Are you prepared for the changes to the Age Pension assets ...

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1http://www.humanservices.gov.au/customer/services/centrelink/age-pension

Are you prepared for the changes to the Age Pension assets test?

How the assets test will work in 2017 could increase your Age Pension entitlements, or take some or all of them away.

With revisions to the Age Pension assets test just around the corner, it’s important to understand how the changes could impact you, particularly with part-pension thresholds somewhat tighter than initially projected.

These thresholds are the value of assets you can own (excluding your home) before you lose eligibility for the Age Pension.

Who the changes will affectThe Age Pension assets test changes will affect Age Pension recipients, aged 65 and over. To be eligible for a full or part Age Pension, retirees must satisfy an income test and an assets test, as well as other requirements.1

According to reports, changes to the assets test, effective 1 January 2017, will see more than 50,000 additional Australians receive the full Age Pension. Meanwhile, roughly 300,000 retirees on the part pension will have their entitlements reduced, with about 100,000 losing all entitlements.2

THIS ISSUE CHANGES TO THE AGE PENSION ASSETS TESTWHAT DOES COMFORTABLE RETIREMENT LOOK LIKE?DELAYED GRATIFICATION, CAN IT HELP WITH YOUR FINANCES?LOOKING AHEAD AT 2017 SEVEN TIPS TO TRAVEL ON A BUDGET

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What’s actually changing in 2017?The Age Pension assets test thresholds will change.The cut-off thresholds previously announced were only projections, as Age Pension rates were not updated until 20 September 2016.

Following the recent update to Age Pension rates, the part-pension cut-off thresholds are a bit tighter than previously announced, meaning more people could be affected.3 The lower thresholds for eligibility for a full pension remain unchanged.

If your assets are below the thresholds in table one, you will be eligible for a full pension under the 2017 assets test.4

The Age Pension assets test taper rate will increase This means that pension payments will reduce by $3.00 per fortnight for every $1,000 of assets above the lower assets test threshold. Currently, the taper rate is $1.50 (75c each for couples) per fortnight, which means from 1 January 2017 pensions will reduce at a faster rate.

The table below outlines the assets test cut-off point for those on a part pension. If you have assets above these limits, a part-pension will no longer be payable.5

Part pension Current asset limits

2017 asset limits

Non-homeowner (single) $945,250 $742,500 (initial projection $747,000)

Non-homeowner (couple) $1,330,000 $1,016,000 (initial projection $1,023,000)

Homeowner (single) $793,750 $542,500 (initial projection $547,000)

Homeowner (couple) $1,178,500 $816,000 (initial projection $823,000)

What assets are taken into account?The market value of most of your assets is taken into account when calculating your Age Pension. This includes, but is not limited to, things such as:

• Property (excluding your home)• Motor vehicles, boats and caravans• Financial investments• Superannuation if you’re over Age Pension age • Business assets• Household contents and personal effects.

Find out more about which assets are assessable on the Department of Human Services website.

2,3http://www.superguide.com.au/how-super-works/300000-re-tired-australians-to-lose-some-or-all-age-pension-entitlements 4,5http://www.humanservices.gov.au/customer/enablers/assets

Part pension Current asset limits 2017 asset limits

Non-homeowner (single) $360,500 $450,000

Non-homeowner (couple) $448,000 $575,000

Homeowner (single) $209,000 $250,000

Homeowner (couple) $296,500 $375,000

SUMMER EDITION 2016/17

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Upside to losing your benefitsPeople who lose their Age Pension in 2017 as a result of the changes will automatically be entitled to receive a Commonwealth senior’s health card and/or a low income health care card. These cards will provide access to things such as Medicare bulk billing and less expensive pharmaceuticals.

Preparing for the changesDepending on how the changes may impact you, there are a number of things worth exploring and talking to us about, including:

• How you might replace any lost income if your entitlements are reduced

• How you might be able to trim down your assets before the changes come in, to retain your current entitlements—for example, gifting within annual limits, moving savings into a spouse’s super, or bringing holidays or home renovations forward

• How strategies outside of asset reduction may be able to help—working for longer or reviewing your budget in retirement.

More informationContact Centrelink to find out how your Age Pension entitlements might be affected or contact us to explore possible strategies.

How much money you'll need will depend on a variety of things. Have you got a plan in mind for when you retire? Is it to travel overseas, hit more balls on the golf course or spend time with family and friends? Whatever your goals, you’ll need to have a plan for how you’re going to get there financially.

Comfortable versus a modest retirementEveryone’s idea of how much money they’ll need in retirement is different.

As a guide, the Australian Superannuation Funds of Australia (ASFA) suggests couples around age 65 will need $59,000 a year and singles will need about $43,000 in today’s dollars to live ‘comfortably’1. Now this is assuming you’re in relatively good health and that you own your own home.

On this budget, you should be able to afford things like a new car, private health insurance, to dine at quality restaurants and have local, and some overseas, holidays.

By comparison, a ‘modest’ yearly budget of around $34,000 for couples or close to $24,000 for singles would provide a more basic lifestyle2. This means

you’d probably have to keep your older appliances and car for a bit longer, eat out less frequently and generally stay locally for holidays.

So how much is enough?To work how much money you’ll need in retirement, start by asking yourself these questions:

• Do I have enough money saved in my super? Try AMP’s super simulator to find out if you’re on track or if you have a gap in your savings

• Am I going to have to rely on the Age Pension? If you plan to retire before you get the Age Pension, consider what savings you’ll need to support you for those extra years in retirement

• Will I have to work longer or do something else to generate an income?

sacrifice calculator or to find out how much you could put aside

• If you’re eligible, think about making a personal tax-deductible contribution to your super, as these will typically only be taxed at 15%3 and you can claim these as a tax deduction4. You’ll need to fill in a ‘notice of intent’ form and send it to your super fund before you submit your tax return

• If you decide to sell or downsize assets, such as your home, make sure you check what the tax implications are and whether it will affect your eligibility for the Age Pension. Find out about what changes are happening to the Age Pension assets test from 2017.

It's also important to note that the Federal Government proposed a number of changes to superannuation in the 2016 Federal Budget, which may progress to legislation. You should seek financial advice before making any decisions regarding additional super contributions.

We’re here to helpDeciding on how much money you’ll need to achieve your retirement goals and how you’ll get there may be easier if you have professional advice.

If you’d like to explore your goals, please call us today.

What does a comfortable retirement look like?

Online source: Produced by AMP Life Limited and published on 18 August 2016. Original article.

Important information© AMP Life Limited. This provides general information and hasn’t taken your circumstances into account. It’s important to consider your particular circumstances before deciding what’s right for you. Although the information is from sources considered reliable, AMP does not guarantee that it is accurate or complete. You should not rely upon it and should seek qualified advice before making any investment decision. Except where liability under any statute cannot be excluded, AMP does not accept any liability (whether under contract, tort or otherwise) for any resulting loss or damage of the reader or any other person.

How you could retire with more

Once you’ve considered these questions, think about ways to give your financial situation a boost while you’re still working.

• Got more than one super account? Think about consolidating your super into one account to save on fees and reduce paperwork

• Consider making extra before-tax contributions to your super through salary sacrificing. Use AMP’s salary

Print source: By AMP Life Limited, originally published on 18 August 2016 on amp.com.au/insights

1,2http://www.superannuation.asn.au/resources/retirement-standard330% if you earn over $300,000 per annum.4These contributions will count toward your concessional contribution cap. The concessional contribution cap is currently $30,000 (or $35,000 for those aged 49 and over on 30 June 2016).

Online source: Produced by AMP Life Limited and published on 14 October 2016.

Print source: By AMP Life Limited, originally published on 14 October 2016 on amp.com.au/insights

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Some ways you could use delayed gratification to help achieve your longer term goals:

• Save up enough money before making a purchase to avoid credit card debt, a pay day or a personal loan. When you do run up a debt, make sure you can afford to pay it off when the bill comes in or try to pay it off as soon as possible.

• If you invest in a term deposit, don’t get tempted to take it out before the maturity date. Savour the wait so you don’t lose the interest you’ve earned.

• If you’re saving up a deposit to buy property, try to save up for a bigger deposit so you’ll potentially borrow less in future. Of course, this may mean you are vulnerable to future market or price changes.

• Reinvest any dividends you might get from your shares to increase your total number of shares−this could potentially give you greater returns in the longer term.

1 http://www.apa.org/helpcenter/willpower-gratification.pdf2 http://www.apa.org/helpcenter/willpower-gratification.pdf3 www.psychologytoday.com/basics/self-control


HERE ARE SEVEN TIPS TO CONSIDER:

7 tips on how to retire early

Are you dreaming about early retirement, but unsure how to go about it?You might be surprised to learn that Aussies are retiring earlier, with 25% of men retiring before age 55 and 50% retiring between 55 to 64 years. For women, the figures are higher, with 55% stopping work before they reach 55 and 36% retiring between the ages of 55 and 64 years1.But while these figures sound encouraging, one in three people between the ages of 18 to 64 years still think retirement is too far way to plan for2.So if your goal is to retire early, how can you put in place a plan and make sure you’ll have enough money to live on?

Have a clear goal you’re striving for…

Have a �nancial roadmap. It’s a good idea to map out things like your financial goals, major payments, health care needs and any government benefits you’ll be able to receive at different stages in your life. Part of the roadmap could be ensuring you have a solid credit rating and looking at how you can cut back on the more ‘optional’ expenses over time so you can wind down work.

Live modestly. Get serious about living more modestly, to spend less money and save more. Do other things like signing up for DIY courses to fix things yourself instead of paying to have them done.

Invest wisely. You could generate income through avenues such as rental properties or your own online business. Or downsize to a smaller house and invest the proceeds. Get professional advice first to navigate through the legal, tax or financial issues, including whether it will affect your ability to receive the government Age Pension.

Manage your debt. The number of people over the age of 65 who are still paying off a mortgage has increased by 54% in recent years3. So consider refinancing or consolidating your debts sooner rather than later to reduce interest, fees and charges. It’s no using trying to save for an early retirement if you still have debt hanging over your head. Find out more about how to pay off your debt.

A little salary sacri�ce goes a long way. The more you can put into your super, the sooner you may be able to retire. By salary sacrific-ing some of your before-tax income and putting it into your super, you’ll generally only be taxed at 15%, which is lower than most people’s income tax rate. Try our salary sacrifice calculator to find out how much this could make a difference.

Make your after-tax dollars go the distance. If you make personal after-tax contributions to your super, you could be eligible for a government co-contribution of up to $500 per year4 or your spouse could receive a tax offset by contributing to your super on your behalf.

1 Roy Morgan 6238.0-Retirement and Retirement Intentions, Australia, July 2012 to June 20132 http://www.roymorgan.com/findings/6634-long- term-nature- of-super- negative-impact- on-engagement- 2016011922253 http://www.finder.com.au/press-release- when-youre- 64-will- you-still- be-in- debt4 https://www.ato.gov.au/individuals/super/in-detail/growing/super- co-contribution/

Online source: Produced by AMP Life Limited and published on 15 March 2016. Original article.Print source: By AMP Life Limited, originally published on 15 March 2016 on amp.com.au/insights

I.P. FINANCIAL ADVISERS PTY LTD

THIS ISSUE:7 tips on how to retire early

Not without my smartphone

Flying solo


Winter Edition2016

Can delayed gratification help you with your finances?

Online source: Produced by AMP Life Limited and published on 10 June 2016.

The benefits of delayed gratification and how it can help you achieve your financial goals.

Are you the type of person who always has to have the latest clothes, smart technology or gym gear?

If you answered yes to this question, you could be a person who likes instant gratification, that is, you like to indulge in instant reward now, rather than exercising self-control1, in return for a potentially greater reward in the future.

The "marshmallow test"

Instant gratification was first explored about 40 years ago by psychologist, Walter Mischel, in what has become known as the ‘marshmallow test’. This experiment tested children’s ability, or inability, to curb their urge to have one marshmallow immediately (instant gratification) rather than wait and receive two marshmallows, as promised to them, at a later time (delayed gratification)2.

This test still seems relevant today, so it’s not surprising that many of us choose to eat our marshmallow now, rather than wait, and possibly get a bigger reward at a later date.

Print source: By AMP Life Limited, originally published on 10 June 2016 on amp.com.au/insights

Delayed gratification has its own rewards

Delayed gratification, by exercising self-control, allows you to resist the urge to have an instant reward now with the aim of a better reward down the track3.

For example, you could give up your daily coffee and put the money aside to save for your next holiday, go without sugary treats to help you lose weight, or contribute to your super to help you save for a comfortable retirement.

And while exercising self-control isn’t easy, resisting temptation can have its own rewards, such as imagining how you can indulge yourself once you’ve finally achieved your goal!

How to use delayed gratification to help with your financesThe next time you want to impulse-buy online or at the checkout, pause and think about whether you really need to spend the money now. Divert your impulse and think about what you could do with the money instead.

Take control of your future

Exercising delayed gratification can help you to take control of many aspects of your life, so why not start with your finances? Use AMP’s savings calculator to work out how much you could put aside each payday or check out the budget calculator to find out where all your money goes.

How we can help

Whether your goal is to be debt-free, save enough to buy a property or to have a comfortable retirement, we can help you.

"It’s not surprising that many of us choose to eat our marshmallow now, rather than wait, and possibly get a bigger reward at a later date."

"And while exercising self-control isn’t easy, resisting temptation can have its own rewards, such as imagining how you can indulge yourself once you’ve finally achieved your goal!"

In today’s materialistic, throwaway society, we’ve been bombarded with messages convincing that instant gratification makes us feel better. Combine that with the pace of modern life giving us easy access to credit and rapid changes in technology, instant gratification is tempting us all.

But while instant gratification might make us feel good for a while, it may not help us achieve our longer term goals.

"In today’s materialistic, throwaway society, we’ve been bombarded with messages convincing that instant gratification makes us feel better."

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I.P. Financial Advisers Closing over the Christmas Break

Dear valued clients, Our office will be closed from Friday 23rd December 2016 and re-opening Tuesday 3rd January 2017. All enquiries will be answered upon our team returning. We’d like to take the opportunity to thank you for your loyalty and support throughout 2016 and look forward to being of service to you in 2017. Wishing you a very Merry Christmas and all the best for the New Year!

Looking ahead at 2017

The outlook for 2017 is in places easy, in other places hard and in one particular area, near impossible.

Let’s start with the impossible. I am often asked for my view on the Australian dollar against the US, Euro and Pound sterling. I think I have got this right about once in my 35 years in the money industry. Ironically, this was a few years ago when I was doing a series of talks with AMP’s Shane Oliver. The Aussie dollar was buying around $US1.10. All the predictions were for it to go higher. My comment was that this was as high as I had seen it. It has been as low as US 50 cents to our dollar, and my view was that at a $US1.10 for an Aussie dollar, I would at least buy enough US dollars to pay for 5 years of holidays that linked to the US dollar. This, with hindsight, was pure genius. Can I not mention the other times I was completely wrong?

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Frankly, I and nobody else has the first clue. For example, I have been banging on that the UK economy has been recovering strongly over the last few years. That of course would cause me to want to hold pounds. Hang on, along comes Brexit and the

"Currency punting is a mug’s game. I just tend to watch our dollar as it hits historic highs and lows and use that as my guide. I tend to hold my global investments unhedged against the Aussie dollar, I figure currency can go either way."

pound plunges big time against our dollar. Currency punting is a mug’s game. I just tend to watch our dollar as it hits historic highs and lows and use that as my guide. I tend to hold my global investments unhedged against the Aussie dollar, I figure currency can go either way.

"Life is long, at least on average, so we all need to make our money last and it won’t in a term deposit at under 3%."An easy call is low interest rates. They will be at or around where they are now for 2017, and I suggest beyond. So for near retirees, like me, or retirees, this presents a major issue. Life is long, at least on average, so we all need to make our money last and it won’t in a term deposit at under 3%. Even if you pay no tax, inflation will grab much of that 3% return. So this takes us into the harder areas. Property and shares. It is bleatingly obvious that a growing population, an undersupply of housing where people prefer to live and very low interest rates make property in “population growth” areas, with public transport, entertainment, jobs, schools and decent coffee a very attractive investment. So to no one’s surprise, property in these areas has exploded in value. Sooner or later it will go backwards for a while, but the growth in our population underpins rental demand and prices. So while I am not a seller, I am not an eager buyer.

Shares are also a hard call, but here I feel more comfortable. The average income return on shares is nearly 4% and usually comes with franked dividends. So while I hold some cash in term deposits as my “safety’ money and I’ll hang on to my property, I do have quite a decent exposure to shares, both here and globally.

I regard shares as the best way to spread my risk outside of Australia and also into industries we just do not have here. Don’t forget, our market is mainly banks, financial services companies and resources. Sure, we have companies such as CSL and Sonic, both in the health sector, which operate quite significantly in the global market, but I do like many of the food, biotechnology and technology companies that are listed outside Australia. An international fund or ETF may be your best way to hold these investments, but I’ll leave that to you and your adviser.

I appreciate my shares can and will at times, fall in value. At times the falls can be large. But I am not a seller, and I reckon the dividends, which is the bit that buys me food and so on, will not go away. So while I am broadly diversified as I should be as a 61 year old, I think my shares are likely to be my best asset class in 2017.

"I regard shares as the best way to spread my risk outside of Australia and also into industries we just do not have here. Don’t forget, our market is mainly banks, financial services companies and resources."

And here we need to remember this is why I am diversified. I hold term deposits, residential and commercial property, local and international shares. I really doubt they will all do well in 2017, but I also doubt the whole lot will do badly!


– by Paul Clitheroe AM

Paul Clitheroe AM, co-founder and Executive Director of ipac securities limited, Chairman of the Australian Government Financial Literacy Board and Chief Commentator for Money magazine.


Seven tips to travel on a budget

Careful planning can help you enjoy a great holiday, whatever your budget.

Does it feel like ages since your last holiday? Maybe with responsibilities like paying off your credit card, saving for your first home, or paying back your university fees, your next holiday still seems a long way off…

Well, don’t despair. There are plenty of ways to take a break without breaking the budget.

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And don’t forget wherever you’re going next—planning makes perfect!


SUMMER EDITION 2016/17

Online source: Produced by AMP Life Limited and published on 18 March 2015.

Print source: By AMP Life Limited, originally published on 18 March 2015 on amp.com.au/insights

Go at the right timeTake advantage of earlybird deals and avoid school or public holidays.

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Travel with friends or familyMore people can mean more savings on tours, car hire and hotel rooms.

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Package it upCombine airfares with accommodation, day tours and even meals to save money ahead of time and avoid nasty surprises if the exchange rate changes.

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Start savingBecome savvy at saving by looking at how successful savers go about it. Then why not use some handy tools to help you along, like AMP’s savings calculator, MoneySmart’s TrackMySPEND app or check out MoneyBrilliant, all of which can help you organise your personal finances.

7Go socialCheck out travel hubs like Trip Advisor and The Savvy Backpacker to decide where to go, what to look for and how to get the best bargains once you arrive.

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Keep your eye on the exchange rateBefore booking an overseas holiday work out what your Aussie dollar is worth in other currencies. Why? The recent fall in the value of our dollar means holidaying overseas may be more expensive than you realise. It may be worth looking at local holiday options too.

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Get the best dealCompare prices using online aggregators like Skyscanner, Webjet and Wotif and sign up for e-newsletters from travel providers to find out about specials. Check out Channel Nine’s hottest Getaway travel deals, which feature different holiday deals on a weekly basis.

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Are you prepared for the changes to the Age Pension assets ...

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