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Welcome to the February 2010 edition of Your Financial Future.
In this issue, we provide an update on what's happening in investment markets and reveal 10 ways in which the Scheme can help you improve your financial shape in 2010.
We discuss the landmark Cooper review into the superannuation system and warn you about "smishing", the practice of sending a hoax email to trick you into providing your bank account details.
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In addition, we remind you that you may be at risk of exceeding the new contribution caps if you salary sacrifice to super and discuss the benefits of the 5 Star Chifley Home Loan.
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.
Daniel Park
Investment Director,
FuturePlus Financial Services
The markets
In September 2008, the bankruptcy of Lehman Brothers transformed the financial world. Panic ensued, triggering a run on money-market funds and financial institutions. The global financial crisis has been widely analysed and I won't revisit it here but it is worth remembering how dramatic and severe the crisis was and how close the world financial system came to breaking down.
More than twelve months on from that shock, a number of closely watched indicators have returned to more normal levels: credit markets have started to flow; commodity prices have risen; goods and capital are both flowing more freely once again through the global economy. All this as a result of a globally coordinated government response using all the necessary monetary (interest rates) and fiscal means (essentially government spending or tax cuts) they could muster.
Share markets here and overseas have also recovered from the lows they reached in March 2009. For example, the Dow was up 60% from its March low as at the end of November 2009. The gains we have seen so far can be split into two phases. The initial gain in share markets was the result of the market coming to the view that the world economy was more likely to suffer a recession rather than the expected global depression. From there, a combination of government spending, tax cuts and falling interest rates along with corporate cost-cutting led to an improvement in the prospects for company earnings and this spurred the second leg of the rally. In Australia, the unemployment rate has stabilised at a much lower rate of 5.8% than the 8.5% first anticipated and our resource exports to Asia, as well as commodity prices for those exports, have significantly increased. The RBA has raised interest rates for a record three consecutive months from October this year to 3.75% in December on the back of the improved economic outlook.
The recovery so far is welcome but looking ahead into 2010 we see considerable headwinds that may constrain further economic growth. The share market is in essence a forward looking indicator and its value is based on future expectations of corporate earnings. At current share market levels much of the good news seems to have already been allowed for.
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In order for the markets to move higher company earnings will need to start growing again. For this to happen consumers will need to start spending again on goods and services. However, there are several factors that are likely to discourage consumers from spending. First, the increase in unemployment around the world or the fear of becoming unemployed has put a dampener on people's willingness to spend. Second, in the US and parts of Europe we have seen a significant fall in residential property prices and the ability of homeowners to use that equity (which contributed to much of the spending in the recent past) has decreased significantly. Third, financial institutions have suffered significant losses from bad loans and as a result they are lending less and have also made their lending standards more stringent. This has led to businesses cutting back on purchases of new plant, equipment and inventory which all contribute to economic growth.
What this all means is that there needs to be further evidence of stabilisation in unemployment and positive economic growth feeding through to corporate revenues. With the unemployment rate and government debt in the US and Europe at elevated levels and consumers still struggling to reduce their own high levels of personal debt most indicators point to subdued consumer spending and lower corporate profits in 2010. Our view is that 2010 will be a tough year with most of the positive sentiment driven by the more favourable economic outlook for the Emerging Markets and in particular Asia.
Click here for information about the latest returns.
Click here
for commentary on how investment markets performed over the December 2009 quarter.
Here are some ways in which the Scheme can help you improve your financial shape in 2010.
1. Get rid of the Christmas spending hangover
It's important to take control of your debts because they can quickly get out of hand, especially now that interest rates are rising. Remember the interest you pay on debt, including credit card debt, is money that cannot be saved or invested. It's just gone!
The first step in managing your debt is to draw up a realistic budget to track where your money goes and to ensure that you don't spend more than you earn. As part of the process, you should also examine what payments you need to make on loans, such as your mortgage or car loan repayments.
You might consider consolidating all your loans into the lowest interest loan, such as your home loan. But check first that there are no penalties for repaying your existing loans early and that there are no fees for increasing your mortgage.
Click here to
access our handy budget planner and savings tips we have prepared for you.
2. Review your investment strategy
If you've never seen a financial planner and haven't put an investment strategy in place, now is as good a time as any to do so.
Even if you've seen a financial planner some time ago, it's important to ensure that the investment strategy you originally decided on is still relevant to your current situation. As you know, investment trends and your circumstances can change over time.
If you would like to speak to a planner, please call 1300 883 788.
3. Salary sacrifice
You could consider salary sacrificing a portion of your gross salary into super. It's a tax effective
way of making contributions to a tax effective investment environment. To find out more about salary
sacrificing call Member Services on 1300 369 901 and ask for a free copy of our
"Make Your Super Count"
booklet. Please also read the "Reduction in contribution caps" article in this newsletter for information about the restrictions that apply to salary sacrifice.
4. Make a Co-contribution
As part of the Government's Co-contribution Scheme, the Government will make a payment into your
super account for every $1 (after tax) you contribute up to $1,000. The maximum amount the Government
will match is $1,000 if your Total Income is less than $31,920. The matching level tapers away if income
exceeds $31,920 and stops altogether if income exceeds $61,920. To find out more,
click here.
5. Consolidate your super accounts
If you're like many Australians, you may have two or three different superannuation accounts. This means
that you could be paying administration fees three times, which can end up being quite expensive. You may be
paying fees on superannuation you are not even aware you have.
If you don't want to waste your money, it pays to consolidate your super into one account. This is really easy to do.
By having all of your super with the Scheme, you will only pay one administration fee. Another great reason to consolidate
your super into this Scheme is that there are no entry fees and the management fee is extremely competitive.
As a bonus, you'll also be able to keep track of your super easily. To find out more on how you can consolidate your
super with the Scheme call Member Services on 1300 369 901.
6. Find your lost super
There were around 6.4 million lost superannuation accounts worth $13 billion in June 2008 and some
of this money may be yours. You may also be paying unnecessary administration fees on this super.
You can use the ATO SuperSeeker to find your lost super. Just
click here or
call 13 28 65 and follow the
prompts.
7. Review your home loan
Interest rates are on the up and up, but that doesn't necessarily mean that you have to keep forking out more on your mortgage
payments.
One way to keep these payments in check is to ensure that you secure one of the more competitive home loans around, one that
comes at a low mortgage rate and without unnecessary fees and charges.
As a member of this Scheme, you are able to take advantage of the great deals offered by
chifley Home Loans. Just scroll down this newsletter to find out more or call 1800 800 002.
8. Save on life insurance
You work hard to build up your assets, but what measures do you have in place to protect them?
Insurance is considered a vital part of any wealth creation plan. It's about providing you peace of mind and it helps you protect your financial security and that of your family in the event of sickness, injury, disablement or death.
Did you know that obtaining life insurance through your super is one of the most cost effective ways of doing so? One benefit is that the premiums are paid from your superannuation contributions, meaning that you don't pay for the cost of the insurance directly. You also get to take advantage of the wholesale insurance rates your Scheme has negotiated, which are among the lowest rates available. Buying insurance elsewhere as an individual, especially from a for-profit organisation, is very likely to cost you more.
For more information on insurance, please call 1300 369 901.
9. Don't overpay for general insurance
Don't spend more than you need to on general insurance. As a member of this Scheme, we are now able to offer you general insurance at highly competitive rates through Chifley Insurance Brokers. With the Energy Industries Superannuation Scheme owning one third of Chifley, we can now offer home, contents, vehicle, caravan, boat cover and travel insurance.
For an obligation free quote, please call 1300 562 774.
10. Have a Fair Go
It's not always easy to find ways to save for the important things we want in life. To help you find those extra dollars, the Scheme has used its large purchasing power to negotiate a range of special offers for you.
Our Fair Go Member Benefits program provides you with a wide range of savings, from essential items like health cover and
pharmaceuticals to holidays, travel insurance, car hire and family outings. We are also constantly looking to introduce new and
improved offers to the program.
For more information, visit the
Fair Go section on our website at
www.eisuper.com.au or call Member Services on
1300 369 901.
A landmark review into the superannuation system, aimed at maximising the retirement incomes of Australians, is well under way.
Chaired by Jeremy Cooper, former deputy chairperson of the Australian Securities and Investment Commission, the review's panel has released three issues papers for discussion and is set to provide its final report to the Government by June 30 this year.
The review is examining the governance, efficiency, structure and operation of Australia's superannuation system, including both compulsory and voluntary aspects. It is also looking at how the superannuation system can be better regulated and its business costs reduced.
"The review is not so much a backward-looking assessment of where we have come from and the fact that we survived the global financial crisis. The review is trying to find out whether we really think the current way we do superannuation in Australia is as good as it could be in serving the long-term interest of members. Will our current thinking last us another 20 years?" Cooper said at a superannuation conference in November last year.
You may have heard of phishing - the practice of sending a hoax email to trick you into providing your bank account details. But have you heard of smishing? Smishing is where identity thieves use SMS messages to obtain your personal details.
A recent example involves sending text messages that claim your bank account or credit card has been blocked and asking you (either in the text message or through a subsequent recorded message) to provide these details for confirmation so a new card can be sent.
The Australian Securities and Investments Commission provides these top tips to avoid mobile phone scams:
- Don't give out your number to just anyone.
- Keep your mobile phone number confidential and share it only with friends and relatives. If you put it on your business card, be careful who you give this to.
- Be suspicious of unexpected text messages or calls.
- Check the number before replying to text messages or calls. Not only could these be a scam but some numbers such as those starting with '19' could result in higher charges than normal rates if you respond.
- Install anti-virus software. Most of the big internet security companies have mobile versions of their software.
- Scrutinise your bill every month.
- Watch out for small payments which scammers may try to sneak past you.
- Don't use your mobile for competition entries or other apparently "free services". If you do choose to do this, make sure you read all of the terms and conditions.
Reduction in contribution caps
If you salary sacrifice to super, you may be at risk of exceeding the new contribution caps and of incurring excess contributions tax.
In the May 2009 Federal Budget, the Government halved its cap on the amount of concessional (or pre-tax) contributions members can make to super to $25,000 a year (indexed). This change came into effect on 1 July 2009.
Income that's salary sacrificed as additional superannuation contributions is counted towards the concessional contributions cap, as is the 9% Superannuation Guarantee.
The transitional concessional contributions cap (for members aged 50 and over or who turn 50 before the end of the 2011/12 financial year) has also been reduced from $100,000 to $50,000 a year.
The annual cap on non-concessional or after-tax contributions remains at $150,000 per annum for the 2009/10 financial year. It will in future be calculated as six times the level of the (indexed) concessional contributions cap.
Excess concessional contributions are currently taxed at 31.5% in addition to the standard 15% contributions tax. So, to avoid any nasty surprises, it's important to review any salary sacrifice arrangements you may make. Remember that our team is on hand to help you through this process. Just call 1300 369 901 for assistance.
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Fletcher Jones can create a look for many occasions. It really is a one-stop shop for your all-year
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To access this benefit please email
fairgo@memberbenefits.com.au
and ask for a letter of introduction,
which you will need to hand to the Fletcher Jones store staff. This letter contains a special Fletcher Jones
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Visit www.fletcherjones.com.au for store
locations and further information.
Take advantage of the 5 Star Chifley Home Loan
With interest rates on the rise, it's vital to ensure you have the most competitive home loan possible. Every cent saved on your mortgage is money that can be better invested or used elsewhere.
So, why not take advantage of the 5 Star Chifley Home Loan? Despite all the recent uncertainties in the financial markets, a Chifley Home Loan is still rated 5 Star by CANNEX, the independent financial services monitoring agency. This means our mortgage loan offers "superior value", giving you the reassurance that you are making the best possible choice!
Products awarded 5 stars by CANNEX are the best 5% of similar products available in Australia. So when you consider that there are literally hundreds of similar products around, the awards give you the reassurance of knowing that with your Chifley Home Loan you are considering a competitive solution.
There are no mortgage application fees and no monthly account keeping fees. You can make extra and lump sum repayments without any restrictions which allows you to use any extra funds to reduce interest and pay out your loan faster*.
For more information on these or any of our competitive loans, either call us on 1800 800 002 or visit our website www.chifley.com.
*Limitations apply to Fixed Rate products. Terms and conditions apply. The credit provider is Select Credit Union Ltd. Fees, charges and all loan details will be disclosed in the loan contract. Some charges such as valuation fees and costs charged by the lender's solicitors are payable. These charges are non-refundable should they be incurred and the loan is not proceeded with. An early repayment fee may be payable. Chifley Financial Services Limited (ABN 75 053 704 706, AFSL 231148) provides services through an agreement with Select Credit Union Ltd (ABN 20 058 538 140, AFSL 238257). Chifley Financial Services does not guarantee the obligations of Select Credit Union Ltd.
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
28 Margaret St
Sydney NSW 2000
Postal Address:
PO Box N835
Grosvenor Place
Sydney 1220
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
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 does not constitute personal advice as it does not take 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 (ABN Pool A - 22 277 243 559 and ABN Pool B - 64 322 090 181).
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 investment decision you should obtain and consider the relevant Product Disclosure Statement (PDS) pertaining to your Scheme membership and seek professional investment advice.
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