Question 1

My partner and I are looking to retire within the next 12 months. 

We were advised to see a financial planner to set up a plan and to navigate all the forms, Centrelink and other financial issues we may face. After seeing a financial planner we thought that he would be able to create our financial plan and guide us through everything.

However, after we signed a letter of engagement, he then said that he would not take us as a client as we were not willing to take our money out of our super accounts for him to manage. Is this a common thing with all financial planners, and if so, what would be our best options going forward? 

Ange

Hi Ange,

That sounds a bit rough. However, it might be for the best.

Different financial advisers (sometimes called financial planners – they are the same thing) have different operating models, specialities, product preferences and fee models.

If you and the adviser are not aligned, or at least on the same page then this creates confusion and friction.

From what you have stated you need advice on:

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• Converting your super into an income stream/pension.
• Choosing an appropriate investment option(s) within a pension.
• Help with Age Pension.
• Working out how much you can spend in retirement without running out of money – perhaps some different modelling around this.
• And you may have some other issues you want addressed – any non-super money etc.

Most financial advisers offer holistic advice that includes investment management and ongoing advice. This sounds like the adviser you have seen.

This model may be suitable for those with complex financial arrangement and/or high net worth individuals, but for many other people it doesn’t work for the adviser or client.

Many people want only advice on certain topics, not comprehensive advice. 

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As you are coming into retirement you perhaps need more than basic advice, but if your situation is straightforward you probably also don’t need complex comprehensive advice either.

Before you sign a letter of engagement with the next adviser, check with them about their services, such as:

1. How they charge fees and whether they think you need ongoing advice. Or whether you can come back later at your choosing if you need further advice?
2. Do they specialise in anything?
3. Who is their typical client?
4. Are they restricted on the products they advise on?

If you are happy with your current super fund, you can contact them to see what they offer.

Many funds would offer advice, at a fee, that would cover the sort of advice you are looking for. If not, many also have a panel of advisers that they have vetted and can refer you too.

Question 2

I’m planning my retirement and seek clarification on the mandatory Superannuation Drawdown Rates (SDR) and related strategies. Please help with these questions: 

1. If I hold part of my super in accumulation phase, while retired, is this subject to the SDR’s?
2. If I don’t withdraw or underdraw from my pension account, less than the SDR, what are the implications? For example, does the government heavy penalties? 
3. If, say, due to medical expenses, I overdraw my SDR in one year, can I under draw in the next year?   

Thanks,    Dean

Hi Dean,

Funds in an account based pension are subject to minimum drawdowns each year. These are based on your age and account balance, as shown below. 

This is just for money in pension phase. Money held in accumulation is not counted.

They are based on a financial year and are independent of each year. Therefore, regardless of what you drew down last financial year, you still need to draw down at least the minimum for this financial year.

These are just minimums. They should not be used as a guide on how much you should be drawing.

Many people stick to the minimum because they don’t know what else to draw out. They then adjust their lifestyle accordingly. This is not ideal. If you can afford to and want to, you should be drawing more out and enjoying your retirement.

Retail and industry funds will always ensure you draw out at least the minimum. If you are in an SMSF and don’t meet these rules there can be large tax penalties and the fund could be ruled non-compliant by the ATO.

Question 3

Dear Expert, a relative came to Australia under a permanent residency visa. He lived and worked in Sydney for a year then decided to go back to his home country and has not returned to Australia since. He accumulated super savings, but his account has become dormant and was taken over by the ATO. He will be turning 60 and is enquiring how he could get his super.    

Gian

Hi Gian,

Firstly, there is a misconception among some people that you can take your super if you move overseas and become a non-resident. The normal conditions of release rules still apply.

(Note: Temporary residents on certain visas may be able to obtain their super when departing Australia.)

The ATO has an online or paper-based form to receive the money.

Details are here.

Craig Sankey is a licensed financial adviser and head of Technical Services and Advice Enablement at Industry Fund Services.

Disclaimer: The responses provided are general in nature, and while they are prompted by the questions asked, they have been prepared without taking into consideration all your objectives, financial situation or needs.

Before relying on any of the information, please ensure that you consider the appropriateness of the information for your objectives, financial situation or needs. To the extent that it is permitted by law, no responsibility for errors or omissions is accepted by IFS and its representatives.