MLC Market Watch

On Sunday 3 May, the Government announced a range of proposals in response to the much anticipated Henry Review of taxation. If legislated, many Australians will benefit in the long term.

Summary of key proposals
The key proposals announced by the Government include:

• the minimum super guarantee (SG) contributions you can receive from an employer will increase gradually from 9% to 12% of salary, starting from 1 July 2013
• the age to which you could receive SG contributions from an employer will increase from 70 to 75 from 1 July 2013 (more…)

As further evidence that the Australian sharemarket is indeed rallying to a sustained recovery, superannuation funds have risen for the sixth month in a row, offering some much needed relief to pensioners and retirees.

The latest SuperRatings research shows the median balanced superannuation fund rebounded 14.3 percent between March and August this year.

This results in a minus 7.9 percent performance for the year and a positive 5.4 percent return for the five year period.

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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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The prospect of a recession leaves most people with a sense of dread. There are, however, some benefits which if used wisely, can serve to safeguard, or even improve, your financial prospects.

We’ve identified four advantages of a recession: and how you could be profiting from them.

1. Decreased cost of living

While an economic boom cycle is great news for investors, it has the counter-effect of driving inflation into worryingly high levels. In simple terms, inflation is a rise in the average price of goods and services, as measured by the consumer price index (CPI).

During a boom cycle, the economy is in full swing; exports are high, jobs are plentiful and the nation generally enjoys high levels of prosperity. With more people eager to spend, the price of goods and services increase as producers take advantage of the high levels of demand.

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It’s often the case in dealing with the demands of every day life, we forget the financial year will soon be drawing to a close.

There are, however, great benefits to getting in early with your financial year-end planning.

We’ve identified four strategies to consider as the tax year draws to a close. Three of them may boost your retirement savings while paying less tax, and the fourth is a tax-effective way to purchase insurance.

And this is just the tip of the iceberg! Your financial adviser has many other strategies which may be suitable for you, all designed to improve your financial position.

So why not make this year-end a clever one?

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