Managing Your Contributions - unisuper.com.au/media/Files/Slide Decks... · Managing Your Contributions – 13 February, 2015 . How our balanced option has performed . 6 . ... $18,201

Managing Your Contributions

13 February, 2015

Managing Your Contributions – 13 February, 2015

Disclaimer The information contained within this presentation is general in nature. It has been prepared without taking into account your objectives, financial situation or personal needs. Prior to making any acting on any of the information, you should consider whether the information is appropriate for your needs, objectives and circumstances. You should obtain a copy of the relevant product disclosure statement (PDS) prior to making a decision regarding any investment in any financial product. UniSuper defined benefits (including defined benefit pensions) are not guaranteed and are subject to the risk that the pool of assets supporting them may not be sufficient to meet all of UniSuper’s defined benefit obligations. In the event of prolonged underfunding, clause 34 of UniSuper’s trust deed provides a mechanism for defined benefits to be reduced on a fair and equitable basis. A clause 34 monitoring period was recently concluded and it was resolved to reduce the defined benefit formula from 1 January 2015 by changing the way Benefit Salary is determined as it applies to service on and after 1 January 2015. This change does not affect defined benefits or pensions that became payable before 1 January 2015. There are three further clause 34 monitoring periods in place, concluding on 30 June 2015, 30 June 2016 and 30 June 2017. This information is current as at January 2015 and is based on our understanding of legislation at that date. Information relating to the 2014/15 Federal Budget is based on our understanding of the proposals. The information provided in this presentation in relation to these announcements is subject to change and certain proposals may not become effective until they are enacted by Parliament. You should not rely on this information and it should be verified prior to making any decision The information contained in this presentation is not legal, taxation or accounting advice. Professional advice should be obtained before making any decisions. Whilst care has been taken in the preparation of this information, the accuracy or completeness of the information is not guaranteed. This presentation was prepared and issued by UniSuper Management Pty Ltd ABN 91 006 961 799, AFSL No: 235907, which is the administrator of UniSuper Superannuation fund (ABN 91 385 943 850). UniSuper Management Pty Ltd is wholly owned by UniSuper Limited (ABN 54 006 027 121) in its capacity as trustee of the UniSuper Superannuation fund . If you would like to contact us please do so on 1800 331 685 or alternatively send us an email to [email protected]

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mailto:[email protected]


UniSuper’s awards – super & pensions

SuperRatings, a superannuation research company, has awarded UniSuper a Platinum rating for its Accumulation products and Flexi Pension product. SuperRatings Infinity Recognised is awarded to super funds that clearly demonstrate excellent sustainable business practices and responsible investment principles. Go to www.superratings.com.au for details of its rating criteria. SuperRatings does not issue, sell, guarantee or underwrite this product

Chant West, has awarded UniSuper a 5 Apples rating for its Accumulation products and Flexi Pension product. Further information about the rating methodology used by Chant West, see www.chantwest.com.au

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http://www.superratings.com.au/

http://www.chantwest.com.au/


About UniSuper

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Run exclusively for the higher education sector

Covers 37 Universities and over 200 related bodies

Low fees and competitive insurance

Retirement and Transition to Retirement

solutions

In-house administration & investment teams


How our balanced option has performed

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Balanced option performance over 1, 3, 5, 7 and 10

years (to 31 December 2014) is above the

SuperRatings median

3rd best performing Balanced fund over three years to

31 December 2014 according to SuperRatings

UniSuper Balanced fund return: 14.16%

Source: SuperRatings return data 31 December 2014 as published on 19 January 2015. Does not take into account any subsequent revisions or corrections made by SuperRatings. Note: Returns greater than one year are annualised returns. The past performance of an investment option should not be relied upon as an indicator of future performance. Option and benchmark returns are calculated net of investment expenses and fund taxes but are gross of account-based fees. SuperRatings median returns are as published by SuperRatings and reflect returns calculated using SuperRatings/participants methodology.


How our balanced option has performed

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Source: SuperRatings return data 31 December 2014 as published on 19 January 2015. Does not take into account any subsequent revisions or corrections made by SuperRatings. Note: Returns greater than one year are annualised returns. The past performance of an investment option should not be relied upon as an indicator of future performance. Option and benchmark returns are calculated net of investment expenses and fund taxes but are gross of account-based fees. SuperRatings median returns are as published by SuperRatings and reflect returns calculated using SuperRatings/participants methodology.

Returns (Accumulation) to 31 December 2014

0%

3%

6%

9%

12%

15%

1 year 3 year (p.a.) 5 year (p.a.) 7 year (p.a.) 10 year (p.a.)

UniSuper Balanced Option SuperRatings Balanced Option All Funds Median


What we will cover

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Contributions and Your UniSuper Membership Category

Types of contributions & caps

Understanding salary sacrifice

Managing your contributions

Additional contribution strategies

Where to from here?


Contributions and Your UniSuper Membership Category

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Employer contributions of 9.5%

UniSuper membership categories

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Employer contributions of 14% or 17%

Standard member contributions apply: Up to 8.25% before-tax; or Up to 7% after-tax

or Accumulation 1 Accumulation 2 Defined Benefit Division (DBD)

OR


Types of Contributions & Caps

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Contribution types

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Contribution Type Concessional (before-tax)

Non-Concessional (after-tax)

Employer

Standard Member before-tax (e.g. 8.25%)*

Standard Member after-tax (e.g. 7%)*

Voluntary – salary sacrifice

Voluntary – after-tax

Deductible (e.g. self employed or retired)

Spouse Contribution * DBD and Accumulation 2 only


Contribution caps

12 * Plus potential interest charge

2014/15 Contribution Limits Concessional (before-tax)

Non-Concessional (after-tax)

Under age 50 $30,000 p.a. $180,000 p.a. or $540,000 (over 3 years

and under age 65) Age 50 or over $35,000 p.a.

Tax on excess contributions Marginal tax rate* 49%

DBD Members: Notional Taxed Contribution (NTC) formula used to determine your concessional contribution totals for cap purposes.

* Plus potential interest charge


What if you exceed your cap?

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Excess concessional contributions are included in your assessable income and taxed at your marginal rate.

You receive a 15% offset for the tax paid in the super fund.

You have the option to withdraw up to 85% of your excess contributions from your Accumulation account.

An excess concessional contributions charge may be charged by the Tax Office on the additional personal tax you have paid.

An additional tax of 15% applies to concessional contributions for ‘High Income earners’ where total income exceeds $300,000


Non-Concessional contribution caps 3 Year Averaging Provision

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Year 1 Year 2 Year 3 Year 4

Example 1 Averaging provision triggered year 1

$250,000

Example 2 Averaging provision triggered year 2

$75,000 $190,000

Example 3 Full averaging provision triggered and used in year 1

$540,000

Example 4 Averaging provision not triggered

$180,000 $180,000 $180,000 $180,000

The 3 year averaging provision is a bring-forward provision which is triggered the financial year in which non-concessional contributions exceed $180,000


Non-Concessional contribution caps 3 Year Averaging Provision

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The 3 year averaging provision is a bring-forward provision which is triggered the financial year in which non-concessional contributions exceed $180,000

Warning for averaging provisions triggered before 1 July 2014:

The 2014/15 averaging provision of $540,000 only applies where the averaging provision is triggered after 30 June 2014. If the averaging provision is triggered before this date, $450,000 will be the limit for the full 3 years of that averaging period.


Understanding Salary Sacrifice

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Is a before-tax (concessional) contribution to superannuation

Example: Heather earns $90,000 pa and is considering salary sacrificing $10,000

If taken as income (fully taxable e.g. at 39%)

If Salary Sacrificed (taxed at 15%)

Superannuation Account

$10,000 of Salary


2014/15 tax rates

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Taxable income Tax

0-$18,200 Nil

$18,201 - $37,000 19c for each $1 over $18,200

$37,001 - $80,000 $3,572 plus 32.5c for each $1 over $37,000

$80,001 - $180,000 $17,547 plus 37c for each $1 over $80,000

$180,001 and over * $54,547 plus 47c* for each $1 over $180,000

* Includes the 2% Temporary Budget Repair Levy applicable on taxable income in excess of $180,000


Managing Your Contributions

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Example: Eva is an Accumulation 2 member and wants to start salary sacrificing to boost her super ahead of retirement

Age: 40

Current salary: $80,000

Current employer contribution: 17%

Current member before tax contribution: 8.25%

Managing your contributions: Accumulation 2

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Managing your contributions: Accumulation 2

Example: Eva is an Accumulation 2 member and wants to start salary sacrificing to boost her super ahead of retirement

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$0

Cap $30,000

$13,600

Member before-tax contribution (8.25% of salary)

$6,600

Employer Contribution: (17% of salary)

$9,800 available


Managing your contributions: Defined Benefit

Example: Sam is a Defined Benefit Division member and wants to start salary sacrificing to boost his super ahead of retirement

Age 61

Current salary: $120,000

Current employer contribution: 17%

- Standard 14% contribution

- Additional 3% contribution

Current member before tax contribution: 8.25%

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Managing your contributions: Defined Benefit

Example: Sam is a Defined Benefit Division member and wants to start salary sacrificing to boost his super ahead of retirement

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$0

Higher Cap $35,000

$20,160

Employer 3% Contribution

$3,600

Notional Taxed Contribution (NTC); includes: - Standard employer contribution (14%) - Member before tax contribution (8.25%)

$11,240 available


Calculating the NTC

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1.2 x New

Entrant Rate

Super Salary at start of

financial year

Days in NTC Category /

365

After tax contributions to DBD component

x x -

For further information:

- Refer to the Fact sheet “The concessional

contributions cap and NTCs for DBD

members”

- Call UniSuper Help Line

- Get Single Issue Personal Advice

- Log on to Member Online


Special “grandfathering” arrangements generally apply

If the calculated value of concessional contributions to

the Defined Benefit component exceed the cap (& the

member is grandfathered) only the cap is reported

Grandfathering could be lost in certain circumstances

i.e. being a member since 12 May 2009 is only one criteria for grandfathering

Special rules for DBD members on 12 May 2009

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Contributions flexibility for DBD and Accumulation 2 categories

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DBD and accumulation 2 members can reduce their level of Standard

Member contributions in exchange for higher take-home pay, BUT:

This will reduce your end benefit (upon resignation, retirement or

death benefit)

You cannot increase this type of contribution in future

Instead you can make voluntary before and after tax contributions

at any stage

Refer to Contribution Flexibility Fact Sheet

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Contributions flexibility for DBD

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Effect on 3% employer contribution Example: Sam decides to reduce his member before-tax contribution from 8.25% to 5.25%

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Accumulation Component

Defined benefit component 14% employer contributions plus member contributions - Before tax (now 5.25%)

3% employer contributions (if any) plus voluntary contributions (before or after tax)

3% employer contribution now forms part of the 14% employer contribution into DB component


If you exceed a concessional contribution cap

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Options Ramifications

Change to after-tax contributions

May pay more tax Do nothing

Exercise contribution flexibility • Will permanently affect your

Defined Benefit entitlement • May affect your insurance


Additional contribution strategies . . .

Co-Contribution Benefit Government will contribute $500 into your account where your income is less than $34,488 You make a non-concessional contribution of up to $1,000 (aged 70 or less)

Spouse rebate Applies where spouse earns less than $10,800 and aged less than 65

Allows partner to claim a tax offset of up to $540 where a contribution of up to $3,000 is made as an after tax contribution into the spouse’s account - A reduced tax offset is available where spouse earns more than $10,800 and

less than $13,800.

Superannuation Splitting Allows transfer of concessional (before-tax) contributions into a partner’s account

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Where to from here?

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Next steps…

Understand what the contribution caps are

If contribution caps are an issue for you, consider what options

are available to manage them

Consider taking advantage of contribution incentives if relevant to

your situation

Visit UniSuper’s website: www.unisuper.com.au

Call UniSuper’s Helpline 1800 331 685

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MemberOnline

Notional Taxed Contribution Summary (NTC)

Account Balance (updated daily)

Investment Switching

Statements

Fact sheets & tutorials

Calculators

Comparison service and much more . . .

Register today at www.unisuper.com.au

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Call UniSuper Advice today on 1300 331 685 for a complimentary initial assessment on the level of advice that might suit you

How UniSuper can help

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UniSuper offers 3 levels of advice:

General Advice (phone-based)

- Not specific to your personal situation

Limited Advice (phone-based)

- Single issue personal advice specific to your situation

Comprehensive Personal Advice (face to face)

- Full personal advice covering multiple issues specific to your

situation


Any questions?

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Federal Budget 2014/15

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Issue Proposal

Temporary Budget

Repair Levy

(Legislated)

Applies at a rate of 2% on an individuals’ taxable income in excess of $180,000 per annum. • Applies for a 3 year period from 1 July

2014 to 30 June 2017

Other tax rates that are currently based on calculations that include the top personal tax rate will also be increased

FBT rate will be increased from 47% to 49% from 1 April 2015 until 31 March 2017 to align with the FBT income year



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Issue Proposal

Superannuation

Excess Contributions

Tax

Applies to excess non-concessional (after-tax) superannuation contributions made from 1 July 2013

• These amounts (including any associated earnings) can be withdrawn and taxed at the individual’s marginal tax rate

• If withdrawn, excess contributions tax (currently 49%) will not apply to these amounts

Implications

• Allows those who exceed non-concessional cap to avoid a double taxing (e.g. up to 98%)


Example - Temporary Budget Repair Levy

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In 2014/15, Darren had taxable income of $230,000

$230,000 - $180,000 = $50,000

$50,000 x 2% = $1,000 levy



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Issue Proposal

Repeal of the

Minerals Resource

Rent Tax

Change to schedule for increasing Superannuation Guarantee (SG) to 12%

• Rate will increase to 9.5% on 1 July 2014 as previously planned

• Rate will remain at 9.5% until 30 June 2018

• Rate will increase by 0.5% per year until it reaches 12% (1 July 2022)

Implications

• 3-year delay in reaching the 12% level (currently due to reach 12% in 2019)



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Issue Proposal

Commonwealth

Seniors Health Card

Annual Indexation of income thresholds by the Consumer Price Index (CPI) • Applies September 2014

Cessation of the Seniors Supplement for card holders

Untaxed superannuation income to be included in the eligibility assessment • Applies from 1 January 2015


Example - current income test deductible amount v deeming

Margaret, age 65 and single, commences an account based pension with $500,000 drawing an income stream of $35,000 p.a.

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Assessment

Current income (deductible) Test $11,873

($35,000 – ($500,000/21.62))

Deeming (from 1 January 2015) $16,780

(48,000 x 2%) + ($452,000 x 3.5%)



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Issue Proposal

Age Pension

Increase qualifying age to 70 years • From 1 July 2025, qualifying age will

continue to rise by 6 months every 2 years • Qualifying age will increase from 67 (in

2025) to 70 (in 2035) • Those born before 1 July 1958 are not

affected by this measure

Changes to indexation of payments • Commences September 2017

Eligibility thresholds will be frozen for a period of three years from 1 July 2017



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Issue Proposal

Pensioner Education

Supplement

Supplement will cease from 1 January 2015

• Current maximum benefit is $62.40 per fortnight


More information?

For more information regarding the 2014/15 Federal

Budget go to:

www.unisuper.com.au/budget

www.budget.gov.au

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Like all investments, the DBD carries some risk. In the event of a

shortfall of assets caused by a prolonged market downturn or other

factors, the Trustee may reduce defined benefits in the future.

On 1 January 2015 a change to the Benefit Salary component of

the DBD formula will apply as follows:

From 1 January 2015: For service before 1 Jan 2015: - Average over three years (indexed by CPI)

PLUS For service after 1 Jan 2015: - Average over five years (no CPI)

Defined Benefit Division (DBD) – Key Risk

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Current: - Average over three years - Each of the three salaries

is indexed by CPI


Defined Benefit Division (DBD) - Clause 34

Section of the Trust Deed

Provides a process to manage the DBD’s financial position

- including a mechanism to reduce benefits if necessary.

Allows for a four-year monitoring period to be established

- if measures used to monitor the fund’s financial health fall below

certain levels.

- At the end of a monitoring period: Trustee considers benefit

reductions if the fund’s position has not improved sufficiently.

- There are 3 concurrent monitoring periods concluding on 30 June

2015, 30 June 2016 and 30 June 2017.

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For further information go to: www.unisuper.com.au/dbdupdate

Managing Your Contributions - unisuper.com.au/media/Files/Slide Decks... · Managing Your Contributions – 13 February, 2015 . How our balanced option has performed . 6 . ... $18,201

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