Expert Insights: Australian Superannuation And Retirement

Expat Finance

Expert Insights: Australian Superannuation And Retirement

We speak with Brent Allcock of Chartwell Associates to learn about a “super” way to save for retirement if you’re an Australian living in Singapore.

Published on 26 January 2018

Planning for financial retirement when living outside of your home country can be challenging, to say the least. Countries have different programmes with unique rules depending on where you reside. On January 31st, Brent Allcock – a Certified Financial Planner from Chartwell Associates – will be giving a talk in association with WEALTH on how Australian nationals living in Singapore can still save for retirement. We thought we’d give you a sneak peek on what to expect on Australian Superannuation from Allcock prior to next week’s event.

Superannuation, Chartwell & Associates, Australia, Retirement

Brent Allcock from Chartwell Associates

WEALTH (W): Which area of financial planning will you be discussing during the talk in Singapore on January 31st?

Brent Allcock (BA): The focus will be mainly on the Australian Superannuation System and alternative retirement options for Australians who are unable to contribute to the Australian Superannuation Fund.

W: Can you tell us a bit about what the Australian Superannuation System is and how it affects Australians working in Singapore?

BA: The Australian Superannuation System (or “super” as it is known) is Australia’s primary National retirement savings scheme. It is compulsory for employers in Australia to make superannuation contributions for their employees and the scheme has attractive tax benefits to encourage employees to make contributions as well. Most Australians will have some “super”.

“The super” is a tax-advantaged way to accumulate wealth for the purpose of retirement income. It’s taxed on the way into the scheme, and earnings within the fund are also taxed. However, pensions and withdrawals after retirement age have zero tax, which in a country whose top tax rate is effectively 47% is a major attraction.

The amount you can contribute into the scheme has restrictions and these are constantly being changed by the Government, so this means that Australian’s living and working in Singapore and other regions have to plan carefully to get their funds into the system if they want to access a zero taxed income stream after retirement age.

The problem for Australians living and working outside of Australia is that they will miss out on the employer’s contribution into their super, and probably are not making any contributions themselves either because they are unaware that they can, or do not know how to.

W: Will there be any changes for 2018?

BA: Probably not – but who has a crystal ball? The next election in Australia is scheduled for 2019 and changes to Superannuation are generally a political football. There was a raft of very significant changes introduced in 2017, which will take their time to work through the system, and some people need and must take steps to address these changes. The tax implications in Australia can be quite onerous.

Superannuation, Chartwell & Associates, Australia, Retirement

W: What strategies do you employ to maximise returns for investors?

BA: Everybody wants maximum return for minimum risk, but that’s generally a fool’s gold and unobtainable Utopia. However, it is essential to understand the client and to educate them on the range of possible and probable outcomes. Any plan is specific to the individual – the investor’s goals and needs, investment time horizon, and their appetite for investment risk, but generally we follow the following 5 rules:

1)    Diversification –  A well-diversified portfolio reduces risk

2)    Rebalance – This keeps the portfolio aligned with the original risk profile

3)    Keep costs down – The cheapest funds are not necessarily the best performing, but there are good performing funds out there with low fees.

4)    Dollar Cost Averaging – Fear can cause investors to miss buying opportunities when prices are low. Euphoria can cause them to buy high. By investing the same amount in the same investments on a regular basis, dollar-cost averaging takes emotion out of the equation.

5)    Stay invested – There are numerous studies that show that trying to “time” the market really does not work. Trust the market to do its job of providing decent returns over the long term.

W: Which super funds should employees be looking at instructing their employers to pay their contributions into?

BA: It is unlikely that employers in Singapore will be able to pay into an employees super and get the tax benefits. However, individuals can make what are called “non-concessional” or after-tax personal contributions.

The main things to consider in choosing a super fund are: what are the fees and charges, what’s the availability of insurance options within the super fund, what suite of investment options available, what level of online connectivity does the fund provide.

Superannuation, Chartwell & Associates, Australia, Retirement

W: What percentage of income should one be contributing?

BA: At least what would have been going into your super if you were working back in Australia. It’s very easy to say that you will “catch up” on your super contributions when you go back, and in the meantime just enjoy that little bit of extra money now in Singapore. The reality is that you never will! The difficulty is getting your money into the system. There are restrictions on how much you can put in each year – so you can’t just dump in US$500,000 on your return home.

The percentage of income to save for retirement is variable depending on a few factors, such as what income in retirement do you want and what age will you retire. As a general guideline if you want to retire at age 55, multiply your annual required retirement income by 17; if you retire at age 60, multiply by 15; and if you retire at age 65, multiply by 13. However, as a minimum, you should be putting aside at least 15-20% of your income towards retirement.

W: Top tips to retire happily?

BA: So here’s my 1 step plan…

Seek professional assistance. A good financial planner that you trust and get on with, will do most of the planning for you. They will help you set realistic goals and set you on a path to achieve them. He will also review the progress regularly to ensure you keep on track. This will free up your time so you can enjoy yourself with your other half.

Brent Allcock’s talk on “Australian Superannuation And Retirement Tips In 2018” will take place on 31st January at 6:30pm at The Working Capitol in Singapore. You can find more information on the event here.