August 2009 - The Police Association Victoria

THE POLICE ASSOCIATION
16
Why super is still super!
A couple of years ago, when share markets were rising rapidly, superannuation
may have seemed like a sure-fire way to achieve a comfortable retirement. But a
second year of negative returns for the average super fund* may have some people
questioning whether super is still such a good investment?
A world leading retirement
incomes system
Although confidence in super
may have been dented by the
market downturn of the past year,
commentators both in Australia
and overseas, regard Australian
superannuation as a world
leading retirement incomes system.
It is considered to be a robust,
sufficiently liquid, prudent and
well regulated system for funding
peoples’ retirement.
Tax benefits add up
Superannuation’s tax advantages
can make a significant difference
to your retirement benefit compared
to investing outside super. The tax
advantages include:
• Investment returns within super
are taxed at up to 15%, unlike
investment returns outside super
which are taxed at your marginal
tax rate of up to 46.5%.
• You don’t pay income tax on
amounts you salary sacrifice
to super. Instead, these super
contributions (within the
contribution caps) are taxed at
15%, which can be less than your
marginal tax rate. In addition, you
may pay a lower rate of income
tax on your remaining salary if
your salary sacrifice arrangement
reduces your income to a lower
income tax bracket.
• Once you reach age 60 you pay
no tax on any money you take out
of super.
• If you convert your super to a
pension (eg. an ESSSuper Income
Stream), no tax is paid on the
investment earnings in your
pension account.
• You could receive up to $1,000
free from the Federal Government.
If you earn $31,920 or less in the
2009/10 financial year, every
dollar you personally contribute
to super after-tax will be matched
by the Government (up to a
maximum of $1,000) – that’s a
100% increase on your original
contribution! People earning
up to $61,920 in the 2009/10
financial year can also benefit.
A regular form of saving
History shows that people tend
to invest back in growth assets after
there is clear evidence that the
markets have turned for the better.
By the time a market rebound
has been confirmed it is generally
too late to take advantage of a
significant part of the rebound.
While it is impossible to pick the
bottom of markets, a structured
approach to gradually drip feeding
funds into growth assets allows
investors to average into the market
and benefit from a market rebound
when it comes through. This is
known as ‘dollar cost averaging’.
The compulsory nature of super
means that many people will
be taking advantage of dollar
cost averaging through their
regular employer contributions.
Additional contributions made
now may also mean you’re picking
up quality assets at “bargainbasement”
prices, so that when
a turnaround comes your balance
may recover more quickly.
All in all, super remains one
of the most tax-effective savings
strategies for retirement available.
* Defined benefit fund members are
likely to be less concerned about
negative returns than accumulation
super fund members as most defined
benefit accounts are not directly
affected by investment performance.
ESSSuper is the
superannuation fund
for current and former
Victorian emergency services
employees, public sector
employees and their spouses.
For information about
ESSSuper’s range of products
and services go to www.
esssuper.com.au or call
1300 650 161.
Get active in your Association, speak
to your Delegate or go to the website
www.tpav.org.au
Get active!
VIC T O RIA
August 2009 The Police Association Journal
www.tpav.org.au