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Sofia is a little concerned with recent changes to superannuation legislation and wants flexibility with her investments.
- 52 years old and single
- Earns $140,000 a year
- Current super balance is $400,000
- Employer makes 17% contributions into her UniSuper Accumulation 2 account
- Makes standard member contributions before tax of 8.25%. She has not made any non-concessional contributions.
- $100,000 mortgage and a small amount of cash savings.
- Surplus income of $20,000 a year.
She intends to retire in 10 to 15 years and wants to keep building up wealth while investing her surplus income for long-term capital growth, as her debt is at a manageable level.
Issues to consider
- Managing Sofia’s excess contributions in light of the reduced concessional contributions cap
- Meeting any liability arising from excess contributions
- The impact on Sofia’s cash flow from changes to her contributions strategy
- How to invest Sofia’s surplus income with consideration to tax implications, accessibility to capital, legislative risk, ease of management
- Pros and cons of debt repayment versus investment
- Sofia’s investment risk profile
- Sofia’s investment time horizon
After speaking with Sofia and reviewing her options, we provided the following advice:
Sofia is a hypothetical member. All information provided in this case study is based on the specific circumstances detailed in this scenario and it is not guaranteed and will vary depending on your specific circumstances.
- Reduce standard pre-tax member contributions to an appropriate level within the new concessional contributions caps, resulting in an increase to her existing surplus cash flow.
- Direct the surplus money as follows:
- Start making non-concessional contributions into super (the most tax-efficient way to save surplus cash flow if the amount is within the relevant cap)
- Start an Investment Bond, making monthly deposits with a view for this to mature in ten years (at or around retirement). This gives Sofia access to her capital if she needs it (with some tax implications), and is more tax efficient than other investment schemes such as managed funds or separately managed accounts
- Agreed on a Growth risk profile following a discussion and completion of the risk profile questionnaire, so invest both her super and Investment Bond mainly in long-term growth assets (shares and property) but regularly review through the UniSuper Advice Review Service.
- Estate planning considerations including:
- Updating her superannuation death benefit nomination
- A referral to an estate planning specialist to update her Will (she previously had a homemade will) and put in place Enduring Powers of Attorney and Guardianship.
The information contained in this case study is not legal, taxation or accounting advice. It is intended to provide general information only. It has been prepared without taking into account your objectives, financial situation or personal needs. Prior to making any investment decisions, you should speak with a financial adviser to consider whether this information is appropriate for your needs, objectives and circumstances. You should also obtain a copy of the relevant product disclosure statement (PDS) prior to making a decision regarding any investment in any financial product. Whilst care has been taken in the preparation of this information, the accuracy or completeness of the information is not guaranteed. This case study was prepared and issued by UniSuper Management Pty Ltd ABN 91 006 961 799, AFSL No: 235907, which is also the administrator of, and wholly owned by, the UniSuper Superannuation fund (ABN 91 385 943 850). UniSuper Limited (ABN 54 006 027 121) is the trustee of the fund. UniSuper Advice is operated by UniSuper Management Pty Ltd, which is licensed to provide financial product advice to members.