News
Here you will find a collection of news articles on recent superannuation issues.
The Federal Government announces proposed changes to super
April 5, 2013 - The Federal Government announced some proposed changes to super. We highlight a few of the announcements that could have an impact on your super investment.
The Co-contribution and low income super contribution
Febuary 1, 2013 - The Federal Government has proposed to reduce the matching rate and the higher income threshold for the Co-contribution from 1 July 2012.
Government has announced some changes to super
December 3, 2012 - The Federal Government recently announced a number of proposed changes to superannuation.
Fixed Term rate announced
November 22, 2012 - The final rate for the Fixed Term Investment Option commencing in December is 4.35% p.a.
iPad competition winner announced
October 22, 2012 - Congratulations to the lucky winner of our ‘Win an iPad’ competition.
Would you like a guaranteed investment return?
August 24, 2012 - Applications for the October fixed-term investment are now open for Rollover and Account-Based Pension members.
If you found $50, would you stop to pick it up
August 17, 2012 - What about if you found $50 in one of your old super accounts?
The average lost super account is worth $4,800*, so you could have a lot more than that sitting in an old account not doing much more than attracting extra fees and charges, which can really eat away at your retirement savings.
Local Government Super wins Property Council of Australia award
July 2, 2012 – Carnegie Morgan Hill House at 120 Sussex Street in Sydney recently received the Australian Property Council Award for the best sustainable development of an existing building.
New investment options
February 6, 2012 - LGS has launced six new 'single sector' investment options for members of the Accumulation Scheme and Account-Based Pension Plan.
2011 News items
Legislation Update
December 22, 2011 - Over the past couple of weeks the Federal Government has announced some changes to superannuation law which may have an impact on your super investment.
Colour of Money competition winners
November 4, 2011 – Congratulations to the two lucky winners of Local Government Super's Colour of Money reactivation competition.
Would you like the security of a guaranteed investment return?
October 18, 2011 – Rollover and Account-Based Pension members can now choose our 12-month fixed-term investment option and earn a guaranteed investment return.
What does the Government's climate change plan mean for your super?
August 31, 2011 - The Federal Government has released their climate change plan, which includes a price on carbon emissions.
Find out more about the plan and the likely impact on your super.
Market Update
August 15, 2011 - The recent movements on Australian and global markets have understandably caused concern for some members, so we thought we would provide you with some commentary on these events.
Too many fees can really eat into your super
August 15, 2011 - Multiple super accounts can mean extra fees eating away at your super, so why not consolidate your different accounts into Local Government Super and make the most of your investment.
Do you want 12% super guaranteed?
July 15, 2011 - The superannuation guarantee has helped a lot of Australians save for their retirement but the fact is that many people still retire with not enough super and have to rely on the Age Pension to meet their living costs.
Japanese earthquake and investment markets
The recent natural disasters in Japan have had an impact on investment markets both in Australia and overseas. While the fall in the markets has had an impact on some of our investment returns, our financial year to date returns still remain positive.
We continue to actively monitor the situation.
News
Japanese earthquake and investment markets
Devastation of the Japanese earthquake
On 11 March, an 8.9 magnitude earthquake off the coast of Japan caused widespread damage and triggered a devastating tsunami on the north-east coast of the country.
The earthquake caused significant damage to several of Japan's nuclear facilities and after numerous explosions at these plants, two reactors have dangerously overheated and have been leaking radiation into the atmosphere.
Impact on share markets
The Japanese share market is down 14% and this is mainly due to the loss of production caused by factory closures which is expected to result in lower company earnings.
The Australian share market is down almost 6% and may fall further in the short term.
The fall in international shares has been offset a little by the recent 3.5% fall in the Australian dollar this month due to investors selling off riskier assets like the Australian dollar.
Bond yields have fallen since the earthquake so their returns for the month are positive in both Australia and overseas.
Impact on our investment options
The fall in share markets will have some impact on our investment options, but returns for the financial year to date remain positive.
For example, the performance of our High Growth option is down around 3% for March* but the year-to-date return remains strong at 7.2%.
In contrast, the March* return on our Conservative option is slightly negative but is still 4.7% for the financial year to date.
March* and year-to-date returns on our Cash option remain positive.
* March figure is up to 17 March 2011
Containing the nuclear radiation problem
There is a lot of uncertainty about the scale of the radiation leaks and how long it will take to contain and fix the problems at the Japanese nuclear facilities.
There have been reports of very high radiation levels and if the situation escalates it may present long-term growth challenges for the Japanese economy.
Our investment portfolios are not overly exposed to the Japanese economy, or their share market in general, so the direct impact should be minimal.
If the radiation situation is contained, the focus will swing back to rebuilding the country and this is likely to boost the Japanese economy over the medium term.
We will of course continue to monitor the situation and take appropriate actions if the outlook continues to deteriorate.
This commentary has been prepared by LGSS Pty Limited (ABN 68 078 003 497) (AFSL 383558), as Trustee for Local Government Superannuation Scheme - Pool A (ABN 74 925 979 278) and Pool B (ABN 28 901 371 321) - collectively known as Local Government Super.
The information contained in this commentary is of a general nature only and is not intended to be a substitute for advice. It does not take into account any individual's or organisation's investment objectives, financial situation or particular needs.
If you require advice that is based on your own personal situation, we recommend you contact an authorised financial advisor. For more information about Local Government Super, contact Member Services on 1300 369 901 or go to www.lgsuper.com.au to obtain a copy of the relevant Product Disclosure Statement pertaining to your membership.
News
We want you to really enjoy your retirement.
The superannuation guarantee has helped a lot of Australians save for their retirement but the fact is that many people still retire with not enough super and have to rely on the Age Pension to meet their living costs.
Our aim is to help you maximise your super investment so when you finally finish working you can start enjoying your retirement.
The Government's proposal to increase the super guarantee from 9% to 12% will help many Australians achieve a much better standard of living in retirement, in fact, the average wage earner could increase their retirement savings by more than $100,000 over 30 years*.
But the proposal to increase the super guarantee is yet to be passed by parliament.
So if you want to get behind the proposal join the Australian Institute of Superannuation Trustees (AIST) petition and make sure we all get the opportunity to be better off in retirement.
Let's support the proposal to increase the super guarantee to 12%.
*Based on Australian Government estimates of a 30 year old earning average full-time wages. for source: visit www.futuretax.gov.au
December 2011
Legislation Update
There have been some recent changes announced to super
The Federal Government has recently announced some changes which may have an impact on your super investment. Here is a brief summary of the changes and how they may affect your super.
Changes to the new low income superannuation contribution
This proposal was first announced earlier in the year. From 1 July 2012, it allows people earning up to $37,000 to effectively pay no tax on their compulsory super guarantee (SG) contributions, as the Government will refund the 15% contributions tax to those who are eligible.
What does this mean for you?
If you have a taxable income of $37,000 or less, you will pay no tax on your super guarantee contributions as the Government will refund the 15% tax which you normally pay.
Reduction in the Government’s Co-contribution
When the new low income superannuation contribution tax rebate begins from 1 July 2012, the super co-contribution will be reduced.
The maximum amount claimable for the super co-contribution will be halved from the current $1,000 to $500. Only people with an income of up to $31,920 will be eligible to receive the maximum amount.
The matching rate (that is the amount that the government puts in for each $1.00 you put in) will also be reduced. The government currently matches contributions dollar for dollar, but this will be halved to 50 cents for each $1.00 of after-tax contributions. It then progressively reduces for incomes over $31,920 up to a maximum of $46,920 (currently $61,920), after which it phases out completely.
What does this mean for you?
You will still be eligible for the co-contribution if you earn less than $61,920 and make an after-tax super contribution this financial year.
However from 1 July 2012, with the reduced matching rate and the lowering of the upper income threshold, fewer employees will be eligible for the co-contribution, and there will be less incentive for low and middle income earners to make after-tax super contributions.
But if you earn less than $37,000, this reduction will be at least partially offset by the introduction of the new low income superannuation contribution tax rebate.
Changes to the concessional contribution caps
The concessional or before-tax contribution caps are currently $25,000 per annum for people under the age of 50 and $50,000 per annum for people aged 50 years and over. However, the Government is considering reducing this cap to $25,000 for people over age 50 and with $500,000 or more in super.
The Government has announced a pause in the indexation of these caps, which means they will not be indexed to inflation for the 2013/14 financial year. So these caps will effectively remain the same for a much longer period.
What does this mean for you?
The Government has not adjusted the concessional contribution caps since it halved them in 2009. However, you may have received annual salary increases during this time, meaning your SG contributions may also have increased.
If you sacrifice some of your salary into your super, you need to make sure that you are not running the risk of exceeding your contribution cap.
Removal of age limit on super guarantee contributions
Currently employees over the age of 70 are not entitled to super guarantee contributions from their employer, but the government has announced that from 1 July 2013, all eligible employees 70 years of age and over will receive these contributions.
What does this mean for you?
If you are a mature-age employee, this change will provide you with more incentive to stay in the workforce and allows you to keep contributing to your super up until you decide to retire.
Extension of the drawdown relief on account-based pensions
In recent years, the Government reduced the minimum pension payment requirements to help self-funded retirees who suffered a drop in the value of their investment due to the global financial crisis.
Due to the continuing volatility in global financial markets, the Government has now announced that it will extend the 25% reduction in minimum payments for the 2012/2013 financial year.
What does this mean for you?
If you have an account-based pension, this means you take advantage of the reduction for another year to conserve the capital in your pension account and make your retirement savings last longer.
August 2011
Market Update
Recent movements on Australian and global markets
Over the past three months share markets have pulled back from the gains made in the aftermath of the global financial crisis (GFC) mainly due to mounting concerns over the debt problems in Europe and the United States.
At the start of August, rumours about the worsening debt crisis in Europe sent the markets into a tailspin, losing around 10% in just one week, and then they bounced back just as abruptly.
This sort of volatility is unusual and caused concern among investors, and we’ve received a lot of calls from our members.
So we thought we would provide you with some commentary on these events.
What caused markets to fall during the GFC?
The GFC was in fact a credit crisis. During the 1990s and the first half of the last decade, we saw a massive explosion of debt by both business and consumers.
The easy availability of this debt meant that many financial institutions relaxed their credit standards (i.e. the assessment of the borrower’s capacity to repay) and many people who were not strictly creditworthy were able to obtain credit, particularly large mortgages.
In a world where asset values are rising you can cover your increasing repayments by refinancing and taking on more debt. But when asset values start to fall, the lender may not be keen to lend you more money.
A simple example
So, picture this. You owe $600,000 and as security you have put up your house which is valued at $800,000.
Even if the value of the house falls by 50%, as long as you are meeting your repayments, there is no problem from your perspective. However, if you can’t meet your repayments, your lender will want to reclaim your house and will sell it to cover their loss, even if selling the house further erodes its value.
And that is precisely what happened
Asset prices dropped in 2008/09, particularly in the US, and a number of borrowers in order to make repayments were forced to sell. This in turn forced prices down further so that the lenders themselves were also hurt by only being able to recover a fraction of their loan.
Clearly the main lenders are banks and in order to protect the financial system from collapsing under the weight of these ‘distressed loans’, governments worldwide did two things. They:
1. Bought a lot of the bad debts themselves by buying a stake in these banks, and
2. Injected massive amounts of money into their economies as the banking problems had
dried up credit and therefore economic growth.
So why are we going through this again?
There are a couple of reasons.
Firstly, the effect of the governments’ fiscal stimuli has largely worn off and many commentators have argued that these cash injections into the economy would not have a prolonged effect in the first place.
To some extent this is understandable; the world was in a financial crisis and governments wanted to get people spending again. Of course infrastructure projects would have had a more sustainable long-term impact, but these take years, sometimes even decades, before you can see an economic benefit.
But even more importantly, while governments are seen to be more secure borrowers than an individual or a company, they are still required to make repayments. The reality is that for many countries the size of their debt is so large that they have no hope of making repayments without either increasing their revenue (i.e. taxes) or reducing their spending.
Where does that leave us?
It seems clear now that to avert a collapse of the financial system, governments around the world resorted to what we refer to as the ‘sugar hit’.
While it temporarily got us through the mess, it didn’t address the underlying problem. The fact is that most western countries are living beyond their means and they have to start making some decisions to address this problem which will be painful in the short to medium term.
Given that governments are usually voted in every three to four years, it is hardly surprising that this is a spoonful of medicine that most would rather leave for the next government to administer.
Like many others, we hope that this current crisis will see some consensus on how to reduce debt levels across the world. If this happens we are confident that markets will settle down once again.
What this means for your super
The diversified nature of LGS’s investment portfolio means we are in a good position to ride out the bumpy share market and deliver strong, consistent investment returns over the long-term. In fact, our High Growth, Balanced Growth and Balanced investment options have recommended investment time frames of five to nine years.
In times of market volatility, your superannuation balance is affected, and it’s natural to feel anxious. However, it’s important not to lose sight of your long term goals and moving between investments on a regular basis may do more harm than good. If you do think that your investment is no longer best meeting your needs, you should obtain professional advice to review your investment choice.
If you are particularly concerned about the recent volatility, consider speaking with a financial adviser. And remember, as a member of LGS, you have access to financial planning advice at no extra cost.
October 2012
iPad competition winner announced
Congratulations to the lucky winner of our ‘Win an iPad’ competition.
Mr Ian Dalton has won a new iPad for simply logging into his account online and checking that we have his correct email address recorded.
We’d like to make sure that we have your email address so we can keep you up-to-date with what’s happening with your super. From time to time, we’ll update you on changes to super, provide helpful super tips and send you invitations to upcoming events, so it’s a good idea to make sure that we have your current email address.
Thanks for logging in and congratulations again Ian!
The Federal Government announces changes to super
Following a number of recent stories in the mainstream media, the Federal Government has this morning announced a number of proposed changes to superannuation. While these changes are yet to be formally passed by Parliament, we’re highlighting a few of the announcements that could have an impact on your super investment.
Increasing concessional contribution caps
In an effort to further simplify contribution caps, the Government proposes to increase the concessional contribution cap to $35,000 for anyone who meets certain age requirements.
It has been indicated that for people aged 60 and over, this higher cap will be introduced from1 July 2013 and for those aged 50 and over, on 1 July 2014.
Currently, the concessional contribution cap is $25,000 for everyone, regardless of age or account balance.
Changes to the treatment of excess concessional contributions
From 1 July 2013, the Government is proposing to allow anyone who exceeds the concessional contribution cap the ability to withdraw their excess contributions.
In addition, the Government will tax excess concessional contributions at the individual's marginal tax rate, plus an interest charge to recognise that the tax on excess contributions is collected later than the individual’s normal income tax. These changes aim to ensure that anyone who has made excess contributions is taxed in the same way as if they had received those funds as part of their salary or wages.
Currently, if you exceed the concessional cap, your excess contributions are taxed an additional 31.5%, which means members effectively pay the equivalent of the highest marginal tax rate (46.5%).
Tax on income stream earnings over $100,000
Under current arrangements, earnings on funds held in superannuation income streams (such as the Account-Based Pension Plan) are tax-free, while earnings on funds in the accumulation phase (such as the Accumulation Scheme) are taxed at a concessional rate of 15%.
From 1 July 2014, the Government is proposing to restrict this tax-free threshold for earnings on funds supporting income streams to $100,000 per year. They’ve indicated that earnings greater than $100,000 will attract the same concessional tax rate of 15%, in line with funds that are held in the accumulation phase.
The tax treatment on earnings over $100,000 will also apply to defined benefit funds.
Normal ‘deeming rules’ to apply to account-based income streams
The Government also announced that normal deeming rules will apply to superannuation account-based income streams (such as the Account-Based Pension Plan). It is proposed that deeming arrangements will apply to new superannuation account-based income streams assessed under the pension income test rules after 1 January 2015.
Currently, income from account-based income streams receives a higher concessional treatment under the pension income test, when compared with income from similar assets.
This is just an overview of some of the proposed changes the Government has announced. For more information, or to read a copy of the Government’s full press release, click here.
5 April 2013
The Co-contribution and low income super contribution
The Federal Government has proposed to reduce the matching rate and the higher income threshold for the Co-contribution from 1 July 2012.
| Old | New | |
| Maximum Co-contribution entitlement | $1,000 | $500 |
| Contribution matching rate | 100% | 50% |
| Lower income threshold | $31,920 | $31,920 |
| Higher income threshold | $61,920 | $46,920 |
While this legislation is yet to be passed, if the changes do come into effect it will mean that the Federal Government will contribute up to $0.50 for every $1 you personally contribute (in after-tax dollars) to your super, subject to a maximum of $500 a year. This maximum starts reducing once your assessable income exceeds $31,920 and will reduce to zero once your income reaches $46,920.
Although the Government is reducing Co-contribution entitlements, it’s certainly not all bad news for lower income earners, as the ‘low income superannuation contribution’ commenced on 1 July 2012.
If you earn $37,000 or less, the low income superannuation contribution effectively refunds the tax paid on your ‘concessional contributions’. These contributions include the compulsory super guarantee contributions made by your employer which are taxed at a rate of 15% when they enter the fund.
With the introduction of the low income superannuation contribution, the Government will refund this 15% tax (up to a maximum of $500 per year) with the refund paid directly into your super to help boost your retirement savings.
It’s expected that this will benefit over five times as many people as the current Co-contribution, as all low income earners will receive this contribution automatically, without having to make additional contributions from their own income. The first low income superannuation contribution payments will be made in the 2013-14 financial year.
November 2012
Fixed Term rate announced
The final rate for the Fixed Term Investment Option commencing in December is 4.35% p.a.
For information on past fixed-term investments, please select your product below:
November 2011
Colour of Money competition winners
Congratulations to the two lucky winners of Local Government Super's Colour of Money reactivation competition.
Mr Toby Browne and Mr David Atkins have each won a $5,000 contribution toward their Local Government Super account for reactivating their accounts during the promotional period by recommencing contributions or transferring in funds from another account.
Congratulations again!
News
Why we believe a clear climate change policy is necessary for investment certainty
We consider climate change to be a significant risk to our investment portfolio and the long-term returns for our members.
We believe the scientific case for climate change is very clear but unfortunately the appropriate regulatory and policy response is not so straightforward and this has been reflected in the nature of the carbon tax debate in Australia.
Introducing a price on carbon emissions is a major reform and the policy was always going to involve a degree of compromise and attract a certain level of criticism.
Nevertheless, we welcome the introduction of a climate change policy which aims for long-term economic growth that is not linked to long-term carbon pollution growth, and achieves this aim in an efficient and cost-effective way.
There has been an urgent need for this policy as the investment community has been waiting for clarity on this issue for more than a decade. In fact, many important infrastructure projects, vital for the Australia's long-term economic prospects, have not proceeded due to this uncertainty.
So what's in the Federal Government's climate change plan?
The Federal Government's plan, Securing a Clean Energy Future, is a package which includes incentives, tax reform and compensation for business and households but the two aspects of the plan that will have a direct impact on investment markets are:
- Introduction of a carbon price on heavily polluting industries
- Promotion of investment and innovation in renewable energy
While attracting some criticism, overall we believe this is a comprehensive plan and it is a starting point for the essential transition to a low-carbon economy which will change the way many organisations do business.
The carbon price will be levied on around 500 of the biggest polluters, particularly companies in power-generation, mining and waste industries. The aim is to encourage these businesses to be more energy efficient and reduce their output of pollution so they pay less tax on their emissions.
Businesses which adapt to the new low-carbon economy will cut their costs and be more likely to improve their profit margins and their market share. It may also create opportunities for these businesses to develop new low-carbon products and services.
On the other hand, businesses that fail to reduce their emissions will face increasing costs and may become less competitive.
Most Australian households will receive compensation for any cost of living increases associated with the carbon tax, and most high carbon emission-intensive and trade-exposed industries will also receive financial relief from the full impact of the carbon tax.
The price on carbon emissions and super fund returns
Our view is that the government's policy package will have a neutral short-term effect on our investment portfolio returns as the sectors most exposed to the carbon tax will receive substantial compensation.
Most stockbroker reports currently show that the carbon tax will have about a 5% negative effect on profit for a handful of companies but for all other ASX-listed companies the carbon tax will have a negligible impact on their profits.
We also believe that overall the greater certainty around the price of carbon emissions will have a positive influence on investment markets.
Over the medium to longer term, the introduction of a carbon price and the Government's support for investment in clean energy technologies should have a positive impact on investment returns for super funds who invest in these clean energy projects.
How does LGS we compare against other super funds?
Our long-standing commitment to sustainability has put us in a good position to take advantage of the opportunities and effectively manage the risks of introducing a price on carbon emissions.
A recent survey conducted by the Climate Institute and the Australian Institute of Superannuation Trustees (AIST) found that while over a third of super funds recognise the impact of climate change, only 11% of them have a strategy to measure and manage the risks and opportunities of climate change.
The survey independently assesses the readiness of Australia's super funds and the results confirmed that Local Government Super is the number one super fund when it comes to managing these risks and opportunities.
In fact, we currently have over $3 billion invested in responsible investment strategies and the Government's climate change plan potentially offers a whole new range of investment opportunities.
Just click on sustainability if you would like to know more about how we manage the risks and opportunities of climate change.
What about if you found $50 in one of your old super accounts?
The average lost super account is worth $4,800*, so you could have a lot more than that sitting in an old account not doing much more than attracting extra fees and charges, which can really eat away at your retirement savings.
If you’ve changed jobs over the years, you probably have super scattered around in different super funds, so why not move all of your super into one super fund and stop paying more fees than you need to.
As a member of Local Government Super, you get competitive investment returns, some of the lowest fees around and a range of other member benefits.
To consolidate your super with LGS today simply complete and return the Transfer-in Authority form or call us on 1300 369 901 for more information.
The ATO’s SuperSeeker can also help you find your lost super.
* source: http://billshorten.com.au/found_2_8_billion_inlost-super
In general, consolidating your super is a good idea but there may be exit fees involved or you may have insurance with your previous
fund which might not be available at the destination fund. To check on this, you should contact your old funds or seek advice from one of our
financial planners.
Local Government Super wins Property Council of Australia award
Carnegie Morgan Hill House at 120 Sussex Street in Sydney recently received the Australian Property Council Award for the best sustainable development of an existing building.
This 21 year old office building in Sydney is a great example of our strong commitment to environmentally and socially sustainable development across our entire direct property portfolio.
In fact, Carnegie Morgan Hill House was the first CBD building in Australia to receive a five and half star NABERS Energy rating.
Our upgrade of 120 Sussex Street reduced the building's total energy consumption by 54% making it the lowest energy-intensive CBD building in Australia, as well as reducing water consumption by 46%.
All this was achieved using leading Australian lighting, air-conditioning and chiller technology, and the full upgrade was completed at a final cost of only $160 per square metre.
These upgrades mean lower running costs and more satisfied tenants and this means more sustainable long-term returns for our members and the environment.
Just some of the reasons why Local Government Super received Money magazine's Best of the Best Award for the Best Green Super Fund.
Click here to read about the Australian Property Council's Innovation and Excellence Awards.
Click here to find out more about Carnegie Morgan Hill House.
Left to right: A. Kim (LGS), P. Horwood (SMAC), R. Walker (Walker EcoStrategies), B. Churchill (LGS), V. Purnell (LGS), J. Derrick (CBRE),
W Ryan (SMAC), G. Hilbourne (CBRE), G. Turnbull (Envirolite).
June 2012
Government has announced some changes to super
Following the Mid-Year Economic and Fiscal Outlook (MYEFO), the Federal Government announced a number of proposed changes to superannuation.
While these changes are yet to be passed by parliament, they may have an impact on your super investment.
Transferring lost accounts to the Australian Taxation Office (ATO)
The government estimates that super funds currently have around $17 billion sitting in 3.4 million 'lost' accounts, and these balances are being eroded away by fees and charges.
To address this problem, the government has proposed the following changes to begin from 31 December 2012:
- Super funds will have to transfer the balance of any inactive accounts, and accounts of uncontactable members, to the Australian Taxation Office (ATO) if the balance is $2,000 or less (up from $200).
- Once an account of unidentifiable member has been inactive for 12 months (down from five years), the fund must transfer the balance of the account to the ATO.
Also, from 1 July 2013, the Government will pay interest at a rate equivalent to Consumer Price Index (CPI) on all lost superannuation accounts reclaimed from the ATO.
What does this mean for you?
If you have more than one super account, it means that if one of your super funds cannot contact you, they may transfer the balance of your account to the ATO if the balance is $2,000 or less and you are not making contributions.
If this happens, you will need to contact the ATO to reclaim your lost super.
It underlines the benefits of consolidating all your super into one active account and always keeping your contact details up-to-date.
By consolidating all your super into one account, it's much easier to keep track of all your super and make sure you are not paying multiple sets of fees and charges.
You can transfer your other super balances into your Local Government Super account by using the Transfer-in Authority available on our website.
December 2012