Many people are concerned that on retirement they will not receive their superannuation in a lump sum. I have been warning clients for ages about the very real possibility of them not getting their Super in a lump sum.
Where is my evidence for this opinion?
The First clear indication was in 2010 with the Super system review chaired by Jeremy Cooper. The Foreign Investment Review Board Chairman, Brian Wilson was a member of this 2010 review and he also threw his support behind the move to a default pension fund system.
Brian Wilson recently said, as reported by Sally Rose of the Sydney Morning Herald, “The importance of reforming the rules governing the payout phase of Superannuation was clear when we did the Cooper revision in 2010, but the Government of the time wasn’t ready to make the changes so we squibbed it.”
The main driving factor for this approach was that in March last year, treasury released it’s 2015 Intergenerational Report which forecast that in 40 years’ time Australia will have a population of approximately 40 million, with an average life expectancy of 96 years and relatively fewer young people.
Is there much support from the Super Industry?
Yes, the Superannuation Consumers Centre Chairwoman, Jenni Mack also backed the development of a default option for managing the retirement phase of Superannuation, as it is in the best interest of consumers. She is quoted as saying “expecting a 65 year old who has never managed a bucket of money before to suddenly know how to do so is exposing them to too much risk.”
In my opinion, every case is individual and some people will no doubt be happy with a default pension fund system, rather than a lump sum. But, if a client wanted to manage their own affairs, this is possible with the following strategy. If a couple have a minimum of $220k in combined super and an income of $100k per annum, I would suggest they set up a Self Managed Super Fund (SMSF) and start building a residential portfolio.
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Let me provide an example. I have an executive 5-bedroom home at North Harbour, in Brisbane for $496,750. For a client with $200K in Super and an income of $100k per annum, the employer contribution of 9.5% will pay it off requiring no extra contribution.
What about capital gains tax?
If they wanted to sell it prior to retirement they would only pay capital gains tax of 10%, but if they moved to pension phase in retirement, there would be no capital gains tax.
If you are concerned about not receiving your superannuation as a lump sum and require assistance to set up a Self Managed Super Fund (SMSF) to build a property portfolio please contact my office on 07 4987 7567 for a cost free, no obligation consultation.
Steve Taylor
At the helm of Steve Taylor & Partners, Steve Taylor has been delivering expert advice and product knowledge to clients for over 30 years. Steve Taylor & Partners provide individuals, couples and families with the right strategies to create wealth and change their lives with solid bricks and mortar.
Photo credit: Cimexus
DISCLAIMER
Steve Taylor & Partners blog is opinion and not advice. Readers should seek their own professional advice on the subject being discussed. The figures stated in this article were accurate at the time of publication. For up to date figures, please contact our office.
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