Your Options Now
Information correct as at 1 October 2011.
CK/TTR/OPT 859.2 10/11 ISS1 1
Contents 01 Your Retirement Options 02 About the Club Plus Pension 03 Pension Income Requirements 04 T he Transition to Retirement (TTR) Pension
Why you should retire with Club Plus •
Platinum rated by SuperRatings – the highest rating by one of Australia’s leading superannuation monitors
SuperRatings ‘Pension of the Year’ 2012 finalist
AAA rated by SelectingSuper
A low admin fee of only $1.60 per week
A choice of five investment options
Weekly Crediting Rates available so you can monitor your investments
Freedom to tailor your pension payments to your lifestyle
Dedicated Member Services Managers
Competitively priced financial plans through Club Plus Financial Planning
Online access to your account 24 hours a day through MemberAccess
Your Retirement Options Your superannuation is money invested to provide for you in your retirement. Retirement can occur at any time, however, there are restrictions on when you can take your money from the superannuation system. Generally, you must meet a condition of release such as the following: • Have attained preservation age (currently 55) and retired permanently from the workforce; • Have attained age 60 and ceased an employment arrangement; • Have attained age 65; When you retire you can: • Leave your money in superannuation with no requirements to withdraw money (however the option to withdraw is available); or
The tax advantages include: 1. The investment earnings in the pension system are tax-free, where the investment earnings in the superannuation system can be taxed at up to 15% and investment earnings in other investments may be taxed at your marginal tax rate, which could be as high as 45%; 2. If you are over age 60, any payments from the pension are tax-free; 3. If you are under age 60, the taxable component of your regular income payments will be taxed at your marginal tax rate, however, you will receive a rebate of 15% (based on the taxable component). Your money in the Club Plus Pension is invested for you, as it was in your super fund. You have five investment options to choose from. So even though you are withdrawing some money as a pension, your account balance may still grow as tax-free returns are added to it.
• Convert it to a pension, providing you with a regular income; or • Take your balance out of the super system as a lump sum. Whatever option you choose, you will need to consider how much you can afford to spend each year, how to invest the money to generate an income and what tax will be payable. Converting your superannuation to a pension is becoming an increasingly popular option and for good reason. The pension has tax advantages and can be tailored to suit your needs. You choose where your money is invested, how much you want to receive (provided you at least take the minimum required) and how often. Your regular income is then paid directly into your bank account. If you want to withdraw a lump sum, you can do that too. A pension is simple and convenient.
But what if you’re still working? The great news is with a Club Plus Pension you don’t have to be retired.
Provided you have reached your preservation age, you are eligible to draw an income through a Transition to Retirement (TTR) Pension. This allows you to do one of three things: 1. Reduce your work hours by supplementing the income you would have earned with your TTR Pension income (see page 4); or 2. Boost your superannuation savings for future retirement by salary sacrificing work income which you have supplemented with your TTR Pension income (see page 5); or 3. Increase your annual income by continuing to work your normal hours and also have your TTR Pension income.
About the Club Plus Pension
The value of your account at the beginning of each financial year will depend on:
The Club Plus Pension is commonly referred to as an ‘account-based’ pension. It’s designed mainly for retirees and for those near to retirement. To invest, you must have at least $20,000 in superannuation and you must have reached preservation age, as shown below.
• Your initial deposit;
If you were born…
Before 1 July 1960
Between 1 July 1960 and 30 June 1961
Between 1 July 1961 and 30 June 1962
Between 1 July 1962 and 30 June 1963
Between 1 July 1963 and 30 June 1964
After 30 June 1964
When you commence a Club Plus Pension, an account will be set up in your name.
• Investment returns; • Pension income paid out; • Lump sums paid out; • Fees and other costs deducted. Key features and benefits of the Club Plus Pension include: • T ax-free investment earnings added to your pension account; • T ax-free pension payments if you are age 60 or over; • Choice of five investment options; • C onvenient payment frequency of twicemonthly, monthly, quarterly, six-monthly or yearly with pension income paid direct to your bank account; • Low fees; • O nline account management through MemberAccess.
Pension Income Requirements Minimum limit You can choose how much you wish to receive as your pension payment but it must be at least the minimum pension payment based on your age at 1 July each year. This limit is a percentage of your account balance. For the 2011/2012 financial year, the minimum drawdown from a pension is 75% of the legislated amount (being the percentage of your account balance that the government requires you to drawdown based on your age). The reduced drawdown will allow members to retain more funds in their account to recoup some losses experienced during the global financial crisis and means that members aren’t selling assets when investment values may be low.
For example… If you are aged 80-84 you have to withdraw a minimum of 5.25% of your account balance for the 2011/2012 financial year instead of the legislated minimum percentage of 7%.
The following table outlines the legislated minimum percentage and the corresponding minimum percentage provided by the relief, that you need to drawdown based on your age: Legislated Minimum Percentage
Minimum % 1 July 2011 – 30 June 2012
65 – 74
75 – 79
80 – 84
85 – 89
90 – 94
95 or older
The minimum is worked out at the commencement of your pension and then at the start of each financial year. Club Plus will advise you each financial year of your required minimum payment for that year. To calculate your minimum payment you can simply multiply your account balance by the aged-based percentage shown in the table. In the first year, the minimum amount is pro-rated if you joined on a date other than 1 July. Maximum There is no maximum payment limit if you take a regular Club Plus Pension. If you take the Club Plus Transition to Retirement Pension, your total pension payments each financial year cannot exceed the maximum payment limit, which is equal to 10% of your account balance. The maximum pension limit is set at the start of each financial year and applies until you retire permanently or attain age 65.
The Transition to Retirement (TTR) Pension If you have reached your preservation age (currently 55 or over) and are still working, you can drawdown money from your superannuation by converting it to a Transition to Retirement (TTR) Pension. A TTR Pension works in the same way as a regular account based pension except there are restrictions, which are: • You cannot withdraw lump sums from your pension account (except under limited circumstances); • Your pension payments cannot exceed a maximum pension payment limit of 10% of your account balance each financial year.
TTR Pension to reduce your work hours without taking a pay cut A Club Plus TTR Pension is an ideal investment if you are over age 55 and wanting to move from full-time to part-time employment. It allows you to access your super to provide income to make up for reduced work pay. Example*: Jane is age 57 and wants to reduce her work hours as she eases into retirement, however, she is concerned about the reduced pay. She has a considerable sum locked up in super, which she cannot access until she retires permanently or meets another condition of release. A Club Plus TTR Pension provides the solution. By transferring some of her super to a Club Plus TTR Pension, Jane can access her super in the form of a pension. Her TTR Pension payments can supplement the reduced pay she would get if she reduced her working hours and went part-time. With careful planning, Jane can draw a TTR Pension that, when added to her work pay, equals what she would have received had she remained in full-time employment. Using a TTR Pension has allowed her to reduce her work load without taking a pay cut. As Jane is still employed, she will continue to receive her employer’s Superannuation Guarantee (SG) contributions equal to 9% of her earnings, based on her new reduced hours. * The above example is illustrative only.
Jane also knows that she is not locked into her TTR Pension. When she retires permanently, she can draw out her account balance in part or entirely. If she does so after age 60, lump sum withdrawals are tax-free.
Benefits of this strategy: • Access super while still working; • Use pension payments to supplement reduced work income; • Reduce tax on investment earnings on super savings; • Continue to receive employer SG contributions (at reduced working hours); • Continue to be covered for insurance in the super fund (Income Protection cover will be on the reduced level).
TTR Pension to boost your superannuation savings for future retirement A Club Plus TTR Pension can be used very effectively in a Salary Sacrifice arrangement aimed at maximising your super. Salary Sacrifice means your employer contributes into super what they would otherwise pay you as salary. Although you will receive less pay, you can make up for that by drawing an income from your Club Plus TTR Pension. Example*: Peter, aged 55, is working fulltime but plans to retire in a few years. He currently has $105,000 in his super account but is concerned whether he has enough for a comfortable retirement lifestyle. He wants to boost his super by making extra contributions in addition to his employer’s 9% Superannuation Guarantee (SG) contributions. One option to increase his contributions is through Salary Sacrifice, however, if he did so it would lower his pay to an amount insufficient to meet his current living standard. After consulting with his Club Plus Financial Planner, Peter develops an ideal solution, one in which he can add to his super via Salary Sacrifice and at the same time receive the same annual income. Peter starts a Club Plus TTR Pension by transferring $100,000 from his Club Plus Super account. He leaves $5,000 in his super account to ensure that his account remains active as he will continue to receive contributions and to ensure he has funds to cover the cost of his insurance premiums. Peter then arranges with his employer to Salary Sacrifice some of his salary. This amount is paid directly to his Club Plus Super account as an employer contribution. To make up for his reduced pay, Peter draws an income from his Club Plus TTR Pension.
With this simple but very effective strategy, Peter has accomplished the following: 1. He has increased his super savings each year. 2. He will receive the same amount of annual income (the sum of his work pay and his TTR Pension payments). 3. He has reduced personal income tax because he has reduced his taxable income by salary sacrificing plus he receives a rebate on part of his pension income. 4. He has reduced tax on his super savings as his pension account pays zero tax on investment returns compared to a super account which pays up to 15%. 5. He will continue to receive employer SG contributions because he is still employed, which continues to provide him with Income Protection cover. 6. He will continue to be protected with Death & TPD insurance in his Club Plus Super account.
Benefits of this strategy: • Save personal income tax by reducing taxable income; • Boost super savings using before-tax dollars; • Reduce tax on investment earnings in super savings; • Continue to receive employer SG contributions. For more information about Salary Sacrificing and other ways to boost your Super – see the ‘Super-Size Your Retirement Savings’ brochure from www.clubplussuper.com.au or request a copy by calling our Member Hotline on 1800 680 627. To arrange an obligation-free consultation with Club Plus Financial Planning, call 02 9376 9422 or email [email protected]
* The above example is illustrative only.
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Issued by Club Plus Superannuation Pty Ltd ABN: 26 003 217 990, AFSL No. 245362, RSEL No. L0000529, as Trustee for Club Plus Superannuation Scheme. ABN 95 275 115 088, RSER No. R1000757. The information contained in this brochure is general information only and does not take into account your individual investment objectives, financial circumstances or needs. You should not rely on this information as a substitute for professional advice. Information provided does not constitute financial, taxation or other professional advice and should not be relied upon as such. You should not rely upon this information without your obtaining financial, taxation and other professional advice. If you would like to consult a qualified financial planner before making your decision, you can obtain no commission based professional financial advice from Club Plus Financial Planning on a range of financial issues including superannuation, retirement planning, wealth creation, income protection and personal life insurance. Club Plus Financial Planning Pty Ltd (ABN 14 143 636 766) is a corporate authorised representative #367058 of Mercer Investment Nominees Limited (ABN 79 004 717 533) AFSL 235906.