Dear Friends,
Special edition – same message!
The headline writers must be a lot of grumpy old men who only have the one playbook – always go with the ‘Disaster’ headlines.
The Federal Government has had its Division 296 legislation passed and it will come into law on 1 July 2026. And if you believe everything you hear and see in the news media, you may be mistaken for thinking the retirement system is about to collapse – it is not.
This change puts an indexed cap on super at $3 million – which according to the press will affect 0.05% of the population.
The purpose of superannuation is to provide for your income in retirement. It remains very generous. For example, if you are lucky enough as a couple to have $2 million in pensions each, drawing the 5% pa, minimum for those over 65, that supplies an annual TAX-FREE income of $200,000.
Assuming you own your own home, and seek some financial advice, this is effectively a tax-free equivalent to earning around $320,000 pa in Gross employment income. Not bad – with a good financial adviser, you won’t need to pay any tax if you and you partner have a combined $4 million in your pension funds.
Even for those very few with super balances over the new $3 million cap the pain is not so great. The higher tax rate of 30% will apply only to earnings on balances above $3 million, with the 40% tax rate applying to earnings on balances which are above $10 million.
However, there are alternative strategies available for those who find themselves in this situation. Please refer to my August 2022 and June 2023 ureka articles for further information.
Don’t get spooked by the headlines. Super is still a brilliant way to ensure financial independence and dignity in retirement.
Investment market volatility
The current war in the Middle East has seen world stock exchanges, including Wall Street, Tokyo, Seoul, London and our own ASX, fall dramatically and bounce back – only to repeat this behaviour.
So, what should clients of Marinis Financial Group clients do?
Nothing.
Stay in your seats. If your super is in accumulation phase, keep contributing to your super fund as it will buy some bargain priced stocks. If you are in income drawdown phase, remember that you have the “Marinis Buffer” which is a cash reserve designed to protect you for up to two years against a market break (so you don’t have to sell good quality stocks at bargain basement prices just to live)!
As an economist, I enjoy sharing this old quote “The stock exchange is the best device ever designed to transfer wealth between the greedy and the scared to the patient.”
The markets will bounce back. They always do!
Don’t panic. Base your expected returns over the decade on an annual yield of around 5% pa (the real average is approximately 7.2% pa – but forget about this and just let your funds grow around the average). Let the hype wash over you without causing any issue.
See you at Halifax Street
Our team and I are very excited for the move to Halifax Street on April 2 when we join our future partnership with Caveo.
I would like to extend a warm ‘thank you’ to everyone who has offered their congratulations on this decision, which I am certain is in the long-term interests of our clients.
As a reminder, our new location will be Level 1, 11 Halifax Street Adelaide SA 5000. Phone and email contact details will remain the same.
Keep cyber-cynical
In this world of digital thievery, please ‘slow-down’ any requests for information.
Don’t click on links in odd or unexpected emails, be sceptical of telephone calls pretending to be from a bank, telecom provider or superannuation fund. And if you make a mistake, call us immediately.
Please visit www.scamwatch.gov.au for information on current scams to be aware of.
As always, if I or any of our team can be of assistance, please don’t hesitate to get in touch by either calling (08) 8130 5130 or admin@marinisgroup.com.au
Yours sincerely
Theo Marinis CFP®, B.A., B.Ec., CPA., MCIFAA
Financial Strategist
Authorised Representative
