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Super Strategies - Big Sky Financial Solutions

Super Strategies



Superannuation is one of the most important assets an individual will have in retirement. Superannuation is expected to be the major source of income for retirees.

What you know and what you decide about your Superannuation can make a big difference to the money you have to retire on.

Through Superannuation, you save and invest money during your working life to get a pension or lump sum when you retire. Your Superannuation will grow because:

• your employer and/or you make regular contributions,
• your Superannuation fund invests your money, and
• your fund gets tax concessions that boost your earnings.

By law, you generally get your Superannuation payout only when you:

• permanently retire from the workforce, and also
• reach the minimum age set by law
• recent legislative changes mean that a “Transition to Retirement Strategy” may allow earlier access to Super if all other conditions are met.

Super is your money, take control

Understanding investment styles and their impact

The way your Super is invested can make a big difference to your total wealth. The example below highlights the difference a change in investment style can make.

Client age 35, current super balance $40,000
If invested in “defensive assets” Total balance at age 65 = $129,736
Based on earnings rate of 4% per annum and no contributions being made.

If invested in “growth assets” Total balance at age 65 = $697,976
Based on earnings rate of 10% per annum and no contributions being made

Therefore the difference in balance at 65 is $568,240.

Topping up Super

The long term nature of super investing means that a small additional contribution can make a substantial difference to your total wealth in retirement. Assume the same client adds $50 extra per month via salary sacrifice.

• No additional contribution Total balance at age 65 = $304,490
Based on earnings rate of 7% per annum and no other contributions being made, balanced risk profile


• $50 monthly contribution Total balance at age 65 = $370,599

Based on earnings rate of 7% per annum and salary sacrifice contribution of $50 per month ($600 per annum) indexed to inflation (CPI 3%), balanced risk profile

Therefore the difference in balance at 65 is $66,109. After taking into account the salary sacrifice contributions of $28,545 made over the 30 year period, the net earnings are $37,564.

If you can spare the money until you retire, consider contributing extra out of your own money on top of what your Employer puts in. Some Employers encourage you by offering to put in extra money if you do. Even if the fund your Employer uses does not allow you to contribute your own money, you can contribute to an Industry fund open to the public or a retail fund. Big Sky Financial Solutions can help you develop a suitable strategy.

Because your Superannuation fund gets tax concessions, you will usually build more wealth by investing through Superannuation than if you invested in identical assets outside Superannuation. However, Superannuation locks your money away until you retire.

If you have not been working for a long period, you may not be able to make personal contributions, although your spouse may be able to contribute on your behalf. Discuss your options with Big Sky Finanical Solution on 1300 700 180 or email us.

Superannuation can be a very tax efficient investment vehicle too.

Depending on your circumstances and requirements your Financial Planner may suggest a financial strategy that utilises Superannuation as a vehicle to enter the investment markets.

Salary sacrifice
Salary sacrifice is a process of renegotiating your total remuneration with your Employer. You agree to a reduced wage or salary in return for the provision of other benefits (such as Superannuation contributions) of equivalent value by your Employer.

Pre-tax contributions, where the contribution is made as part of a salary sacrifice strategy, can be more tax efficient for you. This is because contributions to Superannuation are taxed at a much lower rate than comparable income tax thresholds. Any earnings on Superannuation are re-invested so they continue to be taxed at a lower rate.

Salary sacrifice arrangements typically include car benefits, car parking benefits, loan benefits and expense payments benefits. Salary sacrifice options may vary according to the policies of individual Employers.

Spouse contributions
The government encourages accumulation of superannuation for low or no income partners. Spousal contributions enable one partner (irrespective of their income or age) to contribute any sum into their partner’s superannuation account, as long as their partner is under 65. Tax rebates may be available subject to income limits.

If you wish to take advantage of this excellent investment opportunity, you should make sure that your spousal contribution is made before 30th June. A regular monthly savings plan into superannuation for a low income partner can be an attractive strategy.

Big Sky Financial Solutions can assist you with advice about the most appropriate superannuation fund to use for this purpose simply call 1300 700 189 or email us.

Co-contributions
A Government co-contribution to Superannuation may be received where a person contributes after-tax monies to Superannuation. Income and employment rules determine entitlement.

Splitting of superannuation contributions
From 1 January 2006 it is possible for Superannuation fund members to split contributions made since that date with their spouse. Trustees of Superannuation funds are not obliged to offer this option to members.

Consolidation of accounts may save you unnecessary duplication in administration costs and erosion of earnings. Big Sky Financial Solutions can also help you with rollovers and consolidation of Superannuation monies into one account call us on 1300 700 189 or email us.