Curb Your “Retirement Anxiety”: How PSS members can benefit from a superannuation health check.

Honesty, integrity, fiduciary duty

In my role as a financial adviser I meet many clients who are looking forward to the freedom retirement can bring. They are aspiring to travel around Australia or around the world, help out with raising their grandchildren or pursue passion projects such as working at an NGO. 

However, one key theme that underpins most questions, concerns and discussions that I have handled, and continue to handle with clients: is whether or not they will have achieved enough financially to be able to take their planned next steps.

I term this “retirement anxiety”.

By this, I mean that ‘middle-of-the night’ worry that many people experience when they think about what happens after the last pay cheque comes in. It occurs when people don’t know what they can expect financially in retirement and often expect the worst.

In my experience, there are two main factors driving these worries:

  1. Media reporting. The financial press regularly reports on very large, unattainable figures that are ‘required’ before retirement is possible. In many cases the figures quoted are far greater than most people will actually need. Unfortunately, these figures are frequently quoted by finance professionals which can often led to ordinary people becoming disillusioned and disengaged with their finances.
  2. Over-complication of the superannuation industry which has made people’s ability to predict their retirement benefit too challenging meaning they worry about the unknown. 

In combination, these two factors create the perfect ‘retirement anxiety’ environment. 

Fortunately, there is a very effective solution to this issue. A well-executed Superannuation Health Check can provide you with a retirement road map which will show you how much your benefit will be at your preferred retirement age. It can also provide you with annual checkpoints to compare against each year to see how you are travelling compared to the road map.

Retirement anxiety
Excerpt from a PSS Health Check Statement of Advice

PSS defined benefit members are very fortunate because your retirement outcome is dependent on two key variables: your Final Average Salary (FAS) and your Accrued Benefit Multiple (ABM). These are both readily identifiable and also relatively easy to project with a high degree of certainty.

Importantly a Superannuation Health Check will allow you to consider any key inputs that you are able to manipulate to adjust that trajectory, including increased contributions or higher duties. 

Once you have determined your final retirement benefit, a Superannuation Health Check will also enable you to determine your likely pension income which you can then compare directly back to your current income.

Rather than not knowing what to expect financially in retirement, you will know exactly what to expect in retirement. If the road map takes you somewhere you don’t want to go, then you can take steps sooner rather than later to alter both the road and ultimately the destination. 

In my experience, this service provides an instant cure for retirement anxiety.  

I have seen first-hand many times that the development of a roadmap to retirement and the removal of retirement anxiety from one’s life is one of the most powerful investments you can make in your wellbeing.

It is genuinely life changing.

For more information about getting a PSS Health Check click here.

The cost of not getting advice

The cost of not getting advice

In March 2019, the AFR’s front-page headline stated that ‘in the wake of the Hayne inquiry, investors seeking financial advice are left with tough choices’. One “tough choice” was around paying the perceived high cost of professional financial advice. In this article, I will make the case that the cost of not accessing good quality advice is often far greater than the planning fees you will pay.

Depending on the complexity of the advice needed, you can expect to pay around $2000 to $3500 for advice around your CSS/PSS superannuation. CSS/PSS schemes are highly complex. By paying for high quality advice you ensure that you make informed decisions:

  • When claiming your CSS/PSS benefit e.g. taking a partial lump sum may be advantageous for accessing the aged pension and associated benefits.
  • Around whether you take the 100/67 reversionary option versus the 93/85 option.
  • If you are offered a redundancy. Redundancies bring about specific advice issues for CSS and PSS members that need to be dealt with in a time-critical manner.
  • If you are planning to take a deferred benefit (54/11), as the default versus cash option is a very important consideration.

With CSS and PSS, the pension decision is a one-off decision that cannot be undone. Making the wrong decisions could cost you hundreds of thousands of dollars.

With any lump sums taken from PSS or CSS, there will likely be an inbuilt death benefits tax issue around which getting advice would also be highly beneficial. Many people are unaware that where a tax deduction has been claimed for a super contribution either personally or by an employer, or where earnings have been achieved inside the fund, there is an inbuilt death benefits tax associated when paid to a non-dependant. It is not uncommon to have residual superannuation balances passing to the estate, therefore considering and dealing with this issue during the small window of opportunity available can lead to considerable long-term savings.

A $200k super fund balance made up of the ‘tax taxable’ component will incur a death benefits tax bill of $34k.

Finally, for members who are not in a defined benefit fund, including CSS/PSS members who have claimed their defined benefit, it is important to ensure your superannuation is in a high performing fund. In late 2018, the Productivity Commission released a report examining the efficiency and competitiveness of funds across the superannuation industry. The report concluded that:

For a typical full-time worker, being in a low versus high performing fund could reduce their super by around $660k over their lifetime.

To put this in perspective, this could equate to twenty first-class European trips in retirement for a couple.

Not getting advice will certainly save you money in the short term. However, for CSS/PSS members, not getting advice can come at a much greater financial cost.

So make the “tough choice”, ensure you access good quality advice and gain peace of mind that you have shaped your financial future, including your retirement, in the most effective way possible.

If you would like to arrange a meeting to discuss these issues further please get in touch.

Cameron Teague

certified financial planner I Director

I am owner and director of Cameron Teague Wealth Advisory. My practice is a privately owned, fee-for-service business with offices in Brisbane and at the Sunshine Coast. I also offer phone and online appointments to clients living in remote, regional and overseas locations. I have been working in the Australian finance industry for more than 20 years within both private practice and Industry Fund environments. I provide my clients with clear, readily understandable advice which puts their interests first and which will get them results.

©2019 Cameron Teague Wealth Advisory. CTWealth Pty Ltd T/A Cameron Teague Wealth Advisory is a Corporate Authorised Representative (001275442) of MFG Advice Pty Ltd ABN 76618661108 AFSL 499010. The information contained in this article is general in nature, is not financial product advice and does not take into account any individual’s objectives, financial situation or needs. Please arrange a meeting with Cameron Teague for personal advice before you make any changes to your investments.

Public service redundancies

Preparation of a statement of advice (SOA)

The Public Service is a constantly evolving engine largely driven by policy and government changes.

A byproduct of this constant evolution can often unfortunately be redundancies for department employees which can often be quite a stressful and overwhelming time.

Since I have been advising on the Commonwealth Superannuation Schemes through CSC, there have been many such redundancies across a number of departments including;

• The Australian Taxation Office (ATO);

• The Department of Defence;

• The Australian Bureau of Statistics (ABS);

• The Australian Broadcasting Corporation (ABC);

• The Department of Human Services;

• CSIRO.

When faced with a redundancy, one issue that many employees face is what to do with their CSS and PSS defined benefit superannuation funds. There are a lot of emotions occurring at this time, so planning what to do with these funds may not seem like an immediate priority.

However, given the complexities of these funds it is extremely important to get financial advice if you are going to be receiving a redundancy. The decisions made at the time of redundancy are irreversible and in place until death.

Over your lifetime, the difference between making the right and wrong decision could equate to hundreds of thousands of dollars, maybe even millions of dollars in the case of CSS.

It is critical to seek advice from a planner experienced in this area. I have a lot of experience with clients experiencing this issue and I am of course happy to provide this guidance that is so important. But my advice is, do not try to take this financial step without seeking out expert guidance.

Once these decisions are made there really is no turning back.

Cameron Teague

certified financial planner I Director

I am owner and director of Cameron Teague Wealth Advisory. My practice is a privately owned, fee-for-service business with offices in Brisbane and at the Sunshine Coast. I also offer phone and online appointments to clients living in remote, regional and overseas locations. I have been working in the Australian finance industry for more than 20 years within both private practice and Industry Fund environments. I provide my clients with clear, readily understandable advice which puts their interests first and which will get them results.