People planning their retirement finances now have two new tools to help them make informed decisions. Financial Decisions at Retirement clearly explains the financial choices available to people at retirement and the pros and cons of each retirement income option.

The guide covers:

• when you can access your super
• how much money you’ll need in retirement
• how you can use your super when moving to part-time work
• the benefits and drawbacks of withdrawing super as a lump sum or income stream
• how low-tax retirement income streams work, and
• risky or more complex investment strategies to think twice about.

To accompany the new guide, ASIC also launched an upgraded MoneySmart Retirement Planner, an online calculator that shows people how to boost their retirement savings in simple, sensible ways.

ASIC Chairman, Greg Medcraft said, ‘The MoneySmart Retirement Planner provides people with an estimate of how much they are likely to have in every year of retirement and even calculates the best way to make extra super contributions. It also generates a personalised printout for people to give to their employer to increase their super contributions.

‘Financial Decisions at Retirement will help people decide what to do with their retirement nest egg. It has been extensively user-tested to ensure it meets the needs of people on the verge of retirement. Trial users said the guide explained a complex subject in simple terms. They liked the case studies, explanations of different super income options and unbiased, simple facts. They also said they wanted to be better informed about retirement income choices,’ said Mr Medcraft.

Financial Decisions at Retirement should be used to complement professional financial advice.

View, download or order copies of Financial Decisions at Retirement (new window)

To use the Retirement Planner, also visit www.moneysmart.gov.au (new window)

Feedback
on the system from large funds has been very positive, with the new
system reducing rollover processing times and removing the need to
request further documentation from members to verify SMSF membership
(for example, certified copies of SMSF trust deeds). The new system also
provides confidence that a rollover request to an SMSF is legitimateThis
new service has obvious benefits for SMSF trustees wishing to roll over
into their SMSF from large funds.

However, SMSF trustees who have not
kept up to date with their administrative obligations (for example,
informing the ATO of any changes to their SMSF membership) may find that they
will not be able to roll over to their SMSF.

SMSF
trustees are required under the super regulations to inform us of any
changes to their SMSF within 28 days of the change. This includes
changes to:

• the name of the SMSF or corporate trustee
• addresses (including postal, registered and addresses for the serving of notices)
• trustees, directors and membership.

Where a large super fund does not have a successful member match for a
rollover request, they will direct their member to contact the ATO.

CoreData-brandmanagement’s latest Investor Sentiment Index, which surveyed almost 900 Australians, has shown nearly three in five Australians (59.8%) do not trust the Government to maintain the current legislation around super. A further quarter (23.2%) say they don’t know whether or not they trust the Government to leave super alone.

Adding to this, almost half of Australian investors (49.4%) say that the Government is not providing a climate which is good for investment and one third do not know if this is the case (32.9%). Less than one in five (17.7%) believe the Government is providing a climate which is good for investment.

Except from Burning pants

Mr Shorten said the paper presents 2 options for consideration:

• Option 1 – bring tax agent services provided by financial planners permanently within the tax agent services regime and be regulated by the Tax Practitioners Board, but do so in a way that minimises any additional compliance burden.

• Option 2 – investigate and implement what changes, if any, might be made to the Australian Financial Services Licensing regime or its enforcement to ensure financial planners offering tax agent services are regulated to the same standards imposed on tax agents.

Comments are due by 25 December 2010. (Source: Assistant Treasurer’s press release No 018, 29 November 2010.)

Taxation Institute of Australia RESPONSE: The TIA says the Federal Government has an opportunity to close a loophole and ramp up consumer protection with the release of the paper. The paper confirms that doing nothing is not an option, Taxation Institute Senior Tax Counsel, Robert Jeremenko, said. “People relying on tax advice should expect that their adviser meets the highest standards as the Tax Agent Services Regime offers, and that they are also covered by the sorts of protective measures it offers”, he said. (Source: TIA media release, 29 November 2010.)

NAB’s banking rivals attracted somewhere in the range of $11 billion and $22 billion more of cheaper funding during the recent crisis, leaving NAB now scrambling for market share.It is easly to conclude that NAB’s latest round of fee cuts appear more like a desperate attempt to claw back some of the ground it has lost recently.

The move by NAB is set to cost the bank over $100 million a year.

But if it succeeds in boosting deposit levels, it will prove a cunning move.

If NAB can increase deposits quickly, it will provide a funding source for a potential spike in residential lending, as the newly acquired mortgage broker army from Challenger begins writing the bank’s loans.

The strategy at NAB seems to be a case of giving with one hand and while taking back with the other.

Thanks to www.burning-pants.com/ for the bringing this to our attention

The report, Helping home borrowers in financial hardship (REP 152), found that while some lenders are responding well to the needs of their customers, there is generally room for improvement and provides guidance to industry on how to improve practices.

‘This report highlights the importance of industry taking an active role in dealing with hardship’, said ASIC’s Senior Executive Leader, Deposit Takers, Credit and Insurance Providers, Mr Greg Kirk.

‘With forecasts of growing unemployment, we can expect to see increasing numbers of borrowers experiencing mortgage stress. In many cases, however, financial difficulties will be temporary, allowing problems that arise to be resolved.’

‘It’s important that lenders and intermediaries have processes and procedures in place to provide constructive responses to financial hardship. These include procedures to identify customers in hardship, to provide clear and timely information to customers on their right to seek relief, and to engage sufficiently with a customer’s circumstances in order to provide appropriate and flexible assistance’, said Mr Kirk.

The report found that:

• Information about financial hardship is usually only provided following payment default, making it very difficult for borrowers to take positive action at an early stage. Equally concerning, this information is often insufficient for borrowers to understand their options and make informed choices;
• Some lenders do very little to identify borrowers who may require hardship assistance. Many lenders leave this identification of need to collection officers who may not be trained for the purpose eg. one lender only identifies hardship where the borrower raises the need for assistance themselves;
• Lenders appear to prefer offering short-term assistance, such as a three month payment moratorium, rather than genuinely engaging with, and responding to, a borrower’s specific situation. For example, a home loan borrower who has lost income through reduced overtime may need their loan to be extended with lower repayments over a longer period. In such circumstances, a short moratorium is a very temporary fix leaving the borrower likely to default when repayments resume;
• Some lenders have adopted policies that are inconsistent with the rights and remedies available to borrowers under the Uniform Consumer Credit Code. For example, by refusing hardship assistance once payments are more than 60 days overdue or limiting any variation in repayments to a maximum period of six months; and
• Despite clear industry standards mortgage brokers generally have a limited understanding of their role in responding to financial hardship. While most brokers say they offer assistance, there is little evidence of formal policies and procedures to ensure it is done effectively or constructively.

‘This report examined industry practices as at late 2008 and there are already moves within some sectors to improve. On 5 April 2009, the Federal Treasurer announced an agreement with the four major banks wherein they commit to assist borrowers who are experiencing financial difficulty as a result of the global recession’, Mr Kirk said.

‘ASIC is confident industry will welcome the guidance provided by the report, and we’ll continue to work with them to promote better outcomes for borrowers.’

‘Helping home borrowers in financial hardship’ also provides guidance for borrowers. Further information for borrowers is also available on ASIC’s consumer website, FIDO, at www.fido.asic.gov.au.

Victorian borrowers are also encouraged to visit the Consumer Affairs Victoria website (www.consumer.vic.gov.au) for publications that can assist them in dealing with their credit providers. These publications explain the rights and responsibilities of both lenders and borrowers in Victoria.

• The Australian economy finally succumbed to the global downturn in the December quarter with GDP falling 0.5%. We are now effectively in recession. In the absence of Government stimulus the fall would have been even steeper.
• The recession probably has another 6 to 12 months to run. The global slump has yet to really hit our exports and leading indicators are continuing to slide. On average, Australian recessions last approximately 12 months.
• Unemployment is likely to rise to 7% by year end before peaking next year around 9%. The recent up-tick in the housing market is likely to be just a false dawn before more weakness, company profits are likely to fall 20 to 30% this year and the cash rate has more downside. The decision by the RBA to leave interest rates on hold was premature.
• Fortunately, the absence of housing oversupply, the fall in the $A and quick stimulatory action by the authorities should mean that the recession in Australia will be milder than that already underway in most other developed countries. Nevertheless, its going to be a pretty rough ride over the year ahead.

First home buyers also appear unafraid of loading up with cheap debt – combining the carrot of the Government grant and lower interest rates to push the average first loan up 7 per cent for the quarter.

The latest Australian Bureau of Statistics figures, for the quarter ending November 2008, show the average first time home loan jumping $18,100 to $269,200.

This suggests that first home buyers are ‘stretching’ themselves and not necessarily reducing the amount required to borrow as rates fall.

In fact, first home buyers are taking a punt Australian official interest rates continuing to fall from 4.25 per cent, which seems likely in the short term with March and June 90 day bank bill futures contracts below three per cent.

This is reflected by the fact new mortgage borrowers remain heavily skewed towards variable lending, with only 2.5 per cent of the 49,383 mortgages financed in November having fixed rate terms.

This is a dramatic turnaround from the 19.3 per cent fixed average for all loans financed during the 2008 financial year. The current fixed average for FY09 is 4.4 per cent.

Overall, new home purchases financed in November 2008 (the latest Australian Bureau of Statistics housing finance data) jumped 18 per cent to 11,665, month on month, as the falling interest rate environment and the government grant encouraged new entrants.

Existing property purchasers are placing less confidence in the market, with financed loans crashing 13 per cent in November to 37,718, leaving total loans financed for the month down three per cent to 49,383.

From www.burning-pants.com

Open margin lending accounts fell 2 per cent to 202,200, as investors with leveraging in mind are not just sitting on the sidelines waiting to re-enter, but totally exiting the market by closing accounts.

Client account growth had been rapid in recent years, increasing 5 per cent in the year to September 2008, 26 per cent in the last two years and 44 per cent in the last three.

The aggregate credit limit declined by 4 per cent to $71 billion, as expected due to account closures, but also indicating those margin lenders remaining in the market are not increasing lending limits.

Margin calls of 4.32 per day per 1,000 clients in the September quarter were over double the 1.75 the June quarter, and four times the 1.04 in the corresponding period a year before.

The full story at Financial Services Review

It is a resource for secondary schools in each state and territory and is currently being distributed to every high school in the country.

“Young Australians who understand insurance as a way to protect their assets and superannuation as an effective way to save for retirement will get a head start on two key areas of personal finance”, Superannuation and Corporate Law Minister Nick Sherry said

“Your Money Starter includes a variety of innovative classroom materials, activities and multimedia elements designed to make learning about financial services relevant and attractive to teenagers,” ASIC chair Tony D’Aloisio said.

The materials are available in hard copy and on CD-ROM and can be downloaded, free of charge, from ASIC’s consumer website, FIDO, at www.fido.gov.au/yourmoneystarter.