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Welcome to the April 2008 edition of Your Financial Future.
In this issue, we update you on what's happening in global investment markets and provide some tips on how to stay calm when
the ride gets bumpy.
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We introduce you to Australia's first government minister for superannuation, Nick Sherry, and review his priorities for the
retirement savings industry. We remind you about why it's crucial to provide the Scheme with your Tax File Number
and how you can benefit from the Government's Co-contributions scheme.
We also review why it's important to be in the right super fund with the right mix of assets when investment markets are unstable.
In addition, we profile Peter Hogg, the Newcastle-based financial planner who looks after the wealth creation needs of members from Port Macquarie to Gosford.
As usual, we also include an offer from the Fair Go Member Benefits program, and update you on how the different asset classes and investment markets have performed in the past quarter.
What's happening in investment markets?
A reminder about Tax File Numbers
As a result of legislative changes which came into effect from 1 July 2007, it has become more important than ever to supply your Tax File Number (TFN) to the Scheme.
If you don't, you may have to pay extra tax on concessional contributions and we won't be able to accept personal contributions from you. You may also miss out on Super Co-contribution payments.
Please call 1300 369 901 to provide your TFN to the Scheme if you have not already done so.
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Few could have predicted that bad weather in a small part of the US housing market would gather so much momentum and blow such ill winds across global financial markets.
It all started in the middle of last year when it emerged that pockets of lower income Americans who had been advanced subprime mortgage loans (high risk loans) were unable to re-pay them. Since then it has escalated into a full-blown global liquidity crunch and is likely to thrust the US economy into a recession.
The market became extremely jittery when the news broke. No one knew how deep the subprime lending problem ran and who would be hurt next. This uncertainty led to a credit crunch where lenders were afraid to part with their money, making it harder and more costly for companies to borrow.
Some companies, especially those which already had high borrowings, suddenly found that the taps had been turned off on their loans. Others found that the costs of funding their businesses were now much higher.
Part of the fallout was due to the fact that some institutions had become increasingly sophisticated at wrapping up debt and parceling it in complicated ways that may have disguised the underlying risks. This led to a renewed look at, and a re-pricing of, risks.
As a result, share markets bounced around nervously during the last six months of 2007. Since December, however, they have dropped sharply as more banks (and other companies) have notified the market of their losses and on the belief that there may be some more bad news to come.
At the same time, investors have become jittery about the prospects of the world's biggest economy, the US. At first they worried that it was heading into recession. These days, however, they debate how bad and prolonged a recession it will be and how it will affect other economies.
These conditions have started to rub off on Australian companies. Debt is now more expensive to obtain and the Australian dollar has recently been surging to new highs, hurting those companies who export or have operations overseas.
While the Federal Reserve has been lowering interest rates in the US, the Reserve Bank of Australia has been raising rates as part of its war against inflation. Inflation has been edging up as a result of the buoyant economic growth we've enjoyed in recent years.
Economists still insist that the fundamentals of the Australian economy are, and will remain, sound - despite the problems in the US. Australia is less likely to be hurt by problems in the US as we are far less dependent on the US than we used to be. That's because Australia has become increasingly reliant on Asian economies, many of which are still surging ahead.
China's economy, for example, isn't forecast to run out of steam after the Beijing Olympics end in September. Its economy is being fuelled by massive urbanisation which continues to create huge demand for infrastructure, housing and materials, which then creates demand for the resources Australia produces.
Nonetheless, Australian companies are still feeling the impact of the global turmoil as the recent interim reporting season revealed. Overall, companies still showed earnings growth, but many are tracking below forecasts. And, while most analysts still expect company earnings to grow, they expect the growth rate to slow this year.
So if these analysts are right and if the turmoil in world markets doesn't get worse, then Australian stocks could be in for a somewhat sluggish year as company profits underpin the performance of the share market.
What should you do?
Whatever you do, don't panic. This could lead to you taking action that you might regret later.
At times like these, it's a good idea to take a step back and look at the fundamentals underpinning the market. Market experts believe that both local companies and the Australian economy are still in good shape and, with Asian economies still growing, that Australia's prospects remain sound. Governments around the world are also taking steps to ease the pain caused by the fallout from the US subprime crisis.
It's also always a good idea to remember a few important points when it comes to investing, no matter what is happening in investment markets:
- Diversification is a key investment strategy which basically means not having all your eggs in one basket. If one asset class is yielding negative returns another may be in positive territory, helping to smooth out your returns.
- Superannuation is a long-term investment. While there may be short-term dips in market returns, the experts also agree that most carefully selected and age-appropriate strategies work well for investors over the long term.
- Keep in mind why you selected your investment strategy in the first place.
Choosing the right super fund
It's always important to ensure that you are in a good super fund with the right mix of assets that meets your needs and this is critical when times are tough.
Markets are cyclical and returns do rise and fall. When they fall, your account balance can be further eroded by costs and charges. Over a long period, this can make a huge difference to your savings.
Fortunately, as a member of this Scheme, the charges you pay are competitive, relative to the services you receive (remember you need to compare apples with apples when looking at different retirement funds), and you don't pay some of the fees that other funds may charge, such as entry, exit or switching fees. That's because the Scheme's trustee is not a for-profit company.
The Scheme is also part of a much larger not-for-profit financial services group which looks after the needs of more than 150,000 members and has funds of approximately $10 billion under management.
A key benefit of this is that the Scheme enjoys the economies of scale and enhanced bargaining power that it wouldn't otherwise be able to achieve. This scale allows us to negotiate a range of highly competitive life and other insurance deals for you which would be extremely hard to match on your own.
Further, as this group includes FuturePlus Financial Services, which is part-owned by your Scheme, we can provide you with a wide range of services, including access to qualified financial planners. As the planners don't earn commissions, you know they will give you advice that's best for you, rather than their back pockets. The planners also provide you with continued support after you retire.
As you may be aware, the Scheme has also worked hard to bring these services close to you. It has seven branches spread across NSW and the staff in each office are available to answer any questions you have about super or any of the services we offer. The teams also run numerous wealth creation and pre-retirement seminars at member worksites and in local venues so that family and friends can come along too.
You can also call our Member Services Contact Centre during work hours with any questions you have about your super and the Scheme's website has up-to-date information, as well as tools and calculators, to help you make investment decisions.
The Scheme is also working hard to help you cut costs on other expenses so that you can save more and further bolster your personal wealth. It offers you access to low cost home loans and, through the Fair Go program, discounts on a wide range of services such as medical insurance, phone contracts, travel, accommodation and entertainment. Look out for these offers from Fair Go in newsletters and on the web.
So, whatever your circumstances, we are here to help you. To find out more about any of the services we offer, or any of the ways we can continue to make this the right retirement fund for you, please call Member Services on 1300 369 901.
Don't forget the Super Co-contributions scheme
With the end of the financial year fast approaching, it's a good time to remember the Government's Super Co-contribution scheme.
The scheme has been highly popular since it was introduced in July 2003 with the aim to help low and middle income earners boost their retirement savings. The Government recently announced that it had already paid out over $1 billion in co-contributions this financial year.
The scheme is available to Australians who earn less than $58,980 a year.
To be eligible, you must make an after-tax personal super contribution directly into your superannuation account of up to $1,000 by 30 June 2008.
If the person owning that account has an annual income of $28,980 or less, the Government will match the contribution with a payment of $1.50 for every $1 of after tax contributions made. The amount the Government pays steadily reduces on incomes over $28,980 and stops after the income level tops $58,980.
To make an additional contribution, complete the 'Optional contributions' form found at
www.eisuper.com.au and send it to the Scheme with your cheque.
Meet your Financial Planner: Peter Hogg
Peter Hogg has fast become a recognisable face at many worksites between Port Macquarie and Gosford since joining FuturePlus Financial Services in September last year. On average, the financial planner spends three days a week out on the road meeting members and helping them through the complex world of personal finance and superannuation.
In addition to seeing new places and meeting new people, Peter loves the challenges of his job which he believes involves finding that workable solution to a complex problem that initially seemed unsolvable.
"The challenge will vary from client to client. It might be that they need to unravel a growing mountain of debt, or they may need to start salary sacrificing and building up a deposit for a home. Or, they may be looking to invest their hard-earned assets more wisely," he says.
Whatever the issue, Peter says his motto is: "Everyone is different. Each situation has to be considered individually." What gives him the greatest satisfaction in his role, however, is "making a significant difference, not just a small one".
Peter started his career in accounting, but quickly switched over to financial planning as he preferred client contact to number crunching and he found planning was more varied and hands on.
Before joining FuturePlus, he worked at a large national financial planning group, but says he prefers the profit for members, commission free values of the Scheme. "It doesn't matter how much money my clients have now. I am not chasing big clients or big commissions. It doesn't matter if the client has $100 or $1 million. What matters is that advice is unbiased and helpful," he observes.
Peter is now based at the office in Newcastle, a town he has grown to love since moving there at the age of six. "It still has a great small town feeling about it. It offers everything that Sydney does, without the chaos."
Create your own Will online with Fair Go
The Fair Go Will Service, brought to you by your Scheme, provides you with two options for creating your Will online - for as little as $20!*
Do-It-Yourself Wills - You can now create your Will online at home with the Fair Go DIY Will. This lawyer-approved product is written in plain English with step-by-step directions and explanations.
At the end of the process you can print the document ready for signing and witnessing, resulting in a completed Will within one hour of starting the process. You can also update and reprint your Will as many times as you like within a year.
For those with a less complicated Will or who have had a Will drawn up before, the DIY Will is for you.
Solicitor Wills - The Fair Go Solicitor Will facility follows the same principle as the DIY option, however, at the end of the process, you submit it electronically to a solicitor for legal checking and approval, instead of printing the document. The Solicitor will then contact you by phone or email within two working days to address any issues. Once both parties are satisfied, the solicitor prints the Will and arranges for signing.
This convenient and efficient service gives you the peace of mind of knowing that a solicitor has personally checked your Will, without you having to leave the comfort of your home.
| PRICING |
| DIY Will |
Single - $20
Couple - $32
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Solicitor Will |
Single - $108
Couple $176
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Visit www.eisuper.com.au to make out your Will today.
* Price refers to DIY Will for a single person.
Investment and market commentary
Click here for commentary on how investment markets performed over the March 2008 quarter.
Investment returns
Click here for the latest Accumulation & Executive Scheme returns (post-tax)
Come along to a seminar
Are you looking to set aside some money for a house, a holiday or perhaps for your children's education? Would you like to know more about investment options, risk and return and managed funds? Are you wondering whether you will have enough money to retire on?
You could get the answers to these questions, and more, by attending one of the free wealth creation or pre-retirement planning seminars we are running at a venue close to you. To find out more, click here, or contact Member Services on 1300 369 901.
Contact us
Energy Industries Superannuation Scheme
Ground Floor
28 Margaret Street
Sydney
Member Services
T: 1300 369 901
F: (02) 9279 4131
Financial Planning
T: 1300 883 788
This document was prepared for the exclusive use of members of the Energy Industries Superannuation Scheme.
Please note that the information contained in this document is of a general nature only and is not for personal advice and has not taken into account your personal objectives, financial situation or needs. Any advice in this document is provided by FuturePlus Financial Services Pty Ltd (ABN 90 080 972 630) as an Australian Financial Services Licensee (AFSL 238445) on behalf of the Trustee of the Energy Industries Superannuation Scheme, Energy Industries Superannuation Scheme Pty Ltd (ABN 72 077 947 285). Energy Industries Superannuation Scheme Pty Ltd is an APRA Registrable Superannuation Entity Licensee (RSEL: L0001373). Energy Industries Superannuation Scheme is a Registered Superannuation Entity (RSE: Pool A - R1004861 and RSE: Pool B - R1004878).
Members should not rely solely on this information and should consider their own personal objectives, financial situation and needs before acting on this information. Prior to making any decision you should obtain and consider the relevant Product Disclosure Statement (PDS) pertaining to your Scheme membership.
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