ADF Transition Case Study

After 15 years of ADF service, Jason has decided to transition into a civilian role.

The motivation for Jason and his partner Fiona was so they can help settle down their young family and utilise his acquired ADF skills in the civilian sector coupled with the increased salaries available to him in civilian life.

We met with Jason and Fiona to go through the first of two Transition meetings where we had the opportunity to help them understand the following issues:

MSBS – On exit from the ADF Jason’s MSBS will move to preserved mode

  • This means that his Member and Ancillary will continue to be invested in his chosen invested option.
  • His Employer benefit will be increased each year to keep pace with the Consumer Price Index (CPI).
  • We discussed the likely MSBS Lifetime Pension in today’s dollars that will be available to Jason at age 60. This helps to identify any gap that needs to be filled between now and then to achieve a comfortable retirement at 60.
  • The inbuilt prospective insurance will cease, including invalidity and life.

New Job – New employer Default super fund

  • We discuss the need to replace the lost Life and Invalidity cover with the civilian version.
  • Life Insurance – Fixed and Unitised Cover.
  • TPD Insurance – a fixed level of cover paid as a lump sum vs the MSBS version of an Invalidity Pension.
  • Income Protection Cover – cover that provides a replacement to lost income through illness or injury.
  • TPD and Income protection are a replacement to Invalidity.
  • Investment options available including the default option of their new fund and how this compares to MSBS.
  • The impact of additional contributions via Salary Sacrifice.
  • We are able to model this live in the meeting on a 72-inch TV to show the long term impact on both extra contributions and also the difference in outcome from having a good performing fund vs a poorly performing fund. A 1% difference over a long period of time can have significant impacts.
  • We also discuss Fiona’s super and use the ATO’s YourSuper website to check how it performs.

Buying a new home

  • We were able to run cashflow modelling assuming different loan and interest rate amounts to help with how much can be borrowed, including the new Civilian income to purchase a property.
  • We were able to discuss DOHAS with regard to the new property.

Cashflow and Asset modelling

  • Given the capacity of the software we have available in our office we were able to run a number of different modelling scenarios for both Jason and Fiona so they could see.
  • How much they could probably afford to borrow given different interest rates.
  • How long it would take to pay out there mortgage.
  • How much super Jason is likely to build up in his new role to work alongside his MSBS Pension at retirement.
  • How much super Fiona is likely to have at retirement using a number of future work assumptions.

Given their Life Stage, Jason and Fiona did not require comprehensive advice at this stage, they just needed to understand the basics of how everything was going to come together.  General and Factual advice took care of this.

Given the new fund Jason went into we were able to direct him to that funds resources where simple advice relating to his new fund, is available at no cost to Jason or Fiona.

We have scheduled a second meeting for twelve month’s time to see how the issues discussed have been managed.

If personal advice had been identified as being needed, we would have provided a quote for this however in this case, as is often the case, Jason and Fiona just needed someone to take the time to talk them through the number of questions that they had about a lot of simple issues.

The ADF Transition Centre programme allowed them to get clarity on these and move forward into their next stage with confidence.

* Please note the client’s names in this case study have been substituted to Jason and Fiona.

Are you planning to transition out of the ADF?  You may be eligible to access $1,000 towards professional financial advice through the Defence Force Transition Program.  Talk to your transition coach for more information and approval.

If personal advice is required, this will be identified and quoted on separately.  If any personal advice is identified to be limited in nature it may be covered as part of your new funds normal fees and we will direct you to take advantage of these benefits where required and available.

We offer a complimentary and obligation-free 10 minute phone discussion to explore likely advice needs prior to committing to an initial appointment.

We are a listed adviser to the ADF Financial Services Consumer Centre linked here.

Information discussed will be general advice only.