0:00:03.031,0:00:06.442 Hi everyone, my name is Brad Zaknich from[br]GESB, and I'd like to thank you very much 0:00:06.489,0:00:10.179 for logging onto today's recorded webinar,[br]so it's not a live one today, 0:00:10.179,0:00:14.151 it's recorded and it's about investing[br]in super 101. So we're gonna go through 0:00:14.995,0:00:18.815 the ideas of investing through [br]superannuation compared to investing 0:00:18.815,0:00:22.823 in other formats. So, for those who[br]haven't used webinars before, very simple 0:00:22.823,0:00:26.795 technology, sit back and relax. Some of [br]the normal interactive opportunities we 0:00:26.795,0:00:30.944 have with webinars has been turned off[br]for today's session, obviously things like 0:00:30.944,0:00:34.721 typing in questions and clicking send, [br]you can't do that today because there's 0:00:34.721,0:00:38.681 no-one to reply to them. So what we'll do [br]is get through some of the housekeeping. 0:00:38.681,0:00:42.004 What we're showing you here is what you[br]already would have received, well, in fact 0:00:42.004,0:00:46.506 what you're going to be receiving, is a [br]webinar survey follow-up email, we do 0:00:46.506,0:00:50.275 still love to get feedback, even with [br]recorded webinars, so if you wouldn't mind 0:00:50.275,0:00:53.912 setting a few moments it takes to complete[br]that, that'd be greatly appreciated. 0:00:53.912,0:00:57.321 The webinar, like I said, is being [br]recorded, and you'll be able to sit back, 0:00:57.321,0:01:02.350 watch it at your own leisure. You can move[br]forward, you can go back in the slides, 0:01:02.350,0:01:05.439 and you can watch it as many times as you[br]like, and from my understanding, this 0:01:05.439,0:01:08.915 webinar will be staying live on the GESB [br]website, so probably around the end of 0:01:08.915,0:01:13.585 the financial year, at which point we'll[br]most likely get a new presentation up. 0:01:13.585,0:01:16.952 Now, I'd first love to show my respect[br]and acknowledge the traditional custodians 0:01:16.952,0:01:21.653 of this land, of Elders past, present and[br]emerging, on which this event takes place. 0:01:21.653,0:01:25.062 And then you've got the all-important [br]disclaimer. When talking about 0:01:25.062,0:01:29.767 superannuation, investing, money, finance,[br]it's important that you understand that 0:01:29.767,0:01:33.344 we're not giving you personalised[br]financial advice today. My job today is to 0:01:33.344,0:01:36.710 provide you with information, explain [br]things, explain how things work. 0:01:36.710,0:01:40.540 It's not to get you to make a decision[br]based on what I'm saying. So if you do 0:01:40.540,0:01:43.918 need personalised financial advice, [br]you'll need to go elsewhere to get that, 0:01:43.918,0:01:49.009 as GESB only provides you general advice.[br]Now in today's session there is a lot to 0:01:49.009,0:01:52.057 get through, some of which might be[br]concepts that you're familiar with, 0:01:52.057,0:01:55.267 and some maybe not. So in this session [br]we're gonna talk about the basics of 0:01:55.267,0:01:58.592 investing, and we're gonna talk about [br]things like income tax, and how that 0:01:58.592,0:02:03.822 impacts investing, budgeting, where to use[br]your money, borrowing, and debt. 0:02:03.822,0:02:07.177 Also going to talk about with investment[br]concepts, the idea of compounding 0:02:07.177,0:02:12.097 interest, the value of superannuation, [br]understanding the different asset classes 0:02:12.097,0:02:15.996 that exist within super, and what [br]investment options are available. 0:02:15.996,0:02:19.752 Now hopefully you all know who GESB is,[br]I work for GESB, GESB is a state 0:02:19.752,0:02:23.036 government department, and it just stands[br]for Government Employee Superannuation 0:02:23.036,0:02:26.817 Board. Now we've been around for over[br]85 years, we've grown over $42 billion 0:02:26.817,0:02:31.603 in funds under management as of 31st [br]December 2024, and GESB, being a 0:02:31.603,0:02:35.104 government department, we're a[br]not-for-profit organisation. 0:02:35.104,0:02:39.659 So the only fees we collect from you, [br]through your super, through your insurances 0:02:39.659,0:02:43.263 are to run the fund, we are [br]not-for-profit. And our returns are 0:02:43.263,0:02:45.840 competitive and long-term. 0:02:45.840,0:02:48.950 In regards to GESB's product structure,[br]people often get a little confused, 0:02:48.950,0:02:52.533 but it's quite simple. GESB at the top[br]of the tree there stands for Government 0:02:52.533,0:02:55.957 Employee Superannuation Board. Below that[br]are the different schemes that we 0:02:55.957,0:02:59.379 administer. Now we're got some old [br]legacy schemes like the Pension scheme 0:02:59.379,0:03:02.186 and the Gold State Super scheme,[br]we're not going to be talking about 0:03:02.186,0:03:06.570 those at all today, okay, they don't sit[br]within the bounds of today's presentation. 0:03:06.570,0:03:10.233 We're predominantly going to be talking[br]about superannuation, that are in the 0:03:10.233,0:03:15.100 accumulation phase, and are accumulation[br]accounts, so West State Super, GESB Super, 0:03:15.100,0:03:20.113 and some of the other invest, general[br]super funds that work in a similar fashion. 0:03:20.113,0:03:24.150 When we speak about stuff that is general,[br]superannuation, I'll make that very 0:03:24.150,0:03:27.787 well-known. When we're talking about [br]anything that might be GESB specific, 0:03:27.787,0:03:31.356 I'll also make that well-known. What we're[br]not going to talk about in great detail 0:03:31.356,0:03:35.995 today, or if at all, are the allocated [br]pensions. They are the retired products 0:03:35.995,0:03:38.601 that most people use to draw down their[br]retirement savings. 0:03:38.601,0:03:41.836 Well let's quickly talk about West State[br]and GESB Super because there are some 0:03:41.836,0:03:45.834 differences between the two of them, [br]and you need to be aware. So, West State 0:03:45.834,0:03:51.122 Super was the default super fund for [br]WA State Public Servants who commenced 0:03:51.122,0:03:56.957 working for the government prior to [br]15 April 2007. The reason that is 0:03:56.957,0:04:01.970 important is that after April 2007, new[br]employees to the public sector might have 0:04:01.970,0:04:07.545 had a GESB Super account open, or perhaps[br]some other super fund, Hesta, Australian Super, 0:04:07.545,0:04:11.008 Hostplus, something like that. The reason[br]it's important to know, is that most 0:04:11.008,0:04:15.565 Australian funds like GESB Super, and most[br]other funds, are considered to be taxed 0:04:15.565,0:04:21.141 super schemes. Why is this important?[br]The government allows super contributions 0:04:21.141,0:04:25.653 to be contributed at a lower rate of tax[br]than your normal pay. We need to remember 0:04:25.653,0:04:29.704 that super comes under the tax regime, [br]and GESB super, like most Australian funds 0:04:29.704,0:04:33.862 is a tax scheme and that simply means[br]when your employer puts money into your 0:04:33.862,0:04:39.202 super fund, through your employers' 11.5%[br]super guarantee, or you put extra money in 0:04:39.202,0:04:43.318 through your payroll process called [br]salary sacrifice. Those contributions are 0:04:43.318,0:04:47.704 only taxed at 15%, compared to [br]your normal tax rates through your income. 0:04:47.704,0:04:51.192 But it happens on the way into your [br]account, and while your money's still 0:04:51.192,0:04:55.778 invested. If however you've got a West[br]State Super account, your money's are 0:04:55.778,0:04:59.561 not taxed on the way in, because it's [br]called an 'untaxed super scheme'. 0:04:59.561,0:05:03.253 So the money's from your employers'[br]contributions and any salary sacrifice are 0:05:03.253,0:05:08.090 not taxed on the way into your account so[br]the full contribution hits your account. 0:05:08.090,0:05:12.891 Any investment earnings or growth in your[br]fund would normally be taxed at 15% in 0:05:12.891,0:05:17.435 a regular fund, they are not taxed in [br]West State Super whilst the money remains 0:05:17.435,0:05:21.068 in West State Super, but what happens[br]however is when you take your money 0:05:21.068,0:05:24.616 out of the West State scheme, that is [br]when the 15% tax gets applied. 0:05:24.616,0:05:27.842 So it's important that you understand the[br]difference, and there are some other 0:05:27.842,0:05:31.425 differences to talk about in a little[br]while as well. 0:05:31.425,0:05:35.619 Now, when we talk about tax, you need[br]to remember as well that the way the 0:05:35.619,0:05:39.774 Australian tax system works is relative to[br]your income, is the more income that 0:05:39.774,0:05:46.659 you earn, the more tax you generally pay.[br]So up to the first $18,200 you earn in 0:05:46.659,0:05:51.513 earnings through your salary, through your[br]income, there is no tax applicable to that 0:05:51.513,0:05:58.212 income for most Australians. But once your[br]salary gets above $18,201, up to $45,000, 0:05:58.212,0:06:02.620 I shouldn't say salary, I should say[br]income, in that bracket your income is 0:06:02.620,0:06:12.088 taxed at 16%, okay, for every dollar over [br]$18,201, up to $45,000. 0:06:12.088,0:06:18.302 Then, if you're earning over $45,001 per[br]year, the earnings between $45,001 and 0:06:18.302,0:06:24.440 $135,00, that portion alone is taxed at [br]30%. So people often think 'well I'm 0:06:24.440,0:06:29.820 earning over $45 grand a year, I must be[br]paying 30% tax.' Yes, but only on the money 0:06:29.820,0:06:35.262 you're earning, above $45,000. And as your[br]salary goes into the new higher brackets, 0:06:35.262,0:06:40.956 you pay more tax on the extra earnings. [br]Now, as I said earlier, money's going into 0:06:40.956,0:06:44.740 superannuation from your employer's [br]contributions, and through the process 0:06:44.740,0:06:50.920 called salary sacrifice. They are not [br]taxed at your marginal, personal tax rate. 0:06:50.920,0:06:56.089 They are instead taxed at 15%. So when you[br]talk about that, you can see that money's 0:06:56.089,0:07:00.983 being earned over 45 grand are normally [br]taxed at 30%, money going into your super 0:07:00.983,0:07:05.583 are only going to be taxed at 15% maximum. [br]That is the benefit of superannuation, 0:07:05.583,0:07:09.992 so let's go through this. Let's start[br]talking about investing money, finances, 0:07:09.992,0:07:13.682 all those sort of things, and first thing[br]when I talk about this is the basics of 0:07:13.682,0:07:15.870 investing and knowing where your money[br]comes from. 0:07:15.870,0:07:19.698 So knowing where your money goes is [br]extremely important, being able to track 0:07:19.698,0:07:23.698 your spending is an extremely important[br]part of looking after your money. 0:07:23.698,0:07:27.799 Planning your goals, whether they be[br]short-term, medium-term, or long-term, 0:07:27.799,0:07:31.382 basics of knowing where your money comes[br]from, and what you're gonna spend it on. 0:07:31.382,0:07:35.179 But also being a smart borrower. There's [br]nothing wrong with borrowing money, 0:07:35.179,0:07:39.180 but some would argue, borrowing money to[br]purchase something that is declining in 0:07:39.180,0:07:43.527 value may not be a smart borrow, but[br]that's up to the individual to decide how 0:07:43.527,0:07:47.010 they want to do that. Also understanding[br]compounding interest. 0:07:47.010,0:07:51.867 Interest earnt, people understand that [br]maybe I'm making, for example, a 7% 0:07:51.867,0:07:55.337 return on my money, but when you [br]understand that compounding interest is 0:07:55.337,0:07:59.162 interest on top of interest on top of [br]interest, that's extremely powerful. 0:07:59.162,0:08:02.706 Albert Einstein once said 'compound [br]interest is the eighth wonder of the 0:08:02.706,0:08:08.467 world, he who understands it, earns it. [br]He who doesn't, pays it.' Something to 0:08:08.467,0:08:11.730 think about there. Well let's firstly talk[br]about budgeting. 0:08:11.730,0:08:15.659 So there is a concept called the [br]'bucketing approach', cause when we talk 0:08:15.659,0:08:18.454 about budgeting, people get quite [br]concerned and they think very heavily 0:08:18.454,0:08:22.798 about every cent that this, and every [br]individual item, and that is fair enough. 0:08:22.798,0:08:26.755 But if you simplify things in budgeting[br]into a simpler approach, it might be as 0:08:26.755,0:08:31.649 simple as dividing your income into three[br]buckets, or three aspects of your income. 0:08:31.649,0:08:36.636 And you might allocate, for example, 50% [br]of your income to your needs, so for 0:08:36.636,0:08:40.446 example your home loan, your rent,[br]groceries, utilities and your insurances. 0:08:40.446,0:08:44.402 So 50% is just a concept, you might have[br]more than that, you might have less, 0:08:44.402,0:08:48.497 but when you identify an amount of[br]money, that is used for your needs, set 0:08:48.497,0:08:51.423 that money aside and you know that your[br]needs are covered. 0:08:51.423,0:08:55.152 And then you might have your wants, and[br]you might decide to allocate maybe 30% 0:08:55.152,0:08:59.201 of your income to your wants. And they can[br]be things like your, upgrading needs, 0:08:59.201,0:09:03.600 money's for evenings out, hobbies, [br]sporting events, holidays, but upgrading 0:09:03.600,0:09:07.973 needs we might talk about maintenance[br]on your home, new cars, things like that. 0:09:07.973,0:09:12.852 And then you might decide to allocate [br]20% of your income towards savings. 0:09:12.852,0:09:17.236 And that might be an emergency fund for[br]when things go wrong, or maybe long-term 0:09:17.236,0:09:21.354 savings for things off in the future, [br]that might include other investments like 0:09:21.354,0:09:26.516 superannuation, shares, property, but it [br]also might include the overpayment of your 0:09:26.516,0:09:31.407 debt, so paying extra money to pay off[br]loans might be considered to be savings. 0:09:31.407,0:09:36.474 And when you break it down into 50%, 30% [br]and 20%, it's a very reasonable starting 0:09:36.474,0:09:41.072 point, you might decide to put more money[br]into savings, less into wants, but by 0:09:41.072,0:09:45.966 having a structure, makes it easier to [br]stick to that structure, and identify what 0:09:45.966,0:09:48.024 you're going to be putting your money[br]into. 0:09:48.024,0:09:53.278 Let's now talk about being a smart [br]borrower. Borrowing money is for most 0:09:53.278,0:09:59.454 people, a necessity in life, for certain[br]things, but not all debt is equal, it will 0:09:59.454,0:10:02.828 depend on the purpose of the loan, [br]it will depend on the interest rates 0:10:02.828,0:10:06.378 you're paying, how often and how much[br]your payments are going to be, and it 0:10:06.378,0:10:10.756 should be consolidating different debts,[br]or different loans, into one. 0:10:10.756,0:10:15.489 So for example, when they say 'not all[br]debt is equal', if you're borrowing money 0:10:15.489,0:10:18.978 from a bank or institution, as an [br]example, and maybe you're borrowing it 0:10:18.978,0:10:24.271 and you're having to pay, 5% interest[br]or 6% interest to borrow that money, 0:10:24.271,0:10:27.788 but maybe you're borrowing that money[br]to purchase something that's going to 0:10:27.788,0:10:32.065 increase in value by 7, 8, 9 or 10% [br]per year, that might be said as being 0:10:32.065,0:10:36.171 'good debt'. Whereas 'bad debt' might be[br]be something as simple as paying for a 0:10:36.171,0:10:40.209 holiday where you don't have much to show [br]for it at the end and you're paying extra 0:10:40.209,0:10:44.335 when you get back by way of interest. [br]So understand, borrowing money is not 0:10:44.335,0:10:49.337 necessarily a bad thing, but understanding[br]when you should, shouldn't borrow to 0:10:49.337,0:10:51.819 purchase things is something[br]that you have to decide. 0:10:51.819,0:10:55.530 Now lets now talk about compounding [br]interest, I'm gonna go through the example 0:10:55.530,0:10:59.469 we quite often use. Compounding interest[br]is basically earning interest on top of 0:10:59.469,0:11:04.242 previously earned interest. So let's look[br]at a case study of Jenny, who invests 0:11:04.242,0:11:09.121 $10,000 over a five year period. Now she's[br]gonna, let's say in her example, she 0:11:09.121,0:11:15.098 receives 5% per annum compounded interest,[br]compounded on a monthly basis. 0:11:15.098,0:11:21.690 Now, and the end of five years, her[br]investments actually gonna grow to $12,834. 0:11:21.690,0:11:27.476 She's not just earning 5% on $10,000, [br]so let's see how this works. 0:11:27.476,0:11:33.440 If she invests $10,000 at the start of [br]year 1, by compounding interest at 5% 0:11:33.440,0:11:38.479 per annum monthly, she's doesn't end up[br]with $500, which would be if she 0:11:38.479,0:11:43.439 compounded once, she ends up with $512, [br]it's actually more than 5% over the 12 0:11:43.439,0:11:47.237 months because it's been compounded [br]monthly. So at the beginning of the next 0:11:47.237,0:11:52.358 year she's got $512, which she earns 5% [br]interest compounded monthly, for the next 0:11:52.358,0:11:58.239 12 months, she accumulates $538. [br]Ends up with $11,049, and you can see over 0:11:58.239,0:12:06.610 five years, the interests that's been [br]compounded grows, 512, 538, 565, 594, 625. 0:12:06.610,0:12:10.266 So compounding interest, when you leave [br]investments alone, and they compound on 0:12:10.266,0:12:14.071 top of each other. It's investments' [br]interest on top of the last lot of 0:12:14.071,0:12:18.203 interest returns. That's where leaving [br]things long term can generate greater 0:12:18.203,0:12:22.285 levels of interest, because it's not [br]simple interest, it's compound interest. 0:12:22.285,0:12:27.708 And that's where these slides come in,[br]excuse me, time is money. 0:12:29.638,0:12:35.727 People often talk about 'timing the market',[br]it's often more important to spend time 0:12:35.727,0:12:40.757 in the market. What do we mean by that?[br]Well let's say for example, you've got 0:12:40.757,0:12:45.014 a 20-year-old, a 30-year-old, a 40 and a [br]50-year-old, who all of a-side, 0:12:45.014,0:12:48.956 with a starting balance of nothing, [br]they want to put an extra $50 a fortnight 0:12:48.956,0:12:52.761 perhaps even less, in superannuation. [br]So let's just assume this is extra money 0:12:52.761,0:12:56.522 you're putting into your super, above and [br]beyond what you might already be getting. 0:12:56.522,0:13:00.481 What difference will it make by putting[br]$50 a fortnight, now let's assume an 0:13:00.481,0:13:04.948 annual earning rate of roughly 7.8%,[br]so you're probably in the growth plan. 0:13:04.948,0:13:10.797 Now if you start when you're 20, an extra[br]$50 a fortnight, taken out of the 0:13:10.797,0:13:15.493 conversation inflation and things like[br]that, when you get to 60, so after 40 0:13:15.493,0:13:21.388 years, you'll have $345,758 extra sitting [br]in your account. 0:13:21.388,0:13:26.483 By only putting in $50 a fortnight. [br]Now if you don't start until you're 30, 0:13:26.483,0:13:32.298 now I've got $154,000, you don't start[br]until you're 40, about $64,000, 0:13:32.298,0:13:36.295 you don't start until you're 50, it's [br]$21,000. Now you can see, even though 0:13:36.295,0:13:41.027 they're only 10-year periods separating[br]each starting point, the amounts of 0:13:41.027,0:13:45.345 difference are massive. Because the person[br]starting making contributions earlier, 0:13:45.345,0:13:49.290 is getting compounding interest every[br]month on top of the contributions that 0:13:49.290,0:13:53.167 have already grown. And that's why the [br]balance can be quite large, by putting in 0:13:53.167,0:13:56.829 significantly small amounts of money, [br]if you start really early. 0:13:56.829,0:14:01.188 Well let's now focus on that $345,000 [br]because we know that starting at 20, 0:14:01.188,0:14:04.770 over 40 years, should generate a figure [br]that's similar to that. 0:14:04.770,0:14:09.796 But what if, you need that amount of [br]money, but you don't start when you're 20. 0:14:09.796,0:14:14.169 Well if you don't start 'til you're 30, [br]to meet the same objective, you'll need to 0:14:14.169,0:14:19.181 put in $112 a fortnight, significantly[br]more. If you don't start 'til you're 40, 0:14:19.181,0:14:23.232 now you've gotta do $270 a fortnight, [br]for a much shorter period of time. 0:14:23.232,0:14:27.203 And if you don't start 'til you're 50, [br]now it's $807 per fortnight. 0:14:27.203,0:14:31.507 So this is where compounding interest can[br]work against you, the longer you wait to 0:14:31.507,0:14:35.304 start making investments. And because[br]superannuation can't be accessed, 0:14:35.304,0:14:39.314 generally until the age of 60 anyway, [br]for a lot of people making extra 0:14:39.314,0:14:43.486 contributions in super, the benefits of [br]compounding interest come along anyway, 0:14:43.486,0:14:47.189 because you can't get access to it. [br]But what it does say, is if you want to 0:14:47.189,0:14:52.485 start growing your super, the earlier you[br]start, generally speaking, the less amount 0:14:52.485,0:14:55.484 you've gotta make as a contribution[br]a fortnight. 0:14:55.484,0:14:59.917 And what is the value of superannuation[br]to you? Well the value of super is this; 0:14:59.917,0:15:06.614 It's a very tax-advantaged saving scheme [br]for retirement, often more, better tax 0:15:06.614,0:15:09.227 advantages than you're gonna get through[br]your income tax rates. 0:15:09.227,0:15:14.488 Why is superannuation compulsory, and it's[br]been compulsory since 1992, it's so that 0:15:14.488,0:15:18.853 you have an alternative to, or a [br]supplement for, the age pension. 0:15:18.853,0:15:23.552 The age pension, is not going to disappear[br]anytime soon, but it is still seen as 0:15:23.552,0:15:27.830 being only a safety net for retirement.[br]Because we've been getting compulsory 0:15:27.830,0:15:30.237 super now since 1992. 0:15:30.237,0:15:34.716 And the value of super for you might be [br]to give you the options in retirement 0:15:34.716,0:15:40.237 that you might not otherwise have, by just[br]relying on the age pension, or even just 0:15:40.237,0:15:45.050 compulsory super, maybe making extra [br]contributions, will meet your objectives, 0:15:45.050,0:15:48.584 as to what your lifestyle might look like[br]in retirement. 0:15:48.584,0:15:52.270 Now there are different ways of getting[br]money into super, and the main way is 0:15:52.270,0:15:55.239 your employers' contributions. [br]Now down on the left-hand side you can 0:15:55.239,0:15:59.108 see, you can put money in super through [br]your employers' contributions, through 0:15:59.108,0:16:03.358 salary sacrifice through your payroll, [br]voluntary after-tax contributions, 0:16:03.358,0:16:07.050 through cheque or B-pay or even through[br]your payroll. There are also personal 0:16:07.050,0:16:10.198 deductible contributions which we're not[br]going to go into great detail about today, 0:16:10.198,0:16:14.562 and there's also spouse contributions. [br]But across the top, there are two main 0:16:14.562,0:16:20.271 forms of contributions. One is called [br]concessional contributions, one is called 0:16:20.271,0:16:22.022 non-concessional. 0:16:22.022,0:16:26.434 What is the difference? The difference [br]comes down to the name. Concessional 0:16:26.434,0:16:31.380 contributions are moneys' that go into [br]your super before you pay your income tax. 0:16:31.380,0:16:36.861 So when I showed you before that for [br]most Australians earning over $30,000 a 0:16:36.861,0:16:41.695 year, most of us are paying 30% tax on a[br]fair chunk of our income. 0:16:41.695,0:16:46.031 So for when you have a non-concessional[br]contribution, that means you've earned 0:16:46.031,0:16:51.697 your money, you've generally paid your [br]tax on your income, which could be 30%. 0:16:51.697,0:16:57.623 So if you earn $1000, you might lose 30%[br]being 300, you can get $700 into your 0:16:57.623,0:17:01.540 super, that would be a non-concessional[br]contribution. But when putting money 0:17:01.540,0:17:05.363 into your super as a concessional [br]contribution, the money comes out of your 0:17:05.363,0:17:09.775 income, before it gets taxed at your [br]regular tax rate and instead goes into 0:17:09.775,0:17:15.898 your super and will only be taxed at 15%. [br]So you earn $1000, only to lose 15%, 0:17:15.898,0:17:22.101 you're left with $850. So superannuation[br]concessional contributions is like earning 0:17:22.101,0:17:26.997 $1000 and being able to invest $850, [br]whereas non-concessional contributions, 0:17:26.997,0:17:30.590 which you can invest in anywhere, might [br]otherwise be earning $1000 and only 0:17:30.590,0:17:34.828 getting $700 invested. That's the benefit [br]of superannuation. 0:17:34.828,0:17:39.360 And what this slide here is showing, [br]excuse me, is normally you earn your 0:17:39.360,0:17:44.253 salary, your salary gets taxed at your [br]marginal tax rate, think 30-odd percent or 0:17:44.253,0:17:48.051 possibly more, at the top end, and money[br]goes into your bank account. 0:17:49.690,0:17:53.345 Money that you can buy and invest [br]elsewhere, the interest or earnings are 0:17:53.345,0:17:58.717 also taxed at your marginal tax rate. [br]But when you put money into superannuation 0:17:58.717,0:18:03.021 through your salary, through salary [br]sacrifice, it'll only be taxed at 15%, 0:18:03.021,0:18:06.822 either on the way into your account with [br]most super funds like GESB, Australian 0:18:06.822,0:18:11.777 Super and Hesta, or the money on the way[br]out, with West State Super, still 15%. 0:18:11.777,0:18:18.087 And not just that, not only do you pay [br]only 15% tax on the contributions, you 0:18:18.087,0:18:22.914 only pay 15% tax on the investment [br]earnings, as opposed to your marginal tax 0:18:22.914,0:18:29.665 rate. Now because superannuation [br]is considered to be a tax-effective savings 0:18:29.665,0:18:33.475 strategy for your retirement, that's why[br]the government's put in place, they also 0:18:33.475,0:18:36.617 understand, that by saving for your [br]retirement, the government is going to 0:18:36.617,0:18:40.320 receive less tax now, than if you hadn't[br]put it through your pay. 0:18:40.320,0:18:43.581 That's why they limit the amount you're[br]allowed to put into your superannuation 0:18:43.581,0:18:47.177 through what are called concessional [br]contributions. Now for most Australian 0:18:47.177,0:18:52.361 funds, being taxed funds, GESB, Hesta, [br]Australian Super, that sort of fund, the 0:18:52.361,0:18:57.900 limitation per year is $30,000 per year. [br]And that includes your employers super 0:18:57.900,0:19:02.467 contributions, so you could already be [br]getting 11 and a half percent in super, 0:19:02.467,0:19:07.322 you're allowed to go above and beyond [br]that up to $30,000, per year to grow your 0:19:07.322,0:19:12.108 superannuation savings. If you go above[br]that, you're not penalised as such, but 0:19:12.108,0:19:15.442 the excess contributions will be taxed [br]at your marginal tax rate. 0:19:15.442,0:19:20.061 Now, for those of you who might have a[br]West State Super, or indeed a Gold State 0:19:20.061,0:19:24.915 Super Account those concessional [br]contributions of an annual $30,000 limit, 0:19:24.915,0:19:29.726 do not apply to you. Instead, you've got [br]what's called an untaxed plan cap, 0:19:29.726,0:19:36.038 and as that currently stands, that is [br]$1.78 million in your lifetime. 0:19:36.038,0:19:40.038 And that gets indexed every year. [br]So that means, if you've got West Side 0:19:40.038,0:19:43.551 Super for example, irrespective of [br]what your employer's putting into your 0:19:43.551,0:19:47.655 employers' contributions, you can salary [br]sacrifice above and beyond that, past the 0:19:47.655,0:19:54.246 $30,000 per year, up to $1.78 million over[br]your lifetime. 0:19:54.246,0:19:58.938 So that's an important consideration of[br]West State that provides benefits that may 0:19:58.938,0:20:00.944 not be applicable in other super funds. 0:20:00.944,0:20:04.848 However, there is one thing you need to [br]consider. Whilst West State Super does not 0:20:04.848,0:20:09.473 have an annual limitation, like every [br]other super fund, there is a correlation 0:20:09.473,0:20:14.927 between West State, and other super funds.[br]So what this example here is showing is 0:20:14.927,0:20:19.820 this, let's say I've got a West State Super[br]account, but maybe I've got another tax 0:20:19.820,0:20:24.003 super fund, like Hesta, or Australian [br]Super, or maybe a self-managed super 0:20:24.003,0:20:28.242 fund. What this slide here is showing is, [br]if I'm putting in $20,000 per year, 0:20:28.242,0:20:32.399 of concessional contributions into West [br]State, that's okay, I can still put 0:20:32.399,0:20:36.155 $10,000 of concessional contributions [br]into another fund, without breaching the 0:20:36.155,0:20:41.424 $30,000 cap. Now, in example two, [br]if I put in $30,000 a year into West 0:20:41.424,0:20:46.183 State, that is also okay, even though the[br]$30,000 limit does not apply to West State, 0:20:46.183,0:20:51.772 by putting $30,000 into West State, all of[br]a sudden, whatever I'm putting into West 0:20:51.772,0:20:56.383 State counts against whatever I'm putting[br]into any other Australian super fund, 0:20:56.383,0:21:01.463 tax super fund. So if I'm putting $30,000 [br]into West State through salary sacrifice, 0:21:01.463,0:21:07.145 and employer contributions, at that point,[br]if any extra moneys' are going into a tax 0:21:07.145,0:21:11.169 super fund, as a concessional[br]contribution, that amount is now in breach 0:21:11.169,0:21:17.439 of the concessional contributions cap. [br]And as per example slide three, if I'm 0:21:17.439,0:21:21.971 putting $50,000 into West State, that's [br]not a problem, but it means anything going 0:21:21.971,0:21:25.848 into any other fund as a concessional[br]contribution is in breach of the 0:21:25.848,0:21:30.195 concessional cap. So please be mindful [br]of that if you've got multiple super funds. 0:21:30.195,0:21:35.513 Now, irrespective of which super [br]fund you've got, the non-concessional 0:21:35.513,0:21:40.514 contribution cap is, for example, money I[br]might have in the bank, money I might have 0:21:40.514,0:21:43.534 already saved, money I might be getting[br]from an inheritance. 0:21:43.534,0:21:47.773 Moneys' that I either don't need to pay [br]tax on, or I've already paid tax on. 0:21:47.773,0:21:51.070 I could put that into my West State[br]account, or GESB account or any other 0:21:51.070,0:21:55.981 super fund. And the amount that you're[br]limited to is $120,000 per year, up to 0:21:55.981,0:22:01.274 the age of 75. If I happen to go over [br]$120,000 per year, it's not a major 0:22:01.274,0:22:06.755 problem, provided I don't put in more [br]than $360,000 over a three-year period. 0:22:06.755,0:22:11.446 So what that's saying here is, if I put [br]$120,000 in this year, 120 the following 0:22:11.446,0:22:14.565 year, 120 the following year, no problem. 0:22:14.565,0:22:19.202 But let's say, for example, I accidentally[br]put in $150,000 this year, I don't have a 0:22:19.202,0:22:23.145 problem, but what happens is for this year[br]and the next two years, the government 0:22:23.145,0:22:26.849 says the most you can put in is $360,000. 0:22:26.849,0:22:30.912 Now, you do not want to breach that cap[br]because if you do, your excess gets taxed 0:22:30.912,0:22:34.295 at 47%. Now, there is something else to[br]take into account. 0:22:34.295,0:22:39.201 Whilst there is an annual limits, at a [br]three year limit to what you can put into 0:22:39.201,0:22:43.934 your super through non-concessional [br]contributions, you can only make these 0:22:43.934,0:22:50.190 contributions if your balance in super[br]is less than $1.9 million at the end of 0:22:50.190,0:22:54.061 the financial year. So what I would say is[br]this, if you're planning on making 0:22:54.061,0:22:57.570 non-concessional contributions to your[br]super, and you've got less than 0:22:57.570,0:23:02.342 $1.9 million, and you're under 75, you can[br]still make these contributions. 0:23:02.342,0:23:06.808 But as you get closer to 75 years of age, [br]please be aware, you need to contact your 0:23:06.808,0:23:11.594 super fund, 'cos once you're within three[br]years of getting to 75, the amount you 0:23:11.594,0:23:15.494 can put in, you just need to be a little[br]careful, when using the bring forward rule 0:23:15.494,0:23:18.712 because you might exceed that cap.[br]So please contact your super fund 0:23:18.712,0:23:20.551 to understand how that works. 0:23:20.551,0:23:24.851 Now, let's start talk about the investment[br]side of things. 0:23:24.851,0:23:29.013 Investment terms and concepts, so we're[br]going to talk about unit prices, share 0:23:29.013,0:23:33.131 prices, dividends, and liquidity, we're[br]gonna talk about asset classes, we're 0:23:33.131,0:23:36.540 gonna talk about risk profile and time [br]horizon. 0:23:36.540,0:23:40.297 So what are unit prices, [br]well unit prices are very similar to 0:23:40.297,0:23:44.841 shares, so in your super, when money [br]goes into your superannuation fund, 0:23:44.841,0:23:47.488 what happens is you don't get a set level[br]of return. 0:23:47.488,0:23:52.142 What actually happens is, we purchase[br]investments at a certain price. 0:23:52.142,0:23:57.261 So if a unit is worth $1, and you put in[br]$100 into your super, we buy 100 0:23:57.261,0:23:59.575 investments at a dollar per investment. 0:23:59.575,0:24:03.813 As the unit price goes up in value, [br]the investments you've already got go up 0:24:03.813,0:24:06.375 in value, your balance goes up. 0:24:06.375,0:24:10.896 But it also means that extra money going[br]into your super, buys less and less for 0:24:10.896,0:24:15.063 your dollar 'cos the new investments you're[br]buying are getting more expensive. 0:24:15.063,0:24:19.440 Subsequently though, if unit prices drop,[br]and you're putting money into your super, 0:24:19.440,0:24:23.328 you buy more for your dollar.[br]So understanding how unit prices work is 0:24:23.328,0:24:27.127 extremely important with super, because [br]even when markets go down, even though 0:24:27.127,0:24:30.821 your balance might fall, you actually get[br]to buy more investments for your dollar 0:24:30.821,0:24:35.739 because you're getting more purchasing[br]value, so please understand that. 0:24:35.739,0:24:39.466 Also, unit pricing provides liquidity [br]because it means that when you resign 0:24:39.466,0:24:43.610 or retire and you want to access your[br]super, you don't have to sell all your 0:24:43.610,0:24:47.489 superannuation investments to take some[br]money out. Unit pricing provides 0:24:47.489,0:24:51.793 liquidity, you might decide to sell off[br]$10,000 worth of investments to get the 0:24:51.793,0:24:55.909 money out. Now we're going to talk about[br]asset classes shortly, we're also going to 0:24:55.909,0:25:01.861 talk about risk profile, and time horizon,[br]in fact, I'll talk about time horizon now. 0:25:01.861,0:25:07.354 Time horizon is, how soon until I need my[br]actual money. Why is that important? 0:25:07.354,0:25:12.485 If I need my money tomorrow, from my [br]retirement savings, you may not want to 0:25:12.485,0:25:16.619 have your money invested in high growth or[br]risky investments, because if the balance 0:25:16.619,0:25:20.981 you need is about what you've got now, [br]then all of a sudden the market falls for 0:25:20.981,0:25:24.680 the next 12 months, if you're invested in[br]a more volatile investment type, 0:25:24.680,0:25:28.965 and the market will drop, you might lose[br]some of the value of that investment at a 0:25:28.965,0:25:32.446 time when you don't have time to recover[br]the investment losses because you're 0:25:32.446,0:25:36.511 drawing down soon. However, on the[br]flipside, if you don't need your 0:25:36.511,0:25:41.912 superannuation for 20 or 30 years, your [br]time horizon is quite far off, you might 0:25:41.912,0:25:45.825 decide 'well my risk profile might be a[br]little bit greater, which means I can 0:25:45.825,0:25:50.405 afford to take on more risk, maybe I can[br]afford to take on more volatility,' because 0:25:50.405,0:25:54.468 the more volatile your investments are, [br]the most risk they take on, the more 0:25:54.468,0:25:58.399 likely it is to go up, but the more likely[br]it is to experience downturns. 0:25:58.399,0:26:03.396 As we all know, over the long term, more[br]volatile investments do go up, yes they go 0:26:03.396,0:26:07.555 down, but they likely recover the losses [br]in the medium-to long-term. 0:26:07.555,0:26:12.268 And that's why we talk about risk in[br]super, super is not without risk. 0:26:12.268,0:26:16.319 There's legislative risk, the risk that[br]the government may change the rules. 0:26:16.319,0:26:19.367 It has happened in the past, will likely[br]happen in the future. 0:26:19.367,0:26:23.939 But the extent to which those risks come [br]about with legislation, often or at the 0:26:23.939,0:26:28.054 top end, to reduce the amount of tax[br]effectiveness that people can get, the 0:26:28.054,0:26:31.064 rules don't change that much or that often. 0:26:31.064,0:26:36.533 Then we've got investment risk, the risk [br]that your investment may not achieve 0:26:36.533,0:26:39.580 your investment outcomes, that you're[br]looking for. 0:26:39.580,0:26:44.527 So understand that even though markets[br]go up and down, okay, that is the 0:26:44.527,0:26:48.938 investment risk. But avoiding risk might [br]result in you not getting the return that 0:26:48.938,0:26:51.559 you actually want, it may not give you[br]enough return. 0:26:51.559,0:26:55.725 Increasing investment risk may increase[br]volatility, how much it goes up and down, 0:26:55.725,0:26:58.813 but hopefully should increase what you[br]return in the end. 0:26:58.813,0:27:03.332 And restricted access is also a risk. [br]Only put money into superannuation 0:27:03.332,0:27:07.264 you can afford to be without generally[br]until the age of 60, because that's when 0:27:07.264,0:27:09.134 you get access to your super. 0:27:09.134,0:27:13.640 So managing your investment risk through[br]the GESB website, we have an investment 0:27:13.640,0:27:19.856 tool in the GESB calculators area, there's[br]one that allows you, called the 0:27:19.856,0:27:24.908 Investment Tool, to choose what investment[br]profile you might want to take on. 0:27:24.908,0:27:28.265 Because in your super your money gets [br]invested in Australian shares, 0:27:28.265,0:27:31.660 international shares, private equity, [br]and other investment options. 0:27:31.660,0:27:36.316 Some are less, or more defensive, less[br]aggressive, some are more growth-orientated 0:27:36.316,0:27:38.961 providing greater levels of return over [br]the long-term. 0:27:38.961,0:27:43.666 Now, GESB takes what's called a[br]multi-manager approach, by doing this 0:27:43.666,0:27:47.388 it means we spread your money far and [br]wide, so whether you're in GESB Super, 0:27:47.388,0:27:51.204 West State or one of our retirement income[br]pension options, you can choose to be 0:27:51.204,0:27:55.750 invested in cash, conservative, balanced,[br]sustainable balanced, growth and a range 0:27:55.750,0:27:59.653 of other options. But even below that,[br]when you look at the actual investment 0:27:59.653,0:28:03.985 managers we use, within the Australian[br]share portfolio, we use about seven 0:28:03.985,0:28:07.661 different fund managers, within the[br]property portfolio we use in excess of 0:28:07.661,0:28:12.487 10, we do this to spread the risk far[br]and wide, which mitigates the chances of 0:28:12.487,0:28:15.469 the managers making mistakes and impacting[br]you. 0:28:15.469,0:28:18.959 Because as you can see, different[br]investments perform differently, so what 0:28:18.959,0:28:22.741 we like to do is take the risk away,[br]so you don't have to choose one investment 0:28:22.741,0:28:27.207 or the other, and by taking the balanced[br]approached for a lot of people, whether 0:28:27.207,0:28:31.377 it be in the growth plan, sustainable or[br]my West State plan, what this graph is 0:28:31.377,0:28:35.983 showing is how the West State Super plan[br]has performed since 2001. 0:28:35.983,0:28:39.737 Now even though a lot of you aren't in[br]West State, maybe you're in GESB Super, 0:28:39.737,0:28:44.403 the reason we show West State first is [br]because it goes back the furthest, which 0:28:44.403,0:28:48.641 allows you to see the impact of volatility[br]growth has had on the investment markets. 0:28:48.641,0:28:54.348 And you can see, even though growth and[br]the West State plan are the most important 0:28:54.348,0:28:59.148 aggressive of the plans, that also [br]returned the greatest investment growth. 0:28:59.148,0:29:04.161 Whereas the cash plan, nice, slow and [br]steady, doesn't perform overly well, 0:29:04.161,0:29:06.619 but it also doesn't achieve negatives. 0:29:06.619,0:29:10.435 Now you'll see over the last couple of [br]years, or year or so, there's some orange 0:29:10.435,0:29:14.296 line, the sustainable balanced plan, [br]it only shows a short-term because 0:29:14.296,0:29:16.995 we've only had it available for about[br]12 months. 0:29:16.995,0:29:20.833 Now in West State Super there are five[br]ready made plans to choose from, 0:29:20.833,0:29:25.178 and you get to choose from cash, [br]conservative, the default plan if you've 0:29:25.178,0:29:29.013 not made an option, which used to be[br]called the balanced plan, there's also 0:29:29.013,0:29:32.638 the sustainable balanced plan as well as[br]growth. The growth plan is the most 0:29:32.638,0:29:35.793 aggressive, the cash plan is the least[br]aggressive. 0:29:35.793,0:29:39.281 But you can also take the option to do[br]a mix your plan. 0:29:39.281,0:29:43.613 This is where you can choose the exact [br]allocation of investment types, from the 0:29:43.613,0:29:47.156 five asset classes that exist, you can [br]change it as often as you want. 0:29:47.156,0:29:53.185 Now, the GESB Super. GESB Super only goes[br]back to 2007 and as you can see when it 0:29:53.185,0:29:56.082 first started, that's when the global [br]financial crisis hit. 0:29:56.082,0:30:00.445 But it still shows, that even though cash[br]has been very steady along the middle, 0:30:00.445,0:30:04.455 the other investment plans have been more[br]volatile, but have provided greater levels 0:30:04.455,0:30:08.412 of return. And you can actually plot these[br]graphs on the GESB website through the 0:30:08.412,0:30:12.537 investment centre, and you can plot the[br]cash, conservative, balanced, the default 0:30:12.537,0:30:14.586 plan, sustainable and the growth. 0:30:14.586,0:30:18.794 And as I said before, you can change your[br]investment options as often as you want. 0:30:18.794,0:30:23.585 The benefit of investing through super is[br]that firstly, it's a long-term investment 0:30:23.585,0:30:27.235 for most people. It means you pick and[br]choose, you pick a fund or a plan that 0:30:27.235,0:30:30.959 suits your personality trait, you make [br]those contributions, you can make extra 0:30:30.959,0:30:34.578 contributions, and because you can't [br]access the money generally until you're 0:30:34.578,0:30:39.147 60, you get the benefit of compounding[br]interest, without disturbing those 0:30:39.147,0:30:41.823 investments. So the next steps for you. 0:30:41.823,0:30:45.702 Try out investment planning tool to help[br]determine what investment vehicle you 0:30:45.702,0:30:49.401 should be in. You might be a conservative [br]person, that might just mean simply, 0:30:49.401,0:30:52.094 you need to take a less aggressive option[br]with your investment. 0:30:52.094,0:30:55.679 However, if you understand that over the[br]long-term, and you understand that the 0:30:55.679,0:30:59.076 ups and downs with investments might[br]provide you with greater outcomes, 0:30:59.076,0:31:01.946 you might decide to go with more growth[br]orientated options. 0:31:01.946,0:31:07.783 You can change as your personality changes,[br]as your timeframes change for retirement. 0:31:07.783,0:31:11.659 You can review your investment choice [br]through the member online facility, 0:31:11.659,0:31:15.643 go to the GESB website, top right-hand [br]corner you can log-on to member online, 0:31:15.643,0:31:17.555 you can do it as often as you want. 0:31:17.555,0:31:21.806 Also read the quarterly investment updates[br]on our website, so that you get a better 0:31:21.806,0:31:25.684 understanding of how investments actually[br]work, rather than just listening to the 0:31:25.684,0:31:30.136 news, rather than your sister-in-law,[br]or indeed your friends because without 0:31:30.136,0:31:35.054 any disrespect intended, most of us aren't[br]investment gurus, we hear things through 0:31:35.054,0:31:37.180 the news, we hear things through friends. 0:31:37.180,0:31:41.352 Get it from the horse's mouth, read the[br]updates, we want you to be as informed 0:31:41.352,0:31:44.948 as you can and you make those key[br]decisions. You can also try our 0:31:44.948,0:31:49.024 contributions calculator, so on the GESB [br]website, right-hand side roughly half-way 0:31:49.024,0:31:52.488 down, there's a section called[br]'calculators', within that there 0:31:52.488,0:31:56.470 is the investments tool, but there are[br]also tools about showing you how much 0:31:56.470,0:32:00.387 your contributions could be into your[br]super, there are also calculators about 0:32:00.387,0:32:04.548 the time and planning. How much difference[br]will contributions make into your super 0:32:04.548,0:32:05.989 over the long-term. 0:32:05.989,0:32:08.310 Have a look at them, they're very [br]worthwhile. 0:32:08.310,0:32:12.171 What should you be being next?[br]Well maybe contact at GESB if you need to. 0:32:12.171,0:32:16.205 Now this is a recorded session so I won't[br]be taking any questions, but please feel 0:32:16.205,0:32:22.768 free to contact at GESB on working days[br]Monday to Friday between 7:30am and 5:30pm 0:32:22.768,0:32:31.056 by calling 13 43 72, which just happens to[br]be 13 GESB. So 13 43 72. You can also use 0:32:31.056,0:32:36.920 the live chat on the GESB website between [br]the hours of 7:30am and 5:15pm, or you 0:32:36.920,0:32:42.453 can contact us through the website. If you[br]found this somewhat useful, you can go 0:32:42.453,0:32:45.972 back and watch this webinar at your[br]leisure, it is being recorded, and if 0:32:45.972,0:32:50.054 you've got any questions, contact GESB [br]directly. We'll be updating this webinar 0:32:50.054,0:32:53.856 probably at the beginning of the next [br]financial year, and there are many other 0:32:53.856,0:32:58.056 webinars available on the GESB website. [br]In the meantime, my name is Brad Zaknich, 0:32:58.056,0:33:01.785 thank you very much for logging in, [br]we hope you enjoyed this recorded webinar.