1 00:00:03,031 --> 00:00:06,442 Hi everyone, my name is Brad Zaknich from GESB, and I'd like to thank you very much 2 00:00:06,489 --> 00:00:10,179 for logging onto today's recorded webinar, so it's not a live one today, 3 00:00:10,179 --> 00:00:14,151 it's recorded and it's about investing in super 101. So we're gonna go through 4 00:00:14,995 --> 00:00:18,815 the ideas of investing through superannuation compared to investing 5 00:00:18,815 --> 00:00:22,823 in other formats. So, for those who haven't used webinars before, very simple 6 00:00:22,823 --> 00:00:26,795 technology, sit back and relax. Some of the normal interactive opportunities we 7 00:00:26,795 --> 00:00:30,944 have with webinars has been turned off for today's session, obviously things like 8 00:00:30,944 --> 00:00:34,721 typing in questions and clicking send, you can't do that today because there's 9 00:00:34,721 --> 00:00:38,681 no-one to reply to them. So what we'll do is get through some of the housekeeping. 10 00:00:38,681 --> 00:00:42,004 What we're showing you here is what you already would have received, well, in fact 11 00:00:42,004 --> 00:00:46,506 what you're going to be receiving, is a webinar survey follow-up email, we do 12 00:00:46,506 --> 00:00:50,275 still love to get feedback, even with recorded webinars, so if you wouldn't mind 13 00:00:50,275 --> 00:00:53,912 setting a few moments it takes to complete that, that'd be greatly appreciated. 14 00:00:53,912 --> 00:00:57,321 The webinar, like I said, is being recorded, and you'll be able to sit back, 15 00:00:57,321 --> 00:01:02,350 watch it at your own leisure. You can move forward, you can go back in the slides, 16 00:01:02,350 --> 00:01:05,439 and you can watch it as many times as you like, and from my understanding, this 17 00:01:05,439 --> 00:01:08,915 webinar will be staying live on the GESB website, so probably around the end of 18 00:01:08,915 --> 00:01:13,585 the financial year, at which point we'll most likely get a new presentation up. 19 00:01:13,585 --> 00:01:16,952 Now, I'd first love to show my respect and acknowledge the traditional custodians 20 00:01:16,952 --> 00:01:21,653 of this land, of Elders past, present and emerging, on which this event takes place. 21 00:01:21,653 --> 00:01:25,062 And then you've got the all-important disclaimer. When talking about 22 00:01:25,062 --> 00:01:29,767 superannuation, investing, money, finance, it's important that you understand that 23 00:01:29,767 --> 00:01:33,344 we're not giving you personalised financial advice today. My job today is to 24 00:01:33,344 --> 00:01:36,710 provide you with information, explain things, explain how things work. 25 00:01:36,710 --> 00:01:40,540 It's not to get you to make a decision based on what I'm saying. So if you do 26 00:01:40,540 --> 00:01:43,918 need personalised financial advice, you'll need to go elsewhere to get that, 27 00:01:43,918 --> 00:01:49,009 as GESB only provides you general advice. Now in today's session there is a lot to 28 00:01:49,009 --> 00:01:52,057 get through, some of which might be concepts that you're familiar with, 29 00:01:52,057 --> 00:01:55,267 and some maybe not. So in this session we're gonna talk about the basics of 30 00:01:55,267 --> 00:01:58,592 investing, and we're gonna talk about things like income tax, and how that 31 00:01:58,592 --> 00:02:03,822 impacts investing, budgeting, where to use your money, borrowing, and debt. 32 00:02:03,822 --> 00:02:07,177 Also going to talk about with investment concepts, the idea of compounding 33 00:02:07,177 --> 00:02:12,097 interest, the value of superannuation, understanding the different asset classes 34 00:02:12,097 --> 00:02:15,996 that exist within super, and what investment options are available. 35 00:02:15,996 --> 00:02:19,752 Now hopefully you all know who GESB is, I work for GESB, GESB is a state 36 00:02:19,752 --> 00:02:23,036 government department, and it just stands for Government Employee Superannuation 37 00:02:23,036 --> 00:02:26,817 Board. Now we've been around for over 85 years, we've grown over $42 billion 38 00:02:26,817 --> 00:02:31,603 in funds under management as of 31st December 2024, and GESB, being a 39 00:02:31,603 --> 00:02:35,104 government department, we're a not-for-profit organisation. 40 00:02:35,104 --> 00:02:39,659 So the only fees we collect from you, through your super, through your insurances 41 00:02:39,659 --> 00:02:43,263 are to run the fund, we are not-for-profit. And our returns are 42 00:02:43,263 --> 00:02:45,840 competitive and long-term. 43 00:02:45,840 --> 00:02:48,950 In regards to GESB's product structure, people often get a little confused, 44 00:02:48,950 --> 00:02:52,533 but it's quite simple. GESB at the top of the tree there stands for Government 45 00:02:52,533 --> 00:02:55,957 Employee Superannuation Board. Below that are the different schemes that we 46 00:02:55,957 --> 00:02:59,379 administer. Now we're got some old legacy schemes like the Pension scheme 47 00:02:59,379 --> 00:03:02,186 and the Gold State Super scheme, we're not going to be talking about 48 00:03:02,186 --> 00:03:06,570 those at all today, okay, they don't sit within the bounds of today's presentation. 49 00:03:06,570 --> 00:03:10,233 We're predominantly going to be talking about superannuation, that are in the 50 00:03:10,233 --> 00:03:15,100 accumulation phase, and are accumulation accounts, so West State Super, GESB Super, 51 00:03:15,100 --> 00:03:20,113 and some of the other invest, general super funds that work in a similar fashion. 52 00:03:20,113 --> 00:03:24,150 When we speak about stuff that is general, superannuation, I'll make that very 53 00:03:24,150 --> 00:03:27,787 well-known. When we're talking about anything that might be GESB specific, 54 00:03:27,787 --> 00:03:31,356 I'll also make that well-known. What we're not going to talk about in great detail 55 00:03:31,356 --> 00:03:35,995 today, or if at all, are the allocated pensions. They are the retired products 56 00:03:35,995 --> 00:03:38,601 that most people use to draw down their retirement savings. 57 00:03:38,601 --> 00:03:41,836 Well let's quickly talk about West State and GESB Super because there are some 58 00:03:41,836 --> 00:03:45,834 differences between the two of them, and you need to be aware. So, West State 59 00:03:45,834 --> 00:03:51,122 Super was the default super fund for WA State Public Servants who commenced 60 00:03:51,122 --> 00:03:56,957 working for the government prior to 15 April 2007. The reason that is 61 00:03:56,957 --> 00:04:01,970 important is that after April 2007, new employees to the public sector might have 62 00:04:01,970 --> 00:04:07,545 had a GESB Super account open, or perhaps some other super fund, Hesta, Australian Super, 63 00:04:07,545 --> 00:04:11,008 Hostplus, something like that. The reason it's important to know, is that most 64 00:04:11,008 --> 00:04:15,565 Australian funds like GESB Super, and most other funds, are considered to be taxed 65 00:04:15,565 --> 00:04:21,141 super schemes. Why is this important? The government allows super contributions 66 00:04:21,141 --> 00:04:25,653 to be contributed at a lower rate of tax than your normal pay. We need to remember 67 00:04:25,653 --> 00:04:29,704 that super comes under the tax regime, and GESB super, like most Australian funds 68 00:04:29,704 --> 00:04:33,862 is a tax scheme and that simply means when your employer puts money into your 69 00:04:33,862 --> 00:04:39,202 super fund, through your employers' 11.5% super guarantee, or you put extra money in 70 00:04:39,202 --> 00:04:43,318 through your payroll process called salary sacrifice. Those contributions are 71 00:04:43,318 --> 00:04:47,704 only taxed at 15%, compared to your normal tax rates through your income. 72 00:04:47,704 --> 00:04:51,192 But it happens on the way into your account, and while your money's still 73 00:04:51,192 --> 00:04:55,778 invested. If however you've got a West State Super account, your money's are 74 00:04:55,778 --> 00:04:59,561 not taxed on the way in, because it's called an 'untaxed super scheme'. 75 00:04:59,561 --> 00:05:03,253 So the money's from your employers' contributions and any salary sacrifice are 76 00:05:03,253 --> 00:05:08,090 not taxed on the way into your account so the full contribution hits your account. 77 00:05:08,090 --> 00:05:12,891 Any investment earnings or growth in your fund would normally be taxed at 15% in 78 00:05:12,891 --> 00:05:17,435 a regular fund, they are not taxed in West State Super whilst the money remains 79 00:05:17,435 --> 00:05:21,068 in West State Super, but what happens however is when you take your money 80 00:05:21,068 --> 00:05:24,616 out of the West State scheme, that is when the 15% tax gets applied. 81 00:05:24,616 --> 00:05:27,842 So it's important that you understand the difference, and there are some other 82 00:05:27,842 --> 00:05:31,425 differences to talk about in a little while as well. 83 00:05:31,425 --> 00:05:35,619 Now, when we talk about tax, you need to remember as well that the way the 84 00:05:35,619 --> 00:05:39,774 Australian tax system works is relative to your income, is the more income that 85 00:05:39,774 --> 00:05:46,659 you earn, the more tax you generally pay. So up to the first $18,200 you earn in 86 00:05:46,659 --> 00:05:51,513 earnings through your salary, through your income, there is no tax applicable to that 87 00:05:51,513 --> 00:05:58,212 income for most Australians. But once your salary gets above $18,201, up to $45,000, 88 00:05:58,212 --> 00:06:02,620 I shouldn't say salary, I should say income, in that bracket your income is 89 00:06:02,620 --> 00:06:12,088 taxed at 16%, okay, for every dollar over $18,201, up to $45,000. 90 00:06:12,088 --> 00:06:18,302 Then, if you're earning over $45,001 per year, the earnings between $45,001 and 91 00:06:18,302 --> 00:06:24,440 $135,00, that portion alone is taxed at 30%. So people often think 'well I'm 92 00:06:24,440 --> 00:06:29,820 earning over $45 grand a year, I must be paying 30% tax.' Yes, but only on the money 93 00:06:29,820 --> 00:06:35,262 you're earning, above $45,000. And as your salary goes into the new higher brackets, 94 00:06:35,262 --> 00:06:40,956 you pay more tax on the extra earnings. Now, as I said earlier, money's going into 95 00:06:40,956 --> 00:06:44,740 superannuation from your employer's contributions, and through the process 96 00:06:44,740 --> 00:06:50,920 called salary sacrifice. They are not taxed at your marginal, personal tax rate. 97 00:06:50,920 --> 00:06:56,089 They are instead taxed at 15%. So when you talk about that, you can see that money's 98 00:06:56,089 --> 00:07:00,983 being earned over 45 grand are normally taxed at 30%, money going into your super 99 00:07:00,983 --> 00:07:05,583 are only going to be taxed at 15% maximum. That is the benefit of superannuation, 100 00:07:05,583 --> 00:07:09,992 so let's go through this. Let's start talking about investing money, finances, 101 00:07:09,992 --> 00:07:13,682 all those sort of things, and first thing when I talk about this is the basics of 102 00:07:13,682 --> 00:07:15,870 investing and knowing where your money comes from. 103 00:07:15,870 --> 00:07:19,698 So knowing where your money goes is extremely important, being able to track 104 00:07:19,698 --> 00:07:23,698 your spending is an extremely important part of looking after your money. 105 00:07:23,698 --> 00:07:27,799 Planning your goals, whether they be short-term, medium-term, or long-term, 106 00:07:27,799 --> 00:07:31,382 basics of knowing where your money comes from, and what you're gonna spend it on. 107 00:07:31,382 --> 00:07:35,179 But also being a smart borrower. There's nothing wrong with borrowing money, 108 00:07:35,179 --> 00:07:39,180 but some would argue, borrowing money to purchase something that is declining in 109 00:07:39,180 --> 00:07:43,527 value may not be a smart borrow, but that's up to the individual to decide how 110 00:07:43,527 --> 00:07:47,010 they want to do that. Also understanding compounding interest. 111 00:07:47,010 --> 00:07:51,867 Interest earnt, people understand that maybe I'm making, for example, a 7% 112 00:07:51,867 --> 00:07:55,337 return on my money, but when you understand that compounding interest is 113 00:07:55,337 --> 00:07:59,162 interest on top of interest on top of interest, that's extremely powerful. 114 00:07:59,162 --> 00:08:02,706 Albert Einstein once said 'compound interest is the eighth wonder of the 115 00:08:02,706 --> 00:08:08,467 world, he who understands it, earns it. He who doesn't, pays it.' Something to 116 00:08:08,467 --> 00:08:11,730 think about there. Well let's firstly talk about budgeting. 117 00:08:11,730 --> 00:08:15,659 So there is a concept called the 'bucketing approach', cause when we talk 118 00:08:15,659 --> 00:08:18,454 about budgeting, people get quite concerned and they think very heavily 119 00:08:18,454 --> 00:08:22,798 about every cent that this, and every individual item, and that is fair enough. 120 00:08:22,798 --> 00:08:26,755 But if you simplify things in budgeting into a simpler approach, it might be as 121 00:08:26,755 --> 00:08:31,649 simple as dividing your income into three buckets, or three aspects of your income. 122 00:08:31,649 --> 00:08:36,636 And you might allocate, for example, 50% of your income to your needs, so for 123 00:08:36,636 --> 00:08:40,446 example your home loan, your rent, groceries, utilities and your insurances. 124 00:08:40,446 --> 00:08:44,402 So 50% is just a concept, you might have more than that, you might have less, 125 00:08:44,402 --> 00:08:48,497 but when you identify an amount of money, that is used for your needs, set 126 00:08:48,497 --> 00:08:51,423 that money aside and you know that your needs are covered. 127 00:08:51,423 --> 00:08:55,152 And then you might have your wants, and you might decide to allocate maybe 30% 128 00:08:55,152 --> 00:08:59,201 of your income to your wants. And they can be things like your, upgrading needs, 129 00:08:59,201 --> 00:09:03,600 money's for evenings out, hobbies, sporting events, holidays, but upgrading 130 00:09:03,600 --> 00:09:07,973 needs we might talk about maintenance on your home, new cars, things like that. 131 00:09:07,973 --> 00:09:12,852 And then you might decide to allocate 20% of your income towards savings. 132 00:09:12,852 --> 00:09:17,236 And that might be an emergency fund for when things go wrong, or maybe long-term 133 00:09:17,236 --> 00:09:21,354 savings for things off in the future, that might include other investments like 134 00:09:21,354 --> 00:09:26,516 superannuation, shares, property, but it also might include the overpayment of your 135 00:09:26,516 --> 00:09:31,407 debt, so paying extra money to pay off loans might be considered to be savings. 136 00:09:31,407 --> 00:09:36,474 And when you break it down into 50%, 30% and 20%, it's a very reasonable starting 137 00:09:36,474 --> 00:09:41,072 point, you might decide to put more money into savings, less into wants, but by 138 00:09:41,072 --> 00:09:45,966 having a structure, makes it easier to stick to that structure, and identify what 139 00:09:45,966 --> 00:09:48,024 you're going to be putting your money into. 140 00:09:48,024 --> 00:09:53,278 Let's now talk about being a smart borrower. Borrowing money is for most 141 00:09:53,278 --> 00:09:59,454 people, a necessity in life, for certain things, but not all debt is equal, it will 142 00:09:59,454 --> 00:10:02,828 depend on the purpose of the loan, it will depend on the interest rates 143 00:10:02,828 --> 00:10:06,378 you're paying, how often and how much your payments are going to be, and it 144 00:10:06,378 --> 00:10:10,756 should be consolidating different debts, or different loans, into one. 145 00:10:10,756 --> 00:10:15,489 So for example, when they say 'not all debt is equal', if you're borrowing money 146 00:10:15,489 --> 00:10:18,978 from a bank or institution, as an example, and maybe you're borrowing it 147 00:10:18,978 --> 00:10:24,271 and you're having to pay, 5% interest or 6% interest to borrow that money, 148 00:10:24,271 --> 00:10:27,788 but maybe you're borrowing that money to purchase something that's going to 149 00:10:27,788 --> 00:10:32,065 increase in value by 7, 8, 9 or 10% per year, that might be said as being 150 00:10:32,065 --> 00:10:36,171 'good debt'. Whereas 'bad debt' might be be something as simple as paying for a 151 00:10:36,171 --> 00:10:40,209 holiday where you don't have much to show for it at the end and you're paying extra 152 00:10:40,209 --> 00:10:44,335 when you get back by way of interest. So understand, borrowing money is not 153 00:10:44,335 --> 00:10:49,337 necessarily a bad thing, but understanding when you should, shouldn't borrow to 154 00:10:49,337 --> 00:10:51,819 purchase things is something that you have to decide. 155 00:10:51,819 --> 00:10:55,530 Now lets now talk about compounding interest, I'm gonna go through the example 156 00:10:55,530 --> 00:10:59,469 we quite often use. Compounding interest is basically earning interest on top of 157 00:10:59,469 --> 00:11:04,242 previously earned interest. So let's look at a case study of Jenny, who invests 158 00:11:04,242 --> 00:11:09,121 $10,000 over a five year period. Now she's gonna, let's say in her example, she 159 00:11:09,121 --> 00:11:15,098 receives 5% per annum compounded interest, compounded on a monthly basis. 160 00:11:15,098 --> 00:11:21,690 Now, and the end of five years, her investments actually gonna grow to $12,834. 161 00:11:21,690 --> 00:11:27,476 She's not just earning 5% on $10,000, so let's see how this works. 162 00:11:27,476 --> 00:11:33,440 If she invests $10,000 at the start of year 1, by compounding interest at 5% 163 00:11:33,440 --> 00:11:38,479 per annum monthly, she's doesn't end up with $500, which would be if she 164 00:11:38,479 --> 00:11:43,439 compounded once, she ends up with $512, it's actually more than 5% over the 12 165 00:11:43,439 --> 00:11:47,237 months because it's been compounded monthly. So at the beginning of the next 166 00:11:47,237 --> 00:11:52,358 year she's got $512, which she earns 5% interest compounded monthly, for the next 167 00:11:52,358 --> 00:11:58,239 12 months, she accumulates $538. Ends up with $11,049, and you can see over 168 00:11:58,239 --> 00:12:06,610 five years, the interests that's been compounded grows, 512, 538, 565, 594, 625. 169 00:12:06,610 --> 00:12:10,266 So compounding interest, when you leave investments alone, and they compound on 170 00:12:10,266 --> 00:12:14,071 top of each other. It's investments' interest on top of the last lot of 171 00:12:14,071 --> 00:12:18,203 interest returns. That's where leaving things long term can generate greater 172 00:12:18,203 --> 00:12:22,285 levels of interest, because it's not simple interest, it's compound interest. 173 00:12:22,285 --> 00:12:27,708 And that's where these slides come in, excuse me, time is money. 174 00:12:29,638 --> 00:12:35,727 People often talk about 'timing the market', it's often more important to spend time 175 00:12:35,727 --> 00:12:40,757 in the market. What do we mean by that? Well let's say for example, you've got 176 00:12:40,757 --> 00:12:45,014 a 20-year-old, a 30-year-old, a 40 and a 50-year-old, who all of a-side, 177 00:12:45,014 --> 00:12:48,956 with a starting balance of nothing, they want to put an extra $50 a fortnight 178 00:12:48,956 --> 00:12:52,761 perhaps even less, in superannuation. So let's just assume this is extra money 179 00:12:52,761 --> 00:12:56,522 you're putting into your super, above and beyond what you might already be getting. 180 00:12:56,522 --> 00:13:00,481 What difference will it make by putting $50 a fortnight, now let's assume an 181 00:13:00,481 --> 00:13:04,948 annual earning rate of roughly 7.8%, so you're probably in the growth plan. 182 00:13:04,948 --> 00:13:10,797 Now if you start when you're 20, an extra $50 a fortnight, taken out of the 183 00:13:10,797 --> 00:13:15,493 conversation inflation and things like that, when you get to 60, so after 40 184 00:13:15,493 --> 00:13:21,388 years, you'll have $345,758 extra sitting in your account. 185 00:13:21,388 --> 00:13:26,483 By only putting in $50 a fortnight. Now if you don't start until you're 30, 186 00:13:26,483 --> 00:13:32,298 now I've got $154,000, you don't start until you're 40, about $64,000, 187 00:13:32,298 --> 00:13:36,295 you don't start until you're 50, it's $21,000. Now you can see, even though 188 00:13:36,295 --> 00:13:41,027 they're only 10-year periods separating each starting point, the amounts of 189 00:13:41,027 --> 00:13:45,345 difference are massive. Because the person starting making contributions earlier, 190 00:13:45,345 --> 00:13:49,290 is getting compounding interest every month on top of the contributions that 191 00:13:49,290 --> 00:13:53,167 have already grown. And that's why the balance can be quite large, by putting in 192 00:13:53,167 --> 00:13:56,829 significantly small amounts of money, if you start really early. 193 00:13:56,829 --> 00:14:01,188 Well let's now focus on that $345,000 because we know that starting at 20, 194 00:14:01,188 --> 00:14:04,770 over 40 years, should generate a figure that's similar to that. 195 00:14:04,770 --> 00:14:09,796 But what if, you need that amount of money, but you don't start when you're 20. 196 00:14:09,796 --> 00:14:14,169 Well if you don't start 'til you're 30, to meet the same objective, you'll need to 197 00:14:14,169 --> 00:14:19,181 put in $112 a fortnight, significantly more. If you don't start 'til you're 40, 198 00:14:19,181 --> 00:14:23,232 now you've gotta do $270 a fortnight, for a much shorter period of time. 199 00:14:23,232 --> 00:14:27,203 And if you don't start 'til you're 50, now it's $807 per fortnight. 200 00:14:27,203 --> 00:14:31,507 So this is where compounding interest can work against you, the longer you wait to 201 00:14:31,507 --> 00:14:35,304 start making investments. And because superannuation can't be accessed, 202 00:14:35,304 --> 00:14:39,314 generally until the age of 60 anyway, for a lot of people making extra 203 00:14:39,314 --> 00:14:43,486 contributions in super, the benefits of compounding interest come along anyway, 204 00:14:43,486 --> 00:14:47,189 because you can't get access to it. But what it does say, is if you want to 205 00:14:47,189 --> 00:14:52,485 start growing your super, the earlier you start, generally speaking, the less amount 206 00:14:52,485 --> 00:14:55,484 you've gotta make as a contribution a fortnight. 207 00:14:55,484 --> 00:14:59,917 And what is the value of superannuation to you? Well the value of super is this; 208 00:14:59,917 --> 00:15:06,614 It's a very tax-advantaged saving scheme for retirement, often more, better tax 209 00:15:06,614 --> 00:15:09,227 advantages than you're gonna get through your income tax rates. 210 00:15:09,227 --> 00:15:14,488 Why is superannuation compulsory, and it's been compulsory since 1992, it's so that 211 00:15:14,488 --> 00:15:18,853 you have an alternative to, or a supplement for, the age pension. 212 00:15:18,853 --> 00:15:23,552 The age pension, is not going to disappear anytime soon, but it is still seen as 213 00:15:23,552 --> 00:15:27,830 being only a safety net for retirement. Because we've been getting compulsory 214 00:15:27,830 --> 00:15:30,237 super now since 1992. 215 00:15:30,237 --> 00:15:34,716 And the value of super for you might be to give you the options in retirement 216 00:15:34,716 --> 00:15:40,237 that you might not otherwise have, by just relying on the age pension, or even just 217 00:15:40,237 --> 00:15:45,050 compulsory super, maybe making extra contributions, will meet your objectives, 218 00:15:45,050 --> 00:15:48,584 as to what your lifestyle might look like in retirement. 219 00:15:48,584 --> 00:15:52,270 Now there are different ways of getting money into super, and the main way is 220 00:15:52,270 --> 00:15:55,239 your employers' contributions. Now down on the left-hand side you can 221 00:15:55,239 --> 00:15:59,108 see, you can put money in super through your employers' contributions, through 222 00:15:59,108 --> 00:16:03,358 salary sacrifice through your payroll, voluntary after-tax contributions, 223 00:16:03,358 --> 00:16:07,050 through cheque or B-pay or even through your payroll. There are also personal 224 00:16:07,050 --> 00:16:10,198 deductible contributions which we're not going to go into great detail about today, 225 00:16:10,198 --> 00:16:14,562 and there's also spouse contributions. But across the top, there are two main 226 00:16:14,562 --> 00:16:20,271 forms of contributions. One is called concessional contributions, one is called 227 00:16:20,271 --> 00:16:22,022 non-concessional. 228 00:16:22,022 --> 00:16:26,434 What is the difference? The difference comes down to the name. Concessional 229 00:16:26,434 --> 00:16:31,380 contributions are moneys' that go into your super before you pay your income tax. 230 00:16:31,380 --> 00:16:36,861 So when I showed you before that for most Australians earning over $30,000 a 231 00:16:36,861 --> 00:16:41,695 year, most of us are paying 30% tax on a fair chunk of our income. 232 00:16:41,695 --> 00:16:46,031 So for when you have a non-concessional contribution, that means you've earned 233 00:16:46,031 --> 00:16:51,697 your money, you've generally paid your tax on your income, which could be 30%. 234 00:16:51,697 --> 00:16:57,623 So if you earn $1000, you might lose 30% being 300, you can get $700 into your 235 00:16:57,623 --> 00:17:01,540 super, that would be a non-concessional contribution. But when putting money 236 00:17:01,540 --> 00:17:05,363 into your super as a concessional contribution, the money comes out of your 237 00:17:05,363 --> 00:17:09,775 income, before it gets taxed at your regular tax rate and instead goes into 238 00:17:09,775 --> 00:17:15,898 your super and will only be taxed at 15%. So you earn $1000, only to lose 15%, 239 00:17:15,898 --> 00:17:22,101 you're left with $850. So superannuation concessional contributions is like earning 240 00:17:22,101 --> 00:17:26,997 $1000 and being able to invest $850, whereas non-concessional contributions, 241 00:17:26,997 --> 00:17:30,590 which you can invest in anywhere, might otherwise be earning $1000 and only 242 00:17:30,590 --> 00:17:34,828 getting $700 invested. That's the benefit of superannuation. 243 00:17:34,828 --> 00:17:39,360 And what this slide here is showing, excuse me, is normally you earn your 244 00:17:39,360 --> 00:17:44,253 salary, your salary gets taxed at your marginal tax rate, think 30-odd percent or 245 00:17:44,253 --> 00:17:48,051 possibly more, at the top end, and money goes into your bank account. 246 00:17:49,690 --> 00:17:53,345 Money that you can buy and invest elsewhere, the interest or earnings are 247 00:17:53,345 --> 00:17:58,717 also taxed at your marginal tax rate. But when you put money into superannuation 248 00:17:58,717 --> 00:18:03,021 through your salary, through salary sacrifice, it'll only be taxed at 15%, 249 00:18:03,021 --> 00:18:06,822 either on the way into your account with most super funds like GESB, Australian 250 00:18:06,822 --> 00:18:11,777 Super and Hesta, or the money on the way out, with West State Super, still 15%. 251 00:18:11,777 --> 00:18:18,087 And not just that, not only do you pay only 15% tax on the contributions, you 252 00:18:18,087 --> 00:18:22,914 only pay 15% tax on the investment earnings, as opposed to your marginal tax 253 00:18:22,914 --> 00:18:29,665 rate. Now because superannuation is considered to be a tax-effective savings 254 00:18:29,665 --> 00:18:33,475 strategy for your retirement, that's why the government's put in place, they also 255 00:18:33,475 --> 00:18:36,617 understand, that by saving for your retirement, the government is going to 256 00:18:36,617 --> 00:18:40,320 receive less tax now, than if you hadn't put it through your pay. 257 00:18:40,320 --> 00:18:43,581 That's why they limit the amount you're allowed to put into your superannuation 258 00:18:43,581 --> 00:18:47,177 through what are called concessional contributions. Now for most Australian 259 00:18:47,177 --> 00:18:52,361 funds, being taxed funds, GESB, Hesta, Australian Super, that sort of fund, the 260 00:18:52,361 --> 00:18:57,900 limitation per year is $30,000 per year. And that includes your employers super 261 00:18:57,900 --> 00:19:02,467 contributions, so you could already be getting 11 and a half percent in super, 262 00:19:02,467 --> 00:19:07,322 you're allowed to go above and beyond that up to $30,000, per year to grow your 263 00:19:07,322 --> 00:19:12,108 superannuation savings. If you go above that, you're not penalised as such, but 264 00:19:12,108 --> 00:19:15,442 the excess contributions will be taxed at your marginal tax rate. 265 00:19:15,442 --> 00:19:20,061 Now, for those of you who might have a West State Super, or indeed a Gold State 266 00:19:20,061 --> 00:19:24,915 Super Account those concessional contributions of an annual $30,000 limit, 267 00:19:24,915 --> 00:19:29,726 do not apply to you. Instead, you've got what's called an untaxed plan cap, 268 00:19:29,726 --> 00:19:36,038 and as that currently stands, that is $1.78 million in your lifetime. 269 00:19:36,038 --> 00:19:40,038 And that gets indexed every year. So that means, if you've got West Side 270 00:19:40,038 --> 00:19:43,551 Super for example, irrespective of what your employer's putting into your 271 00:19:43,551 --> 00:19:47,655 employers' contributions, you can salary sacrifice above and beyond that, past the 272 00:19:47,655 --> 00:19:54,246 $30,000 per year, up to $1.78 million over your lifetime. 273 00:19:54,246 --> 00:19:58,938 So that's an important consideration of West State that provides benefits that may 274 00:19:58,938 --> 00:20:00,944 not be applicable in other super funds. 275 00:20:00,944 --> 00:20:04,848 However, there is one thing you need to consider. Whilst West State Super does not 276 00:20:04,848 --> 00:20:09,473 have an annual limitation, like every other super fund, there is a correlation 277 00:20:09,473 --> 00:20:14,927 between West State, and other super funds. So what this example here is showing is 278 00:20:14,927 --> 00:20:19,820 this, let's say I've got a West State Super account, but maybe I've got another tax 279 00:20:19,820 --> 00:20:24,003 super fund, like Hesta, or Australian Super, or maybe a self-managed super 280 00:20:24,003 --> 00:20:28,242 fund. What this slide here is showing is, if I'm putting in $20,000 per year, 281 00:20:28,242 --> 00:20:32,399 of concessional contributions into West State, that's okay, I can still put 282 00:20:32,399 --> 00:20:36,155 $10,000 of concessional contributions into another fund, without breaching the 283 00:20:36,155 --> 00:20:41,424 $30,000 cap. Now, in example two, if I put in $30,000 a year into West 284 00:20:41,424 --> 00:20:46,183 State, that is also okay, even though the $30,000 limit does not apply to West State, 285 00:20:46,183 --> 00:20:51,772 by putting $30,000 into West State, all of a sudden, whatever I'm putting into West 286 00:20:51,772 --> 00:20:56,383 State counts against whatever I'm putting into any other Australian super fund, 287 00:20:56,383 --> 00:21:01,463 tax super fund. So if I'm putting $30,000 into West State through salary sacrifice, 288 00:21:01,463 --> 00:21:07,145 and employer contributions, at that point, if any extra moneys' are going into a tax 289 00:21:07,145 --> 00:21:11,169 super fund, as a concessional contribution, that amount is now in breach 290 00:21:11,169 --> 00:21:17,439 of the concessional contributions cap. And as per example slide three, if I'm 291 00:21:17,439 --> 00:21:21,971 putting $50,000 into West State, that's not a problem, but it means anything going 292 00:21:21,971 --> 00:21:25,848 into any other fund as a concessional contribution is in breach of the 293 00:21:25,848 --> 00:21:30,195 concessional cap. So please be mindful of that if you've got multiple super funds. 294 00:21:30,195 --> 00:21:35,513 Now, irrespective of which super fund you've got, the non-concessional 295 00:21:35,513 --> 00:21:40,514 contribution cap is, for example, money I might have in the bank, money I might have 296 00:21:40,514 --> 00:21:43,534 already saved, money I might be getting from an inheritance. 297 00:21:43,534 --> 00:21:47,773 Moneys' that I either don't need to pay tax on, or I've already paid tax on. 298 00:21:47,773 --> 00:21:51,070 I could put that into my West State account, or GESB account or any other 299 00:21:51,070 --> 00:21:55,981 super fund. And the amount that you're limited to is $120,000 per year, up to 300 00:21:55,981 --> 00:22:01,274 the age of 75. If I happen to go over $120,000 per year, it's not a major 301 00:22:01,274 --> 00:22:06,755 problem, provided I don't put in more than $360,000 over a three-year period. 302 00:22:06,755 --> 00:22:11,446 So what that's saying here is, if I put $120,000 in this year, 120 the following 303 00:22:11,446 --> 00:22:14,565 year, 120 the following year, no problem. 304 00:22:14,565 --> 00:22:19,202 But let's say, for example, I accidentally put in $150,000 this year, I don't have a 305 00:22:19,202 --> 00:22:23,145 problem, but what happens is for this year and the next two years, the government 306 00:22:23,145 --> 00:22:26,849 says the most you can put in is $360,000. 307 00:22:26,849 --> 00:22:30,912 Now, you do not want to breach that cap because if you do, your excess gets taxed 308 00:22:30,912 --> 00:22:34,295 at 47%. Now, there is something else to take into account. 309 00:22:34,295 --> 00:22:39,201 Whilst there is an annual limits, at a three year limit to what you can put into 310 00:22:39,201 --> 00:22:43,934 your super through non-concessional contributions, you can only make these 311 00:22:43,934 --> 00:22:50,190 contributions if your balance in super is less than $1.9 million at the end of 312 00:22:50,190 --> 00:22:54,061 the financial year. So what I would say is this, if you're planning on making 313 00:22:54,061 --> 00:22:57,570 non-concessional contributions to your super, and you've got less than 314 00:22:57,570 --> 00:23:02,342 $1.9 million, and you're under 75, you can still make these contributions. 315 00:23:02,342 --> 00:23:06,808 But as you get closer to 75 years of age, please be aware, you need to contact your 316 00:23:06,808 --> 00:23:11,594 super fund, 'cos once you're within three years of getting to 75, the amount you 317 00:23:11,594 --> 00:23:15,494 can put in, you just need to be a little careful, when using the bring forward rule 318 00:23:15,494 --> 00:23:18,712 because you might exceed that cap. So please contact your super fund 319 00:23:18,712 --> 00:23:20,551 to understand how that works. 320 00:23:20,551 --> 00:23:24,851 Now, let's start talk about the investment side of things. 321 00:23:24,851 --> 00:23:29,013 Investment terms and concepts, so we're going to talk about unit prices, share 322 00:23:29,013 --> 00:23:33,131 prices, dividends, and liquidity, we're gonna talk about asset classes, we're 323 00:23:33,131 --> 00:23:36,540 gonna talk about risk profile and time horizon. 324 00:23:36,540 --> 00:23:40,297 So what are unit prices, well unit prices are very similar to 325 00:23:40,297 --> 00:23:44,841 shares, so in your super, when money goes into your superannuation fund, 326 00:23:44,841 --> 00:23:47,488 what happens is you don't get a set level of return. 327 00:23:47,488 --> 00:23:52,142 What actually happens is, we purchase investments at a certain price. 328 00:23:52,142 --> 00:23:57,261 So if a unit is worth $1, and you put in $100 into your super, we buy 100 329 00:23:57,261 --> 00:23:59,575 investments at a dollar per investment. 330 00:23:59,575 --> 00:24:03,813 As the unit price goes up in value, the investments you've already got go up 331 00:24:03,813 --> 00:24:06,375 in value, your balance goes up. 332 00:24:06,375 --> 00:24:10,896 But it also means that extra money going into your super, buys less and less for 333 00:24:10,896 --> 00:24:15,063 your dollar 'cos the new investments you're buying are getting more expensive. 334 00:24:15,063 --> 00:24:19,440 Subsequently though, if unit prices drop, and you're putting money into your super, 335 00:24:19,440 --> 00:24:23,328 you buy more for your dollar. So understanding how unit prices work is 336 00:24:23,328 --> 00:24:27,127 extremely important with super, because even when markets go down, even though 337 00:24:27,127 --> 00:24:30,821 your balance might fall, you actually get to buy more investments for your dollar 338 00:24:30,821 --> 00:24:35,739 because you're getting more purchasing value, so please understand that. 339 00:24:35,739 --> 00:24:39,466 Also, unit pricing provides liquidity because it means that when you resign 340 00:24:39,466 --> 00:24:43,610 or retire and you want to access your super, you don't have to sell all your 341 00:24:43,610 --> 00:24:47,489 superannuation investments to take some money out. Unit pricing provides 342 00:24:47,489 --> 00:24:51,793 liquidity, you might decide to sell off $10,000 worth of investments to get the 343 00:24:51,793 --> 00:24:55,909 money out. Now we're going to talk about asset classes shortly, we're also going to 344 00:24:55,909 --> 00:25:01,861 talk about risk profile, and time horizon, in fact, I'll talk about time horizon now. 345 00:25:01,861 --> 00:25:07,354 Time horizon is, how soon until I need my actual money. Why is that important? 346 00:25:07,354 --> 00:25:12,485 If I need my money tomorrow, from my retirement savings, you may not want to 347 00:25:12,485 --> 00:25:16,619 have your money invested in high growth or risky investments, because if the balance 348 00:25:16,619 --> 00:25:20,981 you need is about what you've got now, then all of a sudden the market falls for 349 00:25:20,981 --> 00:25:24,680 the next 12 months, if you're invested in a more volatile investment type, 350 00:25:24,680 --> 00:25:28,965 and the market will drop, you might lose some of the value of that investment at a 351 00:25:28,965 --> 00:25:32,446 time when you don't have time to recover the investment losses because you're 352 00:25:32,446 --> 00:25:36,511 drawing down soon. However, on the flipside, if you don't need your 353 00:25:36,511 --> 00:25:41,912 superannuation for 20 or 30 years, your time horizon is quite far off, you might 354 00:25:41,912 --> 00:25:45,825 decide 'well my risk profile might be a little bit greater, which means I can 355 00:25:45,825 --> 00:25:50,405 afford to take on more risk, maybe I can afford to take on more volatility,' because 356 00:25:50,405 --> 00:25:54,468 the more volatile your investments are, the most risk they take on, the more 357 00:25:54,468 --> 00:25:58,399 likely it is to go up, but the more likely it is to experience downturns. 358 00:25:58,399 --> 00:26:03,396 As we all know, over the long term, more volatile investments do go up, yes they go 359 00:26:03,396 --> 00:26:07,555 down, but they likely recover the losses in the medium-to long-term. 360 00:26:07,555 --> 00:26:12,268 And that's why we talk about risk in super, super is not without risk. 361 00:26:12,268 --> 00:26:16,319 There's legislative risk, the risk that the government may change the rules. 362 00:26:16,319 --> 00:26:19,367 It has happened in the past, will likely happen in the future. 363 00:26:19,367 --> 00:26:23,939 But the extent to which those risks come about with legislation, often or at the 364 00:26:23,939 --> 00:26:28,054 top end, to reduce the amount of tax effectiveness that people can get, the 365 00:26:28,054 --> 00:26:31,064 rules don't change that much or that often. 366 00:26:31,064 --> 00:26:36,533 Then we've got investment risk, the risk that your investment may not achieve 367 00:26:36,533 --> 00:26:39,580 your investment outcomes, that you're looking for. 368 00:26:39,580 --> 00:26:44,527 So understand that even though markets go up and down, okay, that is the 369 00:26:44,527 --> 00:26:48,938 investment risk. But avoiding risk might result in you not getting the return that 370 00:26:48,938 --> 00:26:51,559 you actually want, it may not give you enough return. 371 00:26:51,559 --> 00:26:55,725 Increasing investment risk may increase volatility, how much it goes up and down, 372 00:26:55,725 --> 00:26:58,813 but hopefully should increase what you return in the end. 373 00:26:58,813 --> 00:27:03,332 And restricted access is also a risk. Only put money into superannuation 374 00:27:03,332 --> 00:27:07,264 you can afford to be without generally until the age of 60, because that's when 375 00:27:07,264 --> 00:27:09,134 you get access to your super. 376 00:27:09,134 --> 00:27:13,640 So managing your investment risk through the GESB website, we have an investment 377 00:27:13,640 --> 00:27:19,856 tool in the GESB calculators area, there's one that allows you, called the 378 00:27:19,856 --> 00:27:24,908 Investment Tool, to choose what investment profile you might want to take on. 379 00:27:24,908 --> 00:27:28,265 Because in your super your money gets invested in Australian shares, 380 00:27:28,265 --> 00:27:31,660 international shares, private equity, and other investment options. 381 00:27:31,660 --> 00:27:36,316 Some are less, or more defensive, less aggressive, some are more growth-orientated 382 00:27:36,316 --> 00:27:38,961 providing greater levels of return over the long-term. 383 00:27:38,961 --> 00:27:43,666 Now, GESB takes what's called a multi-manager approach, by doing this 384 00:27:43,666 --> 00:27:47,388 it means we spread your money far and wide, so whether you're in GESB Super, 385 00:27:47,388 --> 00:27:51,204 West State or one of our retirement income pension options, you can choose to be 386 00:27:51,204 --> 00:27:55,750 invested in cash, conservative, balanced, sustainable balanced, growth and a range 387 00:27:55,750 --> 00:27:59,653 of other options. But even below that, when you look at the actual investment 388 00:27:59,653 --> 00:28:03,985 managers we use, within the Australian share portfolio, we use about seven 389 00:28:03,985 --> 00:28:07,661 different fund managers, within the property portfolio we use in excess of 390 00:28:07,661 --> 00:28:12,487 10, we do this to spread the risk far and wide, which mitigates the chances of 391 00:28:12,487 --> 00:28:15,469 the managers making mistakes and impacting you. 392 00:28:15,469 --> 00:28:18,959 Because as you can see, different investments perform differently, so what 393 00:28:18,959 --> 00:28:22,741 we like to do is take the risk away, so you don't have to choose one investment 394 00:28:22,741 --> 00:28:27,207 or the other, and by taking the balanced approached for a lot of people, whether 395 00:28:27,207 --> 00:28:31,377 it be in the growth plan, sustainable or my West State plan, what this graph is 396 00:28:31,377 --> 00:28:35,983 showing is how the West State Super plan has performed since 2001. 397 00:28:35,983 --> 00:28:39,737 Now even though a lot of you aren't in West State, maybe you're in GESB Super, 398 00:28:39,737 --> 00:28:44,403 the reason we show West State first is because it goes back the furthest, which 399 00:28:44,403 --> 00:28:48,641 allows you to see the impact of volatility growth has had on the investment markets. 400 00:28:48,641 --> 00:28:54,348 And you can see, even though growth and the West State plan are the most important 401 00:28:54,348 --> 00:28:59,148 aggressive of the plans, that also returned the greatest investment growth. 402 00:28:59,148 --> 00:29:04,161 Whereas the cash plan, nice, slow and steady, doesn't perform overly well, 403 00:29:04,161 --> 00:29:06,619 but it also doesn't achieve negatives. 404 00:29:06,619 --> 00:29:10,435 Now you'll see over the last couple of years, or year or so, there's some orange 405 00:29:10,435 --> 00:29:14,296 line, the sustainable balanced plan, it only shows a short-term because 406 00:29:14,296 --> 00:29:16,995 we've only had it available for about 12 months. 407 00:29:16,995 --> 00:29:20,833 Now in West State Super there are five ready made plans to choose from, 408 00:29:20,833 --> 00:29:25,178 and you get to choose from cash, conservative, the default plan if you've 409 00:29:25,178 --> 00:29:29,013 not made an option, which used to be called the balanced plan, there's also 410 00:29:29,013 --> 00:29:32,638 the sustainable balanced plan as well as growth. The growth plan is the most 411 00:29:32,638 --> 00:29:35,793 aggressive, the cash plan is the least aggressive. 412 00:29:35,793 --> 00:29:39,281 But you can also take the option to do a mix your plan. 413 00:29:39,281 --> 00:29:43,613 This is where you can choose the exact allocation of investment types, from the 414 00:29:43,613 --> 00:29:47,156 five asset classes that exist, you can change it as often as you want. 415 00:29:47,156 --> 00:29:53,185 Now, the GESB Super. GESB Super only goes back to 2007 and as you can see when it 416 00:29:53,185 --> 00:29:56,082 first started, that's when the global financial crisis hit. 417 00:29:56,082 --> 00:30:00,445 But it still shows, that even though cash has been very steady along the middle, 418 00:30:00,445 --> 00:30:04,455 the other investment plans have been more volatile, but have provided greater levels 419 00:30:04,455 --> 00:30:08,412 of return. And you can actually plot these graphs on the GESB website through the 420 00:30:08,412 --> 00:30:12,537 investment centre, and you can plot the cash, conservative, balanced, the default 421 00:30:12,537 --> 00:30:14,586 plan, sustainable and the growth. 422 00:30:14,586 --> 00:30:18,794 And as I said before, you can change your investment options as often as you want. 423 00:30:18,794 --> 00:30:23,585 The benefit of investing through super is that firstly, it's a long-term investment 424 00:30:23,585 --> 00:30:27,235 for most people. It means you pick and choose, you pick a fund or a plan that 425 00:30:27,235 --> 00:30:30,959 suits your personality trait, you make those contributions, you can make extra 426 00:30:30,959 --> 00:30:34,578 contributions, and because you can't access the money generally until you're 427 00:30:34,578 --> 00:30:39,147 60, you get the benefit of compounding interest, without disturbing those 428 00:30:39,147 --> 00:30:41,823 investments. So the next steps for you. 429 00:30:41,823 --> 00:30:45,702 Try out investment planning tool to help determine what investment vehicle you 430 00:30:45,702 --> 00:30:49,401 should be in. You might be a conservative person, that might just mean simply, 431 00:30:49,401 --> 00:30:52,094 you need to take a less aggressive option with your investment. 432 00:30:52,094 --> 00:30:55,679 However, if you understand that over the long-term, and you understand that the 433 00:30:55,679 --> 00:30:59,076 ups and downs with investments might provide you with greater outcomes, 434 00:30:59,076 --> 00:31:01,946 you might decide to go with more growth orientated options. 435 00:31:01,946 --> 00:31:07,783 You can change as your personality changes, as your timeframes change for retirement. 436 00:31:07,783 --> 00:31:11,659 You can review your investment choice through the member online facility, 437 00:31:11,659 --> 00:31:15,643 go to the GESB website, top right-hand corner you can log-on to member online, 438 00:31:15,643 --> 00:31:17,555 you can do it as often as you want. 439 00:31:17,555 --> 00:31:21,806 Also read the quarterly investment updates on our website, so that you get a better 440 00:31:21,806 --> 00:31:25,684 understanding of how investments actually work, rather than just listening to the 441 00:31:25,684 --> 00:31:30,136 news, rather than your sister-in-law, or indeed your friends because without 442 00:31:30,136 --> 00:31:35,054 any disrespect intended, most of us aren't investment gurus, we hear things through 443 00:31:35,054 --> 00:31:37,180 the news, we hear things through friends. 444 00:31:37,180 --> 00:31:41,352 Get it from the horse's mouth, read the updates, we want you to be as informed 445 00:31:41,352 --> 00:31:44,948 as you can and you make those key decisions. You can also try our 446 00:31:44,948 --> 00:31:49,024 contributions calculator, so on the GESB website, right-hand side roughly half-way 447 00:31:49,024 --> 00:31:52,488 down, there's a section called 'calculators', within that there 448 00:31:52,488 --> 00:31:56,470 is the investments tool, but there are also tools about showing you how much 449 00:31:56,470 --> 00:32:00,387 your contributions could be into your super, there are also calculators about 450 00:32:00,387 --> 00:32:04,548 the time and planning. How much difference will contributions make into your super 451 00:32:04,548 --> 00:32:05,989 over the long-term. 452 00:32:05,989 --> 00:32:08,310 Have a look at them, they're very worthwhile. 453 00:32:08,310 --> 00:32:12,171 What should you be being next? Well maybe contact at GESB if you need to. 454 00:32:12,171 --> 00:32:16,205 Now this is a recorded session so I won't be taking any questions, but please feel 455 00:32:16,205 --> 00:32:22,768 free to contact at GESB on working days Monday to Friday between 7:30am and 5:30pm 456 00:32:22,768 --> 00:32:31,056 by calling 13 43 72, which just happens to be 13 GESB. So 13 43 72. You can also use 457 00:32:31,056 --> 00:32:36,920 the live chat on the GESB website between the hours of 7:30am and 5:15pm, or you 458 00:32:36,920 --> 00:32:42,453 can contact us through the website. If you found this somewhat useful, you can go 459 00:32:42,453 --> 00:32:45,972 back and watch this webinar at your leisure, it is being recorded, and if 460 00:32:45,972 --> 00:32:50,054 you've got any questions, contact GESB directly. We'll be updating this webinar 461 00:32:50,054 --> 00:32:53,856 probably at the beginning of the next financial year, and there are many other 462 00:32:53,856 --> 00:32:58,056 webinars available on the GESB website. In the meantime, my name is Brad Zaknich, 463 00:32:58,056 --> 00:33:01,785 thank you very much for logging in, we hope you enjoyed this recorded webinar.