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Hi everyone, my name is Brad Zaknich 
GESB, and I'd like to thank you very much

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for logging onto today's recorded webinar,
so it's not a live one today,

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it's recorded and it's about investing
in super 101. So we're gonna go through

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the ideas of investing through 
superannuation compared to investing

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in other formats. So, for those who
haven't used webinars before, very simple

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technology, sit back and relax. Some of 
the normal interactive opportunities we

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have with webinars has been turned off
for today's session, obviously things like

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typing in questions and clicking send, 
you can't do that today because there's

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no-one to reply to them. So what we'll do 
is get through some of the housekeeping.

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What we're showing you here is what you
already would have received, well, in fact

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what you're going to be receiving, is a 
webinar survey follow-up email, we do

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still love to get feedback, even with 
recorded webinars, so if you wouldn't mind

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setting a few moments it takes to complete
that, that'd be greatly appreciated.

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The webinar, like I said, is being 
recorded, and you'll be able to sit back,

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watch it at your own leisure. You can move
forward, you can go back in the slides,

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and you can watch it as many times as you
like, and from my understanding, this

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webinar will be staying live on the GESB 
website, so probably around the end of

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the financial year, at which point we'll
most likely get a new presentation up.

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Now, I'd first love to show my respect
and acknowledge the traditional custodians

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of this land, of Elders past, present and
emerging, on which this event takes place.

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And then you've got the all-important 
disclaimer. When talking about

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superannuation, investing, money, finance,
it's important that you understand that

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we're not giving you personalised
financial advice today. My job today it to

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provide you with information, explain 
things, explain how things work.

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It's not to get you to make a decision
based on what I'm saying. So if you do

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need personalised financial advice, 
you'll need to go elsewhere to get that,

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as GESB only provides you general advice.
Now in today's session there is a lot to

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get through, some of which might be
concepts that you're familiar with,

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and some maybe not. So in this session 
we're gonna talk about the basics of

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investing, and we're gonna talk about 
things like income tax, and how that

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impacts investing, budgeting, where to use
your money, borrowing, and debt.

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Also going to talk about with investment
concepts, the idea of compounding

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interest, the value of superannuation, 
understanding the different asset classes

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that exist within super, and what 
investment options are available.

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Now hopefully you all know who GESB is,
I work for GESB, GESB is a state

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government department, and it just stands
for Government Employee Superannuation

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Board. Now we've been around for over
85 years, we've grown over $42 billion

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in funds under management as of 31st 
December 2024, and GESB, being a

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government department, we're a
not-for-profit organisation.

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So the only fees we collect from you, 
through your super, through your ??

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are to run the fund, we are 
not-for-profit. And our returns are

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competitive and long-term.

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In regards to GESB's product structure,
people often get a little confused,

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but it's quite simple. GESB at the top
of the tree there stands for Government

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Employee Superannuation Board. Below that
are the different schemes that we

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administer. Now we're got some old 
legacy schemes like the Pension scheme

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and the Gold State Super scheme,
we're not going to be talking about

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those at all today, okay, they don't sit
within the ??? of today's presentation.

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We're predominantly going to be talking
about superannuation, that are in the

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accumulation phase, and are accumulation
accounts, so West State Super, GESB Super,

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and some of the other invest, general
super funds that work in a similar fashion.

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When we speak about stuff that is general,
superannuation, I'll make that very

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well-known. When we're talking about 
anything that might be GESB specific,

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I'll also make that well-known. What we're
not going to talk about in great detail

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today, or if at all, are the allocated 
pensions. They are the retired products

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that most people use to draw down their
retirement savings.

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Well let's quickly talk about West State
and GESB Super because there are some

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differences between the two of them, 
and you need to be aware. So, West State

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Super was the default super fund for 
WA State Public Servants who commenced

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working for the government prior to 
15 April 2007. The reason that is

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important is that after April 2007, new
employees to the public sector might have

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had a GESB Super account open, or perhaps
some other super fund, Australian Super,

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Hostplus, something like that. The reason
it's important to know, is that most

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Australian funds like GESB Super, and most
other funds, are considered to be taxed

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super scheme. Why is this important?
The government allows super contributions

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to be contributed at a lower rate of tax
than your normal pay. We need to remember

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that super comes under the tax regime, 
and GESB super, like most Australian funds

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is a tax scheme and that simply means
when your employer puts money into your

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super fund, through your employers' 11.5%
guarantee, or you put extra money in

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through your payroll process called 
salary sacrifice. Those contributions are

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only taxed at 15%, compared to 
your normal tax rates through your income.

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But it happens on the way into your 
account, and while your money's still

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invested. If however you've got a West
State Super account, your money's are

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not taxed on the way in, because it's 
called an 'untaxed super scheme'.

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So the money's from your employers'
contributions and any salary sacrifice are

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not taxed on the way into your account so
the full contribution hits your account.

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Any investment earnings or growth in your
fund would normally be taxed at 15% in

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a regular fund, they are not taxed in 
West State Super whilst the money remains

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in West State Super, but what happens
however is when you take your money

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out of the West State scheme, that is 
when the 15% tax gets applied.

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So it's important that you understand the
difference, and there are some other

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differences to talk about in a little
while as well.

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Now, when we talk about tax, you need
to remember as well that the way the

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Australian tax system works is relative to
your income, is the more income that

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you earn, the more tax you generally pay.
So up to the first $18,200 you earn in

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earnings through your salary, through your
income, there is no tax applicable to that

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income for most Australians. But once your
salary gets above $18,201, up to $45,000,

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I shouldn't say salary, I should say
income, in that bracket your income is

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taxed at 16%, okay, for every dollar over 
$18,201, up to $45,000.

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Then, if you're earning over $45,001 per
year, the earnings between $45,001 and

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$135,00, that portion alone is taxed at 
30%. So people often think 'well I'm

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earning over $45 grand a year, I must be
paying 30% tax. Yes, but only on the money

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you're earning, above $45,000. And as your
salary goes into the new higher brackets,

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you pay more tax on the extra earnings. 
Now, as I said earlier, money's going into

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superannuation from your employer's 
contributions, and through the process

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called salary sacrifice. They are not 
taxed at your marginal, personal tax rate.

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They are instead taxed at 15%. So when you
talk about that, you can see that money's

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being earned over $45 grand are normally 
taxed at 30%, money going into your super

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only going to be taxed at 15% maximum. 
That is the benefit of superannuation,

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so let's go through this. Let's start
talking investing money, finances,

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all those sort of things, and first thing
when I talk about this is the basics of

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investing and knowing where your money
comes from.

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So knowing where your money goes is 
extremely important, being able to track

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your spending is an extremely important
part of looking after your money.

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Planning your goals, whether they be
short-term, medium-term, or long-term,

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basics of knowing where your money comes
from, and what you're gonna spend it on.

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But also being a smart borrower. There's 
nothing wrong with borrowing money,

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but some would argue, borrowing money to
purchase something that is declining in

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value may not be a smart borrow, but
that's up to the individual to decide how

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they want to do that. Also understanding
compounding interest.

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Interest earnt, understand that maybe I'm
making, for example, a 7% return on

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my money, but when you understand that
compounding interest is interest on top

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of interest on top of interest, that's 
extremely powerful.

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Albert Einstein once said 'compound 
interest is the eighth wonder of the

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world, he who understands it, earns it. 
He who doesn't, pays it.' Something to

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think about there. Well let's firstly talk
about budgeting.

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So there is a concept called the 
'bucketing approach', cause when we talk

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about budgeting, people get quite 
concerned and they think very heavily

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about every cent that this, and every 
individual item, and that is fair enough.

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But if you simplify things in budgeting
into a simpler approach, it might be as

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simple as dividing your income into three
buckets, or three aspects of your income.

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And you might allocate, for example, 50% 
of your income to your needs, so for

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example your home loan, your rent,
groceries, utilities and your insurances.

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So 50% is just a concept, you might have
more than that, you might have less,

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but when you identify an amount of
money, that is used for your needs, set

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that money aside and you know that your
needs are covered.

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And then you might have your wants, and
you might decide to allocate maybe 30%

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of your income to your wants. And they can
be things like your, upgrading needs,

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money's for evenings out, hobbies, 
sporting events, holidays, but upgrading

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needs we might talk about maintenance
on your home, new cars, things like that.

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And then you might decide to allocate 
20% of your income towards savings.

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And that might be an emergency fund for
when things go wrong, or maybe long-term

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savings for things off in the future, 
that might include other investments like

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superannuation, shares, property, but it 
also might include the overpayment of your

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debt, so paying extra money to pay off
loans might be considered to be savings.

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And when you break it down into 50%, 30% 
and 20%, it's a very reasonable starting

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point, you might decide to put more money
into savings, less into wants, but by

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having structure, makes it easier to stick
to that structure, and identify what

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you're going to be putting your money
into.

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Let's now talk about being a smart 
borrower. Borrowing money is for most

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people, a necessity in life, for certain
things, but not all debt is equal, it will

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depend on the purpose of the loan, 
it will depend on the interest rates

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you're paying, how often and how much
you payments are going to be, and it

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should be consolidating different debts,
or different loans, into one.

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So for example, when they say 'not all
debt is equal', if you're borrowing money

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from a bank or institution, as an 
example, and maybe you're borrowing it

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and you're having to pay, 5% interest
or 6% interest to borrow that money,

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but maybe you're borrowing that money
to purchase something that's going to

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increase in value by 7, 8, 9% per year, 
that might be said as being 'good debt'.

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Whereas 'bad debt' might be something as
simple as paying for a holiday, where you

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don't have much to show for it at the 
end and you're paying extra when you get

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back by way of interest. So understand, 
borrowing money is not necessarily a bad

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thing, but understanding when you should, 
shouldn't borrow to purchase things is

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something that you have to decide.

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Now lets now talk about compounding 
interest, I'm gonna go through the example

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we quite often use. Compounding interest
is basically earning interest on top of

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previously earned interest. So let's look
at a case study of Jenny, who invests

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$10,000 over a five year period. Now she's
gonna, let's say in her example, she

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receives 5% per annum compounded interest,
compounded on a monthly basis.

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Now, and the end of five years, her
investments actually gonna grow to $12,834.

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She's not just earning 5% on $10,000, 
so let's see how this works.

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If she invests $10,000 at the start of 
year 1, by compounding interest at 5%

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per annum monthly, she's doesn't end up
with $500, which would be if she

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compounded once, she ends up with $512, 
it's actually more than 5% over the 12

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months because it's been compounded 
monthly. So at the beginning of the next

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year she's got $512, which she earns 5% 
interest compounded monthly, for the next

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12 months, she accumulates $538. 
Ends up with $11,049, and you can see over

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five years, the interests that's been 
compounded grows, 512, 538, 565, 594, 625.

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So compounding interest, we leave 
investments alone, and they compound on

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top of each other. It's investments' 
interest on top of the last lot of

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interest returns. That's where leaving 
things long term can generate greater

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levels of interest, because it's not 
simple interest, it's compound interest.

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And that's where these slides come in,
excuse me, time is money.

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People often talk about 'timing the market',
it's often more important to spend time

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in the market. What do we mean by that?
Well let's say for example, you've got

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a 20-year-old, a 30-year-old, a 40 and a 
50-year-old, who all of a sudden decide,

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with a starting balance of nothing, 
they want to put an extra $50 a fortnight

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perhaps even less, in superannuation. 
So let's just assume this is extra money

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you're putting into your super, above and 
beyond what you might already be getting.

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What difference will it make by putting
$50 a fortnight, now let's assume an

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annual earning rate of roughly 7.8%,
so you're probably in the growth plan.

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Now if you start when you're 20, an extra
$50 a fortnight, taken out of the

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conversation inflation and things like
that, when you get to 60, so after 40

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years, you'll have $340,758 extra sitting 
in your account.

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By only putting in $50 a fortnight. 
Now if you don't start until you're 30,

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now I've got $154,000, you don't start
until you're 40, about $64,000,

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you don't start until you're 50, it's 
$21,000. Now you can see, even though

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they're only 10-year periods separating
each starting point, the amounts of

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difference are massive. Because the person
starting making contributions earlier,

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is getting compounding interest every
month on top of the contributions that

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have already grown. And that's why the 
balance can be quite large, by putting in

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significantly small amounts of money, 
if you start really early.

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Well let's now focus on that $345,000 
because we know that starting at 20,

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over 40 years, should generate a figure 
that's similar to that.

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But what if, you need that amount of 
money, but you don't start when you're 20.

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Well if you don't start 'til you're 30, 
to meet the same objective, you'll need to

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put in $112 a fortnight, significantly
more. If you don't start 'til you're 40,

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now you've gotta do $270 a fortnight, 
for a much shorter period of time.

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And if you don't start 'til you're 50, 
now it's $807 per fortnight.

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So this is where compounding interest can
work against you, the longer you wait to

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start making investments. And because
superannuation can't be accessed,

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generally until the age of 60 anyway, 
for a lot of people making extra

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contributions in super, the benefits of 
compounding interest come along anyway,

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because you can't get access to it. 
But what it does say, is if you want to

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start growing your super, the earlier you
start, generally speaking, the less amount

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you've gotta make as a contribution
a fortnight.

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And what is the value of superannuation
to you? Well the value of super is this;

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It's a very tax-advantaged saving scheme 
for retirement, often more, better tax

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advantages than you're gonna get through
your income tax rates.

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Why is superannuation compulsory, and it's
been compulsory since 1992, it's so that

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you have an alternative to, or a 
supplement for, the age pension.

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The age pension, is not going to disappear
anytime soon, but it is still seen as

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being only a safety net for retirement.
Because we've been getting compulsory

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super now since 1992.

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And the value of super for you might be 
to give you the options in retirement

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that you might not otherwise have, by just
relying on the age pension, or even just

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compulsory super, maybe making extra 
contributions, will meet your objectives,

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as to what your lives might look like
in retirement.

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Now there are different ways of getting
money into super, and the main way is

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your employers' contributions. 
Now down on the left-hand side you can

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see, you can put super through your
employers' contributions, through salary

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sacrifice through your payroll, voluntary 
after-tax contributions, through cheque

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or B-pay or even through your payroll. 
There are also personal deductible

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contributions which we're not going to
go into great detail about today,

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and there's also spouse contributions. 
But across the top, there are two main

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forms of contributions. One is called 
concessional contributions, one is called

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non-concessional.

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What is the difference? The difference 
comes down to the name. Concessional

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contributions are moneys' that go into 
your super before you pay your income tax.

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Now when I showed you before that for 
most Australians earning over $30,000 a

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year, most of us are paying 30% tax on a
fair chunk of our income.

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So for when you have a non-concessional
contribution, that means you've earned

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your money, you've generally paid your 
tax on your income, which could be 30%.

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So if you earn $1000, you might lose 30%
being 300, you can get $700 into your

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super, that would be a non-concessional
contribution. But when putting money

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into your super as a concessional 
contribution, the money comes out of your

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income, before it gets taxed at your 
regular tax rate and instead goes into

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your super and will only be taxed at 15%. 
So you earn $1000, only to lose 15%,

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you're left with $850. So superannuation
concessional contributions is like earning

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$1000 and being able to invest $850, 
whereas non-concessional contributions,

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which you can invest in anywhere, might 
otherwise be earning $1000 and only

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getting $700 invested. That's the benefit 
of superannuation.

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And what this slide here is showing, 
excuse me, is normally you earn your

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salary, your salary gets taxed at your 
marginal tax rate, think 30-odd percent or

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possibly more, at the top end, and money
goes into your bank account.

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Money that you can buy and invest 
elsewhere, the interest or earnings are

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also taxed at your marginal tax rate. 
But when you put money into superannuation

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through your salary, through salary 
sacrifice, it'll only be taxed at 15%,

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either on the way into your account with 
most super funds like GESB, Australian

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Super and Hesta, or the money on the way
out, with West State Super, still 15%.

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And not just that, not only do you pay 
only 15% tax on the contributions, you

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only pay 15% tax on the investment 
earnings, as opposed to your marginal tax

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rate. Now because superannuation 
is considered to be tax-effective savings

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strategy for your retirement, that's why
the government's put in place, they also

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understand, that by saving for your 
retirement, the government is going to

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receive less tax now, than if you hadn't
put it through your pay.

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That's why they limit the amount you're
allowed to put into your superannuation

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through what are called concessional 
contributions. Now for most Australian

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funds, being taxed funds, GESB, Australian
Super, that sort of fund, the limitation

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per year is $30,000 per year. 
And that includes your employers super

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contributions, so you can already get in
11 and a half percent in super, you're

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allowed to go above and beyond that up to
$30,000, per year for your superannuation

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savings. If you go above that, you're not 
penalised as such, but the excess

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contribution will be taxed at your 
marginal tax rate.

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Now, for those of you who might have a
West State Super, or indeed a Gold State

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Super Account those concessional 
contributions of an annual $30,000 limit,

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do not apply to you. Instead, you've got 
what's called an untaxed plan cap,

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and as that currently stands, that is 
$1.78 million in your lifetime.

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That gets indexed every year. 
So that means, if you've got West Side

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Super for example, you're respective of 
what your employer's putting into your

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employers' contributions