MLC Market Watch

New social security rules coming into effect on 20 September will bring welcome relief for pensioners or those nearing retirement.

MLC Technical Expert, Gemma Dale outlines a number of key changes and what it may mean for you.

These changes include:

• an increase in the rate of pension
• incentives to remain in the workforce, and
• new arrangements for treating income.

Find out how the new pension system will work, and how you can make the most of the changes before the 20 September deadline.

View the Gemma Dale video here.

Self-funded retirees who are invested in the sharemarket have arguably been the hardest hit by the global financial crisis.

Many may now be wondering if they should move their account-based pension into a more conservative investment portfolio, which contains less growth assets such as shares and property.

So we went back through history to see the impact that switching to a more conservative portfolio would have had, if done after a major market fall.

We also outline some strategies you could discuss with your financial adviser to help you weather the storm.

What is an account-based pension?

Before we reveal the lessons we can learn from history, we thought it was worthwhile going back to basics to explain how account-based pensions work.

An account-based pension enables you to invest your superannuation savings and receive a tax-effective income to help meet your living expenses.

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On Thursday 4 December, MLC hosted a live investor webcast focused on super and pensions.

The format for the 45-minute online discussion was 15 minutes of presentations, followed by 30 minutes of live Q&A.

The presenters were:

• MLC Investment Strategist Brian Parker who provided a market update and talked through the issues of the day, and
• Paul Maddock, General Manager Investment Products & Services who detailed the options and choices people in or approaching retirement have.

A panel of experts then took live questions from viewers.

A recording of the webcast is now available. Tune in for what was a lively and insightful discussion.

You can hear what other people are asking the panel, and navigate the webcast to just listen to the bits that really interest you.

Watch MLC’s online discussion now.

Andrew Lawless is Head of Technical Services at MLC. Here he answers the super and pension questions the panel didn’t manage to get to in MLC’s online panel discussion, held on Wednesday 12 November. Watch this space for more Q&A.

Is salary sacrifice a good idea in these times as I want to retire in a year?

Regardless of market conditions, salary sacrifice is a tax effective way to save for retirement. This is because your super contribution is taxed at a maximum rate of 15%, instead of your marginal income tax rate which could be up to 46.5%*.

There could also be advantages to investing in super when markets are down. This is because share values are cheaper, so you can buy more with your contribution and capitalise on this when the market recovers.

You should see a financial adviser to work out whether salary sacrifice is the best way for you to boost your retirement savings. If it is, they will also be able to advise on what investments you choose to generate sufficient income for your retirement.

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