September 2005 Quarter          

Content Take control of your debts Surcharge abolished A word of caution October wine offer Fair Go Lifestyle Advantage Package The Myths of Financial Planning Financial Planner profile: meet Mylee Huynh About your fund managers Free Seminars Investment and market commentary Welcome to this edition of Your Financial Future, which reviews the September 2005 quarter. In this issue we discuss how to take control of your debts and the extent to which the Government will look after you in retirement. We also introduce you to Mylee Huynh, one of the Financial Planners on hand to help you secure your financial future. We feature the BT Financial Group, one of the investment managers we use to help look after your investment portfolio. In addition, we examine how different asset classes have performed over the past quarter and how markets are likely to perform going forward. Take control of your debts Savings and investments are crucial in securing your financial future, but they will mean little if you don't manage your debts effectively. Careful use of debt - such as buying a house - can help you build up your wealth. Many people borrow money to use for investments and then claim the interest costs as a tax deduction. They are, in fact, using other people's money to grow their own nest egg. But debt can also spiral out of hand if it isn't used wisely. Remember the interest you pay on debt, including credit card debt, is money that cannot be saved or invested - it's just gone! The first step in managing your debt is to draw up a realistic budget to track where your money goes and ensure that you don't spend more than you earn. Included in your budget should be a list of all your 'contractual' payments (i.e. payments you must make on loans), such as your mortgage or car loan repayments. You should also examine how much excess income you can have to pay off debts. Step two is to rank your different debts according to the interest charges they incur, from the most expensive to the cheapest. Step three is to draw up a plan to eliminate these debts. Questions to consider include: How long will it take to pay off the loans if you keep repayments at the same level? Will you pay higher fees and charges if you pay off any of your loans earlier? (Some loans have conditions that lock you in). Can you claim a tax deduction for the interest paid on any of your loans? It makes sense to pay off the more expensive debt such as your credit card first, rather than the cheaper debt, which is usually your home loan. You then save the difference in interest between the more expensive debt and the cheaper debt. You might also consider consolidating all your loans into the lowest interest loan, such as your home loan. But check first that there are no penalties for repaying your existing loans early and that there are no fees for increasing your mortgage. Ways to avoid the debt spiral: Draw up a realistic budget and stick to it Learn to use your credit card more effectively by taking advantage of interest free periods. Consider using an interest offset account - this allows you to use the interest that you have earned on your savings account to be offset against the interest calculated on your home loan. Make higher repayments to pay off debts more quickly. Get expert help. Don't leave your debts unmanaged for too long. Consult a financial planner or your bank to work out a debt-reduction plan. If your income is limited and repaying debts while paying the day-to-day bills seems impossible, you could consider where you can cut back on daily costs or selling some unwanted assets. It's advisable to speak to a financial planner before consolidating your loans. A key area to assess is whether any loans are tax deductible. Your Scheme's financial planners are able to assist you with this without cost or obligation. To speak to a planner, please call 1300 883 788. You can also contact the credit helpline in NSW on 1800 808 488. Surcharge abolished As you may know, legislation to abolish the unpopular superannuation surcharge has been passed by the Senate. As a result, the surcharge no longer applies to surchargeable superannuation contributions and employer Eligible Termination Payments (ETPs) received from 1 July 2005. Given the many tax advantages of superannuation and the compound benefits of long term savings, high income earners who previously paid the surcharge would be wise to consider placing the money saved by its abolishment into their superannuation to help bolster their retirement nest eggs. A word of caution After two years of strong investment returns, especially from Australian shares, some experts are warning that markets may not be as "generous" in the 2005/06 financial year as they have been in the recent past. They caution that investment markets are cyclical. In other words, they go up and they go down. Fortunately, however, they've risen more than they've fallen, especially over the longer term. So, given the possibility that markets could fall, should you change your investment strategy? Firstly, it's important to remember why you selected this strategy in the first place. You might have chosen it for a number of reasons, such as: To meet your financial goals Because of the number of years you have left until retirement Because of your level of risk tolerance To diversify your investments and spread your risks Because it's generally the right strategy for your life stage If your reasons have changed, then maybe you should re-examine your portfolio mix. If your reasons haven't changed then perhaps it's best to sit tight even if the ride gets a bit bumpy. Many advisers warn against trying to pick the market cycles because most investors rarely get the timing right. Instead, they say that while there may be short-term dips in market returns, most carefully selected and age-appropriate strategies work well for investors over the long-term. However, if you feel uncomfortable with this strategy, or believe that this is a good time to review your investment portfolio, you can call Member Services on 1300 369 901. October wine offer Spring Racing is upon us and this month's mixed dozen is a guaranteed winner this carnival. On behalf of the Fair Go Members Benefits program, Wine Box has hand selected a few favourites, some sure bet fillies and an old chestnut from Tatachilla that would be hard not to back! OFFER $139 /Premium DOZEN Recommended retail $240 SAVING $101 FREE DELIVERY AUSTRALIA-WIDE 2 x 2000 Pikes Cabernet - Clare Valley, SA 2 x 2003 Ferngrove Estate Riesling - Frankland, WA 2 x 2002 Chalice Bridge Shiraz - Margaret River, WA 2 x 2001 Toolangi Chardonnay - Yarra Valley, VIC 2 x 2001 Tatachilla Cabernet Sauvignon - McLaren Vale, SA 2 x NV Casella Brut Sparkling - South Australia To Order: Simply phone your order (credit card) through directly to Wine Box Warehouse on 1300 859 877 and Quote MBOCT This offer valid until October 31, 2005 *Conditions apply Wine Box reserves the rights to substitute out of stock items with equal to value stock Fair Go Lifestyle Advantage Package As a Fair Go member, you can buy the Lifestyle Advantage package for only $35.00 plus GST. Normally this extensive package of lifestyle discount offers would retail for $99.90 a year. Lifestyle Advantage membership consists of the following: The Presidential Card: Australia's leading dining, travel and entertainment savings program featuring 3,000 locations that welcome the card throughout Australia and New Zealand. Your membership entitles you to savings at restaurants, hotels, B&Bs, cinemas, tourist attractions, video hire, car hire, holidays and much more. Great to take on holiday! Shoppers Advantage: it allows you to purchase a wide range of goods (over 25,000 product lines) including digital cameras, MP3 players, iPods, TVs, fridges, glassware, gifts and kids toys. For example, you can save $470 on the TCL27" Widescreen LCD TV (RRP $1565). VIP Preferred Seating: A premium ticketing service sporting, theatre, musicals, concerts, operas, ballet and family entertainment events. Start saving today! To apply, simply click here. The Myths of Financial Planning In this day of financial information overload, it's often difficult to discern fact from fiction. For this reason, in each issue of Your Financial Future, we expose another Financial Planning myth to help guide you through the maze of information out there in the marketplace. Myth: The Government will look after me in retirement Australia's expanding ageing population is fast constraining the Government's ability to provide retirement pensions. Compulsory superannuation and other savings incentives signal that people will be expected to provide for and manage their own retirement assets in the future. We can no longer look to the Government for support in our retirement years. The quality of life we aspire to throughout retirement may well depend on the financial planning decisions we make today. Just consider how you will manage on the Age Pension, which at present provides around $12,700 a year for a single person and $21,200 a year for a couple. In addition, with life expectancies increasing, most of us are likely to spend much longer in retirement than people did in the past. According to a Productivity Commission report, there will be a larger proportion of people aged over 65 in Australia in 40 years time, but the number of people in the workforce should remain the same. This means that there's going to be a much heavier draw down on services, particularly health services, but the same number of people of working age in the workforce paying the taxes to fund these services. Given this scenario, it would be unwise to rely on future taxpayers to fund your retirement. Instead, it would be prudent to start developing some strategies to take care of your own retirement needs. The earlier you start saving the better, and one of the best ways to save is through super. Superannuation: One of the last tax advantaged vehicles Saving through superannuation has many advantages: You can add to your investment on a regular basis. Access to your investment is restricted, so you can't be tempted to spend it before you retire. You may receive Government incentives for making personal contributions. Your superannuation can move with you when you move around the workforce. But super also offers attractive tax advantages when compared to other forms of savings, including: Super fund earnings are taxed at a maximum of 15% with the actual tax paid often being less because of tax deductions and tax offsets, making the tax rate much lower than most people's marginal rate. Capital gains on superannuation investments are effectively taxed at 10%. There's a lower tax rate on lump sum payments after you turn 55. In most cases, you would be able to receive almost $130,000 tax-free. Tax concessions on pensions which could see you receive about $27,000 tax free from an allocated pension. Because of these tax advantages, you may be able to accumulate more through super than through other investment alternatives. In addition to these tax concessions, there are ways in which you can defer or reduce the amount of tax payable on super and it's advisable to talk to a Financial Planner to ensure that you are maximising the opportunities available to you. To speak to one of your planners without cost or obligation, call 1300 883 788. Financial Planner profile: meet Mylee Huynh "Financial planning is such a complex area. It's hard for people to understand how it works," says FuturePlus financial planner Mylee Huynh. "I find helping people through this complex maze really rewarding." Mylee, who has a commerce degree, worked as a paraplanner for almost seven years before qualifying as a certified financial planner at the beginning of last year. She says: "Building up trust and relationships is basically what financial planning is all about." She also loves it when a good plan comes together. "My job is all about finding out about someone's needs and then talking to them about different strategies and putting a plan together. In the process, I also educate them about financial issues." Her number one tip to clients is not to believe everything they hear or read. "Not everything will apply to you. Get advice. You don't have to invest in the same tax efficient investment as your neighbour. It might not be suitable for you." Mylee says she particularly enjoys the commission-free structure in which FuturePlus operates. "It makes sense. We should not be swayed into recommending a certain product because it pays us higher commissions." On how she approaches her work, she says: "I never do anything half-heartedly and I always try to do the best thing for my clients. I also like to make sure that I am well prepared before I meet clients." And when she's not drawing up financial plans or dealing with clients, Mylee can be found playing competitive basketball or fishing. About your fund managers FuturePlus and the Schemes' Trustees adopt a multi-manager investment approach to manage your money. Research has shown that this approach, which uses the specialist skills of several carefully selected investment managers, will produce a better result more consistently and with lower volatility, than a single manager (over any reasonable period). Different investment managers have different styles of investment and some styles perform better at different times of the investment cycle. That's why we take great care in how we combine managers and their styles to ensure that your investment portfolio is not biased in any style direction. In recent editions, we've profiled managers like ABN AMRO and Perennial Investment Partners. In this issue, we introduce you to BT Financial Group (BT), a wholly owned subsidiary of Westpac Banking Corporation. BT currently manages over $37 billion on behalf of investors in Australia and New Zealand. It also manages part of the Scheme's Australian share investments, using its active "core" investment style. Its twelve-member investment team, consisting of nine analysts and three portfolio managers, is one of the largest in the Australian investment management industry. BT's investment style is based on the belief that investment markets are not always rational or efficient and that these inefficiencies can result in periods where markets and shares are mispriced. As a result, BT focuses on generating independent and unique investment ideas to exploit opportunities not yet considered by the market. Its stock selection decisions are driven by in-depth fundamental research and the use of a range of sophisticated quantitative tools. BT's style complements other managers in the Scheme's portfolio, such as Perennial Value Management and ABN AMRO. Perennial is a specialist active "value" Australian equities manager. It aims to buy good businesses that are undervalued now, but which it believes the market will re-rate later at a better price. On the other hand, ABN AMRO uses a "growth" style of investing. It doesn't mind paying the full price - or even a premium - for a share which it believes will show strong growth in the future. Free Seminars Are you looking to set aside some money for a house, a holiday or perhaps for your children's education? Would you like to know more about investment options, risk and return and managed funds? Are you wondering whether you will have enough money to retire on? You could get the answers to these questions, and more, by attending one of the FREE wealth creation or pre-retirement planning seminars we are running at a venue close to you. To find out more, click here, or contact Member Services on 1300 369 901. Investment and market commentary Do you know what happened in investment markets during the past financial year? To find out what the big story was in 2004/05, please click here. Local Government Superannuation Scheme Ground Floor Local Government House 28 Margaret Street Sydney Member Services T: 1300 369 901 F: (02) 9279 4131 Financial Planning T: 1300 883 788 This document was prepared for the exclusive use of members of the Local Government Superannuation Scheme. For members of the Local Government Superannuation Scheme: Any advice in this document is provided by FuturePlus Financial Services Pty Limited (ABN 90 080 972 630) as an Australian Financial Services Licensee (AFSL 238445) on behalf of the trustee of the Local Government Superannuation Scheme, LGSS Pty Limited (ABN 68 078 003 497). Please note that the information contained herein is of a general nature only. It has not been prepared taking into account your particular investment objectives, financial situation and particular needs. You should assess whether the advice is appropriate to your individual investment objectives, financial situation and particular needs. Before making any investment decision, you should seek the assistance of a professional adviser. UNSUBSCRIBE - Your privacy is important to us, so if you wish not to receive information from this service, all you have to do is reply to this e-mail with the word "unsubscribe" in the subject header and we will remove you from the list.