Superannuation and Rollovers
Superannuation is one of the most tax effective ways to save money for your retirement. Bridges can advise you of several ways to maximise your superannuation nest egg.
Rollover investment options
Superannuation schemes are suitable as a rollover vehicle if you want to make more contributions to superannuation or keep your money in the superannuation environment until age 75.
Superannuation bonds are more suitable if you do not intend to make more contributions, or only intend to make large additional contributions.
Deferred annuities are also approved rollover funds. They are offered by life insurance companies and friendly societies. The term 'deferred' is used because the investor has the option of converting the investment to an income stream, that is, an immediate annuity, at a later date which is usually age 65. Your pension payments must start by your 65th birthday. Alternatively, the annuity can be taken as a lump sum, or rolled over to another income stream product. You can withdraw non-preserved money at any time, but only at irregular intervals. Withdrawals may create a tax liability.
Approved deposit funds are trusts set up for the investment of ETPs. You must either withdraw, or roll over, your money to a regular income stream product by age 65. You can withdraw non-preserved money at any time, but only at irregular intervals. Withdrawals may create a tax liability.
Some rollover investments have fixed term options that operate like a term deposit: they offer a set rate of return for a set period of time. Withdrawals may be restricted during the fixed term.
Once you have decided which type of investment fund you will roll your money into, you need to choose a suitable investment option. Each option has a different level of risk. Choose according to the level of risk you are prepared to take, not what the fund predicts it will earn.
All rollovers made after 12 January 1987 must be converted to an income stream product, or withdrawn when you turn 65, unless it's a superannuation fund and you are still working at least
10 hours a week. This is very important for investors in managed funds. Even if the market cycle of your rollover fund is down when you turn 65, you must still withdraw it, even if this means losing money. You cannot choose to wait until the market improves.
This makes your choice in rollover products very different from other investment decisions. Depending on your investment intentions, and particularly if you plan to withdraw your superannuation as a lump sum at age 65, it may be wise to secure your money by investing in, or switching to, a capital guaranteed fund.