Case Study 1

SituationThe client is a single female aged 57 and her only real asset is her superannuation. She is renting and does not have a residential mortgage, but owns a car and has a credit card.

GoalsDue to the client nearing retirement age and no wealth created thus far, the immediate goal was to maximise her superannuation as much as possible for her remaining working years. “A transition to retirement strategy “

SolutionIt was extremely important at this stage of the client’s life to have the right plan in place to ensure that her dividends were optimised. The second part of the approach was risk management, to ensure adequate protection for the client.

We discussed her superannuation plan and the risk versus the return and being able to transition her into a suitable retirement pension plan. The client completed the risk profiles and wanted to be a ‘balanced investor’. The risks involved with investing at this level were fully explained. She was very comfortable with the balance, as she wanted to make the most of the current market performance.

We consolidated the client’s various superannuation accounts to reduce the overall fees being paid to each fund and reduce the high investment management fees. The superannuation accounts were:

• Colonial Mutual – Superwise series 5 – Personal Super Policy – $37,047• Colonial Super Retirement Fund – Colonial Select Personal Super – $17,758• Partial Rollover – Qsuper – $130,000 approx.

The fund of choice for the client was Macquarie’s Pension Manager Wrap Account. This was because her balance is over $50k and the way the super manager fee is calculated is 0.77% for the first $50k, then only 0.10% for everything after. This will save her significantly on management fees. The investment management fee was reduced from as high as 2.85% to 0.34% with Vanguards balanced index fund.

The next step in the strategy was to save money via tax benefits. The best way to achieve this is to invest a portion of the client’s income via salary sacrifice to her current super fund to reduce her taxable income.

She is recommended to salary sacrifice $20,375 each year to her QSUPER fund. This will increase her super by the difference in the taxable amount, which will achieve the goal of $65,924 extra in her super at her goal retirement age of 67.

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Case Study 1The Macquarie Pension wrap account was structured with the consolidated 3 super funds approx. valued $184,000. The yearly pension draw down will be $16,536 and paid on a monthly basis into her bank account. This tops up her take home pay so that she is not out of pocket and retains the same amount, prior to the strategy implemented.

Due to the concessional contribution cap changing, a review will be required to ensure that the strategy is being used to its full potential.

Finally, we discussed the client’s needs for insurance. The client had a Commissure policy that she had been paying for years. After investigation of other risk management options, it was deemed cheaper for her to retain her current policy.

OutcomeA great outcome was achieved for this client. Minimising the fees and tax paid and optimising the income generated from the remaining working years, put the client on the right financial path.

Note that the figures and projections used in this example are used only to illustrate potential achievable outcomes. Figures that have been used to calculate projected outcomes are based on researched data and are not intended to be a guarantee of future performance. Although this information is provided in good faith, it is also on the basis that no person using the information, in whole or in part, shall have any claim against Capricorn Securities Pty Ltd (or any other company within the Members Alliance group), its servants, employees or consultants.

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