Retirement Income Streams

What are retirement income streams?
When we retire we all have a common issue – how are we going to produce an income for the rest of our lives? The main thing we lose in retirement is the ability to earn wages and salaries.
Whether you’ve built up savings from superannuation, investment property, equity in your home, money in the bank, inheritance etc., you will need to turn this capital into an income stream which is convenient, secure and tax effective.
You may also have other objectives in retirement such as gaining the most out of Centrelink and the Age Pension or the Veterans’ Affairs Pension, in addition to estate planning issues.
For an ever-increasing number of people the answer lies in the form of income streams and, in particular, superannuation allocated pensions, term allocated pensions and other complying annuities.

Where do you go to get one?
Most life insurance companies and financial services organisations provide these different types of income stream products. You can approach these organisations directly, at which point they will usually direct you to one of their financial planning groups, or you can seek the advice of an independent financial planner. You should always seek professional advice. It is very dangerous to attempt to set yourself up with an income stream without professional consultation, particularly professional tax advice.

How do you set one up?
1. Decide on your retirement date or year.
2. Ensure you have a clear and defined set of goals and objectives.
(e.g. required income per year, investment objectives, access to capital, Centrelink etc).
3. Do your research! Most providers’ websites have additional information on their income streams.
4. Arrange an interview with a retirement specialist, preferably an independent one.
5. Work together to use your retirement savings to the best effect.
Remember, you do not need to review all possible income stream products in order to choose the one best suited to your circumstances. Pre-qualify your needs by checking the table [here] for those points which do or do not relate to your priorities.
Richard Sheargold

Table supplied by Louise Biti, Asteron.

For more information on Retirement Income from the FACS website,
click here

InvestSMART, a discount broker of allocated pension investments, have provided the following table which shows a number of the top performing funds based on 12 month’s performance.

If you wish to look at any of the funds in the table below you will be taken to InvestSMART’s website where you can research these products more, compare it with other investment options and most importantly request or download a Product Disclosure Statement (PDS).

Top Performing Retirement Funds

Managed Fund data is supplied by Morningstar Research and Standard & Poor’s Information Services and is subject to the following disclaimer.
Managed fund unit prices are indicative only.

Sourcing and comparing fixed term or Life Annuity style products from Life Insurance companies is not available online. Please call InvestSMART on 1300 880 160 for some comparable rates based on your timeframe. There is little doubt that by choosing wisely, a good retirement income stream will contribute to the basis for a comfortable lifestyle in retirement.

IMPORTANT DISCLAIMER : This information has been prepared for distribution over the internet and without taking into account the investment objectives, financial situation and particular needs of any particular person. Neither InvestSMART Financial Services Pty Ltd nor www.aboutseniors.com.au make any recommendations as to the merits of any investment opportunity referred to on www.aboutseniors.com.au or any related websites. All indications of performance returns are historical and can not be relied upon as an indicator for future performance.

© 2007 Morningstar Research Pty Ltd. All rights reserved. To the extent that the above constitutes general advice by Morningstar, this advice has been prepared by Morningstar Research Pty Ltd ABN: 83 062 096 342, AFSL: 243 161 and does not take account of your objectives, financial situation or needs. Before acting on any advice, you should consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. Please refer to Morningstar’s Financial Service Guide (FSG) for more information at www.morningstar.com.au/fsg.asp and consider the product disclosure statement before making a decision to acquire the financial product.

Tax-free allocated pension

A new product, which integrates a superannuation pension with a cash management account, will allow you to get direct access to your pension fund through a bank branch, ATM or online banking, and could save you paying tax.

ING and ANZ have combined to offer an ING pension product with an ANZ Cash management account, meaning you can manage your retirement savings in a single integrated product.

This is a first for the industry and means that you no longer need to keep your cash reserves in a separate, non-super account, with any interest earned subject to tax. In addition, it‘s always handy to have immediate access to cash if you need to cover unexpected costs. This new arrangement provides much flexibility in terms of where you choose to invest your hard-earned dollars. To find out more, click here

ASIC’s Investments Test

The Australian Securities and Investments Commission (ASIC) has warned that many heavily advertised fixed interest investments should be thoroughly researched before consumers buy into them. ASIC’s three-point test can help you keep a cool head when the temptation of attractive returns is dangled before your eyes.

ASIC warns that many companies fail to disclose important information or make claims that are misleading. Asking the following three questions of any investment company could help clarify the true value of their offers and give you peace of mind.

Who are you giving your money to?
Banks, building societies, credit unions, super funds and life insurance companies are the only institutions specially regulated to make sure that, under all reasonable circumstances, they can meet their financial promises. Otherwise, you’re taking an extra risk, like buying shares. And, if property is involved, your investments are not automatically ‘as safe as houses’. You alone have to judge the risk that the company you lend to may fail or default.
Is the interest rate higher than 8.5% per year?
If your expected return seems high, it adds extra risk. Your proposed investment may be more risky than a typical fixed interest investment. You may risk losing a significant amount of what you’re planning to invest, so it’s vital to check if you’ve got all the facts and if you can handle those risks. These must be spelled out in the product disclosure statement or the prospectus which the fund must give you.
Do you plan to put all your eggs in this basket?
Placing all your funds in one investment is extremely risky unless you’re putting the money into a deposit with a bank, building society, credit union, super fund or life insurance company. If things go wrong, your entire nest egg could be wiped out. Unless you can afford to lose all your money, spread your risk by spreading your investments.

FIDO offers lots of financial tips and advice on their website.
Go there

Choosing a Retirement Income Product

As you approach retirement, you need to decide how to use the super you’ve saved to help support yourself in retirement. Super funds and life insurance companies offer various types of financial products that let you draw down your superannuation savings in an orderly way to suit your lifestyle. This exercise can prove very complicated, so ASIC are offering an excellent overview of the products, issues and decision-making process on their FIDO website.

Visit the website to see an overview discussion which walks you through the basics of retirement income, including getting an age pension, having money for emergencies, avoiding unnecessary tax, and much more.
Go there

Income Streams - Finding the Best Product

Retirement income stream products are many and varied. It can be very confusing understanding the differences between the different products. And this can be critical to maximizing your Centrelink benefits. The Fido website has five excellent fact sheets on retirement income streams to help you choose the best product for your specific situation.

Retirement income streams - Fact Sheets

The Fido website has produced five fact sheets, available online as well as a downloadable (PDF) comparison table to help explain the different features of the five main income stream offerings:

Allocated pensions and annuities
Market-linked pensions and annuities
Lifetime pensions and annuities
Life expectancy pensions and annuities
Fixed term pensions and annuities

The products are compared across the following points:

What income do you receive?
Can you withdraw? How long do payments last?
Can you choose how the money is invested?
Is this a complying income stream?
What happens if you die?

Go there

Department of Family and Community Services

FaCS and the National Information Centre on Retirement Investments, Inc. (NICRI) have jointly written "Investing Money - Your Choices" to help you understand your options so you can get the best from your savings and investments both before and after you retire.
Go there

Complaints

If you need help to make a complaint about a financial institution please check the @boutSeniors Dispute Resolution and Advocacy page.
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Retirement Income Streams