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Welcome to the October 2008 edition of Your Financial Future.
In this issue, we explain how you can take advantage of volatile share markets and the importance of saving towards a comfortable retirement, instead of a modest one. We also discuss how you can use this year's tax refund to improve your financial position and what you should do if you receive an unexpected letter offering to buy some of your shares.
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We introduce you to Lisa Judge, who has taken on a new financial planning role at our Parramatta office, and explain how a Chifley Home Loan could get you out of a rising rental price cycle.
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.
Avoiding a modest retirement
Recent research highlights how inflation can dampen the quality of your retirement and the importance of planning for your retirement.
The research, backed by the Association of Superannuation Funds of Australia, shows that higher food and petrol prices are impacting retirees' budgets, with inflation for a couple living comfortably in retirement rising 1.1 per cent during the March 2008 quarter.
That means that the average couple living in retirement needs to spend $49,502 a year to maintain a comfortable lifestyle, up from 0.6 per cent in the December quarter. Couples with a more modest lifestyle need to spend $26,851 a year, a 1.2 per cent rise, up from 0.9 per cent in the December quarter.
The Age Pension, however, only pays $24,414 per couple per year at present. And, there's a big difference between a comfortable lifestyle in retirement and a more modest one.
This modest budget allows for the basics but very little else. For example, both eating out and entertaining at home is very restricted and no overseas travel is possible. The extra expenditure associated with a shift from a modest lifestyle to a comfortable lifestyle in retirement adds a lot to enjoyment, comfort, style, holiday travel, health insurance cover, and the ability to more fully participate in modern Australian society. At the modest budget level, many retirees would not be able to participate in a range of sport and social activities that involves out of pocket expenses of various sorts.
So, will you have saved enough to fund the lifestyle you expect in retirement? If your answer is 'no', the sooner you start doing something about it, the better off you will be. And, we can help you.
As a member of this Scheme you are welcome to attend a free seminar. For more information on these, just click here.
Once you've been to a seminar you can speak to one of our financial planners who will help you develop a strategy that suits your particular needs and circumstances. As a member of this Scheme, this advice is available to you at no additional charge. Just call Member Services on 1300 369 901 today to enquire about how to take a more comfortable path to retirement.
Don't squander that refund
If you are expecting a tax refund this year, why not use some, or all, of it to better your future financial position?
Firstly, you could use the refund to repay debt, especially your credit card debt or car loan which charge higher interest rates than your mortgage.
Calculations by the Australian Securities and Investments Commission (ASIC) show that making only the minimum payments on a $1,000 loan on your credit card can take over 13 years to pay off and would cost you about $1,200 in interest alone. However, a one-off payment of $500 from your tax refund would cut six years off and save around $800 in interest.
Secondly, consider putting your refund straight into your super to boost your future retirement savings. Investing in super is usually a more tax effective investment than investing outside super and you also benefit from the power of compound interest. That's when your interest or earnings keep getting reinvested into your super which can help grow your investments exponentially over time.
And, if you earn less than $60,342 a year and put up to $1,000 from your tax refund into super, you could make this investment go even further because you would be benefiting from the Government's Co-Contributions Scheme.
For example, if you have an annual income of less than $30,342 a year, the Government will contribute $1.50 for every $1.00 you contribute up to $1,000. If you earn more, the Government will still make a Co-contribution but the amount will reduce as your annual income approaches $60,342, after which you won't be eligible for the scheme.
If you'd like to put your tax refund into your super account, call Member Services on 1300 369 901 for assistance.
Unexpected share purchase offers
If you have received an unexpected letter offering to buy some of your shares, be wary!
The Australian Securities and Investments Commission (ASIC) says its received complaints that some organisations are sending out hundreds, and sometimes thousands, of unsolicited offers to buy shares from small shareholders by mass mail-out.
Often these unsolicited offers come at a price below the current market price. Under the regulations, these offers have to tell you the current market value of your shares. This means that you will be able to judge the value of the offer for yourself.
But ASIC observes: "We have found that inexperienced or elderly shareholders, or those under immediate financial pressure, are most at risk of signing away their shares without carefully reading the offer and taking the time to make a few important safety checks."
Although it is not illegal to make an unsolicited offer to buy someone's shares, it is against the law to mislead or deceive shareholders into accepting an offer. The Government has introduced regulations governing these types of off-market offers that give you more protection. Under the regulations, a person who makes an unsolicited offer to buy your shares off market for a certain price must give you a written statement setting out the market value of those shares on the day the offer is made and a minimum of one month in which to accept the offer.
Here are seven safety checks from ASIC which you can use to protect yourself:
1. Who is making the offer?
Read the offer carefully to see exactly who is making it. Some offers have used official looking letterhead, or names that sound like your company or a stock exchange and may be sent at the same time as a company's own letters to shareholders. If you're not sure, phone your company's investor relations department to double check.
2. Why is the offer being made?
Naturally, the company or person offering to buy wants to make money. Perhaps there is public information about something that is expected to happen to your shares that you may not know about. For shares traded on the Australian Stock Exchange (ASX), check company announcements on the ASX website www.asx.com.au, or talk to a stockbroker in case you have lost touch with important news that's been released to the market.
3. Do you really need to sell?
Unless you really need the money now, you may do better by holding on. Consider what the shares are worth now, what they may be worth in the future, what dividends they may pay you, and so on.
4. What's the market price for your shares?
Get an up-to-date market price for your shares and compare it with the price being offered. Market prices can change daily, so check the most recent price for your shares on exchange websites, daily newspapers or a quick phone call to a stockbroker. While any offer you receive must quote the current market value, it may be out of date.
5. How much is the offer really worth?
Watch out for two types of discount offers. The first type offers significantly less than the share's market value. The second type offers to pay you by installment spread over many years. With this offer, even if the total offer price is higher than the present market value, the many years you may have to wait for all your installments means you usually get far less than selling on the market.
6. Compare the cost of selling on the market
Even if you hold only a few shares, you can still sell through a stockbroker. Non-advisory brokers will sell the shares for about $55-65 over the phone, or about $30-45 over the internet. Read the offer to see if you must pay any fees or charges. Work out in dollars what you would get after deducting all fees and charges, and compare that figure with selling on market.
7. Consider getting advice
Anyone making an unsolicited offer to purchase your shares cannot possibly know your financial circumstances and therefore cannot give you financial advice. Further, you may face immediate tax consequences if you accept an offer payable in installments over time. As a member of this Scheme, this advice is available at no additional charge to you. All you have to do is phone 1300 883 788.
Meet your planner: Lisa Judge
Lisa Judge is a new face in our Parramatta office, but one that's well known at FuturePlus Financial Services, where she's held various roles in our Sydney office over the past six years.
Lisa, who took up her new role in May, says: "I really like the atmosphere of working in a regional office."
Lisa's job is to help you put together a wealth creation or pre-retirement plan - and she loves it. "I really enjoy the fact that I get to meet so many different people every day and to help them achieve their financial goals," she says.
Her message in the current volatile investment climate is: "Before making rash decisions, and if you feel uncertain, please discuss your options with a planner. Remember what counts is the time you are in the market, not how you time the market."
She adds: "What upsets me though is when people haven't sought professional planning and advice I get to see the aftermath. Sometimes it's too late."
To some, Lisa may seem like superwoman. Over the past two years, she's had two baby girls eleven months apart, finished a master's degree in financial planning and helped hundreds of members with their financial planning dilemmas.
Making the leap into property
Are you tired of rising rental prices? Now may be a good time to consider buying your own home.
With the screws tightening on the economy, it appears that interest rates are heading in a downwards direction. At the same time housing prices have been either flat or falling. On the other hand, rental prices are rising and the queues outside rental properties are growing.
If you don't know if you can afford to make the leap into your own property, why not speak to Chifley Home Loans, which is co-owned by this Scheme and can offer you one of the most competitive home loans in the market.
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.
For more information on Chifley Home Loans, call 1800 800 002.
Investment and market commentary
Click here for commentary on how investment markets performed over the September 2008 quarter.
Fair Go
Save 30%* on Travel Insurance
Looking forward to some time off, overseas or in Australia?
You'll have more money to spend at your next holiday destination with this travel insurance offer through your Fair Go Member Benefits Program!
We have negotiated a travel insurance offer with AIG Australia, which entitles you to a saving of up to 30%* on travel insurance.
Product benefits include:
- Unlimited overseas medical
- Individual and family rates
- International cover
- Loss of luggage
- Cancellation
- 24 hour help-line for worldwide assistance
Taking advantage of this offer is easy, fast and secure.
Simply click here to access this offer for you and your family.
*The savings are calculated by comparing with AIG Australia's full price premiums as detailed at www.aig.com.au current as at 26/06/2006. AIG Australia and the AIG logo are registered trademarks of American International Group, Inc. Insurance products and services are provided by American Home Assurance Company, ABN 67 007 483 267, AFSL 230903, a member company of American International Group, Inc. American Home Assurance Company, is the issuer of travel insurance products. You should read the Product Disclosure Statement and consider the PDS in light of your personal circumstances, prior to making any decision to acquire the product. S/O 177.
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
Local Government House
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 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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