1

Getting started

Q          I’m ready to invest with Colonial First State. How do I go about it?
A.

  1. Decide which product and request a Product Disclosure Statement (PDS). Decide which type of investment fund you want to invest in (investments, superannuation or pension). Then get hold of a copy of the relevant product brochure, known as a Product Disclosure Statement (PDS). This is available from your financial adviser, through our website or by calling us direct.

    Download a PDS
    Request a PDS be mailed to you
    Order a PDS by phone on 1300 360 645

  2. Read the Product Disclosure Statement. The PDS contains information relevant to your investment decisions (asset classes, risk and return, diversification), details on the product itself (transacting, unit pricing, terms and conditions), information on the investment funds available and an application form. You need to read through all the information in the PDS and decide which investment options you want to invest in.

    If you have any questions or would like help completing the application form, please call us on 1300 360 645.

  3. Complete the application form. Either complete the application form at the back of the Product Disclosure Statement or   apply online.

     Applying by mail: don’t forget to include a cheque or complete the direct debit form.

     Applying online: you’ll need to print a copy of the final application, sign it and send it to us with your payment.

  4. Wait for confirmation. Your application will be processed within two days, once we receive your correctly-completed application and payment. You should receive your confirmation pack five business days later, together with the information you need for accessing your personal account information online.

    Making the right investment decision isn’t always straightforward. We recommend you discuss your options with a financial adviser.

 

Mastering the investment basics

Q.    What is asset allocation?
A.
     Asset allocation refers to the proportion of money a managed fund invests in the different asset classes. This is one of the most important things you need to look at when considering a fund that invests in more than one asset class. The name alone doesn’t always properly explain what a fund does and performance can vary dramatically for two different funds with the same or similar name.

Q.    How can I check if I have any lost super?
A.
    To see whether you have any unclaimed super you can use the Australian Taxation Office's free SuperSeeker tool at www.ato.gov.au/super. You can then consider whether you should consolidate it into one super account.

Q.    Are there caps on the amount I can put into super?
A. 
   The Government imposes different caps on contributions depending on whether you make them from your before-tax (eg employer super guarantee contribution) or after-tax income. The contribution caps are summarised below.

Non-concessional (after tax) contributions:

  • are not taxed by the fund
  • you are taxed on non-concessional contributions above the non-concessional cap at 46.5% (excess contributions tax).

The non-concessional cap is $150,000^ per year. If you are:

  • under age 65 (at any time in the financial year), and you contribute over the non-concessional cap, you will 'bring forward' your following two years contribution caps. This means you can make up to three times the non-concessional cap (ie $450,000) in contributions at any time over a three year period.

Concessional (before tax) contributions:

  • are taxed by the fund at 15%
  • you are taxed on concessional contributions above the concessional cap at an additional 31.5% (excess contributions tax).

The concessional cap is $25,000* per year for everybody.

Contributions above the concessional cap also count towards your non-concessional cap.

* Indexed to Average Weekly Ordinary Time Earnings (AWOTE) in $5000 increments and is frozen until 1 July 2014.

Q.    What is the average life expectancy?
A.
    For a couple aged 55 there’s a 72% chance the woman will live to celebrate her 80th birthday and a 56% chance her husband will be celebrating with her. Men and women aged 65 will, on average, live a further 18 and 21 years respectively.

How many years will you have in retirement?
Age at retirement Female Male
55 30 years 27 years
60 26 years 23 years
65 22 years 19 years
70 17 years 15 years
75 13 years 11 years

Source: Australian Life Tables 2005-07

The bottom line is that in order to make sure that your money doesn’t run out before you do, you need to plan to be retired for at least 20 years - or be prepared to accept the fact that you may have to keep working for much longer than you anticipated.

Q.    Am I eligible for a co-contribution?
A.
    Employees and self-employed people may be eligible for a super co-contribution. If you can answer YES to all of these questions, in relation to a financial year, then you will be entitled to a super co-contribution from the Government.

Have you made, or are you prepared to make, personal (after tax) contributions to your super for which you will not claim a tax deduction?1 Yes No
Do you earn2 less than $46,920 a year before tax (individual income, not household)? Yes No
Do you earn more than 10% of your total income as an employee3 or from carrying on a business? Yes No
Are you under 71 years of age? Yes No
Have you or will you lodge an income tax return? Yes No
Are you a permanent resident, or citizen of Australia?4 Yes No

1 Contributions made by your spouse and employer do not count.
2 Assessable income and reportable fringe benefits and reportable employer super contributions less business deductions (except for super contributions or work-related expenses)
3 Eligible employment includes any arrangement where an employer is required to treat you as an employee for the superannuation guarantee rules (which entitles you to a percentage of your gross annual income as super contributions). Excludes fully retired people.
4 You cannot hold a temporary resident visa.

Q.    SMSF - What is a Self Managed Super Fund?
A.
    A self managed super fund (SMSF) is controlled and managed by the members of the fund. As such, the members, as trustees, make all the decisions about how the fund is run, what investments it holds and the type of benefits it can pay. The level of control and flexibility SMSFs allow are seen as some of their main advantages.

To be a SMSF, a fund must satisfy the following conditions:

it has less than five members

  • if the trustee of the fund is a company (known as a corporate trustee), each director of the company is a member
  • each member of the fund is:
            -    an individual trustee, or       
            -    a director of the corporate trustee
  • no member of the fund is an employee of another member, unless they are relatives
  • no trustee receives any remuneration for duties or services performed as trustee

Where a SMSF only has one member, different rules apply. In this case a one member fund will meet the definition of a SMSF if it satisfies the following conditions:

  • if the trustee of the fund is a body corporate:
            -     the member is the sole director of the corporate trustee, or
            -     the member is one of only two directors of the corporate trustee, and the member is not an employee of the other
                  director (unless they are relatives)

  • if the trustees of the fund are individuals
            -     the member is one of only two trustees, and
            -     the member is not an employee of the other trustee (unless they are relatives)

In certain situations other people may be permitted to act as a fund trustee on a member’s behalf without causing the fund to fail the SMSF definition. These situations include where a member has deceased or is under a legal disability.

Q.    SMSF - Who can be a member of a Self Managed Super Fund?
A.
    In general anyone can be a member of a superannuation fund. However, to be a trustee of a SMSF, each member must be a trustee, over age 18, not be under a legal disability or be a disqualified person. Where a member is under a legal disability or under age 18 another person (i.e. their legal personal representative or guardian) can be appointed to act as trustee on their behalf.

A person will be considered to be a disqualified person if they:

  • have ever been convicted of an offence involving dishonest conduct
  • have ever been subject to a civil penalty for a breach of the SIS Act
  • are insolvent under administration
  • have ever been disqualified from acting as a trustee of a superannuation fund

Where a fund has a corporate trustee the company will be considered to be a disqualified person where:

  • a receiver, administrator or provisional liquidator has been appointed to the company
  • the company has begun to be wound up
  • the company knows or has reasonable grounds to suspect that a responsible officer (director, secretary or executive officer) of the company is a disqualified person

Where a trustee of a self managed super fund becomes a disqualified person, the trustee must immediately advise the Australian Taxation Office (ATO) in writing. Severe penalties can apply where a disqualified person knowingly continues to act as a trustee once they have become disqualified.

In certain circumstances a trustee can appeal to the ATO for a waiver of their disqualified status. For more information please contact the ATO or your professional service provider.

For more information on the definition of a self managed superannuation fund and details on who can be a trustee see “Self Managed Superannuation Funds – “Role and responsibilities of trustees” on the ATO website at www.ato.gov.au.

We recommend you speak to a financial adviser about your specific needs, however, we’re always happy to answer any questions you have about superannuation. Just give us a call on 1300 720 441.

Q.    SMSF - What are the trustee responsibilities?
A.
    The trustees, as members of a self managed superannuation fund, are ultimately responsible for all aspects of the operation, administration and compliance of their fund. Significant penalties can apply to trustees who fail to comply with their obligations.

Q.    SMSF - What super rules must a trustee follow?
A.

  • act honestly in all matters affecting the fund
  • exercise the same degree of care and diligence as an ordinary person in managing the fund
  • act in the best interests of all beneficiaries of the fund
  • keep fund assets separate from other assets (i.e. the trustees' personal assets)
  • retain control over the fund
  • develop and implement an investment strategy
  • not enter any contracts, or do anything else, that would prevent the trustee from properly performing or exercising their functions and powers
  • allow members to access information about the fund and their benefit

Trustees should be aware of these responsibilities and comply with them at all times. Failure to act in accordance with these rules could result in penalties and loss of a fund’s tax concessions.

Q.    SMSF - What is the ‘Sole Purpose’ test?
A.
    The sole purpose test applies to all funds and requires that a fund is established and maintained for the sole purpose of providing benefits to members upon their retirement, or to a member’s beneficiaries in the event of their death.

The sole purpose test is divided into both core and ancillary purposes and requires that a fund is maintained solely for:

  • one or more core purposes, or
  • at least one core purpose and one or more ancillary purposes.

Trustees must ensure that any decision made in relation to the acquisition, use or sale of assets relates solely to the provision of retirement benefits (sole purpose test). One of the main ways to determine if a fund has contravened the sole purpose test is to examine the character and purpose of the fund's investments. For example, providing a direct or indirect financial benefit to any party cannot be a consideration when making investment decisions and arrangements (other than increasing the return of the fund). Contravening the sole purpose test is very serious and may lead to trustees facing civil and criminal penalties, which may result in the fund losing its complying status.

Source: "Self Managed Superannuation Funds - Role and responsibilities of trustees", page 11 on the ATO website at www.ato.gov.au

For more information on the sole purpose test see:

  • “Self Managed Superannuation Funds – “Role and responsibilities of trustees” on the ATO website at www.ato.gov.au or
  • The Australian Prudential Regulation Authority (APRA) “Superannuation Circular No III.A.4 – The sole purpose test” at www.apra.gov.au

Q.    SMSF - Who can make member contributions?
A.
    The superannuation rules require the trustees of a superannuation fund, including a self managed super fund, to only accept contributions to the fund where the member is eligible to make a contribution.

For a summary of the types of contributions a member can make see the ATO guide “Role and Responsibilities of Trustees” on the ATO website www.ato.gov.au

Q.    SMSF - What are the duties when managing investments for the fund?
A. 
   One of the most important duties of the trustees of a superannuation fund is to manage the fund’s assets. To reduce risk and ensure that funds are being maintained for genuine retirement, trustees have a number of duties and responsibilities. This includes setting up an investment objective and strategy for the fund. This allows the authorities to check that the fund is being managed in a way previously agreed.

For more information on formulating and implementing an appropriate investment strategy for a superannuation fund see APRA “Superannuation Circular No II.D.1” at www.apra.gov.au.

Q.    SMSF - Is the fund limited to the types of investments it can make?
A. 
   Although the superannuation rules require trustees to implement an investment strategy for the fund, they do not state exactly what investments a fund can acquire. However, the legislation does impose certain restrictions on fund investments in order to protect member benefits.

Q.     SMSF - What are the ‘Arm’s Length’ rules?
A.
    All investments by a SMSF must be made and maintained on a strict commercial (i.e. arm’s length) basis. In other words, the relevant purchase/sale price of any fund asset should be based on a fair market value regardless of who the parties to the transaction are. Similarly, any rental or lease amounts paid for the use of any fund asset should reflect a fair market rate of return.

Q.    SMSF - What are the ‘In-house asset’ rules?
A.
    The in-house asset rules limit a superannuation fund from undertaking certain transactions with related parties in order to limit risk and to ensure that funds are being maintained for genuine retirement purposes. In-house assets are defined as:

  • an investment of a fund in a related company or trust (i.e. a fund owns shares in a company or units in a trust)
  • an asset of a fund that is leased to a related party
  • a loan made by a fund to a related company or trust

For more information on the investment restrictions discussed in this section see the following APRA publications at www.apra.gov.au.

  • “Superannuation Circular No II.D.5 – Investments to be on an Arm’s Length Basis”
  • “Superannuation Circular No II.D.2 – Lending and Provision of Financial Assistance to Members of Superannuation Entities”
  • “Superannuation Circular No II.D.4 – Borrowing by Superannuation Entities”
  • “Superannuation Circular No II.D.3 – Acquisition of Assets from Related Parties”
  • “Superannuation Circular No II.D.6 – In-House Assets

For more information on relevant ATO Rulings view details at www.ato.gov.au

SMSFR 2008/1
Self Managed Superannuation Funds: giving financial assistance using the resources of a self managed superannuation fund to a member or relative of a member that is prohibited for the purposes of paragraph 65(1)(b) of the Superannuation Industry (Supervision) Act 1993 (As at 16 July 2008)

SMSFR 2008/2
Self Managed Superannuation Funds: the application of the sole purpose test in section 62 of the Superannuation Industry (Supervision) Act 1993 to the provision of benefits other than retirement, employment termination or death benefits (As at 16 July 2008)

SMSFR 2009/2
Self Managed Superannuation Funds: the meaning of 'borrow money' or 'maintain an existing borrowing of money' for the purposes of section 67 of the Superannuation Industry (Supervision) Act 1993 (As at 8 April 2009)

SMSFR 2009/3
Self Managed Superannuation Funds: application of the Superannuation Industry (Supervision) Act 1993 to unpaid trust distributions payable to a Self Managed Superannuation Fund (As at 24 June 2009)

SMSFR 2009/4
Self Managed Superannuation Funds: the meaning of 'asset', 'loan', 'investment in', 'lease' and 'lease arrangement' in the definition of an 'in-house asset' in the Superannuation Industry (Supervision) Act 1993 (As at 24 June 2009)

Q.    SMSF - When can members access their super?
A.
    To ensure that superannuation savings are used for retirement and other permitted purposes, special rules apply to limit when members can access their superannuation. These are called preservation rules. Trustees of superannuation funds are responsible for ensuring that their fund complies with these rules at all times.

If a person has reached preservation age but not yet permanently retired, they can access their super in the form of a pre-retirement pension (but they cannot make lump sum withdrawals).

Q.    SMSF - How is a SMSF taxed?
A.
    The taxable income of complying superannuation funds (including SMSFs) is subject to tax at the concessional rate of 15%.

Any capital gains derived by a SMSF in relation to an asset are included in the assessable income and subject to income tax. Depending on when a superannuation fund acquired an asset the trustees can use one of two methods to calculate the fund’s net capital gain:

  • assets acquired after 20 September 1999 and held for more than 12 months - fund eligible for a 1/3 discount on the gross capital gain (i.e. only 2/3 of the capital gain is included in assessable income); and
  • assets acquired prior to 20 September 1999, held for more than 12 months and sold after 20 September 1999 - fund can either apply the 1/3 discount or index the cost base by using the CPI factor up to September 1999.

Where a superannuation fund, including a SMSF, is paying a pension, the income and capital gains on assets backing that pension are tax free. However, a fund paying a pension, such as an allocated pension, may still be required to deduct PAYG tax from income payments and remit it to the ATO.

We recommend you speak to a financial adviser about your specific needs, however, we’re always happy to answer any questions you have about superannuation. Just give us a call on 1300 720 441.

Q.    SMSF - How are benefits taxed?
A.
    Superannuation benefits paid out to members are subject to tax depending on a range of factors. The following section outlines the tax treatment of lump sums and pensions.

Superannuation tax components comprise the following:

  • taxable component –  includes superannuation guarantee contributions, additional employer contributions (such as salary sacrifice) and personal deductible contributions.
  • tax free component – includes personal contributions for which no tax deduction is claimed, spouse contributions and Government co-contributions.

Taxation of lump sum superannuation benefits

The tax rules for cashing out your super as a lump sum will depend on your age:

Under age 55

  • the whole taxable component is taxed at 21.5%; and
  • the tax free component is not subject to tax.

Age 55-59

  • the taxable component is not subject to tax up to a low rate threshold of $175,000*; and
  • amounts above $175,000* will be taxed at the flat rate of 16.5%; and
  • the tax free component is not subject to tax.

Please note: The components of your withdrawal will generally be required to be taken in the same proportion as the components in your account at the time of the withdrawal.

Age 60+

  • all benefits are not subject to tax.

* $175,000 tax free amount will be indexed on an annual basis.

Taxation of superannuation income stream benefits

How your pension will be taxed will depend on your age when you receive the income payments.

Age 55 to 59
The amount of pension less an annual tax-free amount is included in your assessable income and taxed at your marginal rate. A tax offset of 15% is available to reduce your tax payable. Conditions apply for those under 55.

Age 60+
The whole amount of the pension is excluded from your assessable income and is not subject to tax.

Tax-free amount

For pensions commenced after 1 July 2007
The tax-free amount will be calculated based on the proportion of the components used to purchase the pension or at the time of a trigger event. For example, if your pension commences with a $30,000 tax-free component and $70,000 taxable component, your tax-free amount in each pension payment will be 30%.

If you commenced your pension prior to 1 July 2007, and then subsequently roll over or take a withdrawal (partial or full commutation) from your pension between age 55 and 59, the amount of tax-free pension you receive could change.

For pensions commenced prior to 1 July 2007
The tax-free amount is the deductible amount and is calculated by dividing the undeducted purchase price by the life expectancy at commencement. The tax-free amount will not change until a trigger event occurs – resulting in your existing tax components converting into taxable and tax-free components.

We recommend you speak to a financial adviser about your specific needs, however, we’re always happy to answer any questions you have about superannuation. Just give us a call on 1300 720 441.

Q.    SMSF - Where else can I go to find more information (useful links)
A.

Government
Australian Prudential Regulation Authority
Australian Securities and Investments Commission

Australian Taxation Office
Centrelink

Industry Bodies
Self Managed Superannuation Professionals’ Association of Australia
Small Independent Superannuation Funds Association

We recommend you speak to a financial adviser about your specific needs, however, we’re always happy to answer any questions you have about superannuation. Just give us a call on 1300 720 441.

Q.    Super choice - What is super choice?
A.
    Super choice legislation took effect from 1 July 2005 and simply means you can select which super fund you’d like your compulsory super contributions paid into.

Q.    Super choice - Do I get a choice?
A.
    Not all employees must be given a choice, although more employees are being included over time. The laws governing choice of fund specifically exclude:

  • Employees covered by a range of employment agreements that specify a super fund
  • Government employees in unfunded public sector super schemes
  • Government employees who are members of the Commonwealth Superannuation Scheme (CSS) or the Public Sector Superannuation Scheme (PSS), other than PSSAP members
  • Employees who remain a member of a defined benefit fund that is in surplus or who have accrued their maximum benefit.

You may find that, although you do not qualify for choice of fund under the new laws, your employment agreement, contract or award may allow you to negotiate a choice with your employer. Contact your employer to find out if this applies to you.

If you’re not sure if you qualify for choice of fund, ask your financial adviser, employer or visit the ATO website.

Q.    Super choice - Which funds can I choose?
A.
    You can choose any complying superannuation fund or retirement savings account. The only requirement is that it must be willing and able to accept contributions from your employer.

Q.    Super choice - What contributions does choice cover?
A.
     Super choice only applies to the compulsory superannuation your guarantee employer is required to contribute for you. Generally, compulsory super is a percentage of a person’s salary. Some employers may choose to pay salary sacrifice or voluntary employer contributions to the fund you choose, while others may pay these “non-compulsory” contributions to a default fund of their choosing.

Q.    Super choice - How do I choose my fund?
A.
    You can change your super fund in two ways:

  1. By completing a choice form given to you by your employer; or
  2. By providing written notice to your employer requesting that contributions are made to your chosen fund.

In both cases you need to provide your employer with:

  • Details of your chosen fund – fund name, fund manager ABN, their telephone contact details and super product identification number (if available)
  • Your account details - account name, and account or membership number if you have one
  • A letter from the fund trustee confirming that it is a complying fund
  • If you are choosing a self managed super fund (SMSF), written evidence from the ATO that the fund is regulated
  • Written evidence from the fund that it will accept your employer's contributions
  • Details from the fund about how contributions can be made (ie payment methods)

But don’t worry, this isn’t as difficult as it might seem. When you have a Colonial First State super account, you can obtain a pre-completed choice form, ready to sign and give to your employer. You can obtain this form online, or by phoning us on 13 13 36.

Your employer will then process the information provided and has two months to start making contributions to your chosen fund.

Q.    Super choice - How do I complete the choice form?
A.
    Completing the form is fairly straight forward - it’s just a way of telling your employer where to invest your super, confirming that your chosen fund will accept the contributions, and telling them how to deposit this money.

When you have a Colonial First State super account, you can obtain a pre-completed choice form, ready to sign and give to your employer. You can obtain this form online, or by phoning us on 13 13 36

Q.    Super choice - Do I need to open a new super account before I complete the form?
A.
    If you have an existing Colonial First State super account, you can use this account to receive your compulsory contributions.

If you don’t already have a Colonial First State super account, you’d need to open one, in order to give your employer your account details.

Q.    Super choice - When will my super contributions start going into my chosen fund?
A. 
   Two months after you’ve notified your employer of your fund choice, your contributions must start going to this fund. However, it can be earlier if your employer chooses.

Q.    Super choice - When can I change my chosen super fund?
A.
    Generally, you can only change an existing choice once every 12 months. If you have never made a fund choice previously with your employer, you can make your choice at any time.

Q.    Super choice - How do I make the right choice?
A.
    This is the million dollar question. As everyone’s situation is different your financial adviser is best placed to help you. We’ve also put together a checklist of some things to consider when you’re choosing your fund. Hopefully you’ll find this helpful when making your decision. If you need help finding an adviser visit the Financial Planning Association website at www.fpa.asn.au.

Q.    Super choice - What should I consider before making a choice?
A. 
   Look at a range of super funds available to you. Consider the fund’s investment options, insurance offering, fee information, service offering, website and performance history – although you should bear in mind that past performance is no indication of future performance.

Check that you can get the insurance cover you need just as cost-effectively and easily in the new super fund. This is something you should look into carefully, as you may not be eligible for the same insurance benefit if you opt out of your current super fund, and then back into the same fund later on.

Super choice is designed to let you select the super fund that best suits your individual situation and needs. We suggest you seek professional financial advice prior to making a super choice decision.

Q.    Super choice - Do I have to make a choice?
A.
    No, but if you don't make a choice, or you choose a fund that cannot accept your employer's contributions, then your employer can make contributions to a 'default' fund. The default fund is one that is selected by your employer for employees who do not make a choice.

Q.    Super choice - Can my employer tell me which fund I should choose?
A.
    No, unless your employer is licensed to give financial advice. It is against the law for a person or company to give personal financial advice if they do not hold an Australian Financial Services Licence (AFSL) or are an authorised representative of one. Only the holder of an AFSL has the training, skills and experience to consider your personal situation and recommend a superannuation fund that is best suited to meet your needs.

You can find a financial adviser by visiting the Financial Planning Association website at www.fpa.asn.au.

Q.    Super choice - What kind of insurance is included with superannuation?
A.
    You usually have access to three types of insurance through superannuation

  1. Death only
  2. Death and Total and Permanent Disability
  3. Salary Continuance (ie where you are temporarily ill or injured, you receive a percentage of your income)

Each fund may offer some or all of the different insurance options, or none at all. Details of the types of cover available are in the fund’s Product Disclosure Statement.

Q.    Super choice - Should I look for a fund that includes life insurance?
A.
    Whether you need life insurance or not is a question you should discuss with your adviser. However, if you do need life insurance, accessing it through your superannuation fund should definitely be considered as it is quite often cheaper and tax-effective.

Q.    Super choice - Will choice mean that insurance premiums are higher?
A.
    Not necessarily. You may find that by joining a larger superannuation fund, you can get more cover or lower insurance premiums than you currently get. Regarding fees, you need to compare the situation in your current fund with that in another fund.

Q.    Super choice - Does the default superannuation fund that my employer offers need to provide a minimum level of death only insurance?
A.
    Yes, under choice legislation all employer sponsored default funds must provide a minimum level of death only insurance. FirstChoice Employer Super can be set up to offer insurance cover automatically above the minimum level.

Q.    Super choice - If I choose a new fund, can I transfer my insurance over?
A.
    Generally no, most insurers don’t allow you to transfer insurance between different super funds, however you should check with your fund.

Some funds offer a ‘pre-assessment’ service that allows you to determine if you will get cover and any conditions that may apply, before you commence insurance cover.

Q.    Super choice - Can an employer charge me for exercising my super choice?
A.
    No, your employer cannot charge you for allowing you to choose a fund if you're legally allowed to do so.

Q.    Super choice - Will choice mean that I pay higher fees in my super fund?
A.
    Not necessarily - it is anticipated that, overall, choice will make the super industry more competitive and that this will drive down fees.

Some funds already have low fees due to the way they are structured and the economies of scale that come with having a large number of members – such as the Colonial First State FirstChoice Personal Super fund.

When selecting your super fund, consider the financial strength of the provider. Have they the financial power and economies of scale to improve services and product features without increasing fees?

You will need to carefully compare the fees you're paying in your current fund with the fees you'd be charged in another fund, to work out which represents the best value for you. Your financial adviser may also be able to help.

Q.    Super choice - Why is my employer still contributing salary sacrifice contributions to my old fund?
A.
    Generally, your employer must pay your compulsory super into the fund you choose. However, your employer may choose to pay salary sacrifice or other employer voluntary amounts to your old fund.

Q.    Super choice - Why has my employer's contributions not gone into the fund I've chosen?
A.
    If the fund you've chosen can't accept the contributions your employer makes for you, then your employer cannot contribute to that fund. This may happen if the fund has minimum limits on the amounts of contributions it will accept, or if it requires your employer to apply to be a participant in that fund and your employer doesn't want to, or if the fund is closed to further contributions. In this case, your employer's contributions will be made to the default fund instead.

Q.    Super choice - What happens if my employer doesn't give me a choice when they're meant to?
A. 
   If you're meant to get choice and either your employer doesn't offer you choice (ie doesn't give you a choice form) or doesn't act on the choice you nominate, then your employer will pay a penalty. The penalty for not complying with choice is 25% of the amount of the contribution, up to $500 per employee per quarter, plus 10% p.a. interest and administration penalties will apply.

Retiring on your own terms

Q.    When can I access my super?
A.
    Generally you have to have reached your preservation age and permanently retired before you can access your super as a lump sum. Accessibility depends on your age – those born before 1 July 1960 can access their super when they are 55, whereas if you were born after 30 June 1964, you have to be 60.

How old do you have to be before you can access your super?
Your birthday Preservation age
Before 1/7/1960 55
1/7/1960 - 30/6/1961 56
1/7/1961 - 30/6/1962 57
1/7/1962 - 30/6/1963 58
1/7/1963 - 30/6/1964 59
After 30/6/1964 60


You may sometimes be allowed to access your super before your preservation age under special circumstances such as permanent incapacity and severe financial hardship. This is something you would need to discuss with your financial adviser.

Q.    What age can I qualify for the age pension?
A.
    If you are expecting to get the age pension in your retirement, you need to factor in the age at which you are able to apply. This depends on whether you’re male or female. All men regardless of when they were born, and women born after 1 January 1949, are entitled to apply for the age pension once they reach age 65. Women born before 1 July 1935 are eligible for the age pension at age 60. Women born between 1 July 1935 and 31 December 1948 are eligible to apply for the age pension once they reach the age shown in the table below.

Date of Birth Qualification age
Before 1/7/1935 60
1/7/1935 - 31/12/1936 60.5
1/1/1937 - 30/6/1938 61
1/7/1938 - 31/12/1939 61.5
1/1/1940 - 30/6/1941 62
1/7/1941 - 31/12/1942 62.5
1/1/1943 - 30/6/1944 63
1/7/1944 - 31/12/1945 63.5
1/1/1946 - 30/6/1947 64
1/7/1947 - 31/12/1948 64.5
1/1/1949 and later 65

Taking these two factors into consideration, there could well be gaps between the time you choose to retire, the time you are able to access your super, and the time you can apply for the age pension.

As at 20 September 2012, the maximum pension is around $20,088 pa for a single person, or $30,285 for a couple*. 

There are two separate tests used to determine the level of pension payments you might receive – an income test and an assets test. The table below shows the current thresholds that apply to a couple. If your income or assets exceed the full pension threshold (column B), your payments will proportionately decrease from the maximum until they phase out completely once you reach the ‘cut out’ threshold (column C).

It is important to remember that your entitlement to a pension is subject to both an income test and an assets test, and the test which results in the lowest rate of payment is used.

A B
Full pension
C
Pension cuts out
D
Transitional
cut-off
Assets Test*
Couple (Home owner)
Couple (Non home owner)
 
$up to $273,000
$up to $412,500
 
$1,050,000
$1,189,500
 
$1,000,500
$1,140,000
Income test*
Couple
 
$6,968
(per year)
 
$67,538
(per year)
 
$77,857
(per year)

*As at 20 September 2012, Source: Centrelink

Q.    How can I generate an income in retirement?
A. 
    If you are intending to convert your super to an income stream, you have two basic choices – an allocated pension, or a guaranteed annuity, or a combination.

  • An allocated pension provides a regular income with a reasonable amount of flexibility:

- You can choose the amount of income you wish to receive each year between above your minimum amount. This is    calculated as a minimum percentage of your account balance (depending on your age)
- make lump sum withdrawals at any time

  • A guaranteed annuity pays you a guaranteed amount of money each year, either for a predetermined number of years, or for the rest of your life.

- Your income is pre-determined, fixed and will not change for the life of the annuity (with some flexibility to be indexed each year) and guaranteed for the term agreed.
- 100% of your account balance is counted as an asset under the Centrelink assets test.
- You cannot usually make lump sum withdrawals.
- There may be restrictions to paying any outstanding death benefits to your beneficiaries in certain circumstances.

  Allocated pension Guaranteed Lifetime or Life Expectancy annuity
Can I invest money other than super? Cross Tick
What investment strategies can I use? Cash
Fixed interest
Property
Shares
N/A
You receive a fixed amount indexed by inflation.
Who takes on the investment risk? The investor The insurance company
What part of the investment counts as an asset for Centrelink purposes? 100% 100% (maybe exempt 100% or 50% if commenced prior to 20 September 2007)
Are the payments assessed as income for Centrelink purposes? Tick Tick
Can I withdraw lump sums? Tick Cross
Could I save income tax by investing in this product? Tick Tick
Can I change my pension payments if I change my mind? Tick
minimum percentage amount is taken each year
Cross
Will the balance be paid to my beneficiaries if I die? Tick Some limited death benefit payments can be made in certain situations.
Can I decide how much income I receive? Tick
Cross
Can I decide how often I receive my income? Tick
monthly
quarterly
6-monthly
yearly
Tick
monthly
quarterly
6-monthly
yearly
Is the income guaranteed? Cross Tick
Can I decide how long I should receive income for? Cross
the pension will continue until the account is exhausted.
Depends
You can choose term certain or lifetime depending on the product.

Q.    What are the cut-off times for transactions?
A
.    If your valid transaction request is received in our office before 3pm Sydney time, it will be processed that day using the next determined unit price.

Transaction Cut-off time
Initial investments 3pm (Sydney time) on a NSW business day
Additional investments 3pm (Sydney time) on a NSW business day
Switches 3pm (Sydney time) on a NSW business day
Withdrawals 3pm (Sydney time) on a NSW business day

If your valid transaction request is received after 3pm your transaction will be processed the following NSW business day.

Q.    How do I open an account with Colonial First State?
A.
    Making the right investment decision isn’t always straight forward. We recommend you discuss your options with a financial adviser.

  1. Request a Product Disclosure Statement. Decide which type of investment fund you want to invest in (investments, superannuation or pension). Then get hold of a copy of the relevant product brochure, known as a Product Disclosure Statement (PDS). This is available from your financial adviser, through our website or by calling us direct.

    Download a PDS
    Request a PDS be mailed to you
    Order a PDS by phone on 1300 360 645

  2. Read the Product Disclosure Statement. The PDS contains information relevant to your investment decisions (asset classes, risk and return, diversification), details on the product itself (transacting, unit pricing, terms and conditions), information on the investment funds available and an application form. You need to read through all the information in the PDS and decide which investment options you want to invest in.

    If you have any questions or would like help completing the application form, please call us on 1300 360 645.

  3. Make an application. Either complete the application form at the back of the Product Disclosure Statement or, alternatively, you can apply online.

    Applying by mail: don’t forget to include a cheque or complete the direct debit form.

    Applying online: you’ll need to print a copy of the final application, sign it and send it to us with your payment.

  4. Wait for confirmation. Your application will be processed within two days, once we receive your correctly completed application and payment details. You should receive your confirmation pack five business days later, together with the information you need for accessing your personal account information online.

Q.    Once I have an account how do I make additional investments?
A.
    By Direct Debit, direct credit, by cheque, by BPAY. For further information please click here.

Q.    What is a binding death nomination?
A. 
   You can complete a binding death nomination to require that we pay your death benefit to the dependants you nominate or to your legal personal representative. If you complete and we receive your valid binding death nomination prior to your death, we are required to follow your nomination. This can provide you with greater certainty on who will receive your super benefit when you die.

Who can you nominate?

You can only nominate your legal personal representative or your dependants for your Binding death nomination to be valid. Your legal personal representative is the person appointed on your death as the executor or administrator of your estate. Your dependants are:

  • your current spouse or de facto
  • your child (including step, adopted, ex-nuptial or current spouse’s child and your child in the Family Law Act meaning).
  • Anyone financially dependent on you
  • any person with whom you have an interdependency relationship (as defined at your death)

Note: Depending on who you choose as a beneficiary, tax may be payable on the benefit. For more information speak to your financial adviser.

How your death benefit will paid?

If you have nominated one of more of your dependants, they will be provided the choice of taking their proportion of the death benefit as a lump sum cash payment or a pension from a pension investment account. Please note, however, that from 1 July 2007 if you have nominated a child, the death benefit must be paid to them as a lump sum cash payment unless the child:

  • is under age 18
  • is under age 25 and is financially dependent on you, or
  • has a certain type of disability.

If your child’s personal circumstances change so that they no longer meet one of these exceptions, we will pay the remaining account balance to them as a lump sum cash payment.

How can you ensure your nomination is valid?

For your nomination to be valid it must:

  • Be made in writing to the superannuation fund

Contain the full name and date of birth of your nominated beneficiaries. Alternatively, if you wish to nominate your estate state ‘my legal personal representative’

  • Clearly set out the proportion of benefit to be paid to each person nominated and how the benefit is to be paid (lump sum and/or income stream)
  • Be signed by you in the presence of two witnesses over the age of 18 (they cannot be beneficiaries on the form)
  • Contain a signed witness declaration for each witness
  • Be received and processed by your super fund

What to consider next

Speak to your financial adviser or choose an option here:

call us on Download pds Apply now


The information contained in this document is based on the understanding Colonial First State Investments Limited ABN 98 002 348 352 AFS Licence 232468 has of the relevant Australian laws as at 1 July 2009. This document is not advice and is intended to provide general information only. It does not take into account your individual needs, objectives or personal circumstances. You should assess whether the information is appropriate for you and consider talking to a financial adviser before making an investment decision. Product Disclosure Statements (PDS) for products offered by Colonial First State are available from colonialfirststate.com.au or by contacting us on 13 13 36. You should read the relevant PDS and consider whether the product is right for you. Past performance and awards are no indication of future performance.