’re very likely to cover next week or the week after. I will ask you, Josh, there was one question that came through. It might be useful for everybody here to know, when we talked about the average retirement some required -- there are lots of assumptions behind that, one of which was you do own your own home. That was one of the assumptions. A couple of concerns around whether that's what that was modelled off. 

 

- Can I make the point, we often get people saying, we know you are favouring people who own their own home in the assumptions. I also want to point out that at the moment in Australia more than half of us who are homeowners enter retirement with a mortgage. It's a very real issue. Yes, we do have to have assumptions. You need to have a basis somewhere. But there is an important consideration and that is that where we were talking about needs and wants, those needs might be paying rent or it might be paying your mortgage. So there are important things to think about there. 

 

- All of those assumptions will be listed on the ASFA retirement standards website. If you want to go to the ASFA website, you will find the detail of all of those assumptions on there. Questions -- there has been an interesting one around a self-managed super fund. Can you please share the pros and cons through superfunds -- I'm assuming like ourselves -- versus a self-managed super fund? Which one is better from a long term growth perspective? 

 

- Set yourself in for the next 30 minutes.  If I can put it to you, self-managed super funds are a great vehicle for the right person. There are a couple of things to consider as to whether it's right for you or not. Firstly, you have to do all of the work. You don't have a big super fund like ART managing that for you. You are in the government's eyes responsible for how it's invested, you are responsible for tax returns, you are responsible for the day-to-day operation. You can outsource that to other people such as accountants, advisers, whoever else it may be, but ultimately the buck stops with you. If you do outsource it, it's going to cost money. That's the second factor, self-managed super funds can be effective where you have a much larger super balance. Probably not something you would think about if you don't have more than about half a million to invest. Okay? Lots of numbers around that online as well.   

 

The third thing for you to then consider is the cost element, who are you going to have to run it, but it's also thinking about the risks of being with a small fund like a self-managed fund in comparison to someone like ART. ART looks after -- getting close to $300 billion meaning we can diversify across hundreds of thousands of different assets. If you’re in a self-managed super fund, it might only be a handful. If something goes wrong, for example, you have a property and you need to sell it, it's going to maybe be more difficult. That's another thing to consider.   

 

The last point I would make is self-managed super funds have some estate planning advantages over a regular super fund like ourselves. But there are complications also around insurance. We will talk about this next week. With a fund like Australian Retirement Trust, it is much easier to get access to insurance in a lot of cases and it can also be significantly cheaper. With a self-managed super fund, you have to go out and source the insurance yourself and there can be expense associated with that insurance. I know I have brought it together very succinctly, but there is some great information on our website around self-managed super funds. I would encourage you to start there. And at the end of the day, self-managed super funds are not something you want to undertake lightly or do without advice. 

 

- 100 per cent agree. We have had questions around the income stream product we spoke of. We talked about it as a channel to access your superannuation. It's something we will go into a lot more detail on in the third session. I want to bring up the question because it's a good one. It's around how much money you can transfer into the particular product. There is a limit as well. We talked about the fact the it's a complete tax free haven. Therefore, there will be a limit. Can you touch on that? 

 

- The government has legislated -- the previous governments have legislated -- you can have $1.9 million in a retirement income account. As Ruth said, because the retirement income account gives you tax-free investment earnings, you are also getting tax-free income and withdrawals. The government doesn't want you to abuse that. So there is that $1.9 million. The thing to realise, with that $1.9 million, you don't achieve it, and then drawdown your account balance and able to top it up. If you start a retirement income stream that is $1.9 million, that's it; you can't put more money into that retirement income stream. So really that's the only limit. And at the moment currently in Australia, there aren't many people with $1.7 million in their super. As time goes on down the track and as we all see, like our generation who -- 

 

- Had super. 

 

- It might become more of an issue. 

 

- There is one more good one I would like to put out, and it's from Gary. It's a big question but do your best. 

 

- Succinctly. 

 

- Yes. How best to optimise your superannuation for the long term. We're talkings about having as much superannuation as you can, but still being able to obtain the Age Pension which is very important for people who have worked for 40 or 45 years, that they can access the Age Pension. How do you strike that balance? 

 

- Ruth, it's much like the last example you showed in the case study; there is a way to have the Age Pension and super work together. They're not mutually exclusive. I think a lot of people feel that they are. I will go back to something I said earlier. You may not be able to access the Age Pension today because your super is too high. Maybe it's something you can access down the track. It's really you working out, again, how they best work with each other where you do have access. That question is a great question. It's very much going to be driven by individual circumstances. But the main take-out is they're not mutually exclusive. 

 

- You can actuality enjoy both. 

 

- We might wrap up. We will be back here next week. And if you do have any feedback on tonight's session which you would like to provide, we would very much welcome it. We also welcome you providing your questions for next week including questions for our dear chief economist. Ruth and I like keeping him on his toes. For full disclosure, I used the word potato earlier this evening, my nine year old son asked me to say that word. It was his challenge of the night. Hello, Jonah, you should be in bed right now and hello to his best friend Lauren who asked for a call-out. On that note, we look forward to seeing you next week, have a very wonderful end to the week, a wonderful weekend, and we’ll see you soon. 

 

- Good evening. And welcome back to those of you who have joined us for the last couple of weeks. And welcome to all of you who might be joining us for the first time. As a middle-aged male, I would like to first acknowledge that today is Star Wars Day, May the 4th. I just had to throw that in, sorry. What I would like to, though, seriously acknowledge is that tonight we are on the lands of the Yuggera peoples and the Turrbal peoples, this place we now call Brisbane. I would like to sincerely acknowledge and pay respects to Elders past, present and emerging, both here as well as all nations around the country.
Over the last three weeks we've conducted a series of webinars that have really looked at three key things. The first is to look at your income needs and your own needs and wants for retirement and to think about what that may actually look like. Last week we looked at investments and contributions to think about, well, if you are not quite where you want to be in meeting those income needs, what do you need to do. And we also thought about how you may want to invest into retirement. And if you weren't here for those first two webinars, they are available on our website and I encourage you to look at them.
What we are doing tonight, though, is really acknowledging that you've done all the hard work and you have worked hard all your lives, you have saved hard all your lives and now you have the opportunity to access your super and live your retirement the way that you want. And that's what tonight is all about, access. What can you actually do with your money? My name is Josh van Gestel, Snr Manager, Strategic Education at ART, and I'm joined, to help us to talk about access tonight, by Ruth. Welcome, Ruth.
- Thank you, Josh.
- Wonderful to be back, isn't it?
- It is. It is nice to be back for our third show.
- Before I keep waffling on, how about you talk about the other acknowledgement.
- Yeah, look, I'll start, as I usually do, which is to remind everybody who has joined with us live tonight, or watching this through the recording, that we are talking in very broad and general terms. Tonight's content is quite comprehensive. We will be discussing some pretty poignant strategies as well. So it's really important tonight that you remember we haven't factored your situation into account. If you need help to do that and apply any of the content we are discussing tonight to your situation, please do so by reaching out. You can request a callback from one of our financial planners. You can do that through the question box. It should be on the right-hand side of your screen at the moment. Many of you have already done that. Or you will get an opportunity to request a callback in our follow-up email as well. Remember, you have access to that financial planning. It is included in your membership. So take advantage of it and get the professional guidance and support that you might need when planning for retirement.
- As we often say, it's only of benefit -
- If you use it.
- I'm actually excited about tonight? Do you know why I'm excited about tonight?
- Please don't make another Star Wars reference.
- No, better than Star Wars. We are talking about tax.
- Oh, gosh.
- We will tonight be talking, as I said, about access. But as part of that we will also be considering things around taxation and also tackling an area that really isn't comfortable for us to think about, which is really the estate planning element that quite often we ignore or overlook. So as Ruth said, a really important session and one that's actually got quite a bit for us to consider and for you to walk away and consider.
So as Ruth has outlined, over the last few weeks we have talked about a number of things. We've talked about understanding your retirement and, like we acknowledged last week, looking at investments and contributions. Tonight we are looking at how you put that all into action. But I remind you, again, that we do have that digital workbook that would have been sent out to you prior to tonight's program. So if you haven't got that, check your emails. But that digital workbook will actually help you at different times throughout tonight to just reflect on a few points, consider a few points, and also where there's key facts or figures that are relevant, those will be highlighted in your workbook as well so you don't have to frantically be writing those down.
So in just thinking about the last few weeks, it really has been a journey, that journey of taking you from super savings phase, transitioning to retirement, and then living your best retirement. Our focus tonight is really going to start at that transitioning to retirement phase. We are not talking about contributions anymore. We are not talking about investments. We are actually now tonight going to be focusing on access.
But before we talk about any of tonight, what we first need to do is pretty much bridge a gap from last week's session. Last week, as I have mentioned, we talked about contributions, we talked about investments, but there are tax considerations from last week that you need to be mindful of as we talk about things tonight. Okay? So we will talk about tax briefly now. I am excited. We will talk about tax briefly now but this is something we will come back to as the night goes on.
So last week we talked about how your superannuation is really made up of a number of key elements. You have got these tax-free components, or tax-free contributions, rather, that go into your account, and those are personal contributions that you don't claim as a tax deduction. It could be amounts that you put in from the sale of a home and downsizing, it could also be contributions put into your account by a spouse. Those amounts are considered tax free when they enter into the super system, which Ruth talked about last week, but it's also important to note that regardless of circumstances, regardless of age, regardless of the way you are accessing that money, on the way out it is also tax free. So tonight when we are talking about withdrawals and tax treatment, keep in mind that anything that's gone in tax free will also come out tax free as well.
On the other side, though, we then have what's called a taxable component. And the taxable component is made up of the majority of what funds our superannuation. And it will be the larger component for many of us. The taxable component is made up of superannuation guarantee contributions from your employer, contributions you've made that you claim as a tax deduction, as well as salary sacrifice contributions. This is what we largely group together as concessional contributions to your super. The other thing that is taxable, though, is your investment earnings. Again, we will talk about these in more detail later tonight. But what it's important to know now is that when you withdraw these amounts, tax may apply. So tax applies on the way in, tax will also apply on the way out, and there's different reasons for that which we will unpack.
So tonight there is really a couple of considerations when it comes to tax. Tax will apply to you depending on your age at the time you take it; it may also apply depending on how it's being taken, okay, so if it's being paid out as a death benefit, for example, there may be different tax consequences or considerations than if you are taking it as a lump sum. But there is also consideration about how you are taking it out. Are you taking it as an income or as a lump sum withdrawal? So a lot to unpack on that. But this, as I said, is a concept we will come back to throughout the evening. Okay.
- Well, what I will say before we do move on, many people might now have a question and think, well, how much taxable component do I have or how much tax-free component do I have? Just hop into your account online. It actually clearly outlines whether you currently do actually have any tax-free component, or whether, like most of us, the majority of your balance is made up from that taxable component, in which case the conversation tonight will be very interesting.
- And I think the other thing to note is that largely we have that taxable component. Where you do have both, you can't select, "Hey, I want to take withdrawals from my tax-free component", for example.
- Yeah.
- They have to come out in proportion. So half of your balance is taxable component, half is tax free, your payments will be half taxable, half tax free. Again, don't want to get into the weeds. You can tell I'm excited about it. Don't want to get into the weeds, it's something we will come back to. But Ruth, before we get into all of this, maybe just reflect on session 1 a bit.
- Yeah, we talked in session 1 about reaching particular milestones and new opportunities that present themselves once you do reach that particular milestone. The first one, if you remember back - and if you look back through your workbook, you might have made note of it then, was preservation age. I would have suggested this is a terminology that we use in superannuation. It basically means the age at which you can start to consider accessing your superannuation, and it's also the age where your very first opportunity arises with superannuation and real retirement planning now.
The reality is most of us will reach preservation age while we're still working. And the fact that we're still working does not mean there is not opportunities to draw it down. And one of the main ways that we might think about accessing superannuation while we're still working is through the transition to retirement product. Now, we've had numerous questions submitted on transition to retirement and I'm going to do my best now to talk you through what that is and how it works.
So the first thing to note is if you already have reached preservation age, you should be talking to us about whether a transition to retirement will give you any benefit. Now, historically, if we think about what transition to retirement is, it is a lifestyle. So if we think about somebody transitioning into retirement, it might mean reducing their working hours, it might mean job sharing, for example, or changing job to a less stressful role, for example, just having a little taste of what retirement might be. But it's also a product. And the product of transition to retirement is designed to help you start to access some of your superannuation.
So if we think about how it physically works, the product will look and feel very similar to a superannuation account. And, effectively, if you are going to use a transition to retirement, it means you are moving your money out of your superannuation account into a new account that's going to look very similar called a transition to retirement account. The idea or the reason you might use one is because maybe you want to replace some of the income now if you have gone part-time. And using the transition to retirement will allow you to supplement your part-time income. There are limits in that and we will cover that in a moment but it is one use for it. But it's only one use. People will also use that transition to retirement product for a tax-effective way of building up their superannuation balances leading into retirement. We will cover that in a moment. I will get Josh to cover that, seeing as it's tax effective. You love that word "tax". So --- - You are going to give me everything ---
- I will let you do all the tax talk tonight. But it's just giving you a visualisation that generally people who are using a transition to retirement will still have a superannuation account because that's going to be needed for the employer to contribute your employer contributions in. The transition to retirement will be a second account you hold that's used to draw down some income from your superannuation. So you can consider this if, of course, you have reached preservation age.
Now, if we think about what does it look like? I said it's going to look and feel really similar to your superannuation account. One of the reasons for that is because you are going to have access to all the exact same investment options that you have known to know through your superannuation journey. Not only do you have the same investment options but you are going to also have exactly the same fee structure. So your investment returns and the fees that you pay will be exactly the same in the transition to retirement product as it is in your superannuation account.
Now, the quirk about transition to retirement products is you are limited in how much you can draw out. You can only draw a maximum of 10% per annum out of that account. So, for example, if you were to move $300,000 of your super over into a transition to retirement product, you could only draw 30,000 a year out of that account. How you draw that will be up to yourself; how regularly you draw it will be something that you can influence.
The other thing to bear in mind is that there can be opportunities to reduce tax. So we talked earlier on about 60. So back in session 1 we talked about 60 being a beautiful age when it comes to taking super out because all withdrawals you make after the age of 60, regardless of which component that money sits in, as Josh referenced, it doesn't matter if you are drawing it out after 60 it's going to be tax-free. And that means you have an opportunity to get completely tax-free money into your bank account. So how will you use that opportunity? I'm going to get you to cover that in a moment.
Lastly, remember, if you are using a transition to retirement it means you are still working. And that basically means your employer still needs to contribute into your existing superannuation account. So you can keep building up your superannuation.
Now, a couple of things to remember: you won't be able to take lump sums out. You will be limited to the 10%. And your investment returns, as we'll talk about, will be exactly the same as the investment returns would be in your superannuation. And we will talk about that in a moment and why we are referencing that.
The last thing to note about a transition to retirement product is the fact that it is flexible with regards to how often you get paid. So you are able to control whether that 10% is paid out to you through fortnightly installments. Some people like to get it out in one lump sum throughout the financial year. So if it is something you are looking for, quick access to some money from that transition to retirement, you don't have to spread the withdrawals out. You can actually take your full 10% out in one lump sum for that particular financial year. Now, I talked about the fact that there are maximum - that there is a maximum of 10%. There is also a minimum, which means there is a minimum amount you have to draw from the account. Now, we are in a financial year at the moment where the minimums are technically halved and that's because of response from COVID where people didn't want to be accessing their money on market downturns and the government acknowledged that and halved the minimum amount you needed to draw out from one of these products. That's going to revert back to the standard amounts very, very soon in July.
- And where it might be interesting, we've got federal budget next week, and each federal budget for the last few years now, really since 2019, the government has just been kicking that over, so it might just be interesting, although it's due to go back to normal on the 1st of July this year, maybe that will just be something to keep an eye out in the budget next week.
- Yeah. So just, I suppose, for the purposes of what's in place now, you are working with a minimum requirement of 2%, about to change to 4, and a maximum drawdown from the transition to retirement of 10%. Remember, you are using a transition to retirement because you are still working. Once you get to the age of 65, however, the concept of transition to retirement changes and the product itself actually changes. But before we talk about once you've actually retired and reached the age of 65, I mentioned that some people like to use a transition to retirement to actually tax effectively build up their superannuation, and you can use it for that. It might not be that you want the money, you actually might want to save more money.
- Absolutely. If we think about where a transition to retirement account was invented, the government introduced it for the reasons you talked about earlier, to give you the ability to supplement your income. But when it was actually created, there were a couple of quirks in legislation, and it meant that it actually gave pretty generous tax advantage. Now, over recent years the government has clamped down on these a little bit. But to just try and give a sense - they still can apply to people but, as Ruth said, what you've got is your superannuation balance or your superannuation account you've still got open to receive contributions, and you've also then got the amount that you've moved into transition to retirement. The thing that is important to know before I go into a lot of detail on it, the income that is paid out from the TTR, if you're over 60, as Ruth has said, it's tax-free. If you are under the age of 60, there will be a tax rebate that applies.
The other thing is that income that's being paid out, some of it, even if you are under the age of 60, may be tax free. In other words, the income being paid out of the TTR in all likelihood is going to be taxed lower than your salary income. Okay?
So what the concept is is instead of taking all of your income from your employer as salary, you divert it into your super account as a salary sacrifice contribution. I will come back to the reasons for that in a moment. At the same time you are diverting your pre-tax income as a salary sacrifice contribution into your super, you then withdraw income out. Remember that income you are drawing out is very likely to be taxed at a lower rate than your salary. So, effectively, you're shifting some of your salary into your super and at the same time you are pulling income at a lower tax rate out of your TTR account.
Now, as I said, this used to be really generous, and I will be frank, a lot of people had a transition to retirement account not because they needed the income but purely as a tax strategy. And the next slide talks about why this actually worked.
We looked at this last week, that your income is taxed at up to 47%. That tax comes off and what you end up with goes into your bank account as your pay. If, though, you divert it as a salary sacrifice contribution into your super, it is taxed at a more concessional tax rate. Instead of up to 47%, it is taxed at up to 15%. In other words, if you divert that money into your super as a salary sacrifice contribution, you are potentially saving a significant amount in tax, over 30%, potentially, and then you are drawing down that income to replace this from your TTR account.
Now, where it used to be really generous was you used to be able to withdraw up to - sorry, you used to be able to salary sacrifice up to $100,000 a year under the caps. Now the government has progressively reduced that but we've got the concessional cap now sits at $27,500. Doesn't give you the ability to have these large amounts of income going in while you are also drawing down. That means that this can still be an effective tax strategy, but it is no longer the primary reason people think about TTR. People now really think about it for the purpose it was invented, which is to supplement income.
But it's still worth considering. It's still worth looking at your circumstances and talking to an adviser about to see whether this can help lower your tax in some way, particularly as you're approaching retirement.
So we've talked about, really, what you can do up until the point of retirement. So you hit preservation age, you are still potentially working, gives you access to your super through a transition to retirement account. You then, though, get to that point where you've decided, right, I am retiring. Okay? At that point and where you've reached preservation age, your super becomes completely accessible to you. And, really, there is four ways that you can think now about accessing it. The first is that you can leave it in super. You can just leave it in super savings, not do anything with it, allow it to continue, and maybe you will just take withdrawals every now and then as you need them. We will talk about these a little later on, why there may be pluses and minuses in doing this.
The other thing, though, is that you might decide to start a retirement income stream. And very much like the TTR, transition to retirement account Ruth talked about, but now that you've reached full retirement, there is a couple of additional benefits or additional pieces of flexibility available to you which Ruth will cover off in one moment.
The other thing, though, is that you might actually decide to do a combination of all these things. You might have some of it sitting in super, some of it in a retirement income account, you might choose just take withdrawals, you might choose take income. Really, it's down to what your needs are. It is really thinking about how you are going to use your super, including how we talked about in session 1; you are going to have the age pension, you are going to have your own income, how does this work with that, and we will come to that point in one moment.
We had a lot of questions come through prior to tonight's session about how can I access my super? Can I keep it where it is? Do I have to withdraw it? This is it on a page. You can withdraw it if you want, you can leave it alone if you want, you can take it as income if you want, you can do a bit of all. And it is also easy in certain circumstances, and if time allows we will talk about it, is if you start an income stream and then decide you don't want it anymore, that's fine. If you leave it in super and just decide at another point you want to withdraw it all, that's fine. But there's consequences and considerations to those actions. But I started to lean in on this, Ruth, but before we go further do you want to just reflect back on what we discussed in session 1?
- Yeah. Session 1 we talked a lot about coming up with a plan as to where your income in retirement is going to come from, seeing as your employer is not going to be paying your wages anymore. You've now got to determine where is that income going to come from? We talked about the tiered approach where most Australians will have more than one source of income. And the prime source of income for many people in retirement will be the age pension. Remember, the age pension is something that you can apply for, if you like, once you reach the age of 67. The age pension is fabulous. It will do a lot of the ground work for many retirees but it does come with some restrictions, if you like. There is no flexibility around what age you qualify for it. It's 67. There is, I suppose, a level of risk around legislation. So you are not in control over how much you receive or how they will apply the means test and the income test. So you are very much at the hands of the government in ---
- But dare I say, we would never do something as foolish and bold as the French.
- Dare we say you have to retire at 64 as opposed to 67. Look, the age pension 67, that is not retirement age. Age pension being 67 is the age that you can start to get some support from the government. But you can retire at any age you feel fit. Many people will be relying on their superannuation as that source of income if they do retire before age pension. And that's why having superannuation does allow you to write your own retirement story that little bit more. If you do decide to retire at age 64 or 65, many people will be using the superannuation to fund that. And then once they get to age pension, potentially using the age pension and the super combined. Look, the reality is for lots of people in retirement they might still like to participate a little bit in the workforce. Maybe work a day or two here or there or maybe some seasonal work depending on the kind of environment you would like to work in. So it's just about having a little think again about where the income is going to come from and when that income is likely to be able to start, as opposed to just thinking about it as one deposit into the bank account.
- And if I could, I know I was being a bit cheeky about the French comment - I am Dutch so we have certain views of the French - but if I can just for a second reflect on both the increase of the age pension age and also the increase to the preservation age and me saying it's not going to be like we saw there, and I'm quite sincere. When it comes to the preservation age gradually increasing to the age of 60, that's a piece of legislation that John Howard passed, and it is only coming through now. Okay? So that's been in the making for 15 or 20 years. It wasn't just thrust upon us.
If we think about age pension age increasing from age 65 to 67, that increase was actually legislated more than 10 years ago. Again, lots of forewarning. You would not expect our government to change legislation overnight on these sort of things. And the reason why I raise that, we had a lot of questions of concern around legislative change. In this space, the government is acutely aware of giving time to plan, they know that it can be life-changing. So be rest assured that, as Ruth said, these dates are important, these ages are important, but they are not going to change overnight on you.
- Yeah. We do have a history with superannuation of gently grandfathering these changes in. So you won't wake up one day and there is a whole new set of rules. We do tend to find they are grandfathered in quite gently.
- Absolutely.
- So that's deciding where the income is going to come from. If we go back again now to the superannuation and the role that's going to play. I already talked to you about the transition to retirement product and the rules around that. But that transition to retirement is really only in existence while you're working, and at some point, hopefully, you will actually finally retire. This is where the actual income stream comes into effect. To put it like this: if you are using a transition to retirement and then you retire, it just naturally turns into an income stream. Nothing actually is required from you. It will just naturally turn into one. The beauty of the income stream, when you are actually no longer working, or if you're over 65 and still working, this is what you have available to you. So that's important to note. There is a couple of different features attached to it, and it just gets nicer and nicer as you get older when it comes to.
- Carrots and sticks.
- And one of the biggest features of this that's different is the fact that your investment earnings are now tax free. Now, we are going to look at that in more detail in a moment. Fundamentally what it means is because this environment is a completely tax-free environment, the superannuation fund does not have to pay tax on the earnings. And that means that you invested in any of those portfolios will likely see a higher investment return than you would if you were in the superannuation stage of super or during that transition to retirement stage. And Josh will cover that again in a moment. But it is a really big important point to note when considering will I just leave the superannuation there and take it out at random points, or will I move it into this completely tax-free environment which I don't even pay earnings tax on and see how that works.
The other difference here is whilst you can still control your income, just like you could with the transition to retirement around how frequently you get paid, you are no longer limited to the 10%. So if you want to live it up in those first couple of years of retirement and spend 20 or 25% of your balance in those first few years, you can do that. You are also not limited with respect to lump sum withdrawals. Once it's converted to the income stream or you are over 65 and still working, you can withdraw as you wish. So if you are having a regular payment fed through, Christmas comes or you want to go on a holiday, upgrade the caravan, you can do a lump sum withdrawal from that retirement income account.
So it is important to notice, though, subtle differences between this particular style of income stream - remember, it's called an income stream when you are retired, or you are over 65. But it's going to look very, very similar to that transition to retirement and will naturally convert into one anyway. The final point about this which is another - I suppose we will talk about carrots and stick - another carrot to be aware of, because it is a tax-free environment we are very conscious of the fact that we want you to benefit from that, which is why for people entering their money from super stage into this income streamed stage you may be eligible for a retirement bonus. And you can read about that on our website but that's just our way of making sure you're getting the benefit of that tax-free environment. Because you love the word "tax", I'm going to let you talk a little bit more about that whole concept of earnings being tax-free and ---
- Before you do, before you do, I'm going to hold off my excitement for one minute. Can I just ask, because I did see a question before we went live tonight that had been pre-submitted around what's the consideration of minimum balances or maximum amounts in the retirement income stream?
- Yeah. - Did you want to reflect --- - Yeah, sure. There are limits on how much money you can move into one of these environments, it's very generous, but there is also a minimum amount that can move into this environment. And you need to have at least $30,000 moving from the super stage into either a transition to retirement or the income stream.
- And that's a product requirement for Australian Retirement Trust.
- That's exactly right. That's not a legislative rule, that's our own business rule, moving the money from super into one of these income streams does require at least 30,000 to be moved across. We don't charge you extra fees. Your admin costs are exactly the same. So when you think about this product, there is a bit more work involved for the super fund to manage this. We've got to pay those regular payments, we will also report for you regularly to Centrelink on a six-monthly basis and we will look after that for you as well. So there is a bit more hands-on work with the income stream product. But don't assume that comes with extra costs for you. It does not. So you will be subject to exactly the same fee structure. But there is a limit, too, on how much you can put through.
- Well, legislative limit, not a product limit here. As Ruth said, this is a tax-free environment. So the government doesn't ---
- Don't like that so much.
- Doesn't want to give that away too easily. So the most you can move into a retirement income account is 1.7 million. And that is an indexed amount. Sounds like a really generous amount but when you think about it, as people move through the superannuation system that have had that coverage - so we were reflecting tonight, I actually have my 30th work anniversary in a couple of weeks, not at Australian Retirement Trust, but being employed. I've been in the superannuation system for 30 years. That means that that $1.7 million figure is probably going to be more a reality for some people of my generation and those that follow than perhaps it is today. So although it sounds like a large figure, it is probably a figure people will start hitting over the decades to come, but just be aware of that. And I think we had some questions on it. If we have time in the Q&A we will come back to it.
But as Ruth said, we do want to just reflect on tax for a moment and also another legislative change that the government has recently announced. As Ruth pointed out, when you are in accumulation or savings phase, your investment earnings are taxed at 15%. So it means that the investment earnings you get on your account are after fees and after taxes. They are net returns. When you actually move into a transition to retirement account, the same theory applies. So if you are in a TTR, because you are still in this semi-savings phase, your investment earnings will also continue to be taxed at up to 15%. Now, the important thing to note there is the tax rate - the real tax rate for the super fund might actually be lower than that. And the reason for that is we as a superannuation fund claim different deductions as an individual would in their tax return to bring that 15% tax rate down. But just as a guide for you to be aware of.
The beauty, as Ruth said, when you start a full retirement income stream is that those investment earnings become tax free. The advantage of that is you are no longer earning net investment returns; you are now receiving gross investment returns. What I'm showing here is three of our investment options, and these are the returns up until the 31st of March over the last year, 3, 5, 7 and 10 years. What I'm showing on the screen here is in red, we've got the cash option, in the dark blue we have the balanced option, and in the light blue we have the retirement option. This is the earnings that you would have received in superannuation savings phase.
If you're an income stream recipient, the grey block I've just put on top is the additional amount that you would receive through that tax benefit. May not look like a lot, but half a per cent or 1% additional investment return compounded can make a significant difference especially when you think that going into retirement, it's the largest pool your money is ever going to be. It's when investment earnings can really continue doing some very powerful work. So a lot of people say is there any reason why I should go into retirement income account rather than keep it in super savings? This is a key consideration for you.
The other thing, as Ruth said, though, is that you do still have those minimums that apply, like you do with the TTR, and that those minimums have been halved during COVID, and that has continued. What we've seen, though, is the vast majority of our members - and the government has seen this through its own research of retirement income stream recipients across Australia - is that the vast majority will only take out the minimum. Legislation says this is the minimum you are allowed to take. It does not say you are not allowed to take more. The reality is, though, that people are often fearful to take out more than the minimum. They almost hug the minimum as the guidance from the government.
Let's just speak on that for a moment, and Ruth and I talk about this a lot when we are not on camera, about the fact that a lot of people may be on the minimum and that may mean that they are living frugally, it may mean they are living below their needs. The question you have got to ask yourself is, well, is that actually - is that necessary? And we are going to talk a little bit later on about estate planning, and it is important to think about are you living frugally now to save capital for those you leave behind or are you living frugally for another reason. The reason I raise this point is don't hug the minimum if it's not the right income level for you. Determine the income you need and make sure that's what you are taking out of your account.
We talked last week about how investment performance, in spite of ups and downs and a number of financial crises over the last 15, 20 years, that if a person was invested in the balanced or retirement option in those examples and stayed the course, even while they were drawing down the minimum amount, they would actually be better off now than they were 20 years ago, in spite of all of those ups and downs. You really have to ask yourself the question if you are just taking the minimum, is there a reason for it? Is there a justifiable reason for it? My parents have very happily declared to myself and my four siblings that they are spending everything they've got before they're gone. That is, dare I say, the right attitude. Okay? Myself and my siblings, we've got to work it out for ourselves. We shouldn't actually rely on estate planning from mum and dad but that's certainly our situation.
- Yeah. There is a lovely saying that I like to often say to people, it's better to live rich than to die rich. The idea of having your superannuation and living off bare minimum to pass that wealth to somebody else who has their own opportunity to build up superannuation. I'm selfish, I have no intention of saving mine to pass on because my kids come through a generation where they will have superannuation from day one. My word would be don't be afraid to live rich.
- Yep. Beautiful. Again, just to close this off, you do have the ability to determine the way you want to take this income, fortnightly, monthly, quarterly, annually. However it works for you. And people plan this to actually work alongside their age pension, work differently to it, or maybe just fulfil the needs that you have. So just know that you have got that flexibility to take the income how you want. I like to say that you've worked for someone else your entire working life. You are the boss of your own retirement. You determine when you get your pay day.
- I like that.
- Me too.
- Yeah, I like the idea of that, being my own boss.
- She says to her manager. Okay. That has sort of thrown me off now. What we wanted to just quickly cover off again was something we started with, which was thinking about how tax may apply. Now, Ruth and I, again, were talking about this. For the vast majority of people, particularly where you're not taking income or withdrawals until after the age of 60, tax isn't really going to be an issue for you. It's really not. But just to give you the full picture, when you are taking income from your super, so a retirement income payment or a transition to retirement income payment, over the age of 60 that is paid to you tax free, regardless of taxable components or tax-free components. The full amount to you is tax free.
If you are between preservation age, which remember is currently 59 and moving to 60, so if you are in that one-year period, if you take income you will be taxed at your marginal tax rate on the taxable component, but you will get an offset. So in other words, you will get part of that tax back. We talked about carrots on the stick. You can see what the government is trying to do here. They are trying to get you closer to that age pension age.
When it comes to lump sum withdrawals, a bit more convoluted. What actually happens, again over the age of 60, anything that's paid out, whether it's in tax-free component or taxable component, is going to be tax free for you. If you are between preservation age and aged 60, there will be a certain amount of your taxable component that is tax free but it is very generous and then over that there will be a concessional rate of tax that applies. So as you can see in this slide, you really need to be taking a significant withdrawal as a lump sum to have tax apply. And that tax-free amount is actually indexed each year, so it grows each year. But likewise, if you are taking it as income, there is actually only a very short period where tax might apply. This could be very important in your planning. If you are currently aged 59 and you are thinking about a TTR and wondering whether do I do it now, do I wait a while, the tax advantage might be what actually makes you think, "Actually, I will leave it until after my 60th birthday." That is what the government wants.
Before we move on, you don't want to temper my excitement on this one?
- Absolutely not. I think you are hyped up enough.
- Thanks, Ruth.
- What I will do, though, is maybe just summarise now the different components that we have - the different structures, if you like, we have brought to you around what you can do with your superannuation at retirement. So we talked about the income stream and, you know, I do want to remind people that you can jump straight from a superannuation account to the income stream. The transition to retirement is just something some people might use if they are wanting to access before they've retired. But the reality is many people will jump straight from a superannuation account to the income stream. Remember, the concept of the income stream allows you to have that superannuation payments paid to you on a regular basis, almost replicating a wage or a salary, if you like. If you are putting your money into that income stream, you are able to still access lump sums. And something that - I saw a question come through that came through somebody live - I should have reminded you I am watching the questions - and there was a question about determining how much the minimum might be on any given year. Remember, if you are telling the super fund that you want to draw the minimum, say, for example, that's 4%, that's based on what your balance is on 1 July that year. You might earn more than what you are actually drawing out. In which case, you might start the next financial year with even more money in your superannuation balance. You are not required to take the excess out if your investment earnings were higher than what you are drawing out. - And that's actually - - -
- The point we were making, yeah. - - - - a point last week and Brian was talking about as well, that really we have seen investment performance do incredibly well over the last decade where a lot of people were earning, if they were in certain investment options, they were certainly earning much, much more than that minimum amount.
- Yeah. So once you are drawing down the minimum amount, the amount of money in your pension is actually growing still because you're drawing out less than you're earning. There is no requirements to take it out at the end of the financial year if that's where that question was going, which I think it was. The minimum, the percentage is calculated each July. In the same breath - and I don't think we brought this up - you don't have to put it down as a percentage. You actually can give the fund a dollar figure as well. If you are not liking the fact that every year it's dependent on your balance and you want more consistency, you are able to say to the super fund, "Look, I know I'm going to qualify for 20,000 age pension. I want to draw 30,000 a year from the superannuation." And give that flat figure. Once it falls above that minimum threshold then you are fine. You are able to give a dollar amount as well. Hopefully that answered that question for that person who put that through. That's structuring it in the retirement income stream. As Josh said as well, you don't have to use an income stream. You might decide to leave your money sitting in superannuation. Why would you do that? Well, look, maybe you've retired before a spouse or partner and there is a good income still coming into the household and you genuinely don't have a need for that money yet. Maybe you've got assets outside super and you don't want to start accessing the super yet. That's something you don't have to touch your superannuation at all. And you can, of course, access it on an ad hoc basis through the lump sum if that's what you want to do. Remember the difference in earnings there depending on the super environment and the income stream which we covered or, as you might like to do, you can actually withdraw it all. This sometimes causes people to raise their eyebrows a bit and think "What, I can access all of that superannuation?" And the answer is yes you can. If you are over 60 and you are retired, you have full access to that superannuation. But think very carefully about why you would pull that money out of an environment that gives you access to incredible worldwide investment opportunities where you pay no earnings tax and where you may pay no tax to draw it down. I'm not saying it's a bad idea, I'm saying approach that with caution, because if you change your mind down the track, it's not that easy to get money into superannuation as you're getting older.
- And I think last week we were asked a number of questions around should I take my money out and put it in the bank, should I take my money out and buy an investment property. One of the consideration - and you can weigh up the pros and cons of that investment change - but the other thing, as Ruth said, weigh up the tax concessions that are afforded to you. If it's in super, it's in a concessional tax environment. The second you withdraw from it, that's gone. So it is just something to be very mindful of. If there is - and I think I mentioned this last week. If there is a purpose to withdraw it, you are paying down debt, you are wanting to purchase a new car, you are wanting to go on holiday - if there is purpose for it, absolutely do it. But if you are doing it just because you want to make an investment change, well, can you actually do that within the super?
- Within the super. You know what, you can do a little bit of all three if that's what you prefer.
- Absolutely.
- You don't have to leave all your money in the income stream, you might still leave some in super. Why would you leave a super account open? Well, maybe you are expecting some money to come your way and you want to feed that into super. Another rule about income streams - again, we keep coming across these little things we forgot to mention - you cannot put money into the income stream. If you have moved all of your superannuation into the income stream and you do actually have an inheritance come your way, or you sell an asset, you would have to open up a new superannuation account to feed the money in. For this reason, many people decide to leave a very small amount in the superannuation account where you feel like there is the potential to have more money. As Josh said, you can commute it back and start again if there is going to be money building up in the superannuation. So it's really, really flexible and gives you loads of options to structure.
- And I know we are about to move to a new section but before we do, Ruth, that's what this is all about. It's all about flexibility. Okay? Your superannuation, I think a lot of people get tied down by the rules and get concerned about it. When it comes to retirement, it's your money.
- And getting it out, yeah.
- It is you just choosing the way in which you want to do that. But it is actually a really flexible environment. It's more just how are you going to maximise that and take advantage of it.
- Now, we are going to change tone.
- We sure are.
- We want nothing more than for you to live long, happy, fulfilled retirements. But at the end of the day, there is nothing more certain than death and taxes. Isn't that what they say? We are going to talk about both of those right now. We've talked about leaving money in your estate, particularly from your superannuation. And we don't want to see you leaving too much money. We want to see you spending it and enjoying that superannuation savings. But there will be people who will still have money left in their income stream or their superannuation upon their death. What happens to that money?
First of all, there are many Australians out there who have no idea what happens to super. And one thing we need to clarify is your superannuation is not an asset under your estate. So if you have gone to the extent of setting a will in place and you've taken all that effort, your superannuation is dealt with separate to your will. Unless you've told the fund to put it into your estate, it will get paid out separately. And let's be honest, I know in my own case this is the situation. Our superannuation is often the largest asset that we actually have, maybe outside of a property, but it's often the largest asset we are going to pass on to family once we've passed away. So it is important that you tell your superannuation fund who you want that money to go to in the event of your passing. If you don't, it may not go to who you wish.
There are two ways you can put a beneficiary on your account. The first way is simple. It's called a preferred beneficiary. You can do it by logging into your account online, you can do it through the mobile app if you wish as well. This is a really simple way of telling the fund who you would like the money to go to, but it's so important to bear in mind that this is just a guide and it can be disputed. Remember, the trustee of the super fund have a duty of care almost to look after your dependants when you are gone. If you have intentionally omitted a dependant from that beneficiary list, the trustee might decide otherwise. So the preferred beneficiary is a guide only.
Where you want more certainty on who will get that money, there is the option to put a binding beneficiary in place. This is a legally binding arrangement between you and the trustee of the fund who should get that money in the event of your passing. This cannot be contested if you have completed it and it's valid.
A couple of points I will make about the binding beneficiary. First of al,l it is a form available on our website if you do want to put one in place. Secondly, there is no charge to put a binding beneficiary in place. You will need to have two people witness your signature and it cannot be the person or the people you nominate. You can nominate more than one person on your form and you can even nominate your estate.
The next thing to be mindful of, it doesn't stay on there forever. So the binding beneficiaries will be valid for three years. Three months before it's about to expire, you will be notified by the super fund that that beneficiary is about to lapse. If you are wanting to renew it and it's the exact same person or exact same people, you can do that digitally by selecting a button. I did my own very recently. It took me two seconds. But if you are changing the individuals, you will have to complete the form again. It's very, very simple to put it on there.
The last point about the binding beneficiary is you can change it whenever you want. You don't have to wait for it to expire. You can change it if your situation changes. I often talk about the fact very openly that I have a binding beneficiary and I hope you've got one on too, Josh, for your superannuation.
- I do.
- I've got one on there. And I have different motivations for doing it. One would be I want the certainty that in the event I pass away my husband will get that money. - Your three girls just got very ---
- Yeah. I don't foresee anybody really disputing that. I know I've got beautiful sisters and brothers in Ireland and I don't foresee anybody arguing that fact. That's not really why I put a binding on there. I put a binding beneficiary because the claims process for my poor husband, who would be left behind, is a lot easier if it's a binding beneficiary. He hates paperwork, he hates talking on the phone. The poor bloke can barely log into his bank account. I don't know how he would go logging a death benefit. If I can leave one thing to him, it's a process that's very, very simple for him because he is down as a binding beneficiary.
- And here I was hoping when you said you had recently updated I may have got a guernsey.
- No, no hope. The other thing to bear in mind, when you're putting a binding beneficiary, there are rules around who you can nominate on there. You can't nominate your long lost cousin or your work friend on a binding beneficiary. It does actually technically have to be someone who is classed as a dependant. A dependant under the Superannuation Act might look slightly different to a dependant for tax purposes. We are talking about dependants for super here. You can nominate a spouse or a partner as your binding beneficiary. You can also nominate a child of any age, even if that child is earning a lot more money than you, if that child is a lot wealthier than you are right now.
- If that child is adopted.
- If that child is adopted, they can of course be on the binding beneficiary. Also somebody that is - you are in an interdependent relationship with, maybe living with somebody and you're connected financially, so where there is a level of financial dependence on the particular individual, you can pop them on the binding beneficiary form.
- And if I can give an example, you can't normally nominate a brother or a sister. Before I got married, I lived with my older brother. We had a mortgage together, we shared chores together in the house. That was considered an interdependent relationship. I wouldn't have been able to nominate my other siblings but I could have nominated him in that case. Don't tell my other siblings.
- It's not just about who you nominate. You have also got to be careful that you think about what the implications that might have - back to your favourite subject - from a tax perspective.
- Yeah, you're going to make people think I'm really excited about the federal budget.
- You are.
- I am. My favourite. It is Christmas. As Ruth said, there are really important consequences. We are going to cover off a few strategies and areas to think about to try and mitigate some of this, but when it comes to who you choose to pay out, there can be tax complications or considerations that you need to make. Although the Superannuation Industry Supervision Act, as it is called, determines who you can pay your superannuation out to in the event of your death, it is the Income Tax Assessment Act that determines how tax is applied, and they don't necessarily agree.
What's important to note is that if you nominate a spouse or a former spouse, they will receive, including a de facto, same or different sex - they will receive any death benefit tax free. If you nominate a child, they may receive it tax free. We will come back to this point. If you nominate a financial dependant or an interdependent, they will also receive it tax free.
The issue here, especially when it comes to your retirement, your children, I would suggest, would likely be adults. So there is that third point to consider. The Income Tax Assessment Act only considers a child to be a child under the age of 18, or for the purposes of tax-free benefit. Over the age of 18, except with a couple of limited exceptions, over the age of 18 tax will apply. So if you are thinking about, well, in your passing or if you have got a partner or a spouse in the passing of you both that it's going on to adult children, you need to be aware that there can be tax implications.
So to make this all really clear, if you have a tax-free component and it's paid out to either a dependant or a non-dependant - and by non-dependant, I refer to anyone who wasn't in that list or a child over the age of 18 - where your tax-free component that we talked about at the beginning of the session is paid out, it will be tax free. Where you have a taxable component, it will be taxed according to the way it is paid out. If it is a lump sum, then you will have the tax - you will have - if paid to a dependant, paid out tax free. If paid to a non-dependant, so an adult child, 15% plus Medicare levy will apply. That may not sound like a big figure, but let's assume your superannuation savings at the point of your death are large. That 15% could be significant. So that's the first thing to consider.
Second thing to consider is there is the opportunity that when you pass on, if you have a retirement income in place, that that retirement income can continue on. And we will come to that in a moment. But it's important to note that the tax treatment of this is going to be slightly different because, remember, when you receive income over the age of 60, it's tax free. So if it's paid to a dependant who is over the age of 60 or you are over the age of 60 at the time of death, it will be paid out tax free. If it's paid out to someone under the age of 60, there's actually considerations there but there are limits on who can receive this benefit as an income.
So it then comes down to the question of do you intend to have your superannuation benefits, in the event of your passing, go to your adult children. If the answer is yes, and if it is largely made up of taxable component, which as we've talked about will likely be the case for the majority of you, tax will apply. But there are some strategies you can think about to minimise that. The first is what we call a recontribution strategy. And a recontribution strategy is where you now have access to your super, so let's say that you're retired, you are over the age of 60, again for the purposes of this example, so you withdraw that money from your super, and you are withdrawing it tax free because you are over the age of 60. What you can then do is recontribute that back into your superannuation savings account, which remember Ruth talked about before that you might still have a superannuation savings account open, you recontribute that back in as a post-tax contribution. In other words, it goes back in tax-free. So you are taking out taxable component but you are not paying tax on it because you are over the age of 60 and you are feeding it back in as that non-concessional tax-free contribution. The only reason you are doing this is to try and reduce that taxable component if you intend for this to be paid to adult children in the event of your passing. That is the main motivation for this strategy.
The other way you can think about it is if you have got a spouse, you may, rather than contribute to your own account, you may withdraw it and contribute to your spouse. There is a couple of other reasons you might want to think about this which Ruth will come back to in a moment. But it's important to note that there are contribution limits that apply. So you can't just take out half a million and chuck it back in. There is that contribution limit that applies of $110,000 a year. There is also the consideration of your age. Remember that as you age contribution opportunities limit. This isn't something that you can do when you are 80, if you've decided that this is going to be a problem you need to mitigate. It is something that takes forward planning and thought and we encourage you again, if your estate planning idea is to pay adult children, this is something that you might want to actually talk about.
The other thing that you might do is if you've got a transition to retirement income account, very similar strategy. You've got to take that income - remember, you can take between the minimum and 10% a year. If you don't need that income, that's fine. Put it back into your super savings account but put it in post tax so you are effectively, again, changing it from that taxable component and putting it into your super savings account as tax-free component.
Now, I know this can sound a little bit baffling. Maybe it sounds a little bit witch doctor-ish. It is legitimate but, again, it is something that you should really speak to a financial adviser about, give us a call, have a chat, and we can definitely see whether it's something you need to think about and then we can put the work in because it is something that you don't want to just do on a whim. It's something that takes pre-planning and awareness. Again, if you take that money out of your TTR, there may be reasons to think about putting it into your partner's super. As I said, though, we will come back to that in a moment. Before we do, Ruth, there is another consideration when it comes to just that broader estate planning.
- Yeah, there is. For anybody who has opened up an income stream already or if maybe right now you are looking online for how do I open the income stream, let me first of all say there is actually an application form. It's really simple and there is no cost to open up an income stream. When you are completing the application, you will come across a question about beneficiaries. So even though you might convert your superannuation into an income stream, if you don't manage to spend all of that money, it still gets passed on, just in the same format we've just talked about as a lump sum payment. However, there is another option that you might want to consider, and it's called a reversionary beneficiary. It's only available for the income stream product. And you will see if you are looking at the application form for an income stream, or if you've logged in online and you are applying for the income stream online, which you can also do, or if you give us a call, this is going to come up, whether or not you would like to have a reversionary beneficiary.
What does that mean? It effectively means that if you've established that you are using your money to make regular payments into your bank account of maybe 6% of the balance, for example, if you pass away, the reversionary beneficiary means those payments will literally continue for the person that you've nominated as your reversionary beneficiary. The reason people can be attracted to this means that there is no disruption to the cash flow in the household and from a claims perspective there is really no claims process, if you like. So it gives that real settled continuation of income coming through into the bank account for that person left behind. The beauty of the reversionary beneficiary, though, is once - it's almost like a name change to the account, if you like. The individual who you have put down as the reversionary beneficiary might decide to actually access a lump sum if they want to. So they still have full control over that money. They are not locked into having the money paid as an income. Should they want to convert it to a full lump sum, they can. Should they want to access lump sum withdrawals, they can. So that money is continuing to be structured in exactly the same way that you set it up as when you were opening up the account.
- It is that continuity and peace of mind that you would use this for. I would say particularly, as you said, if it's a household where maybe you've got income coming in for yourself and a partner and spouse, if you pass away your partner or spouse in that situation would have a lot of things to be worrying about, and this is one less thing. It just very naturally will continue that income on and allow them to focus on other things that they need to.
- It is a little bit different, though, with changing. So you do need to nominate this when you are opening up your income stream account. It's not something you can pop in if you've already got the income stream account open. If you do have one now and you think "I didn't know about this, this is exactly what I would like to do", you can commute your income stream back to super and start all over again basically and then put the reversionary on. - There could be considerations on, so always important ---
- Yeah, yeah, it is always worth a conversation, but technically you are able to convert your income stream back and then start it over again, depending on the type of income stream you might have in place. That's worth a phone call.
The other thing I would draw out is you can only have one reversionary beneficiary. You can't have multiple people and it is limited to being your spouse or partner. It is not a decision you take lightly. There are questions you should be asking about this, is there implications for Centrelink purposes, tax purposes, et cetera, but it is a really valid way of ensuring that stable income will continue for the person that's left behind. One question that came up, a pre-submitted question was about, well, what happens if the person I have nominated as the reversionary beneficiary dies before me. In which case, it is as if you had no beneficiary at all and the super fund would pay the money out to whoever those financial dependants are you have left behind.
Now, we've talked a lot about spouse and partners, and I think one question we get a lot from couples particularly is can we combine our superannuation balances. The answer is you can't have a joint superannuation account. Remember, your superannuation account is directly linked to your tax file number. So the answer to a lot of those questions is you can't have a combined account, which is why most couples will have a superannuation account each.
But just because you can't have a combined account doesn't mean you can't work together to structure your superannuation in a really smart way, and this is why we are now going to have a little look at people who are coming into retirement as a couple and what kind of things you can think about. So there are questions you should be asking. Is the smaller balance with you or with an older spouse, for example? Because this can have implications for accessing. We are going to talk about that. Remember, the smaller balance, if it sits with somebody who is under age pension age, age pension - sorry, Centrelink won't assess superannuation for an individual until they hit age pension age. So there might be reasons there why the younger person may hold the majority of the money.
There is also questions around equalising balances to mitigate legislation risk. We talked about the fact that the government can often put some little changes in place. Yes, they can be grandfathered in quite slowly, but generally where the balances are split more evenly there might be less impact if there is a legislation risk. We also talked about - I did mention already about Centrelink and the assets test but also think of it from the perspective of accessing. If you are the older person and you hold more of the money, well, then, you are going to be able to get it out sooner than the younger spouse. So it's all about, well, why would we have money in one spouse's account over the other? What is the motivation for this? So you can work together really effectively to achieve what you are trying to do. - You can. And what we see typically is - and if we want to be a bit gender specific, we will typically see if there is a partner or spouse relationship, it will be the male who is typically older and has the majority of the superannuation savings. And they might have a spouse or partner that is younger and has the minor amount of savings. So as Ruth said, that can provide --- - Opportunity. - --- opportunity. So maybe just again to highlight, if access to your super is the main priority for you as a couple, then make sure that the money, wherever possible, is with the older person. And, again, the reason why we say that very often when the older person retires, we see the younger person wants to also slow down, but if they don't have access to their super, that's something to consider.
As Ruth said, though, the other thing to consider on the flipside is very often the older person with all the money might be retiring first, go to Centrelink, want to get the age pension. Sorry, you've got too much in your super. If they have thought ahead and moved that money progressively to a younger spouse, it will be ignored. It means that in those initial years of retirement rather than using their super, they are using the age pension. - So it would only be ignored - just to clarify that, it would only be ignored until that younger spouse reaches age pension age. But that might mean qualifying for age pension for two or three years while you are waiting for that younger spouse to reach age pension age.
- The last one if we think about an example on that legislative risk, let's say you have got $2 million in your account and you've got a spouse with 50,000. We talked about there's that $1.7 million limit to how much you can put in an income stream. That's got you now. But if you had actually spread the amount amongst the two of you, you would have been able to get all of that through. They are just some of the examples. Again, it's thinking about the flexibility and thinking about your superannuation and what you are trying to achieve. For many of you, this might be a complication that you don't need to consider. For some of you, though, it might be something that you might just want to have a chat to us or your financial adviser about.
Let's make the assumption, though, that you have gone through and prosecuted that argument and decided, yep, you need to move some of the money around to either shift it to a spouse who is younger, or shift it to a spouse with a smaller balance, or shift it for age pension asset test purposes, whatever it may be. There is a couple of strategies you can use but, again, all of these take time and thought. It's not something you can just decide to do all of a sudden. The first is what we call spouse splitting, and this is something that I've done for my wife for much of the last 10 years or so. And that's recognition that while I've been working full-time, she's had time away from the workforce. It's also recognising that I get the more significant wage, so therefore get the higher amount of super paid. What contribution splitting allows you to do is each year you've got your contributions going in from your employer called pre-tax contributions or concessional contributions. You are allowed to shift 85% or up to 85% of those to your spouse. That 85% is basically all of those contributions minus the 15% tax that is already being deducted.
So you can move that gradually over time. The thing to note, though, is if you move that money to your spouse you don't then go, well, great, that's reduced your own limits. Remember, there is concessional limit of $27,500 a year. This money goes into your account. It has to be under that limit. And then whether you move it into your spouse's account or not doesn't change that limit. So you can't effectively do over.
- Double dip, yeah.
- Yeah. That's the first thing to consider. But again it is important that you need to be able to move this money into your spouse's account, and there is considerable forward planning you need to do unless you are much younger. The other thing, going back to that idea of rebalancing that we talked about earlier, where you can actually withdraw part of your money if you are wanting to shift it to a spouse's account or a partner's account, withdraw it from your account, and just contribute it to that spouse's account again as that non-concessional contribution. What you are effectively doing here is moving that money to their account but you are also, again, reducing that tax that may apply in the event that you're paying adult children from your estate, for example. This you can do in much larger amounts. Remember that, really, you can withdraw as much as you want, if you are fully retired. Where you are going to be stuck here is remembering that there is that limit that applies to how much you can contribute. $110,000 a year or $340,000 every three years - 330,000, my apologies.
So there are those contribution limits that you need to be aware of. But again, with a bit of forward planning, and if this is significant enough that you are moving that amount of money, something that you want to be having a discussion about.
- And I think as well to that point, timing is important.
- Yep.
- Remember Josh talked about the 110,000 is your annual amount you can get in each year. But if you happen to make that contribution in June, then you've used the financial year and you get to start again in July. So there are - you know, there are conversations, yes, around the tax and where it is going, but timing can also be an important part of that conversation.
- And it's also important to think about, well, there is a process involved. It's time that you could potentially be off market. It's a significant amount of money. Again, this isn't stuff you want to do on a whim.
- Yeah, exactly.
- Lastly to close off, again picking up something I said earlier, if you do have a transition to retirement account, or even if you've got a retirement income account and you are accessing income but you don't really need it, then maybe think about contributing that to your partner's account. Again, do that contribution as a post-tax non-concessional contribution. Means it goes into their account tax free. Remember as well if you are doing this after the age of 60 you are not paying tax on the way out as well. Again, this can sound like large concepts. It can sound confusing. If you are in the situation where you want to use any of these, do not go it alone. We really encourage you to speak to us, put some clear strategies in place and know exactly what you are achieving as a result. So, Ruth, after really close to 5 hours of presenting or more ---
- We have almost come to the end.
- We have almost come to the end.
- We've got some lovely questions coming through so I am keen to get to them. We will cover this very quickly before we wrap up and get to questions. But what I will say we've alluded to it throughout each of the three sessions. There is a workbook that hopefully you were able to download and work through. Please have a look at that after today's session, go back and look at your notes from the previous sessions, because hopefully now it's all starting to loop together for you. Find out about how you can access your superannuation, what structure is going to suit you best, what your motivations are during retirement, consider your beneficiaries that we talked about tonight, consider the taxation. There's a couple of questions on it we will come to. But don't just think about who you want to receive that money. Think about is my super structured in a way where it is going to pass on as tax effectively as I can within limits make it be.
The other thing, go back to your retirement calculator. We talked in session 1 very much about the forecaster. After everything we have talked about now and you have had a little bit of a think about how you might structure it, what income needs you might want. If you go back and used a calculator now, now that you are a little bit more versed on how it all works, have a play around, move the dial, think about retirement age, think about retirement income, contribution strategies, et cetera, and reconsider what you can do with your superannuation. But the last word I would say is don't go it alone. You are part of a superannuation fund who has a huge financial planning team. Access to that financial planning is included in your membership. So while Josh and I love talking about superannuation ---
- We're paid to talk.
- We're paid to talk about superannuation, we also are very aware for many of you linked in this evening this might be one of the first times you listened to some education about superannuation. There are probably terminology and concepts we've thrown around lightly forgetting maybe it doesn't make sense to you.
- It could have been in Gaelic or double Dutch.
- I could have brought it to you in Gaelic. It's okay not to understand everything. That is why the financial planners are there. If you are wanting advice on the money that's in your superannuation account at Australian Retirement Trust, that is advice that we can give you and it's included in your membership. There is no reason for you to have to go it alone.
Now, not everybody wants advice just on their superannuation. Maybe you have a financial situation where you've got other assets to consider. If that's the case, talk to us first and if we need to refer you to a financial planner who sits on our national advice panel, we will do that. Now, there are costs associated with getting advice on any financial matters outside of your superannuation, but start with us because if the bulk of your finances are within your superannuation, you can probably get some very comprehensive advice included in your membership. If you want to book one, that QR code will land you directly to the page where you can request a callback with a financial planner. You've already had lots of opportunities to do that and you will have more in the follow-up emails that we send out after this program.
Now, we do have 10 minutes left. So I would like to get to some questions, if that's okay. I noticed with some of the live questions coming through that there was some questions about ---
- Tax.
- Yes, death and taxes, unfortunately, is where the conversation is tonight. A question very much around nominating your estate. So we talked about the fact if you nominate your spouse as your beneficiary, your spouse is always going to receive that super tax free. Okay, your spouse will get it tax free regardless of what age you are or what age they are. But, Josh, there was a question to comment on. What would happen where you nominate your estate and the superannuation gets paid to the estate. Now it's getting a bit more complicated, isn't it? - It is. It is referred to as flow-through taxation. Basically you don't avoid tax. If it was going to be paid out tax-free to the people you nominate from the super fund, the same will apply within your estate. So if it's going to someone who is a dependant, as we listed, they will get it tax free. So if it's a spouse in your will, they will get it tax free. But if it's going to an adult child, they will still pay tax. If it's paid to a charity, tax will be paid. So by moving it into your will won't avoid paying the tax that otherwise would have been paid.
- And the same goes for whether you are in an income stream as well. It's irrelevant whether it's in super or income stream.
- Yep.
- Some more questions about I guess drawing down on the superannuation while you are still working. I just want to go back and clarify. I will address the first part of this question and I will put the second part to you. If you are using a transition to retirement and you are earning an income, if you are over 60 you will not pay tax on the money that's coming out of that super fund regardless of what you're earning. Even if you are earning 150, $200,000 a year, whatever you are taking out of the transition to retirement will be tax free if you are over the age of 60. I think someone - there is a question here about someone over 65. What's the difference then between drawing money out of your superannuation over 65 is the tax to think about once you get to the age of 65.
- No.
- Simple. So the answer there is we've just said if you are over the age of 60, it doesn't matter whether you are working there is no tax on drawdown whether it's transition or income stream.
- And you even think that later in life you are receiving age pension, which age pension is taxable, but you are receiving this income from your superannuation that is tax free. 60 is the magic age.
- 60 is the magic age. Now, speaking of magic, if you are able to travel around the world during retirement - wouldn't that be nice - I have a question here - I think it's from Ian. - Where would I go?
- No, that's not the question. Again, we want to know if Ian was going to travel around the world and wanted to have withdrawals from superannuation, be that a lump sum, or be that regular income, can it be paid into a foreign bank account?
- No, it can't. We did get a lot of questions - and I might extend this a little bit to people who also have superannuation or retirement savings elsewhere around the world. But under Australian law, we are required to pay your income payments to an Australian bank account. And there is a number of reasons for that. It's to do with ensuring that no money is directed towards terrorism, it's also because that's within the Australian banking system, it's regulated, it can be more controlled. We've got a lot of concerns around people having access to money through fraud and things . Doing it through the banking system helps mitigate some of that. What I would say, though, to Ian is if you are overseas and you do want that money paid into a foreign bank account, just set it up as a transfer from your Australian bank account to your international account. We also have pre-submitted questions. We had someone in Norway, someone in Canada, someone in New Zealand and someone in the UK asking about moving their money in retirement savings from those jurisdictions into Australia. You can't, unless you are a New Zealand citizen or have Kiwi Saver. Kiwi Saver can be moved across the Tasman and vice versa. We used to once be able to accept moneys from the UK system. The UK government changed the way that is treated and so that closed that off for the vast majority. And with other systems, the Dutch system, Norwegian system, wherever it may be, no, we can't accept that. What you would really see is that if you do have moneys in a foreign retirement system, you would have to abide by their rules to access it, much like you would have to abide by our rules to access it in Australia. Those rules don't necessarily match.
- Great question: can you have more than one income stream? Absolutely, you can. So if you, for whatever reason, need to have two income stream accounts, you can do that.
- But together they can't be more than the 1.7 million.
- Yeah, combined they can't be. But it leads into the point where that question came from. If you are using a transition to retirement, and then you build up superannuation because maybe you are feeding the withdrawals back into super, it goes back to that earlier point, you now have the transition to retirement that may be an income stream because you've retired and you have this money in superannuation with two accounts, what can you do? Do you have to start a second account or can you combine those? So the reality there is you can actually just close off the first one, bring it back, join it altogether and start again. So back to that earlier point we made. - The only - and, again, trying not to over complicate it - but if someone is approaching that 1.7 million - remembering it's indexed each year - it counts when you commence a retirement income stream. For some people, it was 1.5 million when it was introduced. When it increased to 1.7, they can't revert that and chuck another 200,000 in. It doesn't work that way. It's actually based on when you actually started it in the first instance.
The government doesn't want, as they indexed that, that people are ---
- Taking advantage, yeah.
- ---taking it out, putting it back.
- Conscious of time. I might throw one more quick one to you, Josh, before we formally wrap up. The question I had in mind - we covered all the overseas. I think we've covered it very well. It's just reiterating the concept of being able to nominate your estate on your beneficiary nomination. - Well, if we think about - if we try and summarise beneficiary nomination as best we can, option 1 is not to nominate anyone. And dare I say, that's what the majority have done. It will be a long process, it will be a drawn-out legal process in cases. It is not the situation you want. Option 1 is you don't have a nomination. Option 2 is that you do have a nomination, and that that is, as you said, it's a preferred nomination, where you are making a suggestion, effectively, to the trustee of who you would like that to go to. If Ruth nominated she's got three daughters, if she nominated one, the trustee might actually say, "Look, we will pay it to the three." Option 3 is that binding nomination, guaranteed it will go to just the one favourite daughter in that example. Option 4 is to either through that preferred nomination or binding nomination to nominate your estate if you have a will in place.
- Yep. So you can use your estate as your beneficiary.
- Absolutely.
- Bear in mind the tax considerations we've already gone over. It doesn't matter, the question there was probably referencing is that an income at income stream stage. Yes, option - the income stream can have binding beneficiaries and preferred beneficiaries but it also has the reversionary option.
- Remember with reversionary, just a spouse or partner.
- Very conscious of time so I think we might need to bring it home.
- So just maybe to wrap up where we started. So over the last three weeks we've covered off a number of key areas. There's a lot for you to think about but hopefully a lot for you to now move forward with. The first thing we did, Ruth, was to look at understanding what your retirement may look like. I reflect back, I think you put it beautifully saying it is looking at your needs, it is looking at your wants, and very often we think about the age pension, for example, helping us with our needs. Your superannuation is something that helps you with those once and that extra. That's why you maybe need to think about what we discussed last week.
- That's right. So last week we were graced with the presence of our Chief Economist, Mr Brian Parker, who talked about investments and the importance of considering investments as you're leading into retirement. Generally to maximise your superannuation balance, you have two big levers: how the money is invested and how the money is going into that fund. We covered that last year.
- Last year?
- Last year? Last week. It feels like a year. Particularly important for those of you who might have used the forecaster and realised, you know what, I've got a bit of work to do. They are the two levers you have to work with and we discussed those in detail last week.
- I have aged a year in the last week. The things that we discussed tonight were about access and tax considerations on that access, but also considerations around estate planning. You really need to think about all of these things. And, again, we encourage you to reach out to us where you need that guidance or assistance. You are not alone in this, and that's a really important consideration. Remember, too, that you can get financial advice with us as part of your membership, and it's an incredibly valuable membership benefit but it's only one that you will have access to if you use it.
The other thing to note on that vein is that we've also had the retirement workbook that you've been using hopefully over the last three weeks. There is a reason for it. If you were to speak to an adviser, if you were to go through an advice process or discussion, a lot of what you've done in that workbook has actually prepared you for that discussion. A lot of the questions you will be asked have actually been answered by you going through that workbook. So if you haven't done it, we encourage you to reflect back on the last few weeks, reflect on that workbook and maybe just spend a bit of time.
On that note before we do say farewell, I would like to just acknowledge finally that we've had an amazing team helping us with this event tonight, as well as over the last two weeks. The wonderful team here that we've got in the studio who look after us so dearly and wonderfully. I was waiting for a round of applause. It didn't come. We've also had an amazing person looking after putting the words up. How they kept up with your Irish accent, I'm not sure.
- How they understood me. I don't understand.
- Also our really dedicated team at Australian Retirement Trust. We brought this together because our members mean everything to us and we really wanted to give you this experience. To all of you, though, that is where my sincere and strongest thanks goes to. It's been a wonderful journey. We're very glad that you've welcomed us into your lives to take you through it and we wish you the very best of luck with where it leads. Ruth, it's been an absolute pleasure, my dear. Thank you.
- Thank you. I have enjoyed it.
- Have a very good week.

Good evening, everyone, and welcome to our second webinar in our retirement series. It's wonderful to have you all here. For those of you who were with us last week, we'll get to in a moment how this will continue on. But for those of you who weren't at last week's session, what we are going to do tonight is actually talk about a lot of the concepts you need to think about leading into retirement. I'll come back to all of that in one moment. But before I do, my name is Josh van Gestel. I am the Senior Manager, Strategic Education, at Australian Retirement Trust, and I'm joined this evening again by Ruth Weaver. Good evening, Ruth. How are you?

Good evening. I'm well. Thank you.

Ruth will come back to us in a moment to take care of a few things. But the other thing that we are doing tonight is we're actually going to cross to a special guest, our Chief Economist, Brian Parker, in Melbourne, and we will come to Brian shortly. What I'd like to do though, before we do kick off, is acknowledge the traditional owners not just of these lands we're on but of all the lands from which you are joining us tonight. I would like to make special mention of the people of the Turrbal and Yuggera nations, this place called Brisbane, but also make acknowledgement of the Kulin Nation where Brian will be joining us from Melbourne. Between Brian, myself and Ruth, we've actually travelled here from all over the country to do this event tonight, so I would like to also pay my respects to those lands that we travelled over. Tonight's session is going to focus in large detail on the economy, on investments, and on contributions. As I said in the opening, those ways that you can actually really prepare yourself and build for your retirement. There's a couple of things that we will be talking about throughout the session, including with Brian. That is in thinking about the increase in the cost of living as we've seen inflation increase, thinking about the continued volatility in share markets, but also thinking about the pressure on all of you to maximise your account balances and to ensure that you've got enough for your retirement. So quite a lot for us actually to consider and go through. But before we do that, Ruth, do you want to kick us off?

Sure, I will, Josh, and good evening, everyone. Thank you for taking the time to join us again. And for those of you coming back for your second webinar, welcome back. Before we begin, I do need to let you know that Josh, myself, and Brian will be covering a lot of content tonight, but you do need to remember that we are talking in very broad and general terms. We've not factored your personal situation or your financial situation into account. Bear that in mind as we work through. What I always say is if you are not able to apply any of the information we're sharing to yourself personally, that's what we're here to do. As part of your membership, you will have access to our financial planners where you can seek guidance and support to make sure that you're making the right decisions based on the information we're sharing here tonight. Also, hop on the website, give us a call on 13 11 84. Now, you'll notice as you're watching the livestream tonight, there is a little chat pane, if you like, or a little questions box. If you would like a call back, you are welcome to use that question back to request a call back. I will be manning the questions here myself this evening. That's my job tonight, is to look after the Q&A, so I'm welcoming those to come through and we will be crossing over to Brian and I'll be bringing some of those questions to Josh as well as we work through the content. So that's it for me for the moment and I look forward to coming back with you soon and when we do reach the first part of our Q&A.

Thanks, Ruth. So just again a reminder for those of you who weren't part of last week's session that this is part of a three-part program. And last week we covered off the basics of thinking about the Age Pension and your income needs. And next week we are going to cover off about accessing your benefits in retirement and estate planning and a couple of other areas that we'll come to later. Tonight, as I said, our focus is really around growing your wealth for retirement and preparing your investments for retirement. What we have sent you is, if you haven't already got it or if you weren't with us last week, you would've received a copy of our workbook. The workbook will help you go through different elements of tonight's session, and what you'll see is an icon there of the book and wherever you see that on one of our slides, it just means that you can refer to that workbook for additional information or to write down some notes for yourself. In regard to tonight's session, as Ruth said, we already have had a lot of questions come through and we're expecting a lot more questions to come through this evening, but what we've seen is some common themes that we are actually looking to respond to tonight. The first is: what is the best way I can contribute to super? Lots of you have asked about the different ways you can contribute, the age upon up until you can contribute, the limits that apply, questions around the tax that applies as well. These are all things that we are going to cover off this evening. We've also had questions around, well, how should I invest particularly as I approach retirement or in retirement? A lot of you are concerned about the talk of recession, a lot of you are concerned about volatility, a lot of you are understandably concerned about the long-term investment prospects, and that's why we've actually brought our wonderful chief economist in to speak to all shortly. We've then also had questions which Brian will talk as well around the economy and what that actually means in regard to our performance at Australian Retirement Trust. But I think you should also look at it as being how can we actually seek out opportunities. Economies like we're in at the moment or economic circumstances like we're in at the moment, really give us possibility and opportunity that we don't have when the economy is actually running very hot and running very high. So Brian will give us some insight into that this evening. Before we do get into this evening's content though, and to put it in context, I just want to reflect again on a couple that we talked about in last week's webinar. What we are looking at here is a couple who have a combined amount of superannuation savings of about a hundred thousand dollars, and they're aiming for a comfortable retirement, which we discussed last week is about that 65 and a half thousand dollars a year. And what we were saying was if they did nothing more than they're currently doing, earning their wage from which superannuation is put in by their employer, contributions put in by their employer, and that invested in a balanced option, this is what their retirement scenario will look like. For the first few years, when they've got their superannuation to draw down as well as some employment income as well as some Age Pension, they will hit that comfortable income target of $65,000 a year. But what you see is within a decade, they will be completely reliant upon the Age Pension. And that's fine. It's met their needs for a lot of those years, but it means much like Ruth was talking about last week, they don't have the freedom and independence to do things beyond their day-to-day needs. They don't really have the ability to fulfil their wants as they go through retirement. So two things we're discussing tonight. How you can invest and think about investing leading up to your retirement and how you can also maximise opportunities through adding more to your super, through contributions. They both go hand in hand. Now, before we do move to Brian though, I just wanted to again reflect on some research we were looking at last week about how people feel about their investments. And what we found was that people really do have three key ways of thinking about their investments in super. They do think about past performance. We saw about just over a third of people say they make investment decisions based on past performance. We saw that about half of people or half of those who responded will actually look at the risk of the investments to make their decisions about how they invest. And then we also had another group of people, again, just over half, who we're conscious of, well, what markets are doing? What Brian will talk to and what we'll talk about is actually it's elements of all of these put together that perhaps you need to be conscious of. Some of them will be more important to some of you than others. Now, Brian's going to talk about a lot of the assets and the investments that we do invest your money in, but just again to recap on last week, at Australian Retirement Trust, we look after more than 200 billion worth of your financial future. More than 2 million members have entrusted us with their retirement money. And we have traditionally seen that superannuation funds put about half of that into the share market, and then put a good portion of it into things like cash and fixed interest. And Brian will talk about all of these assets tonight. But as a large fund, we also realise that the opportunities need to be more than this. Share markets give great growth returns, but they have volatility. Cash and fixed interest, although they're stable, don't necessarily give us the strong returns that our members, that you, demand from us. And so it's meant that we've also had to look at unlisted assets. Things like property, private capital, infrastructure. And I'm not going steal Brian's thunder. He's going to talk about a lot of those^ unlisted assets tonight. But when it comes to you, for the majority of our members in our Super Savings product. They are invested in our balanced option up until the age of 55. And as you can see, about half of that is invested in shares, and then we've got about another 20% or so invested in those other aggressive assets. Things like private capital as well as property for example. Over the age of 65, if you are a member with Super Savings and have never made an investment decision, you will be in our retirement option. And if you're between the age of 55 and 65, you'll be in a mixture of the two. As you can see, they invest in the same underlying assets, there's just different weightings. And again, as we discussed last week, you do have the option of choosing any of our other 17 investment options, including the growth option and the conservative option I'm showing on the screen now. Plus, we'll come back to talking about how all of this flows through to you shortly, but what I'd like to do is pass over to Brian Parker, our wonderful chief economist as well as a beautiful friend to both Ruth and I to give you an economic update as well as give some reflections on what we are doing at Australian Retirement Trust and the opportunities that we are seeing with your investments. Brian, good evening. Are you coming through from Melbourne?

I think I am. I hope you can hear me okay.

[Josh] Certainly can.

Fantastic. Thanks very much, Josh, for the introduction, and thank you everybody for your time tonight. If we go to the next slide, Josh. I think it's important to acknowledge that even though share markets have actually started 2023 on a much firmer footing that we've actually seen some quite solid returns so far this year. This follows a period in 2022 that was very much a wild old ride, that you saw a lot of volatility in stock markets around the world. In fact, most stock markets around the world went backwards over the course of calendar year 2022. And this is what this chart shows you. All I've done is... What I've shown you is just the level of the key stock market indices such as the S&P 500 in the United States or the FTSE 100 in the UK, and rebase them all to the end of their end of 2021 levels and just shown how far they've fallen over the course of 2022 up until a few days ago. And it clearly has been a very, very wild ride. And what's really triggered that, if we can go to the next slide, Josh, is very, very aggressive increases in interest rates from the world's major central banks. And so what I've done on this slide is to show you what's happened to official interest rates or very, very short term interest rates that are controlled by the world's major central banks over the last run of years. And it just shows you how steep and how quickly interest rates have gone up in the major economies of the world, but also here in Australia. And what's triggered that has been very much a massive acceleration in inflation. And in fact a lot of the inflation pressures we saw built over the last year or two have proven to be a lot more persistent than many people thought. If we go to the next slide there, Josh. And this is really what this chart shows you. It's the annual rate of core or underlying inflation in the major economies plus Australia. And what we've seen is, inflation has really risen to multi-decade highs across most of the world's major economies, even in Japan where for many, many years the problem in Japan was actually how to get inflation up or even how to keep inflation in positive territory. Even there, you've actually seen a surge in inflation over the last year or two. So inflation has proven to be stubbornly high. And one of the real challenges for the year ahead is, will the world's major central banks be able to get inflation down to a more reasonable level over a reasonable timeframe, and can they do that without really slamming on the brakes, without actually engineering a global recession? And on that, the jury is still well and truly out. Why have share markets been weaker last year? Share markets have been weaker because markets have been worried that that actually might be the case. Markets have been worried that higher interest rates ultimately lead to a weaker economy that leads to weaker corporate profits, and therefore weaker share markets. And that's really what's been driving things. If we go to the next slide, Josh, and it really does sort of highlight a key, key point. It's something that's, it's a theme we're going to return to over the course of the of tonight. It's real returns that matter. It's not just the headline return, it's the return after fees, after tax, and crucially, after inflation. It means that as a superannuation fund, our job is to generate medium to long term real returns, the kind of returns after inflation, after tax, and after fees, that we know our members need in order to live a comfortable retirement. So with that, I want to actually talk a bit about, I want to actually go back about a decade if I may. I want you to assume that we started our retirement journey, we started our journey as superannuation investors about 10 years ago in 2013. So we might have started our first job for example. And as part of that, where we worked, they handed us a product disclosure statement and we then we did something really remarkable. We read it. And when we read it, we looked at the line that said, okay, let's look at the range of investment options the super fund is offering, but let's also look at what sort of returns after tax, after fees, and after inflation, does the superannuation fund think they can achieve over the following 10 years or so. And if you were doing that for the Australian Retirement Trust Super Savings product, the Legacy Sun Super product, this is what you would've seen in that document. You would've seen for the, say, growth option, we thought that the growth option for those members willing to take somewhat higher risk with their investments in search of a higher return, we thought we could get about 5% after fees, after tax, after inflation. Now, for the balanced option where the lion's share of our members' money tends to be invested, we thought it would be about four or so. And for the retirement option, we thought it would be about three or so, looking at the chart. It's a bit high 'cause I'm currently approaching retirement myself, so I'm finding it hard to read the chart on the screen. Now, that's what we thought at the time 10 years ago. We thought that 10 years ago, those sort of returns were realistic and achievable over the following 10 years. Now, what I want to do then next is I want to scroll forward 10 years and see what has actually been achieved. And this is for the 10 years leading up to the end of March this year. Now, don't forget, over that 10 year period, we had COVID, we had the negative returns of last year, we had a range of significant market downturns over that period. We were still kind of in the aftermath or the aftershocks of the GFC, so there was quite a good deal of volatility over that time. And yet despite that, the real returns after inflation, after tax, after fees, I know I keep harping on that, but it's really, really important, were actually quite a bit higher than we thought we could achieve a decade ago. Which also tells you that not only are we, you know, forecasting future returns is really, really hard, but it also tells you that the past decade by and large has been a very, very good one to be an investor 'cause the real returns that have been delivered have been really, really solid. Now, how do we do this? We do this partly because share markets generally have produced very solid returns over that time and we do invest significant parts of the portfolio in Australian and international shares, but we've also seen very, very good returns from our major unlisted asset classes. By unlisted asset classes, I mean things like property assets, infrastructure assets, and what we call private equity assets. This is investing in businesses where we, they're not listed on the stock market. These are businesses that are privately owned. Investing in these businesses allows us to actually extract more value and actually deliver higher returns over time. It's a theme, again, I'll return to. I want to share with you some of the investments we make in this space on your behalf. And the two I'm going to ... The ones I'm going to highlight, there's a bit of a theme here. What we really want to achieve by investing in these assets is we want to achieve a nice higher return premium. We want to achieve a higher return than we can get by investing in shares and bonds. Why do we want that higher return? We want it because these assets are not publicly traded, they're illiquid. I can't get on the phone and sell our shares in Brisbane Airport tomorrow. And because they're not as liquid as investing in shares or bonds, I need to be compensated for that fact by a nice high return premium. Do we get that premium? Yes we do. But here's some of the transactions we've been involved in recently. Last year we invested about 300 million pounds in a business that invests solely in aged care facilities in the UK. Now, we invest in aged care facilities here in Australia as well, but we've also invested some money in the UK because they are confronting a similar problem to the problems we face in the aged care sector here in Australia. There are not enough quality aged care beds, there is an ageing population, the demand for aged care facilities is outstripping supply. If we can invest money in such a way that we can resolve that major social issue, and in return, get a very nice, reliable and growing income stream for our members, that's a really, really good outcome. The other important point I want to note about this asset is that this is the kind of asset which is going to continue to deliver returns and is going to continue to pay an income to ART members regardless of what happens in stock markets or in bond markets this year or next. In many, many ways, the return is not entirely independent but it's at least somewhat independent of what happens in financial markets. And we think that's really, really important 'cause we don't want our members to be as exposed to the kind of volatility that we've seen in stock markets over many years now. So age care is one area. Another one that we've done quite recently, now, this is a very ugly building, I admit. There's nothing spectacular about this building, but to be honest, it's student accommodation and it shouldn't be terribly attractive, okay? Now, this is a business we've just invested in Norway called Bo Coliving. Now, in Norway, there are no university tuition fees. And not only that, university students actually get paid a fairly healthy allowance to get them through their university years. What that means is, they are able to pay a reasonable amount for student accommodation. And not only that, what we've seen over many years is that even during difficult economic circumstances, by and large, the students are still supported and they continue to pay their rent. So in other words, this is the kind of asset that we can invest in which will continue to deliver returns even if you get a significant economic downturn. It's a business called BoColiving. It has 53 sites across Norway. It has over 1,400 beds rented out to university students and young professionals who work at universities. It's a nice, reliable, long-term income stream with a little bit of growth thrown in. Again, the kind of investment we think is going to help us deliver the sort of returns our members really need. Next slide. Another one a bit closer to home. Many of us in the last decade or so have put solar panels on our roof across the whole country. If you're going to put solar panels on your roof, you need to upgrade your power board, you need what's known as a smart meter so that your solar panels and your inverter can communicate to the grid. Australia's leading provider of smart meters to the utility industry in Australia and New Zealand is Intellihub. It was spun out at one the major electricity companies in recent years. We were fortunate enough to get the opportunity to invest in this business several years ago. In the last year or so, we've sold out of it at a very, very significant profit because this is a business which has been able to deliver very good returns regardless of what has been happening in stock markets. Because it's been, it's kind of unique or idiosyncratic, if you like. These are the sort of investment opportunities which you get access to at ART, and they're the sort of investment opportunities that are capable of delivering the returns our members need, but at the same time, being less exposed to the volatility of stock markets. Next slide. Let's go through the rear view mirror. We've looked through the rear view mirror and looked at past performance, but what I want to do now is talk about future performance. So if you were starting your investment journey today and picked up the product disclosure statement, one thing you might notice is that when we talk about what sort of returns are realistic and achievable over the longer term, they're somewhat lower than we thought they would be a decade ago, and they are considerably lower than the sort of investment returns we've seen in the last decade. So despite the volatility of the last decade, the real returns after fees and after taxes have been really quite strong. But going forward, we expect those returns to be somewhat lower. The world economy is not going to be growing at the same pace that we've seen in the last 10 to 20 years, and that ultimately translates into somewhat lower investment returns. I'll be confident that we can hit those objectives and preferably exceed them. Yes, we are. Partly because we have access to a very, very strong global opportunity set to invest in, but what we've also found is that because of the rise in interest rates we've seen in the last 12 months or so and because of the rise in bond yields, in other words, the return available by investing in government bonds and in high quality corporate bonds, those yields have risen. While that has meant that returns from fixed income portfolios have been negative in the past year, what it also means is the future returns are going to be considerably better because I'm getting better interest rates on offer today, better yields on offer today, better money. When we put money out to term deposit, which we do on behalf of members in our cash accounts, we get better rates today than we did 12 months ago. Next slide, Josh. I just wanted a slide I wanted to finish on it. I just think given how volatile markets have been in the last year, I just think there's a few key messages I want to leave you with a note before we take some questions, it's important to remember that superannuation is the longest term investment any of us are ever going to have, and the longer term returns from superannuation have actually been very, very solid. Next one, Josh. Not just from the industry as a whole, but from ART in particular. We've delivered returns that have been very, very competitive and well in excess of the real return objectives that we put into the PDS a decade ago. And this just shows you an example of that. So this is just assuming that you started out, I think it's some years ago now. I'm just showing you the value of, if I invested $10,000 about 20 years ago or so in a range about diversified investment options, starting with conservative and going to retirement, balance, then growth, and this is after fees and after tax, and compare that to the return I would've got if I'd have just matched the inflation rate, what it shows you is that over time, these investment strategies, these investment options do deliver the kind of real returns our members genuinely need. Not every year. So for example, if I just looked at the last 12 months, have the returns been better than inflation, or they haven't? There'll be some years where there'll be a lot better than inflation, some years where they'll be behind. But over a five or seven or 10-year period, we would expect to deliver the kind of real returns that we communicate to members in our product disclosure statement. So the long-term returns have been very, very strong. Next one, Josh. We can't design portfolios based on our ability or anybody's ability to forecast short-term economic and market developments. Trying to predict when market downturns are going to start and when they end is very, very difficult to do. In fact, almost impossible. Next one, Josh. We also can't predict how the geopolitical environment is going to pan out. Even if peace were to break out in Ukraine tomorrow, which we all hope would happen, even if that were to occur, the geopolitical environment remains highly uncertain. It is a very, very volatile world out there, and there is no point in trying to sugarcoat that. Trying to predict when downturns and crises and recessions start and when they finish is incredibly difficult. Next one, Josh. But one thing we also know is that over the course of our working lives and over the course of our retirement, recessions are inevitable, downturns are inevitable, market downturns are inevitable. They happen. They are part and parcel of being a long-term investor. Over the course of my working life or of anybody's working life, say, from the age of about 20 something through to 65 or 70, it's highly likely that I'm going to experience anything up to maybe nine or 10 major market events which could cause serious damage to my retirement balance. But one thing we do know is that while these downturns are inevitable, they all come to an end. Every recession, every downturn, every bear market comes to an end, bar none. The downturn we saw in 2022, when returns from share markets and bond markets were sharply negative, and towards the end of the year, just when you thought things couldn't get any worse, they didn't. The returns in the March quarter are actually very, very suddenly positive. That's not to say we are completely out of the woods, but it is a lesson that trying to time when these markets will turn around is extraordinarily difficult. One thing that we also know is that before these crises come to an end, they also provide opportunities. They provide opportunities to buy quality assets at much, much cheaper prices. That's what we pay our investment managers to do, that's what our internal investment team here at ART. Over a hundred dollars based in Sydney and Brisbane, that's what we get paid to do as well, to look at a crisis, look at the environment, and look for the best opportunities, and volatility provides us those kind of opportunities. Now, with that, Josh, I think I'm handing back to you.

Thanks, Brian, and we'll come back to you, Brian, in a couple of minutes with questions. Ruth has been keeping an eye on it and we have had a lot come through. So if you can just sit tight with us, we will come to you in a minute. What I just wanted to do though was to translate some of what Brian was saying to how it actually applies to your investments with us and some of the decisions you might want to consider or think about. So if I just thought, for example, how the share market has performed since just before COVID hit us. So looking from December, 2019 when COVID really forced this financial crisis upon us. And what you've seen is that we had this severe decline in the share market, and I'm showing here a proxy here that Brian's created that is half Australian equities, half international shares. And you can see that initial drop-off, then this strong recovery, and then the volatility that is followed. If I overlay that with our own retirement and balanced options, what you can see is that they've mirrored that volatility to some extent, but it's been much smoother. And to Brian's point of thinking about opportunity, when there has been opportunity and where we've used it, you've actually seen that we've seen a good result compared to the share market coming out of it. But why I give some caution is that for many of our members, they made the decision perhaps in the debts of that financial crisis, when losses were at their greatest, to actually move out. And so I'm showing in this example what would've happened if someone moved their money from the retirement or balanced option into cash. I should also point out that what we've modelled this on is a person in retirement. So this is a person not just earning these returns but they're also drawing down the minimum requirement in income each year, which tends to be at least 4% of their balance each year. So it's not just net investment returns after inflation fees and taxes here, it's also after they've actually had pension income come out. But by moving their money to cash, they've crystallised that loss, locked it in effectively, and it gives them very little chance of recovery. Now, yes, some members may have actually decided to go back into balanced or retirement in this example, but what we tend to see is that members are much quicker to get out in a crisis than they are to get back in. But the impact here has been significant. But what if we go back a step further? In this case, I'm showing the last big financial downturn before COVID crisis, which is the global financial crisis. And you can see that incredible decade of growth that Brian referred to. What if someone made the decision to move their money at the depths of that crisis to cash? And what you can see is at the same time again, they're withdrawing money to feed their retirement income, so their balance has actually gone backwards, and it's gone backwards quite steeply. We're not saying don't move to cash or not saying don't move to a conservative option. But what we are saying is remember that even in retirement, your investment is long term. Many of us may spend 20 or 30 years or more in retirement. So do think about your decisions and your actions when it comes to your investments. And as I'm sure Brian will endorse, please reach out to us. Speak to one of our team, speak to one of our advisors before you take any action if you're just not sure. Now, Brian, we'll bring you back in at this point. Ruth has, as I've said, been monitoring the chat and looking at the questions coming in. So, Ruth, over to you.

Thank you. I've been quite busy actually while you've been presenting Brian. So no surprises, we've had plenty of questions come in for you. There was a lot of common themes running through, and there was a couple of questions that touched on inflation. One in particular around how the current high inflation might affect someone's returns and how would that then affect their projections for retirement planning, for example?

Yes, it's a really, really good question. And want to distinguish between what it is done for their, what it's done to investment before once over the past year, and also what it means going forward. So over the past year, the big surge inflation has unsettled stock markets and it's driven bond yields higher and has driven, and the Reserve Bank and other central banks has taken cash rates higher. Now, while that has meant negative returns from shares and from bonds in the last year, and we've certainly been able to cushion a lot of that blow through holding unlisted assets, so that's been a very, very important part of the story. What it also means is the future returns from those fairly conservative strategies such as cash and bonds now look better. You know, about 12 months ago, if I bought a bond issued by the Japanese or German government, the yield was negative. I was guaranteed to lose money by holding that bond maturity guaranteed. Now those yields are positive. We've seen sharply high yields on offer in Australia. So past performance has been affected by this inflation shock, but it also means that the future performance from things like cash and turn deposits and bonds and other fixed income investments is now going to be quite a bit better. And that's actually a good thing. I think if it is the silver lining to last year's cloud, if I can put it that way. So in terms of planning for retirement, for those members who are approaching retirement, what it now means is that the future returns from these very conservative assets which often form the basis of a conservative retirement portfolio, those future returns actually now look considerably better.

Thank you, Brian. There's also quite a few questions both this week, and we had a couple as well last week, Josh, we'll recall around property. And people talking about investing in property versus superannuation. What kind of commentary would you have for somebody thinking about that type of strategy?

Again, let's bear something in mind, and, Josh, you might want to add to this. You can invest in property in super, you can invest in property outside of super. So super is, you know, we can invest in a whole range of different asset classes within superannuation. And because we're doing it within superannuation, it means that we get very favourable tax treatment from doing it, okay? Outside of super, you can invest in the same things but you pay more in tax. Okay, let's just acknowledge that. Now, investing in property, one of the benefits of investing with a large superannuation fund such as ART is that we do invest in property. We have over about 20 billion invested in property, both here in Australia and globally, all sorts of property, literally hundreds of individual property assets. Residential assets, office assets, industrial assets, commercial assets, aged care assets. A very, very well diversified portfolio of property assets both here at Australia and globally that are capable of delivering really, really good returns. It's the benefit of scale. If you take money out of super and put it into a property portfolio, how many properties are you going to own? You're not going to get the same sort of diversity, you're not going to get the same sort of opportunity. And I'd argue, to be honest, you know, if I think about Australian's household wealth, I think about half of our household wealth in property, residential property. That's one of the highest in the world. Some countries overseas, look at Australia and say, "Are you people obsessed with residential property investing?" And often I tell them, "Yes, we probably are."

Yes.

So to be honest, many of us are already pretty much heavily invested in property. Do we want to double down on that as part of our super? Maybe not. I'd much rather, a much broader, more diverse opportunity set to invest in.

And I think picking up on your first comment, Brian, like we said last week, once you are in retirement phase, your investments are tax free. The income you earn is tax free, the withdrawals you make are tax free, your investment earnings are tax free. Superannuation is the only environment that does that. If you take that money out of that environment, then as you said, Brian, it's going to attract that tax. The other thing that I would say, though, Brian, is probably thinking on the question, should I take money out of my super to invest in property? I think there's probably two ways to think about it. Are you withdrawing money out just as you were commenting on Brian to get a property to invest in? And in my view of it, and I think I may have said this last week, what then happens if you need some liquid assets, what happens if you need some money? You can't just sell the front bedroom. But the other way of looking at it is, are you actually talking about pulling money out of super to actually reduce debt that you may have on an existing mortgage? That's probably a different consideration. It's very important that going into retirement, you do weigh up debt and minimising that debt. So I think there's probably two questions for those listening to us themselves. Are you doing this as an investment strategy much like you were talking about, Brian, in which case you sort of need to think about that, or are you using this as a debt minimization strategy on an existing mortgage, particularly if it's your own home. In either case, just remember as Brian said in the outset, that superannuation offers tax opportunities and advantages you don't get outside of super.

Thank you both. Great. Now, we have heard recently lots of whispers and talking about a possible recession. Now, Leanne is one of many members who've actually addressed this throughout the questions, and I wonder, Brian, if you could start by making some commentary on the concept of moving to cash if there is a recession looming. And if we do find ourselves in a recession, how would that actually impact the portfolios that our members are invested in?

Oh, it's a really, really key question, and there's a few aspects to this. One is that remember, share markets, why was share markets so poor for the most part in 2022? Because share markets were already worried about a recession, share markets were already worried that you were going to get a recession in 2023. I often say to people, share markets are more forward looking than anyone on this call, including me, okay? Share markets look ahead and try and price in the future. That's what they do. And so to some extent at least, the risk of recession this year is kind of already priced in to a range of global share markets. Now, I don't think your recession is inevitable, certainly not here in Australia, but is there a serious risk that we do get a mild recession certainly in the United States and perhaps in Europe? Yes, the risk is very much there. But one thing I'd also say is that, using that as a basis to go into cash when superannuation is a long-term investment, and if even if I'm retired, I still want to enjoy some sort of eventual recovery in the economy and in my share market investments. Moving to cash now means that I'm actually at some point, maybe I'm going to want to get back in. How am I going to time that? How am I going to make that decision? Because even the best investors in the world find it almost impossible to make those decisions in a reliable way. So the other thing, just finally, if you are already invested in a relatively conservative portfolio and, say, for example, our retirement option or our conservative option, you've already got an exposure to shares which is much, much less than those members in our balanced and growth option. You've got a significant allocation to both cash and to fixed income. Fixed income does very well during recessions. Fixed income delivers capital gains during recessions. And not only that, the unlisted assets also tend to hold their value to a much greater extent even during a recessionary environment than is commonly thought of, especially those assets that are a little bit unique such as our aged care for example and student accommodation in Norway, just to give you some examples of that. And final thing before you do anything, please, please, please seek financial advice. If you have a financial advisor, call them and ask them a question. If you don't have an advisor, please call us and get some advice 'cause these are really, really important decisions to make and there are trade-offs involved.

I'm sure there's more questions. Is there one more quick one? We know how long Brian's answers are. Is there one more we want to throw?

Look, we'll throw on more. We're doing all care for time. We're pretty good. Brian, there's been a lot-

You shouldn't have said that to Brian.

We've got time for more.

For the first time ever.

For what? Yeah, there's a first time for everything, isn't there? Look, you actually just kind of touched on it anyway, but there has been a few questions around term deposits and people sort of questioning how exposed they might be or what options they've got to invest in term deposits if they're a member of Australian Retirement Trust. A particular question was, "Do you offer term deposits?" If you want to make a commentary to that one.

We don't. But certainly within our cash option, we already take advantage of term deposits on behalf of members. And if anything, we probably get better rates. So we are already doing that. So when we are putting money to work today, when we're putting money on deposit today, the future returns we're going to get from cash and term deposit and the future returns from our cash option, for example, are going to be a hell of a lot better than the returns of the past year. The reason I say that is that the returns of the past year, they reflected what interest rates were a year ago. The future returns from the cash option reflect what interest rates are on offer today. And now we are able to take advantage of some much, much better interest rates, including term deposit rates on behalf of our members than we could have done a year ago. So we don't offer a term deposit facility per se, but rest assured if you have an allocation to our cash option, you are absolutely getting the benefit of the great turn deposit rates on offer, but you're also not locked in because we offer full liquidity on our cash option.

Wonderful. Thank you, Brian. And I think during your presentation, you mentioned your nearing retirement age. Join us next week, Brian, where we talk about transitioning to retirement. Will be well and truly appropriate for you.

Well, as a proud member in the lifecycle strategy, I got the email from Australia Retirement Trust reminding me that I was about to turn 55 and they were about to start de-risking. That was a fairly cathartic email to get just quietly..

I can imagine, mate. I can imagine. Well, Brian, thank you very much. We know that it was a big effort for you to join us tonight. You're probably sitting by yourself in Melbourne while Ruth and I are surrounded by the lights and the team here in the studio. So thank you for your time and being a part of it. We have had more questions come through, which I'm sure we'll be able to get Brian to answer another forum. But if I can also give Brian a bit of a plug, we'll have Brian's next investment update coming out shortly, so please keep an eye out for that. And he'll go into a lot more detail with our head of Retirement, Anne Fuchs, on much of what's being discussed tonight. So, Brian, thanks, mate. Really appreciate it.

Thanks, Josh, thanks, Ruth, and thank you, everybody, for your time. Thanks, everybody, for your continued support of ART. It's greatly appreciated. All the best, everybody.

Thank you. So, Ruth, do you want to wrap investments up for us.

Let's wrap this up. He was fantastic, wasn't he? Brian is always a treat to have on board. He's a great member of the team. Look, I guess now it's bringing it back to yourselves. So what Brian shared with us was great insights to help you shape how you feel about investing and get a little bit of a insight as to how we operate in the investment space as Australian Retirement Trust. But at the end of the day, your superannuation is a big asset, and for many of you, for probably most of you, it's the largest amount of money you have in any one area, and you're going to want to feel comfortable with how that's invested. Brian talks often about the sleep test. We want to make sure that you're sleeping well at night and that that super is invested in a way that suits you. Now, there's a lot of ways you can get support on this and we talked about reaching out and getting advice. If you want to self-help a little bit, there is a tool on our website called our test your inner investor, and it's just a series of questions that will prompt you to get thinking about certain scenarios. And at the end of feeding those questions through, you'll be shared the type of investor you are, and then that will also show you which particular options on our menu would actually suit you based on how you answer those questions. Now, speaking of the options on the menu, we do actually have 19 different portfolios, and Brian shared some of the assets that we invest in. And really the way the portfolios differ is how exposed to certain asset classes like shares, property, cash, fixed interest, you are willing to be invested in. Switching in and out your investment portfolios is simple. You can do it online, you can do it through the mobile app. We do not charge you to switch in and out of different options. And remember as well, you're not just banged by one particular investment option. You can have a suite of options running at exactly the same time. You can be drawing your money out of a particular option if you'd like to invest your money in one way, and then have other money invested as you're moving through that you know you're not going to be accessing in the next couple of years, and we call that a bucket strategy, and we can talk more about that in our next session. But what I would say is making sure that your investments are invested in a way that suits you is very, very easy if you are a member of our fund. Everything is on the website for you to learn more about that. Now, I think we'll leave investments. We'll put investments to bed for the moment, and we are going to move on to talk a little bit about contributions because at the end of the day, the investments need to work on something, and that something is the money that's actually going into your superannuation account. So we're now going to shift the conversation to the different ways that you can actually get money into your superannuation, the different motivations as to why you might choose one strategy over another, and we'll talk about sort of limits and caps and some of the rules around getting money into the system. But I might get you to start with that, Josh.

Wonderful. Thanks, Ruth. And can I just say it was nice while Brian was presenting to almost sit back and just be entertained.

Yeah, enjoy the show. We don't get to do that often, do we?

So as Ruth said, there's actually a number of different ways that you can have contributions go into your super or have money go in, and this for us is probably where we see the most confusion, the most uncertainty. This is where all the rules about super always changing. People say superannuation is always changing. Now actually, it's just the rules really around contributions that are always moving. So as Ruth said, we just want to try and give you some firm guidance as to what those rules are at the moment and what you need to consider. Now, for the vast majority of us, our superannuation is made up of investment earnings as well as what we call pre-tax or concessional contributions. The reason why I can say that this is when the majority of us have our balances made up is because the primary feeder of our superannuation, certainly for those of us that are again fully employed, is through our employer contributions, and this is where they come. And what it basically means is that when you have a contribution come into the pre-tax or concession bucket, it's going to be taxed when it enters the super environment at 15%. So it isn't taxed at your income tax rate, it is effectively diverted into super and taxed at 15%. Now, we also had a question I saw from someone about, "Do I get benefits of imputation credits and tax credits and things like that from us investing in shares?" Yes you do, and that is actually used to lower that tax rate even further. But concessional contributions is also made up of any other contributions that effectively flow through an employer or through a tax environment. And so what I mean by that is, when you ask your employer or payroll to divert part of your salary into your super, it's what we call a salary sacrifice contribution. It goes into this bucket as well. It is also any contributions that you make personally, which you then claim as a tax deduction in your tax return, and anyone can do that, okay? But as Ruth said, there are limits that apply. And in this case, because the government is giving you a significant tax concession instead of your tax rate, they're reducing that to a tax rate of about 15%. The government limits how much can go in through this way to 27 and a half thousand dollars a year. That figure has changed numerous times over the last 15 years or so, but that is the figure at which it is currently set, what legislation is set at. And although there will be indexation of this down the track, you can be rest assured at this point there's not going to be major change there. Now, I did mention that that is the figure that you will have, but it can change depending on what you've done historically. So previously, you got this cap of 27 and a half thousand dollars a year was a case of use it or lose it. What the government then thought of was, what about those people who maybe didn't contribute or that 27 and a half thousand? Maybe they didn't contribute it for a number of years. And they were seeing that a lot of people approaching retirement were being disadvantaged. So what they actually introduced was what we call a bring forward or carry forward option with the concessional cap. And it basically recognises in some years where you don't use that full 27 and a half thousand dollars. The amount you don't use can be carried forward and for you to use that within a five-year period. Just to clarify on the example you're seeing in front of you, there is an annual cap in those early years of $25,000. That's what the cap used to be. But what it's important for you to think about is, well, what is your actual cap? It may be 27 and a half thousand dollars. It could be considerably more than that if you haven't contributed in this way in prior financial years. Ruth will come back to later on about how we can actually keep track of that and look into it. But if I just focus for a moment on why you may choose to make a salary sacrifice contribution, and basically, what you have, as I said, is your normal income going into your bank account and being taxed at your marginal tax rate up to 47%. That then gets supplied, and after tax, your net amount is what actually goes into your wallet. What salary sacrifice effectively does is diverts part of that and puts it into the superannuation system, reduces your accessible income, and instead of all of that income being taxed at that high marginal tax rate, the portion that goes through to super actually attracts that concession rate of tax. So overall you do actually end up in most cases with a better tax position. Where I say in most cases, for some of you who earn very small wages, you may actually have a tax rate less than that 15% superannuation tax rate. For those of you in that situation, it's important that you're aware that the government actually refunds part of that tax for you. So don't think that you are being inadvertently disadvantaged. The government actually makes sure that anyone who's on a lower tax rate is going to have that tax come back into their super. So there is opportunity here and it's important again that you consider it, but also remember that this money is coming in largely for most of us from our employers. The last catch, which I'll come back to next week, is when this money leaves the superannuation environment, if you are under the age of 60, tax will apply to it. And in the event of your death where it's paid out to certain dependents, tax may also apply. But we'll come back to that next week. If you do want to make a personal contribution that you claim is a tax deduction, effectively has the same outcome as what we've just seen with salary sacrifice, you make that contribution, you then let your super fund know that you intend to claim that as a tax deduction, and then you lodge it in your tax return. A pretty straightforward way to just make sure that your super fund marries up with your tax return. And that way, you are getting the full tax benefit in your income tax return. Ruth, over to you to talk about the other way that contributions can go in.

Thank you, Josh. And what I will say about the method that Josh talked about, the tax effective method, that's very common for people to use as they're working. So we tend to see that this is the way most of us would contribute to our superannuation during our working lives. And what tends to happen as we get older and as we get closer to retirement, a couple of things happen. Number one, sometimes our disposable income is a little bit higher. Maybe the debts are reducing, the kids are gone, and you have extra cash, which means that you're more likely to be able to hit those limits of the 27 and a half thousand. And you might have an appetite to get even more money in again, and there is still another avenue. Where we see a lot of people use after tax contributions is those who are probably closer to retirement, not exclusively, but generally older people who are closer to retirement are more likely to think about this. And after tax contributions put simply is putting money that's already in your bank account into your superannuation account. It's just a direct transfer of money from your bank into super. And if you think of it from the context of, if the money is in your bank account, it has already been taxed and the government does not have any interest in taxing that money again. So once it lands in the superannuation, you're safe to say that that money will always come back out tax free. And there are some wonderful strategies that you can play on with that that we are going to cover in detail in the next session we'll run next Thursday tonight. But for now, let's just talk about the process of getting the money in. You do again have limits, and there are limits to be mindful of if you do have cash to contribute. We see this, very often, we'll have people closing in on retirement who might receive an inheritance, maybe sell an investment property, trying to sort of simplify the situation, and we often talk about quite significant lump sums available for people to put into super. Be mindful there are limits for this method as well. They're far more generous though and they are 110,000 per person, per annum, which basically means that every financial year, you can feed $110,000 from your bank account into super. Much like the carry forward method Josh talked about, you can use that under the tax effective way if you've got less than half a million in your account. Whereas you can have more than half a million in your account and continue to contribute after tax monies in and you can use three years together. So effectively getting 330,000. That is not a number an Irish person came up with. 330,000.

If it was Irish, it'd be 333.

If it was Irish, we would've stuck another tree on there, that's for sure. But you can... You get 330,000 in one lump sum into your superannuation account and you've effectively used your next two financial years in advance, if you like. So that's getting money in in an after-tax method. Now, this is also the way that you might get money in to pick up some government incentives, if you like. So there are some government incentives for people to contribute into superannuation, generally targeted lower income earners or maybe even non-working spouses, for example. So if we have a think about why would a lower income earner contribute money into superannuation, Josh talked about the concessional tax method of 15%. Well, if you are earning under 40 odd thousand a year, 15% tax is not really overwhelmingly attractive is it? Because in a lot of cases, you might not even be paying that tax yourself anyway. So the government came up with a co-contribution system to incentivize people who are lower income earners to contribute into super. If you're able to get a thousand dollars of your money from your bank account into your superannuation and you earn under 42,000 a year, they will give you a co-contribution of an extra $500 in your account. Now, that will just land in there after you've lodged your tax return. So there's no paperwork, if you like, for you to have to complete. There are some criteria there around who can receive it. Hop on the website. It's all written out very clearly as to ... With the rules and eligibility around that. And it does taper off, so you might be eligible for some. And once your income gets to 57,000, you're no longer eligible for it. So just bear in mind that that's a lovely little way of boosting your balance towards the end, particularly if you don't have a lot of cash to contribute in and you're a lower income earner, or you've got a spouse in that situation. Speaking of spouses, there is also a lovely little government incentive for people to boost their spouse's superannuation account whereby your spouse might be a lower income or non-working, a lower income murder or a non-working spouse. And if you are able to contribute $3,000 and declare it as a spouse contribution, well, then were eligible you may receive up to $540 back in a tax offset. So those two small little incentives alone mean that if you are able to get a $4,000 from your bank account into a superannuation as a couple, there's the potential there to pick up a thousand dollars in government benefits for doing that. Now, spouse contributions are something that again we'll touch on in the next session, but it's just giving you that view of it from the lens of a lower income earner.

And if I could just add, that earlier comment I made that if you earn less than 37,000, you'll actually also see some of the tax refunded that's being deducted from those contributions I mentioned earlier. So really it's those three things in tandem which the government tries to really use to help lower income earners.

To help low ... You know, I was one of those lower income earners for a very long time when I was having my children and I was out of the workforce. And again, this is something we see as people are getting closer to retirement, maybe reducing working hours and working part-time. So just be mindful of it. Now, in the last session we talked a lot about age and we had some milestones that you reach with age and when you can start to access superannuation. That was talking about getting money out of superannuation, but age is also very relevant when you're thinking about getting money into superannuation. Now, we talked about the limit, the 110,000, or the 330 over the three years that everybody has available to them. That is available to you up to a certain age. But there is an extra ability to get more money in. I'll touch on it in a moment, and it is around the downsizing rule. That is of course referencing downsizing your principal place of residency, and this is something that you can consider from the age of 55 now, allowing you more ability to go above and beyond the limits I already shared. I'll come back to that in a second. 67 is an important age as well. We talked about it last week as an age where you know you qualify for Age Pension. But it is actually also the age where if you are trying to claim tax deductions on contributions, you will need to be able to provide a work test. So there is some criteria to be met for those who are wanting to claim tax deductions. Now, 75 is really the cutoff age, if you like, for you to be able to get money into superannuation. So if you're 74 within the financial year, you can still use that carry forward, you can still get the 330 in. But once you hit 75, the opportunity for you to contribute your own money in is no longer available to you. And of course there's no age limit on an employer putting money into your superannuation, and that can continue. Keep track of what's going into your account through the mobile app. I use the mobile app myself, but of course some people prefer to use their accounts online or through its dashboard. Whatever works for you to keep track of how much is going in there, what ability have I to get more in. When we talked about the concessional contributions, so we're back here now thinking about salary sacrificing, for example. You know, I'd like to maximise that 15% tax bracket, and Josh talked about being able to bring unused amounts with you. That's true if you've got less than half a million in your superannuation balance. You definitely can go back and check. And we always get asked the question, "Well, how do I know how much I have?" There's a couple of ways to do it. You can start rooting out all your statements from the last five years and totting it up yourself manually. Or as I would do, I would hop onto my myGov account because they are actually calculating that in real time for you. When you're in the ATO section of your myGov account, you'll actually find a little tab called the concessional contribution carry forward, something. There's a lot of seasons. Anyway, I'll tell you that. But it is there, it's counting it for you. You don't need to go and manually add it all up. So please keep on track of what you can do and give us a call, particularly if you're thinking about making a significant contribution. And before we wrap up the contributions story, I'll reference back to the downsizing rule, and I think we may have had one or two questions on this as well. Remember, the downsizing rule is acknowledging that whereby you sell your principal place of residence, and there's some considerations around what does that mean, but whereby you sell your principal place of residence, you have an extra ability to get another $300,000 into super, and you can do that from the age of 55. And it means you can also use the 330 I just spoke about in addition to this. So it's not including that. And if you're part of a couple, it means you can both actually do this, so you could get $600,000 into super as part of a couple. Now, there are some really important considerations to think of. Yes, you've got to think about the fact that there's eligibility that applies and there's a length of time you have to have lived in the house and read up about the eligibility. But one consideration, Josh, and I might flick to you here on this, is around Age Pension. So we talked last week about asset tests and income tests and what does Centrelink include, and this is an important point, isn't it?

Yeah, and I actually saw this affect my next door neighbour.

Oh, yeah, which is why I've come to you to share that story.

Which the second you sell your house, you downsize, that access money you've now got access to is going to be assessed for the Age Pension-

Even if you put it into superannuation.

That's right.

So remember, your principal residence is ignored for the Age Pension. So the second that you convert that principal residence to cash, including in super through downsizing, it's now become assessible. And in my next door neighbour's case, that was something she wasn't quite prepared for.

Yeah.

And what she ended up doing was ... She was this wonderful Maltese person and she invested as any good Maltese person would in a very big kitchen. So she ... Although her intention was to get access to some capital actually for her kids and other things, she ended up using that for herself, and that gave her the ability to get some Age Pension back. But regardless, it came as a shock. She wasn't prepared for it.

Yes. Which is why you don't make big moves like that without talking to somebody because we can tell you what the pitfalls are, we can tell you what the opportunities are, and remember, you've got access to that financial planning included in your membership. So bringing it back all together as we've kind of gone through, contributing to superannuation sounds simple in theory, but you really do need to know what it is you're trying to get from that. Are you looking for tax concessions? Are you looking for a place, a way to simplify your assets and just get money into superannuation through the after-tax method? Because it is a tax free environment once it's in there and you're over 60 and drawing out of it. Are you trying to downsize your home and you're looking for somewhere to park the excess from that? Whatever your motivation is, please reach out and speak to us so that we can sort of enlighten you to any other opportunities or any pitfalls that like exactly what Josh has just shared with us there now. Sometimes I'll get asked a lot about somebody who's trying to contribute, and they don't actually know if they would be better off to put their money in after tax or to do it through a salary sacrifice or claim a tax deduction on it, and you don't always have to know the answers to these things. That is what we're here to help you with. But we do recognise that some people do like to self-help. So what I would say, if you are somebody that likes to do your own research and likes to sort of model scenarios, there is a wonderful calculator on our website, and I know that there will be references to it as well in the workbook. And it's allowing you to put some of your own personal details into it. So it's looking for your age and it's looking for your income and it's looking for some insights as to what you're trying to do and how much money you'd like to contribute, et cetera. And it can actually give you a little bit of a forward look as to what that contribution might mean for you in your retirement and give you a little bit of an insight as to what the benefit of contributing that way versus that particular way might be. So a lovely way for you to maybe have a little play around and see what the benefits of contributing into superannuation are through that.

That even goes as far as telling you what tax you could save, what government co-contribution you might be eligible for. It's actually a wonderful tool.

Yes.

That, again, a bit like the investment needs calculator, this is really a conversation starter. It's where you're not sure, go in, use the calculator, explore it, try it different ways, and then that allows you to either reach out to your own advisor if you have one or reach out to us, and you've got some basis then for the conversation, you've got a starting point to really grab onto.

And as much as you can plan and as much as we all like to try and put a plan in place, not everything unfortunately will go according to your plans. Sometimes life just throws us curve balls that actually can throw those plans out of the water altogether, and that is why we're going to very quickly, and we did have some questions on this, we want to talk about insurance within your superannuation and how you need to think about that as you are leading up to and entering into retirement.

Yep, that's right. So the one thing that we'll do, and it's important we talk about insurance at this point as well because next week we will be talking in great detail about estate planning. There are contribution implications around tax but there's also contribution opportunities that we'll talk about estate planning next week. So insurance is in preparing your estate, or financially preparing your estate, but you've also got a way up though, what do I need to think about with my insurance as I approach retirement? Now, insurance is really there to give you financial protection when you are still working, when you still have debts. And as you approach retirement, as you are no longer earning a wage, because let's face it, insurance to a large extent is ensuring you as a person because you lose capacity to provide a wage, okay? So as you approach or even enter into retirement, you have to ask yourself the question, "Well, I'm not producing a wage anymore, so do I need insurance for that purpose?" And then the other reason might be, "Well, I've got insurance to protect assets or debt that I may have." Well, you're probably coming into the time of your life where you are the most asset wealthy that, again, you may be thinking, what do I have the insurance for? You are also coming into a point of your life where you are getting closer to accessing the Age Pension which provides that extra level of knowing you don't necessarily need the insurance if you can access the Age Pension. But let me just go back a couple of steps. There are three main types of insurance cover that you can have within your superannuation. Total and permanent disability cover which protects you in the event that you are now unable to work. So, you don't pass away but you suffer an injury or illness. That means that you do not have physical or cognitive ability to continue working, and that will pay you out the insurance benefit along with your superannuation balance. It can be incredibly difficult to actually qualify for this payment though. You have to meet some very strict tests. The other form of insurance, which is often referred to as life insurance or death cover is as the name suggests, that in the event of your passing, your insurance plus your account balance will be passed on to those that you leave behind. And we'll talk more about this and some of the considerations you need to make regarding that next week. Generally, most of you will have both of these forms of cover in your superannuation account unless you have turned it off, okay? So for many of you, you will have this cover, you would've had it throughout your working life, and you'd have premiums being deducted to fund it. For some of you, you may have also elected to receive income protection cover. An income protection cover doesn't give you access to your superannuation benefit, but instead it gives you access to insurance that effectively pays part of your salary typically about 75% of your salary each month. Income protection unlike TPD, income protection is paid to you where you've suffered an injury or illness, but it is likely you will re-enter the workforce in some way. It's a rehabilitation payment effectively. And this is where you think about the difference between the two. TPD to a large extent will cover you where you are unable to work again. And examples I'd give would be things like your suffering quite severe dementia or progressed Alzheimer's, Parkinson's disease, MS. Things that are not recoverable that will have a bigger decline on you as you age. Compare that when come protection cover, it may be paid to you in the event that you are recovering from cancer treatment, for example, or heart attacks, or other things which may be once would've caused us to pass away. But as we've seen health improve, we've seen that situation change. There's a couple of reasons to think about insurance in your super, and I'm not going to go into detail on all of these except for one. Or sorry, two. The first is this gives you access to group cover. Many of you would've potentially received all of these insurances or some of them without ever filling in any paperwork. They were just provided to you. And you can't do that outside of superannuation. Outside of superannuation, you would have to go through medical tests and requirements in order to get insurance. So it is far simpler and easier. That is done through what we call group cover, okay? Instead of just covering you as an individual, we are getting out insurance cover on behalf of all our millions of members. The other reason or benefit behind that is it gives you access to rates that will likely be far cheaper than you could get yourself. Again, if you get out insurance covered by yourself, you are going to be assessed on your circumstance. If you get it out through your super fund through a group rate, then it's actually going to be effectively looking at all of our millions of members rather than just assessing you, which can make it far cheaper. So how do you think about this as you get to retirement? And I can feel Ruth boring into me saying, "Hurry it up, Josh, hurry it up." Okay. So the things you need to think about, as Ruth and I said, leading into this part of the session, what debt, liabilities, and dependents do you have, and will your savings actually look after all of those or do you need additional insurance? As you approach retirement, it might be a case that you can significantly reduce your insurance. The reason why you might want to think about that is, as I said, you've got these other assets, your savings, your superannuation that are growing, you are probably seeing your debts start to minimise. Does that mean that you are actually over-insured? The problem with over insurance is it costs a lot as you age. Insurance becomes incredibly expensive as you approach retirement age. Don't have insurance that you don't need. And as I said, many people say to us, "Well, I need insurance after the age of 67." Do you? Have you thought about the Age Pension? Have you thought about access to your superannuation? Have you thought about access to other assets that you have? The other thing is, think about preservation age. And again, we'll come back to this next week, but the reason why I say that, it is at the age where your superannuation becomes available. That will be, for many of us, the age of 60, and that's where you really should think about, "Well, how's my insurance fit in?" At that age is where you really need to start asking yourself some of these questions on insurance. It is an important part of your retirement plans, although many of us will often overlook it. So as we've talked about, there are a range of calculators you have available, including one for insurance. This helps you assess what insurance you may need as well as look at what the cost may be for that cover really allows you to have a bit of a way up there as to, well, that need versus that cost and also think about that in terms of your broader retirement planning. Okay, so, Ruth.

Let's take it home and go to some Q&A. So just to wrap things up this evening. We've talked about the investments and how important that is. We've recommended you maybe hop on and test your inner investor through that tool. Great piece of homework to do this evening. Consider if your superannuation needs a boost. We discussed this in great detail last week. And if you think your super does need a boost, have a think about the best way to get that money into your superannuation. And if you're not sure, reach out or use the contributions calculator. Josh has talked about insurance. What role does that play for you along the way, if any, does it need to play a role? And then always, related back to our conversation last week, do you need to reconsider your income needs, are your expectations unrealistic, do we need to have a chat about maybe rethinking what that income need is, rethinking your retirement age, or are things fundamentally an awful lot better than you actually thought and you can maybe look at increasing that income or even retiring earlier? Now, speaking of retiring, next week we are going to get to the really important section of how we structure that money once we've made the decision. So we've talked about coming up with the income, what age we're going to retire, we've talked about boosting the accounts and trying to get the balance up to that point where we're comfortable. Then what? So next week, we will really talk about how we structure that superannuation, some beautiful strategies there, thinking about couples and spouses. We're going to talk about tax considerations.

We'll talk about how you can maximise the Age Pension with your superannuation and move money around.

We will.

Lots of questions have coming on that.

Yes, we'll be looping it back. So next week we'll talk about the end phase, but we will loop it all back to the first two sessions we've just covered, so it sort of wraps it all up beautifully at the end. We'll also talk about transition to retirement. I know there's been lots and lots of questions about TTR as we call it. And look, at the end of the day, regardless, I said it at the very beginning, this is a lot of information. We understand that, and some of you might be feeling a little bit overwhelmed by how to apply it to yourselves. You don't need to do that. That's what we're here for. Please reach out and give us a call. Or if you use that QR code, it will bring you to a page that allows you to request a call back from one of our financial planning team. Remember, you have access to support and guidance on your account, and it's included in your membership. Whereby your needs are beyond that, we will deal with that at the time and refer you to someone on a national advice panel if and when you need that. But hopefully, we'll be able to solve a lot of those queries and questions for you. Now, speaking of queries and questions-

Yes.

I was watching as you were presenting there, Josh, talking about insurance. And as Brian was wrapping up, there was even contributions questions coming through. And there was, again, similar questions to what we had last week, but there was... You actually just mentioned it. There was a question about contributing into superannuation and the implications that that might have on Age Pension. So somebody who suggested that they do have a lump sum of money in their bank account. And if they were to put that into superannuation, is that going to have any impact on Centrelink, or how would that look from a Centrelink's perspective?

Yes. So basically if you move money from one financial asset like a bank account to another financial asset, it's still going to be counted for the Age Pension. Where I would actually say, though, there's the opportunity is, I might be going down a rabbit hole here, so pull me out if you need to.

I'll stop you.

Where there might be opportunity is, do you have a spouse and is that spouse younger? So let me ... Can I?

I'll indulge you. Yes, go there.

People say you are my work wife, okay? So let's play it out. I'm considerably older than you, all right? Which I am. I'm older than you so I'll retire first. If I was to put all the money into my account, my superannuation account, at the point that I retire, I'm going to be ... That's all going to be assessed for my Age Pension. However, if I give it to my work wife, put it all in your account, your underAge Pension age, it actually means for the purpose of the Age Pension, it's ignored because you are not yet Age Pension age. This is some of the stuff we'll talk about next week. Some people might be going, "Oh, that sounds dodgy." No at all.

It's not.

The main reason we talk about that is if you've got a spouse or partner under Age Pension age, their superannuation isn't assessed. So my answer to that question is, don't think about whether you need to contribute it into your own account. Do you actually have a spouse or partner you can use it with?

And you've actually led in, there was a question from Phillip earlier on about that exact thing. Phillip suggested he had some money to contribute to super, didn't know whether it was better to put it into his account or to his spouse's account. And it comes exactly back to that because there is no better way. We would need to know things like your age, like what the existing balances are. But there are some beautiful strategies to maximise your benefits-

Absolutely there is. And I'd also say that it's important, don't think about your super as, although you have your own super account, and I think we may have reflected on this last week, although you have your own super account and your partner has their own super account, think about what combined that does for your retirement. And in that way, think also about, "Well, is it better that I put the money into my account or is there reasons why I would actually consider putting it into my spouse?" Another example I would give you, people worry about legislation changing. The biggest way you can risk having a major legislative change effect you is by having all the money in your account. If you actually try and equalise that around your account and your spouse's account for example, any legislative change risk has been minimised. So this, again, I don't want to be putting too much of a plug on next week, but this is exactly what we'll cover off next week.

It is. There was a question, I'll answer it quickly before I put another one to Josh around tax. But there was a question about actually physically making the contribution. So quite a practical question. Look, if you do have money in the bank account today and you're wanting to put it into your superannuation, whether you're going to claim a tax deduction on it later or not, it is simple. Log into your account online or look through the mobile app. You have a BPAY and a reference number there and just pay it like you'd pay a BPAY bill. That's technically how you do it. So gone are the days where there was oodles of paperwork and it was a big hullabaloo involved with trying to get money in. It's a really simple online transaction. You can do it in a couple of minutes. My husband does it this way all the time. He's self-employed.

Your real husband.

My real husband, not my work husband. He puts it in from the bank account, and then we claim a tax deduction on us. That's how he's feeding the money into his superannuation. Now, I want to swing back one more question. I think we have time. Yes. Tax. Tax has come up a couple of times. So when we were talking about getting money in after tax, I said it goes in tax free, and that money always comes out tax free. That obviously caught the attention of somebody because, of some of you because there was some questions on that. So when I said it always comes back out tax free, that is true, that tax free component, and will always come out tax free regardless who gets it, regardless of why they get it, and regardless of what age they are, but that's the tax free component. Remember, the majority of our balances are made up with that other type of money, which is not always guaranteed to be tax free. We are actually getting some questions about, you know, what's the considerations here if I'm feeding money in and it's passing on to maybe an adult child or somebody if I passed away.

So again, we'll talk about tax a bit next week, but we talked about last week that once you turn 60, superannuation becomes this wonderful tax-free investment vehicle. Tax-free income, tax-free withdrawals. And if you put it in a pension account, tax-free investment earnings. That's all great, but if you actually have that, then if you pass away and you have that to go to a dependent, depending on the dependent, they may pay tax on that taxable component, and it can be quite hefty.

Yeah.

Who could be a dependent in that scenario? Well, again, I don't want to preempt next week. We can talk about it. But the main dependent I'm thinking of, if you are thinking about your kids getting any super that you've got left when you pass away, if those kids are over the age of 18, tax. So there are important strategies, again, to consider. Should I contribute a certain way, not just to help me, but to minimise potential tax in the event I pass away and my kids get that money? But there's also strategies we'll talk about next week about, well, how about if I'm in a situation, I have all of this taxable money that if that goes to my kids, it's going to be taxed, how do I actually move that?

Yeah.

And again, where you've got a spouse that brings some really great opportunities in, but we'll talk about that more generally as well.

So we will wrap up. Just to kind of put a fine line on that, you will always take your money out of your superannuation tax free after the age of 60. So we're not talking about the tax implications for you. Because if you're 60 and you're taking it out, you are going to get it tax free regardless. We are talking here about leaving it as a death benefit for example and passing it on to maybe adult children. So that's what we're going to talk about next week.

Great segue into next week.

It is.

Talking about inheritance or spending all your kids' money before you get there. All right, I would like to thank you all again for your time. It's been wonderful, especially having Brian join us. He's a wonderful part of our trio. But thank you all of you. If you haven't already, please do register for next week's broadcast. It is our third and final event in this series. We look forward to seeing you then on "Star Wars" day, May 4th. And I'll be a year older.

Another year older. Closer to retirement yet again.

We might have a birthday party. Thank you, everyone. Have a great rest of the week. Good night, everyone.

Thanks, Ruth.

- Good evening, everyone, and welcome to our webcast tonight. 

Before we get started, I would like to first introduce myself.  My name is Joshua van Gestel, Senior Manager, Strategic Education here at ART. Joining me is someone who is often sitting next to me, Ruth Weaver, one of our wonderful education managers. We've actually got something new for you tonight.  We realise for many of you, this is the first Australian Retirement Trust webcast you've actually been to. So we welcome you, and to those who have been with us before, we hope that tonight gives you the opportunity to get something fresh, get a new angle or a new perspective, or just rethink things that you have maybe looked at before. But we will come back to all of that very shortly. 

 

Before we do get started, though, I would like to first acknowledge the traditional owners from the land from which we are broadcasting tonight, this place that we now know as Brisbane.  I would like to pay my respects to the Turrbal and Yuggera people of these lands, but also pay respects to the traditional owners of all those lands from which you come from, with special mention of the Gadigal people of Sydney where I am from, where I normally live, but also acknowledge where we all work and those that look after us. I would also like to acknowledge all of you, all of you for providing your time tonight.  And what that means to us is that you've got a keen interest, that you've got questions, that you've got things that you want to think about, and I do think it's wonderful that you're here to try and take those first positive steps. Maybe you are very far into that process and you are wanting to just review things a bit. But I also want to acknowledge the times that we're in. And this is some of the stuff that we will talk about tonight, as well as in future sessions, but we've got inflation going up, we've got cost of living starting to bear down. We've still got volatility and fluctuation in investment markets and meanwhile, you are also trying to manage this pool of savings that you've got that you want to have go through your retirement. So there is a lot for us to consider and a lot for us to unpack. But before we do that, what I would like to do is pass to Ruth to get us all started.

 

- Thank you, Josh, and good evening, everyone. Thank you for taking the time to join us. It is worth reminding you all tonight that Josh and I will be talking in very broad and general terms as we discuss the content this evening. We have not factored anyone's personal or financial situation into account. So bear that in mind. If you want more information about Australian Retirement Trust, hop online or give us a call on 13 11 84. As we navigate through tonight's content, there might be a patch of time where you're struggling to apply the information to yourself personally. If that happens, reach out and speak to one of our financial advisers who can certainly help you to do that. 

 

Now, for many of you linked in this evening, you may have had a superannuation account for 30+ years at this stage. That asset might start to become familiar to you as one of your biggest and most influential assets right now. You've probably become attuned to the fact that this particular financial asset will play a really important role in shaping how I retire, when I can retire, and what that retirement is going to look like, because of the importance of that asset, your superannuation, you are more likely going to want some extra comfort and extra confidence in the superannuation fund that's looking after it for you. I thought I would start by giving a quick overview again of Australian Retirement Trust and who we are and what we strive to do for you. We are a profits-for-member fund. What that means is we do not work for shareholders. We do not need to make a dividend from our members. Instead, any revenue that we are able to generate comes back through to you as the member in the form of lower fees and better services. What I do want to remind you of tonight is given you are closer to retirement at this stage and maybe thinking about transitioning into retirement, or maybe you're already retired, I want to comfort you that the fee structure that you are familiar with now is the same fee structure that you will bring with you throughout your retirement years at Australian Retirement Trust, complete transparency as you're moving through the different stages.  And it is also worth reminding you that there is no additional costs as you move your money through those stages. The other really important component of superannuation is your investment portfolios and how that fund is investing that money for you and growing it on your behalf. We are incredibly proud at Australian Retirement Trust of our long and consistent strong investment returns. And those portfolios that you have access to now are the same portfolios that you will have access to if you are using a transition to retirement product or an income stream product. Again, full transparency there on what you are going to be able to do as you navigate through that journey. Now, at Australian Retirement Trust, our absolute goal is to make sure that our members can retire with confidence, and yes, having access to low fees is really important to achieving that. So, too, is having access to strong performing investments. But we also believe strongly in the power of having access to financial guidance and advice. And that is why one of your great benefits of membership is having access to our financial planning team where you can reach out and ask questions and get personal advice on your superannuation. It is included in your membership. So if at any point during tonight's session you think that that's something you will benefit from, there is going to be an opportunity at the end for you to book one. We will also be sending you an email after tonight's session with the opportunity to book a conversation with a planner as well. 

 

We've got a lot of content to go through tonight, Josh. A big program ahead. 

 

- We certainly do. The important thing about tonight, and not just tonight, actually, but for the next few weeks, for some of you, you have attended our events in the past. And what we found was after those events, we were getting really great feedback, but the consistent feedback was that you actually wanted to hear more. You wanted to go deeper on some of the points of discussion that we were having. We've listened to that feedback and tonight is very much an event borne from all of you. So what we are going to do tonight is actually the first inner series of three events. Tonight allows us to focus on a couple of areas which Ruth will come to shortly, but really looking at what is it that you want your retirement to look like. Let's not worry so much about strategy or considerations around what you can do with your super or not; let's focus more about your income needs, how the Age Pension will fit in and a couple of other elements we'll come to. But then next week, we will have our second webinar which many of you have already registered for and I would encourage those that don't, particularly if you found tonight valuable, that you do think about registering for that webinar as well. And what we will do next week is focus on investments and contributions. But that's something we will come back to a bit later. And then in our third webinar in a couple of weeks we'll talk about, right, you've thought about what your income needs may look like, you've thought about how you're investing and how you might want to contribute a bit more about retirement, what are you now going to do with that money in retirement? What are your different options? What are the things you need to consider? Those three sessions together might sound like a lot of information, but it's meant to take you on a really deep journey and to help you actually make that a bit more personal. What we've sent out to you in the last 48 hours or so is access to a retirement workbook. And if you've got that in front of you now, that's wonderful, but it's also something that I encourage you that after the event, you can open that workbook up and you can still use it.  It can still be very effective for you. So that workbook at different times throughout the webinar tonight, you will see a symbol come up on some of the slides. And that just means that we're talking ‑ that symbol looks like a book ‑ and it just means that we're referring to something directly within the workbook for you to actually weigh up and to consider for yourself. 

 

Ruth was talking about the fact that we do have you go on a journey into and through your retirement, and there are things that will be consistent through that journey, the investment options available to you, the fee structure that's supplied, but that journey you've got to also understand will be a journey of change.  You will go from working full‑time, possibly, or maybe part‑time, to maybe volunteering or changing the way you work. You will transition in some way to a full retirement. For others of you, and Ruth will share some insights in a moment, you might have retirement almost forced upon you for other circumstances. What we are going to do over the course of the next three weeks is actually take you on this journey of going how do you prepare yourself through your savings, through those investments, through those contributions, how do you move or transition to retirement, and then how do you use that money when you're ready in retirement? 

 

So we actually went out and thinking about retirement and conducted some research of not just our members, but of the broad Australian public. And what we asked was, well, what is it that you think about, or what is it that you feel when it comes to retirement? And there were some really positive elements that came out of that. We saw that the majority, two‑thirds of people said, 'Well, my retirement is something that I look forward to because I want to relax, I want to enjoy life.' They also responded by saying that they are wanting to spend time with family and friends. But what was also glaring to us was although we had these positive responses, we also had responses where people are uncertain, people are unsure, people are concerned, concerned about do I have enough money for retirement? Will I have enough to get me through? But also concerns around will I just physically make it through? Again, these are some of the concerns that we're here to help try and solve some of these so you can think about the relaxing, the enjoying, the spending time with your family and your friends. 

 

So, Ruth, with saying all of that, what are our main focuses for this evening? 

 

- Look, I think the main focus this evening is to strip away some of the fear that you might have around retiring. Josh was right. We come across people all the time whose biggest fear about retirement is running out of money. And often, that's because people don't have a plan. Now, having a retirement plan is not like a magic wand and suddenly you do have enough money. But what having a plan does do, it alleviates some of the fear and gives you some of the control back over what you can do and what your expectations should be based on what you actually have. We had over 300 questions pre‑submitted tonight. We looked at those questions very carefully. We were able to determine on those questions that there was really four areas that you wanted us to focus on tonight. And I think it was because you wanted to have a level of control over this because it does take away some of the fear attached. What we’re going to cover tonight is helping you visualise what will that retirement look like. We're going to talk about Age Pension, that was a question that came up a lot because it is going to be a really important source of income for many of you tonight and is currently for many people retired. We're going to talk about how you can access superannuation and when you can access superannuation. This is a question that often pops up because it shapes a lot of thinking around when you might actually retire. Then of course, we are going to touch on some positive steps you could take to better your financial situation depending on where you are at the moment. 

 

Now, the very first question that we often get when we're talking to members about superannuation is how much do I need. How much do I need to retire? You know, I'm not sure if I have enough, I'm scared, I don't think I will ever be able to retire. And often it's because people haven't really thought so much about it. And to answer the question around how much superannuation do I need, we have to start with the question, well, how much income do you think you are going to need to generate in retirement? And that answer is going to be very different for everyone on the line tonight because it's going to depend on an awful lot of personal situations. You can't determine how much superannuation you need until you're able to determine what that superannuation actually needs to do. How much income does that super need to provide to you? And that will depend on things like your personal situation. Are you, for example, retiring as a single person or as a couple? Will you be able to combine assets with somebody else? Are you entering retirement with debt or with dependants or with a health condition, for example. And once you've looked at your personal situation and factored those kind of things in, and if you refer to the workbook, there is some area there where you can actually put some thoughts down right now just in case as we're talking they might leave your mind and I would recommend you do do that. Often, when you are thinking about income, I would bracket it into two different sources of income for retirement. First of all, you need to think about what your actual needs in retirement are. These are the basic things like groceries. How much is it going to cost to feed yourself, put fuel in your car, pay your rates bill if you own your home, your rent if you don’t own your home? Internet, for example, health, medication you know you are going to need. They are things you have to have. So that's your starting point. And when you are able to work out what those actual needs are, that's the basis at which you start your income requirements on. Then you look at the things like your wants. This is the fun money, if you like. And this is, essentially, the things like, well, I want to go on holidays overseas every second year. I want to be able to spoil the grandkids. I want to be able to do X, Y and Z or pay my golf subscription, whatever that might be. These are not essential; these are wants. And determining the difference between a need and a want is a really important first step.

 

- Travelling back to Ireland in retirement.

 

- It's going to be expensive.

 

- Need or what? 

 

- That's a need. I have to keep the accent alive by travelling back to Ireland so I would regard that as a need, absolutely. Once you've looked at your needs in retirement and added on the amount you are going to need to fulfil those wants, the next question is: when am I going to actually retire? Because the age at which you retire is going to determine an awful lot of how much you are going to need. Clearly, the younger you want to retire, the more money you are going to need to be able to do that. There is some interesting data available at the moment about the age at which Australians are retiring. And the majority of Australians are retiring between the age of 60 and 70. And what we see is the older you get, the more likely you are retiring voluntarily. And sometimes we are seeing that some people are forced into retirement against their will for many, many reasons. So what I would say to you is when you are modelling any kind of retirement plan for yourself, generally it will start with two very big questions: how much income do I want to generate? How long do I need to generate that income for? So you need to land on the income you think you need and the age at which you are going to retire. When you are thinking about the age that you think you want to retire at, I would say to you, do a risk assessment around that. So ask yourself something, if you have landed on an age of 67, how secure is my job? You know, can I guarantee I will have that role at 67? How secure is my industry? What's my health like? Am I realistically going to be able to sustain this until 67? What is my spouse or partner’s health like? Am I likely to have to leave work early to care for somebody? You do need to assess that. When I think about my own husband, he is a panel beater and works in a laboursome role. I often think about him retiring. His physical role wouldn't allow him to continue working into his late 60s and 70s. He whinges enough now at 45 about how tired he is. I can't imagine what he would be like at 60. It is important you do a risk assessment around the age you have chosen. You can't just pick an age out of nowhere because there are realities that may very well force you into retirement earlier than you wanted.

 

- Absolutely. When you think about that earlier retirement, in so many cases, it's health driven. It's capacity and health driven that often forces you. But I think it's also important in what you are thinking about -- sorry if I am cutting you off -- what you need to also think about as Ruth said, age is important. We do see a lot of partners will actually retire with their older spouse, for example. So traditionally in Australia, if I want to be a bit gender‑specific, but traditionally in Australia we will see women retire younger, and that's very often because they retire at the same time if they've got an older male spouse typically. The other thing, though, to consider -- and I'm sorry, Ruth, if you were going to pick it up -- but it's also that issue of life expectancy.

 

- Yep.

 

- Not just how young you are going to be, and you think about especially for women, we do see them tending to retire early. So there is already an additional funding need.

 

- Yeah.

 

- But the other thing is women live longer. You know, because you need time after the husbands are gone in that circumstance. But you also need to think about life expectancy. I know none of us know when we will live to, but your parents, your siblings, others in your family give you an indication. I've been reflecting on the fact -- I've actually come up here from Sydney and I'm spending the weekend with aunties and cousins and people down at Stanthorpe and Warwick, they are all approaching 100. Must be good farming stock. But I have to seriously consider including with my own parents in their 90s, that is my real funding forecast. That I'm not just thinking about how much I will need to get to 80, 85. I realistically have to think about 90, 95.

 

- You will still be here presenting when you are 75. Is that what you are saying? 

 

- Absolutely, absolutely. Whether I am still capable is another matter.

 

- It does lead into a point around how much do I actually need to fund retirement. There is a lot of rhetoric around there that you need a million dollars to retire. If that's true --

 

- The million dollar question.

 

- I will be sitting here when I'm 80 as well. I will never reach that as well either. We do have to be realistically here, how much money do I realistically need to live the kind of retirement I want to live. I can tell you I've done the maths on my own situation. I don't need a million to do what I currently would like to do. I am not going to be forced into fear on the media or anything I'm reading. I need to be able to apply all of this to me and my wants and my needs. 

 

- And that's really important because I do think, okay, it's reasonable to compare where you're at; it's reasonable to look at the media and take that in.

 

- Yeah.

 

- But it's absolutely vital you think about how that applies to you. How is your situation and what are your needs for your situation that you have to think about? 

 

So Ruth and I, when we go out and present -- and we're fortunate, we talk to thousands of members every year, and the rest of our wonderful team -- and there are probably four key ways that we really suggest that you consider. You might want to consider all of these, just one of them, whatever works best for you. But the first is really probably the most simple. The government attests to this and other areas attest to it. It's really saying, well, take your income now in your working life and cut it by a third. What you really need in retirement, they suggest, is two‑thirds your normal income. But you have to think about, well, your lifestyle in retirement, as Ruth said earlier, are you also taking debt into retirement? Are you going to be taking dependants into retirement? For myself, for example, I had my son when I was much older so that's absolutely a consideration for me. The next thing you can think about is -- well, not just think about, I think absolutely you should do, is actually prepare a budget. What are your needs and wants that Ruth went through? Really think about it. And I know that there will be needs and wants that change over time -- we will come back to that -- but think about now what would a budget look like if I was to retire today? Okay. 

 

The other thing to also think on is having lifestyle guides. Lots of superannuation funds provide them, lots of associations and bodies provide them. And they are an effective way to get a starting point and to also get some rough guidance. But they shouldn't be what gives you comfort. You shouldn't look at these lifestyle guides and go, 'Yep, that's going to meet my needs.' You have to again go back to that idea of needs and wants and, again, you can really only do that through putting a budget together and seeing what your situation and circumstances will actually lead to. 

 

The other thing that you can do to really start this journey -- and I would actually say if I was to suggest two things that you really do after tonight, absolutely that budget one is first and foremost.  But secondly, then get on to retirement forecaster. It's the way to bring those two together. Use the budget to assess what you need, what you want, and what that's going to cost you, and then use a retirement forecaster to actually see whether you're on track to achieve that. And the retirement forecaster we use is something that we will talk more about, not just through tonight's session, but actually over the coming weeks. 

 

But in thinking about your income, I encourage you to also think about, as you are weighing those things up, your income isn't going to just be a stagnant figure. It's not going to be the same year, after year, after year. And the government has produced lots of research on this over recent years. You have got to be aware that your most expensive periods in retirement will be the initial period when you are hopefully out enjoying yourself, when you are out travelling, when you are really enjoying, still having physical capability. And then your next most expensive period is actually going to be towards end of life. When there are going to be major health considerations, when you might need to think a lot more about those needs becoming the priority. So early in retirement, it's probably more about the wants. Later in retirement, it's going to be about the needs. So, yes, do a budget, yes, do a forecaster, yes, get an idea of what your income will be. But also have the expectation that as you move through retirement, that will ebb and flow. 

 

So, again, thinking about our research that we conducted -- and again, remembering this is research we did of all of Australia or a group of Australians, we didn't go out to 30 million people -- but what we went out to was a representative group. And the group that were in the baby boomer and older cohort said we had 40% who said yes, I think I've got enough for retirement. That was, again, a positive element of the research, that we did have almost half of respondents say, 'Yeah, I think I'm in an okay place.' But again, if we think about the areas of concern and where people really did maybe have questions, maybe haven't sat down and actually applied some thinking and done a budget -- and I would suggest a lot of respondents here who said, 'I don't think I will have enough,' they probably haven't actually thought it out. They think they haven't got enough because they are comparing to the media, they are comparing to those things. So it's important, again, for you to really test this. If you're here tonight and you think you don't have enough for retirement, is that just a gut feel? Is that just a comparison with colleagues or friends or what you see in the media? Or is that actually real? That's the first question you need to answer for yourself. Do you have enough or not? If you do, this exercise might give you comfort that you didn't previously have. But it might also allow you to go, 'Right, I need to take some action, I need to do something.' So if I just -- one last thing, Ruth -- I saw you were about to jump in. One last thing is that we asked the respondents of that survey to tell us, 'Well, what do you think is enough for a reasonable retirement?' And what they told us is, as an individual, that, 'I need about $53,500 a year.' Now, Lord knows how some of them come up with this, this was the average response, but it leads very directly into the next slide Ruth is going to cover off. How do we think about how much people might need, Ruth?

 

- I don't know how you think about it, Josh, but I just always think in my own head around my existing lifestyle. Because people do sometimes lose sight of that. So there is -- you know, there is this expectation that the average person is living on this much so I must live on this. You are the best source of truth for determining what your retirement income needs should be; what you are doing and spending right now will give you the closest indicator as to what you are going to need during retirement. That being said, we are creatures of habit and we like to know what everybody else is doing and so we like to know everybody's opinions on this matter. 

 

For that reason, the Association of Superannuation Funds of Australia, ASFA, do considerable research across the board about what the average Australian would class as a comfortable lifestyle in retirement versus what one would class as a modest lifestyle. The numbers that come back suggest that the Age Pension at the moment in Australia which for a couple is just over $40,000, and for an individual, under $28,000 a year. That is quite a modest lifestyle. The way I would look at that is that's meeting your needs bucket. If you have done your needs and wants analysis, the Age Pension which is so important to many Australians at the moment, but it will primarily fund a lot of the needs for the average Australian in the country at the moment. What it won't do is leave much for the wants side of things. A modest lifestyle based on the data is slightly better than the Age Pension. It gives you a little bit more freedom to maybe eat out at the RSL as opposed to the Age Pension where you really have to think about whether you can do those kind of things. Where we see most people wanting to try to get to is more comfortable than that, though. People tend to want to have a comfortable lifestyle. The average Australian, if you are a couple, that's about $65,000 for a couple in a year and about 46‑odd thousand for an individual. So about $1,250 for a couple is what the average Australian is saying, 'You know what, that gives me the ability to maybe have a really nice car and upgrade it every couple of years, maybe go overseas once every two or three years, and be able to have private health and things like that and run my air‑conditioning during summer without constantly worrying about the bill.' So it gives you just a little bit more freedom than those who are trying to survive on the Age Pension or just that modest income. The reality is, however, somewhere in the middle for most Australians. Most Australians would probably sit somewhere between the modest and the comfortable lifestyle when they do their sums. So it's about you thinking about what your household would look like and what your household needs. The reality is for some people, that's not going to be enough and they would want a much more premium lifestyle than that. You will have to determine what that number is for you and your household. 

 

Once you do land on that figure, then we get to the exciting part and we think, well, where is the money going to come from? So I have landed on this figure, I like the $65,000 figure like the average Australian as a couple. Where is it going to come from? We have to think about the sources of income in retirement. We know for the majority of Australians who are currently retired, the Age Pension is doing a lot of the heavy lifting to meet those needs. The Age Pension, however, is quite a rigid system and Josh is going to cover that in some detail now in a moment. You don't have a lot of control with the Age Pension as to when you will be eligible to receive it. The Age Pension age is 67 and you can't change that. So it's quite an inflexible system for you. You don't get to write your own story if you are relying too heavily on the Age Pension. 

Where superannuation comes in is it gives you that little bit more freedom and it allows you to write your own retirement story a little bit. 

 

Superannuation for the great part is going to be accessible to you in one way or another from the age of 60. This means that you're now in more control over the age at which you'll retire. But it's also a source of income that can complement or be paid to you in addition to your Age Pension. 

 

I often say your superannuation might be funding some of your needs, but primarily it's probably going to be the money that funds a lot of those wants that you have during retirement. 

 

Not everybody will rely on just two sources of income. There are many Australians who may also have a third source of income through other assets; maybe you're still working a day or two a week here or there. 

 

So, it's about looking at the household now you've landed on your figure and determining where is the money going to be sourced from. 

 

The more you're going to be relying on that superannuation bucket, the more superannuation you're going to have.

 

But the reality is for the vast majority of Australians there will be a beautiful relationship between getting funds through the Age Pension and topping it up and complementing it with some money that comes through your superannuation. 

 

It's not quite that simple. So, I mentioned with the Age Pension there are a lot of rules and regulation around it, and this is what we're now going to talk to to give you a little bit of a taste as to whether you might be eligible for some Age Pension and what are some of the things to think about when you are planning with respect to I suppose relying too heavily on that source of income.

 

- Before we dive into that, it's probably important just to take a stocktake for a moment about where government policy is on this. 

 

What we've seen in recent years is the government is really trying to encourage, for a whole range of reasons - but the government is trying to encourage people to remain in the workforce much older in life. 

 

That's why it's important, as Ruth has talked about, traditionally we maybe thought of the Age Pension as a primary source of your retirement, super being there in the mix a bit, and that was probably it. 

 

But we're now seeing that about 52 per cent of Australians when they retire actually will stay in the workforce or return to the workforce in some way, and the government in fact is encouraging that. 

 

And how they're encouraging that is by some things we'll talk about. But actually allowing people to still earn an employment income and to also receive an Age Pension. So, I'll come back to that in a moment. 

 

The other thing I wanted to cover off, though, is I want you to realise that the Age Pension system and the politics in Australia means we're not going to ever have a situation like we're seeing in France at the moment or we've seen in Greece in previous years. You're not going to see these major unexpected universal changes. 

 

What we know is when it comes to policy in this area the government gives a very long flight time, and some of the things we're talking about tonight with ages increasing, for example, were passed into legislation, in some cases, 15-20 years ago. They're not overnight changes. 

 

So, the reason why I go through that is it's important that you understand that the Australian Government certainly wants older Australians to remain a very active part of the economy through working. You're not being forced to, but it is something that government sees as an important part of the mix. 

 

But the other thing to take away is that, certainly for those of you that are close to retirement, don't concern yourself about, 'Well, will the rules change?' 

 

And we saw a lot of questions around this, okay? 

 

So, what we do want to do over the next 15 minutes or 10 minutes is really just try and give you some additional insight into some of the factors that make up the Age Pension, how it works, and again think about how this may apply to you. 

 

- I was just going to interrupt, Josh, for a moment and say that I am actually tracking some live questions here. As Josh is covering this topic, if something does pop up that you think you'd like an answer to live, please put them through. I'm keeping an eye on that as we go through. I'm the multi‑tasking one tonight.

 

- Thank you. I liked how you almost asked permission to interrupt me after you did so, but anyway. 

 

Firstly, in terms of the Age Pension rates - as you can see, the Age Pension rates which Ruth has already referred to, are what we really think just provides that basic payment to cover off those needs. 

 

My parents are both in their 90s or very close to. 

 

They're both completely dependent upon the Age Pension.  And they really do have to scrimp and save. 

 

It is a lifestyle that they really can only afford because they have five children that are there to look after them. 

 

Their youngest, I hear, is fabulous. 

 

I wonder who that is! 

 

All right, sorry. That joke fell flat. 

 

The other thing, though, to note about the Age Pension is, when you receive it, you don't just get access to the Age Pension.  You get access to a lot of benefits around it. 

 

And this is really important to a lot of people. 

 

In fact, for some retirees that are self-funded to a large extent it's still really important for them to have access to these concessions - concessions that give them access to medication at a much lower rate, give them access to different discounts and benefits on everything from transport to even thinking about just paying for some of their bills. 

 

The thing that you need to note as I go through the rules in a moment, even if you get $1 of Age Pension it entitles you to the concessions. 

 

So, for many people, you will have a large dependency on the Age Pension. We'll go through that. 

 

For others of you, you may not be so dependent upon the Age Pension but, remember, that $1 may give you access to a whole lot more than just that money from the government. 

 

So, when do you get access? 

 

Well, the first thing to think about is your age. 

 

And as I've said, the government has been progressively increasing this age over many years. 

 

It's not like we're seeing happen in Europe. 

 

The thing to note about this age, though - and maybe we're now just used to the fact it's increasing - it's important to put it in context. When the Age Pension was introduced over 100 years ago, it was paid at the age of 65, just like it was here in Australia only 10 years ago. 

 

The difference between 100 years ago and today is 100 years ago male life expectancy was actually less than 65; female life expectancy was only just past it. 

 

That meant for the majority of Australians they never actually received the Age Pension when it was introduced. They would have passed away before they became eligible. 

 

What we've seen is, as life expectancies have increased in the 100 years since, the Age Pension eligibility age did not. It's only in that legislative change over the last 15 years that we've seen the government start to increase the Age Pension age. 

 

This is the point to which it's been legislated, and there has certainly been no comment from the government and no sense of interest from them to increase it further at any point soon. 

 

The other thing, though, to consider is, once you achieve the age, well, now you have to do an income test and an assets test. 

 

Now, the vast majority of Australian retirees actually receive the Age Pension. We've got about 80 per cent, I would say, of retirees who receive the Age Pension. But only about 60 per cent of them get the full Age Pension. And that's because the other 40 per cent have maybe not got through either the income test or the assets test. 

 

So, you have both of these tests performed, and the one that gives you the worst result is the one that determines the Age Pension you will receive. I'll go through that a little bit in a moment. 

 

But the other question that we did see online in presubmitted questions was, 'Well, what gets counted around the Age Pension?' 

 

And sorry to be blunt, but pretty much everything gets counted. 

 

But there's a couple of particular things I want to call out here. 

 

Firstly, when it comes to real estate and property, your principal place of residence is not included for the assets test, and obviously it's not included for the income test. Your principal residence, whether it is worth $40,000 or $40 million, is ignored for the purposes of the Age Pension. 

 

If, though, you have investment properties or other properties, they will be counted. Okay? It is just your principal residence that is ignored. 

 

We also have here about gifting. This is something I know that a lot of our members - it's something that even I have had discussions with my mother-in-law about - is in regard to what she can do when it comes to gifting. 

 

That might be giving gifts to family members, to grandchildren, whoever it may be. There are limits that apply. When it comes to gifting, you can actually give away $10,000 a year or up to $30,000 in a five-year period. 

 

The main reason is that the government doesn't want you actually hiding money away. Okay? So, gifting has a limit. 

 

If you go over those limits, then that amount will still be included within the means test for the Age Pension. 

 

Two last things that I just want to cover off on this list very quickly; the next one is employment income. 

 

As I said, the government is trying to encourage older workforce participation, and even in the most recent Budget of the former government we saw them introduce with bipartisan support an increase in what we saw called the work allowance or income allowance. Basically, the government allows you to earn a set amount each fortnight, and that amount is exempt. 

 

It's ignored from the income test. 

 

And what the government also allows is, if you don't use that amount in the fortnight, if you don't earn anything, that pools; it carries over. 

 

And the reason why they do that is that they know for older workers they may actually do blocks of work. Rather than working consistent weeks or fortnights, they might actually work, as my mother did until recently, for just a set number of months a year.  So you get this amount each fortnight that accrues, and the government is allowing that to go up to $11,800 a year, and that amount you can earn from employment without it being counted. 

 

The last thing that I want to touch on, although this is something we'll pick up on in our third presentation or our third webinar, is certain income streams that you have with your savings in retirement will also be exempt from the Age Pension. 

 

The government will ignore them when it comes to conducting these tests. 

 

Those income streams are generally going to be things that are locked away, what we call guaranteed pensions, and that is where you don't have direct access to your money. 

 

It is paid out to you as a regular income that you have no real flexibility on and you don't have the ability to take withdrawals. 

 

We'll come back to that in session 3. I just raise it now because it was a question that was raised in our presubmitted. 

 

So, in terms of the tests themselves, very quickly - and there is a lot of information on our website around this and we do direct you to that in the workbooks, actually - firstly, when it comes to the income test the government will take all of those things that I just listed and determine how much income they earn. 

 

They add that together and, if you earn less than the threshold that is shown, you will get the full Age Pension under this test. If they add up to be more than the cut-off, you will receive nothing. Your Age Pension journey has stopped at that point. So, less than the threshold, you'll get the full Age Pension. More than the cut-off, you'll get nothing. 

 

If you have a result that is in between the two, then you will qualify for a part pension under the income test. 

 

So, you get through the income test, which most do, and you then come to the assets test. The assets test will again look at you as to your situation, are you single or part of a couple. And what they will then do is also look at, do you own your own home or not.  If you don't own your own home, they allow a larger allowance under the assets test, but the same theory applies. 

 

If you have assets under the threshold you will get the full Age Pension under this test. 

 

If you have assets added together that are more than the cut-off, you will receive nothing. 

 

If you have assets in between the two, you will get a part pension. 

 

So, they do that with the income test first, then with the assets test; worst result is what you walk away with. 

 

The most common question we probably get asked is: is my super included in these tests? Yes, it is. Okay? It is an important consideration. 

 

Again, it's something that we'll cover off later in the program. 

 

But, Ruth, it then comes to - I know there's been a lot we've already gone through; we've digested what your needs are, we've digested where the Age Pension fits in. What was that next component we talked about? 

 

- We're now going to talk about actually accessing your superannuation. 

 

Before we do move on to that, though, I will just raise one or two points. 

 

First of all, the process of applying for the Age Pension and running through the income test and the assets test - there is a lot of information in there. There's a lot of numbers in there. What I would say is visit your local Centrelink office. 

 

They are some incredibly helpful people behind those desks that can really work through those tests with you. 

 

Centrelink offices also often have financial information service officers who you can book appointments with. You can sit down and run through your situation if you're really struggling to gauge would this be included or that included. 

 

Make sure you talk to your local Centrelink, particularly if you're close to Age Pension age, because there are some incredibly helpful people that work there. I know some of them, and they do have your best interests at heart as well. 

 

Now, that's the Age Pension and accessing the Age Pension.

 

- My turn to interrupt. What we're also doing in session 2 - and I should have probably not just dropped it and left it - I said that superannuation is included in those assets tests. 

 

What we're actually going to do in sessions 2 and 3 is talk about how you can actually use your super to still try and maximise your Age Pension. 

 

So, I don't want to just leave it there and move on. 

 

That is, as I said, something we'll come back to to talk about in future sessions. 

 

As Ruth said, start doing that assessment and consideration, reach out to Centrelink if you need to, but it's also something we will pick up on. 

 

- Yes.

 

- But when it comes to super, Ruth?

 

- We'll talk now about superannuation. 

 

So, let's assume at this stage you've done your homework, you have a fair indication now how much Age Pension, if any, you will be able to receive from Centrelink. 

 

And now we're going to look at the superannuation component of it.

 

How do I access superannuation? When can I start to access superannuation? Because that's going to influence very heavily for many when they will actually decide to retire. 

 

So, remember, your superannuation is the part that's given you that little bit more flexibility, helping you to sort of navigate your own story rather than relying too much on government rules. 

 

Now, again referring back to the booklet, you'll see a little graph in your booklet that looks a little bit like this. 

 

What we're talking about here is your very first milestone often in superannuation when it comes to being able to access. 

 

It's called Reaching Preservation Age. 

 

It's industry terminology for basically the age at which you can start to access your superannuation in one way or another. 

 

If you have reached your preservation age - and for most of us here it will be the age of 60, but if you're currently 59 you might already be there - once you reach that preservation age you need to be asking questions. You need to be asking questions about what you can do with your superannuation, whether you're continuing to work or not. 

 

So, for the majority of us, our preservation age will be age 60, and that's where things start to get interesting and opportunities will now present themselves to you. 

 

So, if we think about milestones, age 60 is a really important age for a couple of reasons. No. 1, for a lot of us it is preservation age, but it means we can start to structure superannuation differently. 

 

We had a lot of questions come in over the last few days on transition to retirement. And transition to retirement is something that you can think about, ask for help on and advice on once you hit preservation age. 

 

Effectively, once you get to the age of 60 you are able to access at least some of your superannuation even if you're still working, and we're going to cover transition to retirement in a lot of detail in our third session, so not next Thursday night but the following Thursday night. If it is something you'd like to learn about, I would encourage you to register for that particular session.

 

- On Star Wars Day, May the 4th!

 

- May the 4th!

 

Who picked that date, I wonder.

 

Now, age 60 actually has another quirk attached to it. There's another opportunity that a lot of people aren't aware of. 

 

If you have changed employment or changed employer from the age of 60 onwards, you have unlocked your full superannuation. 

 

Many people are not aware of the fact that if they changed their employer after they turned age 60 they have full access to superannuation, and for a lot of people that sounds too good to be true. 

 

Generally I would say approach that with a lot of caution.  Getting money out is easy; getting it back in is not so easy as you're getting older.

 

- What is important to note, that's just money that they've saved to that point.

 

- That's just the superannuation -

 

- If you're working in another job, the money you're accruing from that job you don't have access to.

 

- Yes, exactly. It's the balance you've accumulated up to the age of 60. 

 

The other question we get asked a lot is, 'Well, will I be taxed on it?' 

 

The answer is: you will never pay tax on a withdrawal from your superannuation assuming you are getting it after the age of 60. 

 

If you have changed employer and you are going to access - a couple of questions around, 'Mortgage is nearly finished. I'm 60.  I'd love to get rid of it. Will I pay tax on a drawdown?' 

 

If you're eligible to take it out after 60, I can assure you you will not be paying tax on that withdrawal even if you're still working.

 

That's a really interesting opportunity that I would be encouraging you to explore. 

 

65 is almost like the golden age, I say. 

 

65 is the age where all the locks are off your superannuation. 

 

You can access your superannuation in whatever way you want regardless of whether you're working or retired. So, if you're 65 and you're in this session tonight you may not have realised that you have full access to that super. You can access it when and if you want and there is no limit on how much of it you take out. 

 

Then of course Josh talked a lot this evening about Age Pension.  As we discussed, Age Pension kicks in at the age of 67. 

 

So, you now need to have a little think about where your retirement age sits with regard to those milestones. For many of you tonight, your retirement age might not be on your screen. 

 

Your retirement age might be 63; it might be 66. It's about using these opportunities to help you shape what age you're going to land on to retire.

 

- That's actually really interesting. 

 

I know we talk about the million-dollar question: how much money do I need to retire? I find it amazing the number of people who actually say, 'Well, when can I retire?' 

 

- Yes.

 

- I think there is almost this expectation, 'My retirement age is 67.' 

 

Actually, superannuation allows you to think about, well, your retirement age -

 

- It's whatever age you want.

 

- It may be much younger than that. 

 

But it's important to think about, if you retire sooner than the Age Pension and you have access to your super, there are some decisions to make there. You don't want to blow it - maybe.

 

- Maybe you do.

 

- Something we'll talk about in session 3.

 

- Josh does raise an interesting point. 

 

We do get told a lot that 'I have to work for another three years because Age Pension age is 67'. Well, it's not necessarily the case. If you have the financial means, you have full access to superannuation should you decide to retire before that age. 

 

Now, that's looking at the milestones and the ages. 

 

But when it comes to actually getting the money out of the system and how do I turn that money from the superannuation fund into cash in my wallet and actually spend it - there are a couple of ways you might decide to structure your superannuation. 

 

The first myth I want to debust - is that the right terminology? The first myth is that you have to do something. 

 

That's actually not the case at all. 

 

Very often you will have spouses - you talked about the reality that females often tend to retire alongside their husbands, for example. 

 

Often there is a couple of months in between. It might not be to the exact same day. There might be a situation where one of you will retire and the other one is still working earning an income, and you don't really want to touch the superannuation yet. That's completely fine. 

 

Leave your superannuation as it is if you do not want to touch it. 

 

It will continue to be invested and accumulate as it has been. 

 

The only difference now is there's no contributions coming in from an employer. 

 

Leave it until you're ready, if that's what suits you. 

 

What we do tend to see as well is an option where you can withdraw lump sums. 

 

Very often those early days and months in retirement is where the caravan is bought or the caravan is upgraded or there's a holiday, for example, and maybe you just need that little extra injection of cash to keep you going for those first couple of months. 

 

You can leave the superannuation and just take a withdrawal lump sum and then leave it in the superannuation account until you're ready. What tends to be quite common, though - and probably the preferred way of structuring your super when you get to retirement - is using a product called an income stream. 

 

An income stream is basically structuring your super in a way that you're getting a regular feed of income into your bank account just like you were used to managing your money when you were working. 

 

This is probably one of the most tax effective ways of you structuring your money when you get to retirement. 

 

Now, you can use this product even if you're still working. It's called the Transition to Retirement. So, a slightly different rule is attached to it. 

 

We are going to cover these products extensively in the third session we run in May. 

 

And the reality is maybe you want to do a combination of all. 

 

Maybe you want to leave a superannuation account open. Maybe you might have an inheritance coming your way and you know you're going to have some money you need to feed into the system. You have to put it into a superannuation account so you may leave it open. 

 

Maybe you will want the lump sum withdrawal to support that one big cash injection, that one asset that you want to buy, and maybe you want the income stream to be the source of income that's funding the bills. 

 

You can do a combination of all of these. 

 

It's incredibly flexible. A lovely way to structure your superannuation if you have figured out what's going to work well for your household. 

 

So, if you want to visualise how using an income stream product in conjunction with the Age Pension works, effectively, as we talked about, the vast majority of those who are currently in retirement in Australia will be using a blend of this. 

 

Now, the amount of money coming from the Age Pension will vary per household, and the amount of money coming from the income stream will vary per household. 

 

But the reality is that there are potentially those two sources of income for most of us, anyway, to get to that magic number that we're trying to get to when it comes to working out what we want. 

 

So, we talked about a forecaster earlier on, about how you can feed your situation into a modelling forecaster to get a bit of a taste as to whether you're close to what you're trying to do or whether you have a bit of work to do.

 

- And there are a lot of forecasters out there. Although some of them may vary in assumptions and what you can do, they will all give you a very good idea of what we talked about earlier: are you on track? 

 

So, again, if I can just take a step back, really encourage you to think about those needs and wants and to think about that budget and determine what your income may be. Then think about using a forecaster to see what your superannuation savings will afford you or what they will afford you at the moment without intervention. 

 

Now, the important thing with the forecaster is it is just a forecaster. Okay? It is to provide you an indication to allow you to really start building some comfort or to think about the action that you should be taking. 

 

The forecaster that we offer allows you to put in some simple information around your age, whether you've got a spouse or a partner, your superannuation savings, your salary, if you're still working, and also thinking about when you want to retire. 

 

It also allows you to do a few other things, which Ruth will actually come to later on, about what happens if you change investments or make additional contributions or take different actions, but we'll come back to that. 

 

What's important when it comes to the forecaster in this case is, again, it's a tool that allows you to play. And I encourage you, don't just use it once; use it to actually look at different outcomes. Okay? 

 

Again, it's thinking about that point I made earlier, your income will ebb and flow.  Use the forecaster to look at how that ebbing and flowing may actually have an impact. And even think about, well, what if your wants are actually more than you first thought you'd get? Or what if you think your needs need to be higher?  Play around with it. 

 

Let's take as an example - we've got here a couple that have a combined income at the moment. They are just in their late 50s/early 60s. They are approaching retirement with a combined income of about $120,000, and also combined superannuation savings of $100,000. Now, what I would say to you is that $100,000 is sitting in two separate accounts, but we're just lumping it together as they pooled assets that they have. 

 

They're aspiring in this case to actually receive that comfortable income in retirement that Ruth was talking about earlier, which is about $65,500. By using the forecaster, what we've actually seen is that, for the first 10 years of their retirement or just after that, they've actually achieved what they wanted. They've achieved that comfortable lifestyle, but a couple of things to note. 

 

The first thing is that you can see in those first couple of years of retirement a lot of that amount is being fed by their superannuation in the year before they're eligible for the Age Pension. 

 

But then for the years that follow their dependency on the Age Pension is really large. And, again, putting in context what Ruth said earlier, those needs may be covered but the wants that their superannuation would help fund, maybe they can't be taken into account as much. 

 

What you then see, though, with this forecaster is that for the majority of their retirement they are completely dependent upon the Age Pension. 

 

And what the forecaster here is doing is indexing that Age Pension a little bit each year, but really it's not giving them the lifestyle that they want.

 

And the second thing is it's completely dependent, especially in that later part of their retirement, on the Age Pension. 

 

So, it's a really important consideration. 

 

- And I think as well to that, the other consideration is there is no emergency funding in this. 

 

Superannuation can also be - yes, it can help you have a nicer lifestyle in retirement, it can help you meet more of those wants, if you like, and the niceties you'd like to have during retirement, but there's something very comforting about having a lump sum of money to fall back on on a rainy day should something go wrong. 

 

A lot of people also like to know that there's at least a small pocket there for an emergency fund. If you're relying week to week on the Age Pension and your washing machine breaks down or your car breaks down, where do you go for those little lump sums?  Having superannuation can be seen as well by many as an emergency fund.

 

- My parents go to their youngest.

 

- They go to their youngest, do they?

 

- Yes.

 

- He must be rich. 

 

- I wish.

 

- If you've used the modelling forecaster and you're not in love with what you saw and maybe you're a little bit concerned by the results of that, there are some things you can do. Okay? 

 

Even if you did use the forecaster and you thought, 'Well, I always assumed I'd have to be living quite a modest lifestyle but maybe I can actually achieve more. What can I do now?' 

 

Realistically, if we bring it back now into your superannuation account and what you can do, there are generally two main levers that you can work with. Those two levers, particularly as you're still working for those last couple of years in particular, are around getting some money, some extra money into the system in whatever way that could be for you and also thinking about what happens to that money once it's in your account.  In other words, how is your super fund investing it for you? 

 

And that's an important part of the conversation, investing your superannuation.  We often get the question around, 'What happens to my super when I retire?' 

 

And the reality is, I told you already, it can just sit in the superannuation if you want and accumulate investment returns. 

 

Now, even if you've decided to structure it in an income stream product and have it fed to you on a regular basis, it still needs to be invested. 

 

For many Australians, that investment performances is making up an awful lot of what they're being fed into their bank accounts every week or every month or every fortnight, however you want to be paid. 

 

So, considering how your superannuation is invested at and leading into retirement is probably one of the most important times to really understand what your fund is doing with your money. 

 

For many of us we're aware of this, but your superannuation is market exposed by default. 

 

So by nature, if you've never selected an investment portfolio, there is an awfully high chance you will have a significant amount of your money on the sharemarket. 

 

Now, by 'significant amount' I'm going to say generally it would sit between somewhere about 35 per cent to 55 per cent of your balance could be on shares. 

 

And that is why we tend to see our balances fluctuate quite a bit with superannuation. But we can't be scared of the fluctuation because those kinds of investments are what actually also generate the majority of those returns that we all want to have in our superannuation. 

 

So, we've got to think of the timeframe when we're assessing how much risk we're willing to take. 

 

Super is an unusual kind of investment; it has a long timeframe attached to it. 

 

If you're 60 and you're Josh and you think you're going to live till you're 90, you're working with a 30-year timeframe here, and you have to be realistic about that. 

 

And it's also worth reminding you, you do have choice as to how your superannuation is invested, and it's something that you should be exercising and comfortable with. 

 

You do not want to be going to bed at night worrying about your superannuation balance, balancing around; we have enough to worry about without worrying about that. 

 

So, make sure you're having the conversations to understand what's happening to the money, how exposed to markets am I, and what does that mean for my balance. 

 

If I remove myself from that market exposure what does it mean for my balance and the growth of my superannuation and the returns I can get throughout retirement?

 

- Let's talk a little bit more - and they're all really important points. I know we say this bit, but we will cover that off in detail next week.

 

- We will.

 

- We're actually going to be joined by the Australian Retirement Trust Chief Economist next week, Brian Parker, who will also provide an economic update and talk about a lot of those elements that Ruth has just been covering off. 

 

What I want to pick up on, though, is that point where Ruth talked about market exposure. 

 

Maybe while I'm doing that, would you mind checking in and seeing whether we have any good questions that have come in. Because we're getting to that point, if you really have questions you want answered just make sure that you are feeding those through, because we will come to Q&A shortly.

 

- I did see a question come through before when you were talking earlier on, and it was actually a question trying to tackle inflation. 

 

I think inflation is a concern many people have at the moment, and how do I invest my money in a way that I'm not just keeping up with inflation but I'm actually out-passing that but also able to sleep at night.

 

- It's a really great question. In two slides, if I haven't answered that can you remind me?

 

- I'll remind you to come back to it.

 

- All right. The first thing to think about, as Ruth said, is that your superannuation is market exposed.  And as she also said, if you've made no choice - the vast majority of Australians have never made a choice about how their super is invested - this is where about half of it will be. 

 

Now, depending on your age, with Australian Retirement Trust if you're in our Super Savings product, if you're under the age of 55, about 50 per cent of your balance will be in sharemarkets. 

 

If you're actually over the age of 65, this will be closer to 30 per cent. 

 

Shares are really important because, although they are volatile, they're also what gives very strong growth opportunity, and we've seen that historically. 

 

And, again, that is something we'll look at in considerable detail next week. 

 

But traditionally superannuation funds have used the sharemarket, and then they've tried to balance out that volatility by using cash based investments, what we call income assets. 

 

These are things like cash assets and also fixed term investments, bonds, the like. 

 

What we've seen recently, though, or over the last 20 years in particular is that these markets just do not provide the returns that they once did. 

 

Think about your own bank account. Certainly previously to interest rates going up you weren't getting a lot of investment return for them.  And the bond market following the GFC has just not provided the returns it once did. 

 

What that meant for superannuation funds, particularly large superannuation funds like Australian Retirement Trust, was we really had to think about, well, how do we get broader opportunity outside of those traditional markets? 

 

That's why, although you will have large exposure to shares, and also those income assets, you will also potentially have exposure to things like infrastructure, which provides a great income revenue source - airports, toll roads, rail lines - things that people use that generate income but it also has a really great value to it. 

 

We also invest in property. 

 

This isn't just a house on the corner that some people like to invest in as a residential property investment. 

 

This is a whole range of different investments. 

 

Commercial, industrial, residential, aged care. 

 

We diversify across thousands and thousands of properties globally across all those different sectors to give you the best growth and income opportunities. 

 

And we also invest in private capital. 

 

These are companies that are not listed on the Stock Exchange, but major companies in their own right that make very sound investment opportunities for us. 

 

So, we take all of those and, as I said, if you're under the age of 55 and you've made no investment choice, that's fine.  But if you've made no investment choice this is how that would look for you. 

 

About half of your money in shares, as I said, and then about another 20 per cent in what we see as being aggressive assets - property, for example, private capital - and then the remainder in things like cash and fixed interest. 

 

We have you there when you're 55 or up to 55 and then after the age of 65 we have you in our retirement option. 

 

The same assets but you can see here the mix has changed. 

 

You now have less money in those growth assets and a higher amount in those more secure income assets. 

 

The reason for that is, obviously, as you approach retirement we want any volatility to reduce for you. 

 

Between the ages of 55 and 65 we have you in what's called our Lifecycle Option that basically moves you gradually from one to the other. 

 

But Australian Retirement Trust, in our Super Savings product, offers you actually a whole range of investments, nearly 20 investment options. 

 

They also include more aggressive multi-asset investments like the growth option I'm showing here.

 

Higher exposure to those growth assets.

 

As well as at the other end of the spectrum, our conservative option, which has a higher exposure to those income assets. 

 

Now, we're asking you to investigate a lot tonight, and what we encourage you, as we've said, investigate your income needs, investigate the Age Pension, investigate what age might be the retirement age for you. Also, investigate where your money is invested and how you feel about that. 

 

That is actually where we'll pick up the discussion with our Chief Economist next week, on that very point. 

 

The next thing that I wanted to really go to, though, is we talked about investments being important, and you've got this pool of money on which investments are earning growth and really doing compound interest work. 

 

What's the other way you can shift the dial? 

 

- Look, the other way you can influence what your balance will be when you get to retirement is by taking a bit more control of what's going into the account. 

 

So, historically many of us rely just on our employer to put money into our superannuation and that comes through a channel that we call a concessional bubble of contributions, also known as a pre-tax. 

 

And there are ways you can benefit from that concessional method. 

 

It's referred to as concessional because it's taxed at 15 per cent, basically. 

 

Now, again, we're going to cover this in a lot more detail in the next session next Thursday night, so if you are interested in getting money into the fund, really strongly encourage you to join that session. But it is about knowing that that concessional method of getting money into the fund comes through the employer, comes through a salary sacrifice arrangement you might be doing through the payroll arrangement with payroll, or through money that you're contributing and you're claiming a tax deduction on. There are some rules and regulations about how much of that you can do, and it can change depending on your income as well. 

 

So, we'll go through that in more detail, but generically that's how most of our money is entering the system. 

 

What we tend to see happen, though, as we get older is a much bigger appetite for feeding money in through what we call an after-tax method. This is essentially getting money into your superannuation account when it's already in your bank account. 

 

So, if the money already sits in your bank account, a rule of thumb is generally, look, it's already taxed money so the government has zero interest in taxing that money again on the way into super; nor has it any interest in taxing it on the way out of super. We are going to discuss this in great detail in our third session -

 

- Tax is a very big part of it.

 

- Tax is a big part of that last session. 

 

But it is nice to just get a bit of an insight as to the concessional method. Generally for those who are working. If you're not working and you've got money - often an inheritance can come into play, for example - there is a way to get the money directly from your bank account into superannuation. No, you will not pay tax on it going in and, no, nobody will pay tax on that contribution coming back out again. 

 

There are other ways money can enter the system or other incentives to put money in.  Lower income earners can often be incentivised to get money in through the after-tax by the government co-contribution.  We'll discuss that in more detail. 

 

But also as you're getting older the reality is it's not an unusual practice to see people downsizing their principal place of residence. I have three kids and that means lots of space needed.  When they're all gone and left me to get my sanity back, maybe I will also want and need to downsize that home.  That could often leave you with a lump sum of money that you maybe want to invest.  There is extra opportunity for people to invest the sale of the proceeds of their principal place of residence, again with the intention of boosting that superannuation balance.

 

- Just think about how boring your life would be if you didn't have those three girls, though.

 

- They will probably give me nine grandkids to replace them with.  I'm sure I'll never be bored. 

 

Look, we've just talked in very high level and we haven't gone into detail on investing your superannuation or contribution strategies; that is for next week. 

 

But if we were to say that the couple that Josh introduced us to earlier on were to make some tiny subtle changes to what they're doing at the moment, and if they were in a position - maybe the mortgage is paid now, maybe their last child has gone and is no longer in the household eating all your food and there's an extra bit of cash around the place.  If you can afford to contribute a little bit into superannuation, this particular couple who did execute some very small subtle strategies - those being changing the way their superannuation was invested and, therefore, able to get a little bit more return, but also if they were both able to invest some money, up to $10,000 each, into their balances, how would that impact what their retirement would look like?  And if you remember the first graph - you're probably better than me, if you remember it specifically - in that first graph the superannuation ran out at the age of 80. 

 

So, those individuals who were trying to create or meet that comfortable retirement lifestyle were able to do it, and then their super ran out at the age of 80 and they were relying wholly and solely on the Age Pension beyond that point. 

 

Now, what you're seeing here is by some subtle changes - and we're not talking about changes that are going on for 25 years. Remember, these are only in those last couple of working years in their life. But what we can see is that little safety net, those little blue bits on the bottom is the superannuation. 

 

And whether that's going to be helping you to fund more of those wants or whether that's going to help you sleep better at night because it's an emergency bracket, whatever it might be, then that superannuation has a better chance of going right throughout those retirement years if you can get it boosted through those subtle little strategies earlier on.

And it's important that -- we often talk about, okay, as you get closer to retirement, those subtle strategies sometimes need to get a bit bigger and a bit stronger.

 

- Yeah.

 

- But especially for any of you who are still some years off your intended retirement, maybe like me, you know, you are nudging 50, you have still got years to be subtle.  You have still got years that you can make decisions now that year after year after year will actually make an impact.  For those of you closer to retirement -- and this is a lot about what we will discuss next week -- there are opportunities there, but you have to be a bit more strategic, you have to be a bit more thoughtful and maybe -- there is a bit more there to weigh up and consider than making these subtle nudges.

 

- Yeah. I also think to that point that as you are getting closer to retirement and as you are getting closer to the age of 60, the risk of putting money into superannuation to some extent disappears. Not disappears with regards to investing, but with regards to you being able to get it back out again. So the fear for many young people putting money into super is what if I need it, I can't get it back out until I’m 60. The closer to 60 you are, the less that risk is there for you. You know the reality is you will be able to access that in a lot less years than if you were contributing significant amounts at the age of 40, for example. Just another point to bear in mind if you have access to money you have put into the system.

 

- Absolutely. I do know I haven't answered that question.

 

- You haven't. I haven't forgotten and I have since had another interesting one pop in so I have two now.

 

- So let's answer it now and then we will move to Q&A. We are aware that cost of living is difficult for many including ourselves.  It is something that we also talk about around the water cooler each day. And so, Australian Retirement Trust being one of the largest superannuation funds in the country doesn't just have access to great investment opportunities. We are also really attractive when it comes to retailers and suppliers around the country who want to offer us benefits we can pass on to our members. As a member of Australian Retirement Trust, you have access to our Rewards Program. This program gives you real discounts on everyday items. And this is everything from considering fuel in some cases to thinking about cards for groceries, right through to white goods and other things. So really, I encourage you in trying to find those little savings and those things that can help, please make sure you use stream rewards. Where times are good and that helps you save more money, then you can actually think about putting some of those savings into your superannuation, those nudges we were actually talking about. 

 

Now, we appreciate that we've gone through a lot tonight. And we do have the workbook to help you actually go a bit further. But if you want to think about those next steps, we encourage you -- and some of these things we haven't covered off tonight, but just in doing some general housekeeping. Download the app if you haven't already. And the reason why we say that is when you download the app, you are more aware, you are more connected.  But it also helps you with some of the things that we've talked about tonight. It helps you to get a handle as to where you are and start to do journeys like with the forecaster. Track down any lost super you may have, and we can assist you with that. You are at the age where you really need to make sure that you've got all your super together, that you know where it is, and that you are really maximising the opportunity with it.  o do consider consolidation and, again, that is something that we can assist you with in that regard. When that housekeeping is done, then think about those income needs that we talked about right upfront. What are your wants, what are your needs? Do a bit of a budget and then also do the forecaster and see whether that budget is going to be met. That will allow you to think about, well, do I need to do those nudges? Will they be subtle? Will they be large? Or actually, I'm in a much better position than I thought I would be. I can relax a bit. Also, though, consider your Age Pension eligibility. Think about your age, think about the assets test and the income test. 

 

Now, we've promoted a lot tonight. There’s sessions that are coming up next week on the 27th of April and also on the 4th of May. My birthday is smack bang in the middle, just a reminder, Ruth. So if you do want to come to that session, if you haven't already registered, please just use the QR code and you can register now. Otherwise, in the email we are sending you immediately following this event, you will be able to register to actually go a bit deeper into those contributions and investments that we've talked about as well as accessing your super in retirement.  And again, a plug, we will have our chief economist, Brian Parker, who many of you may know, join us next week. He will be here with Ruth and I and we are pretty excited about bringing him into the conversation. 

 

The last thing, though, for many of you, you may be thinking, well, I've got a lot of what I need and I want to further the discussion now. What you can actually do as a member of super savings product with Australian Retirement Trust, get access to our advice team. And they can talk to you about anything that we've gone through tonight. They can start talking to you about that forecaster, start talking to you about the Age Pension, start thinking about those nudges that you may need to take.  Give us a call. That is at no cost when it comes to your account with Australian Retirement Trust. It is a brilliant benefit, but Ruth often says it's only a benefit if you use it. So make the most of that. 

 

If you do want to take that advice journey further, then you can also come through to us and we can make that discussion go further and that might include bringing in an external independent adviser to assist you. There would be a cost associated with that, but it is an area we can help you with. The QR code on the screen will help you to actually go through and make that appointment if you wish. 

 

But let's come to Q&A in the minutes we've got remaining. I will come first to the question that came up around inflation. Inflation is a concern. I mentioned it in my opening tonight. It's important that when it comes to our investment performance, we are not just thinking about how are we performing against other superannuation funds. Our main benchmark when it comes to our performance isn't them, our peers or competitors, although we're considerate of it, our main benchmark is what are we giving you in real return above inflation. And, yes, inflation is running hot, but we've got to think about the returns that we are giving you over a long period and what they are above inflation. I don't want to steal his thunder. We will absolutely make sure Brian gets those questions for next week, and inflation will be a key focus. But know for us that when we talk about performance, that is absolutely something that we are aware of. 

 

- There is also -- first of all, I will answer a question first and then I am going to throw one. A couple of questions to transition to retirement product. We didn't cover it in detail tonight. We absolutely will in the third session. I will put to bed one question though. If you are still working and you are using the transition to retirement product, you will be limited to 10% of the balance. So that basically means that, yes, you can access super at the age of 60 if you are working through that transition to retirement product, you will be capped at 10% of the balance per annum. That can come out in one lump sum. If you are over 60, it will be tax-free or you can have it drip fed. There is lots of beautiful opportunities you can use our transition to retirement product for. It's not just about accessing money. You can use it as a tax effective strategy and use it as a way to actually transition to retirement and start reducing your working hours. We will be covering it in a lot more detail in the last session. 

 

A couple of questions, one I think you may be able to answer it quickly.  'm going to tell you to answer quickly: what steps is Australian Retirement Trust taking to reduce data breaches? That's a really topical question. Thanks to Laura, I think, sent that question in.

 

- Really great question. I know, again, it's topical because we've seen latitude in the news recently about their data breach, but I actually go back even further than that. We've seen major breaches when it comes to Optus, AHM, I was caught up in that breach myself, it is really, really important. And when it comes to superannuation, we realise that your superannuation is one of the major investments or major assets that you have. So data is something that we take very, very crucially.  It's something we're very much aware of. So when those major events occur, whether it's Optus, whether it's Latitude Financial, whoever it may be, those events are really great reminders, but it's important for you to know we are always stress testing our data, we are stress testing access to our data. I would actually say that at Australian Retirement Trust, yes, we're a superannuation fund first, but we then see ourselves as also being a data organisation. So it's really important that we make sure your data is secure. So I want to give you absolute peace of mind we don't just take notice when it hits the headlines. This is something we've been focused on not just for the last 12 or 18 months, it's been a principal part of our philosophy for many, many years and will continue to be, and, in fact, one of the significant areas that I know as staff that we have to go through is data security and how your information is protected. So please have peace of mind that we are here to make sure your data is protected so you can actually spend your time thinking about what you will do with that money and how it can best work for you.

 

- Thank you, Josh. There is another question. It came quite early in the piece. And a similar question in the pre‑submitted ones. It's actually about -- it's quite topical at the moment, property. What would you suggest or what considerations should I be thinking about if I'm thinking about accessing -- I said earlier on, you can access all of your superannuation in one hit and you could use it to purchase a property if that's what you wanted to do. But it's not just thinking about it as an investment. There are other considerations to think about when you are looking at property as a way to spend that money, for example. 

 

- I think a lot of people go, I can access my super, I will put it into a property. I think it's hard to unpack, but a few things to consider. Firstly, why are you doing it? Is it going to provide you income and return greater than what you could get in super? That's one thing. Is it going to allow you to sleep better at night or is it actually going to add to your concerns financially? That's another consideration. 

 

The other considerations are, if I forget to come to them you can remind me, the other two are to do with tax and the Age Pension. I will tackle the Age Pension first. If you invest that money in a property, it is now -- and if that's an investment property, it's now an assessable asset. The government will be looking at it. We will come to Age Pension a bit more in terms of how that works with superannuation in later sessions, but you have got to realise there is no putting it back.  nd there is considerations there. The second thing, though, is in terms of tax. If you move it into a property as an investment, for example, there will be tax implications. Capital gains tax is now absolutely a consideration. Superannuation, however, tax free environment if you are over 60. Tax free investment earnings, tax free income, tax free withdrawals. You don't get that with the property. Last thing to consider -- and I have made a long response, but last thing to consider: what happens if you need a lump sum? You can't sell the lounge room. Okay? So if you move that money from superannuation into property, for example, are you cutting off access in a different way? The discussion's different if you are thinking about using your super to bring down your mortgage or things like that, and maybe that's something we will pick up in the next week.

 

- Yep. I think looking at the time and going on my tummy rumbling, I think it's dinner time. And time to let the audience have their own dinner.

 

- We would like to sincerely thank you for being on this journey with us tonight. It has been a new area of content for Ruth and I. Something we've talked about previously, but maybe in a whole different way. Thank you for also being with us with our trips and stumbles. But we really do look forward to those of you that are going to join us next week, remembering as I said our chief economist will also be with us and we will be beaming him in live from Melbourne. And we really hope to see you there.  In the meantime, have a wonderful end to the week, a wonderful weekend and we will see you next Thursday night at 6 o'clock eastern standard time. I am from Sydney, so I am still trying to work out daylight savings.

 

- It's over.

 

- But please, register for that event if you haven't already and we look forward to seeing you then. Thank you, Ruth.

 

- Thank you. Have a great night, everyone.

Anne: Hello and welcome to Super Insider, Australian Retirement Trust’s podcast series on investment markets, the economy and most importantly, making sure you retire well with confidence. Today we're sitting here in Meanjin otherwise known as Brisbane Turrbal and Yuggera Country, and I'd like to pay my respects to elders past, present, and emerging. Well, who am I? I'm Anne Fuchs Executive General Manager of Advice, Guidance and Education here at Australian Retirement Trust.

And the team and I help our 2.2 million members make the best possible decisions so that they can put their feet up and enjoy their retirement. Now with me today is a bit of a celebrity economist. Brian Parker, the Chief Economist here at Australian Retirement Trust who's wearing a new tie and it's one of the reasons why our Consumer Price Index is not going down by the looks of it.

How are you, sir?

Brian: Well, thanks very much and it's great to be with you.

Anne: And today we're talking about what's been happening the last quarter in terms of the economy, investment markets and investment performance for Australian Retirement Trust.

Brian: Absolutely. But before we do that, we have to keep the compliance team happy. I know this is their favourite part of the podcast. So, ladies and gentlemen, before we begin, I need to let everyone know that what we're going to talk about today is general information only. Any advice doesn't take into account your personal situation.

You should consider your circumstances and think about getting personal advice before acting on anything we discuss. You should also consider the relevant Product Disclosure Statement and the relevant Target Market Determination before deciding to acquire or continue to hold any financial product from our website or by calling us on 13 11 84 if you have a Super Savings account or 1300 360 750 if you have a QSuper account.

Anne: Well, that was a bit of a mouthful, Brian.

Brian: It was actually.

Anne: From a Super Insider point of view of which you are, as the Chief Economist of one of Australia's largest funds, Brian. What has been happening in the world of investing over the last quarter since we last spoke?

Brian: Look it's been another pretty strong quarter for financial markets. In fact, it really culminated, it's really sort of been the culmination of quite a strong year for financial markets. You know, there's an old adage that share markets climb a wall of worry and there was certainly plenty of things to worry about in the last 12 months. So, you know, rising interest rates, cost of living pressures, etc., you know, stubbornly high inflation rates both here in Australia and internationally.

Brian: And yet despite all of that and again, of course the ongoing war in Ukraine, but yet despite all of that, we actually saw share markets around the world perform pretty strongly, which is and that really did sort of turbocharge superannuation returns over the course of the year. And that's certainly what we saw during the June quarter as well.

Anne: You wouldn't sort of think it if you watch the news every day and you just see what see the stories that are coming on the news and to your point around rising interest rates, geopolitical risk, you would think that things are particularly dire and that's that your investment performance in your superannuation wouldn't be great.

 

Brian: Yeah, that's right. But yet, you know, the end of the day, given that most superannuation funds maintain a fairly significant exposure to Australian and global equities, global shares, you know, that really, and if you look at the major world share markets, you talk about returns are better than 20% for the year. In fact, the Australian share market kind of underperformed, you know, we only did 14% for the year and so, you know, certainly shares did very, very well, bonds not so much so, it was a very, very challenging year for fixed income markets. It's actually been a very challenging year or a challenging couple of years for fixed income or bond markets because you've seen a sharp rise in market interest rates and that means the price of bonds tends to fall. And so, returns from fixed income haven't been great, but shares have done very, very well.

Anne: So if you're looking at the major economies around the world that feed into the investment performance of our members retirement savings, Europe, USA, China, are any of them in recession or do you think any of them are going to go into recession?

Brian: Yeah, it's a really good question. I mean, right now Europe is in recession. It's a very mild one so far, but certainly the eurozone economy has fallen into recession, so far, the United States has actually held up very, very well. You know, especially if you look at the numbers on employment, the US labour market remains very, very strong.

Anne: What’s driving that, Brian?

Brian: Just underlying very, very strong demand for labour, that at the end of the day the US economy is proven to be a lot more resilient than many people might have thought, including this little black duck six months ago.

Anne: I'd never call you a black duck, but that's fine.

Brian: A large duck maybe. But at the end of the day, you know, so far, the US economy has proven to be very resilient. The Chinese economy, you know, you might recall last year when you had another round of COVID lockdowns in China and that certainly curtailed a lot of Chinese economic activity. And as we went into 2023, I think everyone was expecting this big surge in Chinese activity.

And you've seen something of a surge, but it's kind of been a bit lame. The Chinese economy is growing and that's great and that's obviously very, very important for economies across the region, including Australia, obviously. But I mean, so far, the world economy has held up reasonably well. Europe is in recession, but I do think it's worth acknowledging that over the coming 12 months or so, given the fact that interest rates have risen very aggressively around the world, not just here in Australia, but interest rates have gone up aggressively, that is going to increasingly impact on the performance of a whole range of economies around the world.

So, you know, will we end up with a global recession? We think the risk of that is still pretty high, but suffice to say, I do think economic conditions are probably going to get a bit tougher as the as the as we get into 2024 just given the impact of higher interest rates.

Anne: So, what have been the themes that have really influenced why Australia's performed so well?

Brian: In an economic sense? (Yes), Yeah. I just think that when you look at the cost-of-living pressures that are out there and they're very, very real, so certainly low to middle income households, households with substantial mortgage debt, especially mortgage debt, that's been taken on in relatively recent years. People who are renting have certainly felt the pinch. But at the same time, when you look at the consumer, the Australian consumer, in aggregate, you know, consumers have still been out there spending for much of the last twelve months.

Anne: Yes, like you buying new ties for Super Insider, nice of you to do so.

Brian: Absolutely, it's not quite brand compliant. You of course are brand compliant as always, but at the end of the day, I just think that, yes, consumers actually have maintained decent spending in aggregate, but I also think that's probably going to slow down quite considerably. We're already starting to see some signs of that in some of the retail spending indicators, and it's really higher interest rates starting to bite.

Brian: And I think this is going to continue to impact on the Australian economy over the next 6 to 12 months.

Anne: So, since we met last, I'm delighted to note that another glass ceiling has been shattered at the Reserve Bank of Australia, so particularly excited to see that. What does that mean and what does that mean for interest rates if our members are wondering?

Brian: I don't think it actually means that much. Michele Bullock has been Deputy Governor of the RBA throughout this, you know, cycle of, you know, higher and higher interest rates. Would interest rates, would interest rate policy have been any different over the last year or two if Michele Bullock had been governor? I think on balance the answer to that is no.

And I don't think it really changes the outlook. I think given that, you know, Michele has been right at the very highest level of decision making in the bank for some years now, I don't think things would have been done any differently and I don't think the change of governor actually changes the outlook for rates terribly much.

Anne: And are you prepared to make any predictions? I know you.

Brian: I’m an economist, I don't do that right?

Anne: So, around inflation in particular and interest rates obviously you know, interest rates have been on hold for a little while now, the last two, but what's your view on where this might be heading with inflation seeming to trend down?

Brian: Yeah, look, I think it's when you look at the inflation figures, it's pretty clear that inflation in Australia has peaked. That, you know, you are seeing a slowdown in demand. We are seeing some of those sort of goods price pressures, supply chain pressures, commodity price pressures start to roll out of the system, but we think that that continues.

So, I do think inflation continues to grind its way lower over the coming years. For the Reserve Bank's perspective, you know, have they done enough with interest rates to slow down demand and to take some of the heat out of spending so that, that down trend in inflation can continue? I think the answer to that is yes. Could I rule out another rate increase? No, I couldn’t.

And it certainly the Bank has made it pretty clear that they still think there's a risk that they might need to do more, but, you know, given the fact that they've, they've you know, they've done nothing now for two straight meetings, yes, there's a risk of maybe one more increase out there, but, you know, interest rates are very, very close to a peak at the very least.

Anne: Do you think, though, unemployment is still very, very low and we are going to see an increase in migration to particularly skilled labour, is that going to impact, put any pressure on inflation, do you think?

Brian: I think it actually takes some of the pressure, some of the heat out of the labour market, if I can put it that way. And it's kind of complicated because on the one hand you bring in more migrants and that increases demand in the economy, which all other things being equal, might force prices up. But at the same time, to the extent that some of the some of the inflation pressure we've seen is being driven by, you know, labour shortages, especially in the Services sector, you bring in more people, you take some of that pressure off. (That makes sense.)

What's really interesting is that if you think about the last 12 months or so, we brought in over 400,000 new migrants and yet the labour market swallowed them up whole. The unemployment rate barely budged and that's really quite remarkable. It shows you just how much demand for labour there has been out there and that demand for labour has softened a bit.

But when you look at things like the level, the number of job vacancies out there, especially the number of job vacancies relative to the number of people looking for work, I mean, that ratio is still very, very high historically, and not just here in Australia, it's also historically high in the US and elsewhere. So labour markets remain very, very tight.

You know, things are easing, are they easing fast enough to keep the central banks happy? Let's see over the next few months.

Anne: So, what does all of this mean? We've just published investment performance for our Australian Retirement Trust members. What does all of this mean in terms of the end result that our members are getting on their very precious retirement savings?

Brian: Look, it's been a reasonably solid year, especially for those portfolios that have had a significant allocation to equities. Equities have done very, very well. So, all other the things being equal, if you're in in a portfolio with a higher allocation to equities, you've done relatively well. If you're in a portfolio with a lower allocation to equities or a higher allocation to fixed income, you’ve probably still done okay.

The returns are probably been still on average pretty, pretty good, at least positive, but you haven’t done quite as well. So, it’s been that’s been pretty much the main differentiator over the last 12 months or so.

Anne: Swings and roundabouts. So if, you know, we have our QSuper members and members who are in the Super Savings, there are some different, I guess, investment philosophies that are at play that feed into those swings and roundabouts informing investment performance. What’s your, what's your message to our members around understanding investment performance on their account?

Brian: It's a really, really good question because certainly you've seen quite a, quite a significant gap between the performance of ART Super Savings portfolios and our QSuper portfolios. And a big part of the reason for that is the difference in allocations to shares and bonds. So, the way QSuper portfolios are designed, quite deliberately, is they're designed to achieve their long-term performance objective, and that's absolutely crucial.

At the end of the day, that's our main function as an investment team to, you know, deliver what's on the box if I can put it that way.

Anne: Yeah, over the 10 years.

Brian: Absolutely. Over rolling 10-year periods. And certainly, those portfolios have achieved their objectives by and large and that's great. But crucially, they're designed to do that by taking significantly less risk. So, what you tend to find with the QSuper portfolios is they tend to have a higher allocation to fixed income and a lower allocation to shares. And that certainly means that in a year like the last financial year, there has been a significant gap opened up between…

Anne: Because of this huge uptick in the share market.

Brian: Absolutely, because the Super Savings portfolios tend to have a higher allocation to shares and a lower allocation to bonds. Now, this is a bit of a swings and roundabouts game from one year to the next. You know, you will see differences in performance.

Anne: So, your message is if you're if you're losing sleep at night, we always say this. If you're losing sleep at night, that's a really bad you know, if you're losing sleep at night, how do you say it? I’ve gone blank.

Brian: I think it's, it’s a rule to live by. You know if you're doing something with money which is causing to lose more than

Anne: That's what it is.

Brian: about 2 minutes of sleep a night. It's your body telling you something. Your body is telling you you're taking too much risk or you're doing something wrong. And the best solution to that, I think, is to get advice. And this is where your team really comes into the comes into the, comes to the fore.

Anne: Or our, or external financial advisers who, there's 4 and a half thousand of them that work with us here at ART.

Brian: Absolutely. And to any of our members, if you are worried about what's happening with your portfolio or what's with the state of the world or markets, if you have a financial adviser, get on the phone and call that person and say, let's have a chat. If you don't have a financial adviser, contact Australian Retirement Trust.

Anne: Look, if you're wanting more information, going to our website is a great place to start. And if you have family or friends that are members of Australian Retirement Trust, we'd love you to share this podcast with them so that they can also understand how their retirement savings are invested. What's your one final message for our listeners, Brian?

Brian: Oh, look, I think at the end of the day, let's remember that superannuation is the longest-term investment any of us are ever going to have.

Anne: Besides maybe the family home if you buy it and you never move.

Brian: Well, at the end of the day, if it's a family home, is it an investment or is it a consumer good that you’re actually using?

Anne: Well, you probably get superannuation much earlier now too, so I'll retract that one. Yes.

Brian: But look, super is a very, very long-term investment and so let's make sure that we think about superannuation as a long-term investment and understand that from one year to the next returns are going to be somewhat volatile, that, you know, share markets are by nature very volatile. Investment returns will be volatile and the long-term reward, if you like, for tolerating, accepting that volatility is a better long-term return and a better retirement outcome.

Anne: Sensational, well look Brian, it's always fun. Chief Economist extraordinaire. So, thank you to our listeners and viewers. We hope you've enjoyed it. If you have to tell your family and friends, you can find us on Spotify, on Apple Podcasts, and we'll look forward to you joining us again soon.

Brian: Thanks Anne.