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Welcome to the February 2009 edition of Your Financial Future. In this issue, we discuss the current investment market turmoil and what you could do about it.
We question whether a Self-Managed Super Fund is the way to go and reveal how you can protect yourself from identity theft. We also review the disadvantages of having lost super or several unnecessary superannuation accounts. And, we introduce you to Ian Ornelas, a new member of our financial planning team.
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As usual, we also include the latest offers 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.
Dealing with tough investment markets
As you would already know, we are in the midst of a severe downturn in domestic and international share markets. This market downturn was triggered by the sub-prime mortgage crisis in the US and had massive flow-on effects causing problems in the global banking and business sectors and for many governments around the world. As a result we now see many economies falling into recession.
An important point to make is that the extent of the economic meltdown, which is now commonly referred to as the global financial crisis, was not foreseen by most financial commentators and analysts. It is fair to say that even when the economy and investment markets are relatively stable it is difficult to forecast the returns that members will receive in superannuation. With the unprecedented events that have occurred it has become impossible to predict when an economic recovery might take place and therefore when investment returns might improve.
It should be noted however that Governments and regulators here and abroad are engaging in substantial stimulus measures. The Australian Government recently announced a further stimulus package which may assist investment and employment. On the same day the Reserve Bank of Australia announced a 1% reduction in the cash rate to 3.25% and it is hoped that this will also stimulate the economy.
So what should you do?
Superannuation for most investors is a long-term investment and sticking to a well-diversified, quality portfolio in line with your goals and risk profile remains the soundest long-term strategy. Whilst it may be tempting to be defensive in these times and to reduce exposure to growth assets (e.g. by moving investments to cash), such a strategy is unlikely to meet most investors’ long-term targets.
History has also shown that investors who change asset allocation based on guesswork about whether the market is rising or falling (i.e. timing the market) rarely succeed. That’s because they often crystallise losses by selling when asset prices are low and rejoin the market after asset prices have already begun their recovery.
If you are concerned about your investments or believe that they don’t meet your long-term goals, please contact one of our financial planners by calling 1300 883 788.
Is an SMSF the way to go?
It is understandable that when markets get as shaky as they’ve been in recent times and returns start falling, many Australians panic and think of starting their own DIY or self-managed superannuation fund (SMSF).
SMSFs have some advantages, especially for those who have an interest in investment markets. They have been one of the fastest growing segments of the superannuation industry in recent years and now hold about 26 per cent of Australia’s super savings.
But with your super being so vital in determining how you spend your years in retirement, it’s important to look before you leap. Here are two questions which could help you decide if an SMSF is the right vehicle for you.
1. Have you got the time and skills?
‘Self-managed’ super means you do the work. Have you got the time to keep up with what’s happening in investment markets? And, have you got the skills and experience to do a better job than those professionals whose entire day jobs are spent following markets and investment trends?
The key reason people choose self-managed funds is to gain control over their affairs. But with greater control comes obligations and a mountain of paperwork. Trustees of SMSFs have to submit regular income tax and regulatory returns and comply with a number of super and tax laws.
They also have a host of legal responsibilities, including keeping proper records for 10 years, knowing their fund’s investment strategy and not lending super money to members or relatives. If they don’t comply, the Australian Taxation Office can impose penalties ranging from fines and loss of tax concessions or imprisonment.
2. Will the benefits be worth the costs?
Many commentators suggest you need around $250,000 in super to make the costs of an SMSF worthwhile. They say that with less than this amount, the fund may have difficulty earning enough to cover the set-up and running costs, such as auditing and regular reporting fees. According to the Australian Securities and Investments Commission, SMSFs can typically cost around $1,700 to run each year and often much more. And, that’s before you take investment fees into account.
In contrast, the administration costs of your super membership are relatively low. Because of its size and large buying power, you have access to life and other insurance at rates you’d be hard pressed to secure on your own. You also have the opportunity for free financial planning advice which isn’t available to trustees in SMSFs.
And, don’t forget the cost of your time, which might be better spent elsewhere.
It’s vital to remember that higher costs can eat into your savings balance. Even a small difference in costs can have a large impact over time.
Not sure what to do? If you’d like to talk to one of our financial planners about your options, call 1300 883 788.
Preventing identity theft
There’s a new breed of criminals out there called identity thieves. They use some of your personal information without your knowledge to commit fraud or theft.
They may fraudulently obtain money, loans, finance and credit using your details. Worse still, they may take over your identity, access your bank accounts or operate new accounts opened in your name, damaging your reputation and credit rating in the process.
Skilled identity thieves use various methods to steal your personal information. They may rummage through your garbage looking for bills or personal documents or even steal your credit card number by using a special storage device when processing your card. They may also send you spam or pop-up messages to get you to reveal your personal information or they may divert your statements to another location by completing a change of address form.
Here are some tips to help you avoid falling victim to these criminals:
- Take time to shred or destroy old bank statements, credit card bills, utility bills or other documents to prevent this material falling into the hands of criminals.
- Be careful to whom you give personal information. If you have to reveal personal information, ask some questions about the security of the information and be very cautious giving out any information over the phone or internet unless you know who you are dealing with.
- Secure your mail box.
- Minimise your identification and the number of cards you carry in your wallet or purse to what you actually need.
- Check your bank and credit card statements to make sure there are no unauthorised transactions.
- Never click on links sent in unsolicited emails. Instead, type in a web address you know. Use firewalls, anti-spyware and anti-virus software to protect your home computer. Keep these up to date.
- Don't use obvious passwords like your birth date or your mother's maiden name, and change your passwords regularly.
- Be alert to signs that require immediate attention, such as bills that do not arrive as expected, denials of credit for no apparent reason or calls or letters about purchases you didn’t make.
- Don’t use public computers to complete internet banking because there is no guarantee that security software will be installed.
- Provide only necessary information about yourself.
- Sign all credit and debit cards as soon as you receive them.
- If you move house, immediately tell your bank, card issuer and other organisations that you deal with.
- Consider whether it may be safer to use a separate credit card account for online transactions and when you are overseas.
- Read the privacy policy before providing information to any business to ensure you understand how your data will be protected.
Do you have lost super?
You could be losing out if you have lost super or several unnecessary superannuation accounts. This is because you are paying multiple administration fees on these accounts which eat into your retirement savings balance. Over time, these costs can really mount up.
Your lost super may have also been transferred to a special Eligible Rollover Fund where it may be earning less than it would in the Scheme.
Indeed, the level of lost super continues to grow as Australians move home or change jobs. The assets in the Government’s Lost Members Register rose 8.4% to $12.9 billion in the financial year to end June 2008 while the number of lost superannuation accounts jumped 5.2% to 6.4 million.
In addition, a report commissioned by CHOICE reveals that there are 13 million unnecessary superannuation accounts eroding retirement incomes. It shows that the extra fees, missed earnings and lost payments of these cost Australian consumers $1.1 billion a year.
If you believe you have lost touch with your super or would like to discuss the benefits of consolidating your super accounts, contact Member Services on 1300 369 901. You can track down your lost super by:
- Searching online using the SuperSeeker service managed by the Australian Tax Office (ATO).
- Ringing the ATO's Superannuation Infoline on 13 10 20 (for the cost of a local call) and asking them to search the Lost Members Register for you.
- Contacting your State Government as it maintains a State-based unclaimed monies register that can be checked for you.
- Contacting your former employers regarding your personnel records. Your union may also be able to help, as industrial awards often require superannuation benefits to be paid into a particular fund.
To avoid losing your super in the future, remember to keep your super statements in a safe place and to notify us of your new address when you move.
Meet your planner: Ian Ornelas
Ian Ornelas is the new face among our team of financial planners. He joined FuturePlus Financial Services six months ago having worked for a boutique financial planning practice for four years following a stint in stockbroking.
Of the move, Ian says he really appreciates the consistency in service that a bigger group can provide and being able to focus on adding value for clients.
On being in a salaried post as opposed to earning commissions, he observes: “When a planner is on commissions, there is always the inference that his or her interests are not as aligned as they should be with those of the client’s.”
Ian, who is on hand to help you grow your wealth or plan for retirement, enjoys the fact that each client is different and comes with varying needs, risk profiles and attitudes. “It keeps you on your toes and motivated,” he says.
His best financial tips are to plan early, be open and buy into the process. “You get inferior outcomes if you leave it to the last minute. Also, doing one or two small things can make a huge difference over time,” he says.
Calling all first home buyers
As part of a $10.4 billion package designed to stimulate the Australian economy, the Government has announced a temporary “Boost Scheme” which will double the first home owner grant to $14,000 for existing homes and triple the grant to $21,000 for newly-built homes or new homes to be constructed. Additionally, first home buyers in NSW who qualify for the First Home Owners Grant and are buying a newly constructed home or building their first home will be eligible for an additional $3,000 payment known as the NSW New Home Buyers Supplement. This latter grant is for a limited period and will be funded by the NSW Government.
But be careful! To be eligible, you must have entered into a contract between 14 October 2008 and 30 June 2009 (inclusive).
The existing arrangements for first home buyers also include free stamp duty on purchases up to $500,000. The NSW Office of State Revenue has an excellent website – check it out at www.osr.nsw.gov.au and see if you’re eligible for the grant and the discount in stamp duty.
The new arrangements will go a long way towards helping you buy your first home. Don’t forget that when you are borrowing more than 80% of what the property is worth, it will be necessary for Loan Mortgage Insurance to be included in the financing arrangements. These days, lenders are looking at applications a little more closely, so the higher the equity you have the better chance of an approval.
Remember, once you’ve accumulated enough for a deposit using the Boost Scheme, you can further boost your opportunities by securing one of the most competitive home loans on the market through Chifley Home Loans.
Chifley Home Loans can provide you with a low interest rate, a choice of loans to suit your circumstances and a simple process that takes all the hard work out of getting and maintaining your home loan.
Some of our Home Loan features include:
- Low interest rate
- Application fee - $0
- Monthly account keeping fee - $0
- Split loan fee - $0
- Electronic redraw fee - $0
- Redraw facility - yes
- Five Star Rating from Cannex, the independent financial services monitoring agency*.
Any intending first home buyers should contact the friendly staff of Chifley Home Loans on 1800 800 002. It’s there for you so you may as well use it! Chifley Home Loans also welcomes enquiries from members who have already bought a home and who want to give their existing loans a health check.
* Credit provider is Select Credit Union
Investment and market commentary
Click here for commentary on how investment markets performed over the December 2008 quarter.
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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 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
Futureplus Financial Services Pty Ltd
Ground Floor
28 Margaret Street
Sydney
Member Services
T: 1300 369 901
F: (02) 9279 4131
Financial Planning
T: 1300 883 788
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 Local Government Superannuation Scheme, the Energy Industries Superannuation Scheme (EISS), and/or FuturePlus Super. FuturePlus Financial Services Pty Ltd is co-owned by LGSS Pty Limited (ABN 68 078 003 497) and Energy Industries Superannuation Scheme Pty Ltd (ABN 72 077 947 285).
LGSS Pty Limited is the trustee of LGSS and is an APRA Registrable Superannuation Entity Licensee (ABN Pool A - 74 925 979 278 and ABN Pool B - 28 901 371 321).
Energy Industries Superannuation Scheme Pty Ltd is the trustee of EISS and is an APRA Registrable Superannuation Entity Licensee (ABN Pool A - 22 277 243 559 and ABN Pool B - 64 322 090 181).
Chifley Financial Services Limited is an APRA Registrable Superannuation Entity Licensee and the trustee of FuturePlus Super (ABN 76 829 356 693). Chifley Financial Services Limited is co-owned by LGSS, EISS and Unions NSW.
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 membership.
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