WEBVTT

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

00:00:06.489 --> 00:00:10.179
for logging onto today's recorded webinar,
so it's not a live one today,

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

00:00:14.995 --> 00:00:18.815
the ideas of investing through 
superannuation compared to investing

00:00:18.815 --> 00:00:22.823
in other formats. So, for those who
haven't used webinars before, very simple

00:00:22.823 --> 00:00:26.795
technology, sit back and relax. Some of 
the normal interactive opportunities we

00:00:26.795 --> 00:00:30.944
have with webinars has been turned off
for today's session, obviously things like

00:00:30.944 --> 00:00:34.721
typing in questions and clicking send, 
you can't do that today because there's

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.

00:00:38.681 --> 00:00:42.004
What we're showing you here is what you
already would have received, well, in fact

00:00:42.004 --> 00:00:46.506
what you're going to be receiving, is a 
webinar survey follow-up email, we do

00:00:46.506 --> 00:00:50.275
still love to get feedback, even with 
recorded webinars, so if you wouldn't mind

00:00:50.275 --> 00:00:53.912
setting a few moments it takes to complete
that, that'd be greatly appreciated.

00:00:53.912 --> 00:00:57.321
The webinar, like I said, is being 
recorded, and you'll be able to sit back,

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,

00:01:02.350 --> 00:01:05.439
and you can watch it as many times as you
like, and from my understanding, this

00:01:05.439 --> 00:01:08.915
webinar will be staying live on the GESB 
website, so probably around the end of

00:01:08.915 --> 00:01:13.585
the financial year, at which point we'll
most likely get a new presentation up.

00:01:13.585 --> 00:01:16.952
Now, I'd first love to show my respect
and acknowledge the traditional custodians

00:01:16.952 --> 00:01:21.653
of this land, of Elders past, present and
emerging, on which this event takes place.

00:01:21.653 --> 00:01:25.062
And then you've got the all-important 
disclaimer. When talking about

00:01:25.062 --> 00:01:29.767
superannuation, investing, money, finance,
it's important that you understand that

00:01:29.767 --> 00:01:33.344
we're not giving you personalised
financial advice today. My job today is to

00:01:33.344 --> 00:01:36.710
provide you with information, explain 
things, explain how things work.

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

00:01:40.540 --> 00:01:43.918
need personalised financial advice, 
you'll need to go elsewhere to get that,

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

00:01:49.009 --> 00:01:52.057
get through, some of which might be
concepts that you're familiar with,

00:01:52.057 --> 00:01:55.267
and some maybe not. So in this session 
we're gonna talk about the basics of

00:01:55.267 --> 00:01:58.592
investing, and we're gonna talk about 
things like income tax, and how that

00:01:58.592 --> 00:02:03.822
impacts investing, budgeting, where to use
your money, borrowing, and debt.

00:02:03.822 --> 00:02:07.177
Also going to talk about with investment
concepts, the idea of compounding

00:02:07.177 --> 00:02:12.097
interest, the value of superannuation, 
understanding the different asset classes

00:02:12.097 --> 00:02:15.996
that exist within super, and what 
investment options are available.

00:02:15.996 --> 00:02:19.752
Now hopefully you all know who GESB is,
I work for GESB, GESB is a state

00:02:19.752 --> 00:02:23.036
government department, and it just stands
for Government Employee Superannuation

00:02:23.036 --> 00:02:26.817
Board. Now we've been around for over
85 years, we've grown over $42 billion

00:02:26.817 --> 00:02:31.603
in funds under management as of 31st 
December 2024, and GESB, being a

00:02:31.603 --> 00:02:35.104
government department, we're a
not-for-profit organisation.

00:02:35.104 --> 00:02:39.659
So the only fees we collect from you, 
through your super, through your insurances

00:02:39.659 --> 00:02:43.263
are to run the fund, we are 
not-for-profit. And our returns are

00:02:43.263 --> 00:02:45.840
competitive and long-term.

00:02:45.840 --> 00:02:48.950
In regards to GESB's product structure,
people often get a little confused,

00:02:48.950 --> 00:02:52.533
but it's quite simple. GESB at the top
of the tree there stands for Government

00:02:52.533 --> 00:02:55.957
Employee Superannuation Board. Below that
are the different schemes that we

00:02:55.957 --> 00:02:59.379
administer. Now we're got some old 
legacy schemes like the Pension scheme

00:02:59.379 --> 00:03:02.186
and the Gold State Super scheme,
we're not going to be talking about

00:03:02.186 --> 00:03:06.570
those at all today, okay, they don't sit
within the bounds of today's presentation.

00:03:06.570 --> 00:03:10.233
We're predominantly going to be talking
about superannuation, that are in the

00:03:10.233 --> 00:03:15.100
accumulation phase, and are accumulation
accounts, so West State Super, GESB Super,

00:03:15.100 --> 00:03:20.113
and some of the other invest, general
super funds that work in a similar fashion.

00:03:20.113 --> 00:03:24.150
When we speak about stuff that is general,
superannuation, I'll make that very

00:03:24.150 --> 00:03:27.787
well-known. When we're talking about 
anything that might be GESB specific,

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

00:03:31.356 --> 00:03:35.995
today, or if at all, are the allocated 
pensions. They are the retired products

00:03:35.995 --> 00:03:38.601
that most people use to draw down their
retirement savings.

00:03:38.601 --> 00:03:41.836
Well let's quickly talk about West State
and GESB Super because there are some

00:03:41.836 --> 00:03:45.834
differences between the two of them, 
and you need to be aware. So, West State

00:03:45.834 --> 00:03:51.122
Super was the default super fund for 
WA State Public Servants who commenced

00:03:51.122 --> 00:03:56.957
working for the government prior to 
15 April 2007. The reason that is

00:03:56.957 --> 00:04:01.970
important is that after April 2007, new
employees to the public sector might have

00:04:01.970 --> 00:04:07.545
had a GESB Super account open, or perhaps
some other super fund, Hesta, Australian Super,

00:04:07.545 --> 00:04:11.008
Hostplus, something like that. The reason
it's important to know, is that most

00:04:11.008 --> 00:04:15.565
Australian funds like GESB Super, and most
other funds, are considered to be taxed

00:04:15.565 --> 00:04:21.141
super schemes. Why is this important?
The government allows super contributions

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

00:04:25.653 --> 00:04:29.704
that super comes under the tax regime, 
and GESB super, like most Australian funds

00:04:29.704 --> 00:04:33.862
is a tax scheme and that simply means
when your employer puts money into your

00:04:33.862 --> 00:04:39.202
super fund, through your employers' 11.5%
super guarantee, or you put extra money in

00:04:39.202 --> 00:04:43.318
through your payroll process called 
salary sacrifice. Those contributions are

00:04:43.318 --> 00:04:47.704
only taxed at 15%, compared to 
your normal tax rates through your income.

00:04:47.704 --> 00:04:51.192
But it happens on the way into your 
account, and while your money's still

00:04:51.192 --> 00:04:55.778
invested. If however you've got a West
State Super account, your money's are

00:04:55.778 --> 00:04:59.561
not taxed on the way in, because it's 
called an 'untaxed super scheme'.

00:04:59.561 --> 00:05:03.253
So the money's from your employers'
contributions and any salary sacrifice are

00:05:03.253 --> 00:05:08.090
not taxed on the way into your account so
the full contribution hits your account.

00:05:08.090 --> 00:05:12.891
Any investment earnings or growth in your
fund would normally be taxed at 15% in

00:05:12.891 --> 00:05:17.435
a regular fund, they are not taxed in 
West State Super whilst the money remains

00:05:17.435 --> 00:05:21.068
in West State Super, but what happens
however is when you take your money

00:05:21.068 --> 00:05:24.616
out of the West State scheme, that is 
when the 15% tax gets applied.

00:05:24.616 --> 00:05:27.842
So it's important that you understand the
difference, and there are some other

00:05:27.842 --> 00:05:31.425
differences to talk about in a little
while as well.

00:05:31.425 --> 00:05:35.619
Now, when we talk about tax, you need
to remember as well that the way the

00:05:35.619 --> 00:05:39.774
Australian tax system works is relative to
your income, is the more income that

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

00:05:46.659 --> 00:05:51.513
earnings through your salary, through your
income, there is no tax applicable to that

00:05:51.513 --> 00:05:58.212
income for most Australians. But once your
salary gets above $18,201, up to $45,000,

00:05:58.212 --> 00:06:02.620
I shouldn't say salary, I should say
income, in that bracket your income is

00:06:02.620 --> 00:06:12.088
taxed at 16%, okay, for every dollar over 
$18,201, up to $45,000.

00:06:12.088 --> 00:06:18.302
Then, if you're earning over $45,001 per
year, the earnings between $45,001 and

00:06:18.302 --> 00:06:24.440
$135,00, that portion alone is taxed at 
30%. So people often think 'well I'm

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

00:06:29.820 --> 00:06:35.262
you're earning, above $45,000. And as your
salary goes into the new higher brackets,

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

00:06:40.956 --> 00:06:44.740
superannuation from your employer's 
contributions, and through the process

00:06:44.740 --> 00:06:50.920
called salary sacrifice. They are not 
taxed at your marginal, personal tax rate.

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

00:06:56.089 --> 00:07:00.983
being earned over 45 grand are normally 
taxed at 30%, money going into your super

00:07:00.983 --> 00:07:05.583
are only going to be taxed at 15% maximum. 
That is the benefit of superannuation,

00:07:05.583 --> 00:07:09.992
so let's go through this. Let's start
talking about investing money, finances,

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

00:07:13.682 --> 00:07:15.870
investing and knowing where your money
comes from.

00:07:15.870 --> 00:07:19.698
So knowing where your money goes is 
extremely important, being able to track

00:07:19.698 --> 00:07:23.698
your spending is an extremely important
part of looking after your money.

00:07:23.698 --> 00:07:27.799
Planning your goals, whether they be
short-term, medium-term, or long-term,

00:07:27.799 --> 00:07:31.382
basics of knowing where your money comes
from, and what you're gonna spend it on.

00:07:31.382 --> 00:07:35.179
But also being a smart borrower. There's 
nothing wrong with borrowing money,

00:07:35.179 --> 00:07:39.180
but some would argue, borrowing money to
purchase something that is declining in

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

00:07:43.527 --> 00:07:47.010
they want to do that. Also understanding
compounding interest.

00:07:47.010 --> 00:07:51.867
Interest earnt, people understand that 
maybe I'm making, for example, a 7%

00:07:51.867 --> 00:07:55.337
return on my money, but when you 
understand that compounding interest is

00:07:55.337 --> 00:07:59.162
interest on top of interest on top of 
interest, that's extremely powerful.

00:07:59.162 --> 00:08:02.706
Albert Einstein once said 'compound 
interest is the eighth wonder of the

00:08:02.706 --> 00:08:08.467
world, he who understands it, earns it. 
He who doesn't, pays it.' Something to

00:08:08.467 --> 00:08:11.730
think about there. Well let's firstly talk
about budgeting.

00:08:11.730 --> 00:08:15.659
So there is a concept called the 
'bucketing approach', cause when we talk

00:08:15.659 --> 00:08:18.454
about budgeting, people get quite 
concerned and they think very heavily

00:08:18.454 --> 00:08:22.798
about every cent that this, and every 
individual item, and that is fair enough.

00:08:22.798 --> 00:08:26.755
But if you simplify things in budgeting
into a simpler approach, it might be as

00:08:26.755 --> 00:08:31.649
simple as dividing your income into three
buckets, or three aspects of your income.

00:08:31.649 --> 00:08:36.636
And you might allocate, for example, 50% 
of your income to your needs, so for

00:08:36.636 --> 00:08:40.446
example your home loan, your rent,
groceries, utilities and your insurances.

00:08:40.446 --> 00:08:44.402
So 50% is just a concept, you might have
more than that, you might have less,

00:08:44.402 --> 00:08:48.497
but when you identify an amount of
money, that is used for your needs, set

00:08:48.497 --> 00:08:51.423
that money aside and you know that your
needs are covered.

00:08:51.423 --> 00:08:55.152
And then you might have your wants, and
you might decide to allocate maybe 30%

00:08:55.152 --> 00:08:59.201
of your income to your wants. And they can
be things like your, upgrading needs,

00:08:59.201 --> 00:09:03.600
money's for evenings out, hobbies, 
sporting events, holidays, but upgrading

00:09:03.600 --> 00:09:07.973
needs we might talk about maintenance
on your home, new cars, things like that.

00:09:07.973 --> 00:09:12.852
And then you might decide to allocate 
20% of your income towards savings.

00:09:12.852 --> 00:09:17.236
And that might be an emergency fund for
when things go wrong, or maybe long-term

00:09:17.236 --> 00:09:21.354
savings for things off in the future, 
that might include other investments like

00:09:21.354 --> 00:09:26.516
superannuation, shares, property, but it 
also might include the overpayment of your

00:09:26.516 --> 00:09:31.407
debt, so paying extra money to pay off
loans might be considered to be savings.

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

00:09:36.474 --> 00:09:41.072
point, you might decide to put more money
into savings, less into wants, but by

00:09:41.072 --> 00:09:45.966
having a structure, makes it easier to 
stick to that structure, and identify what

00:09:45.966 --> 00:09:48.024
you're going to be putting your money
into.

00:09:48.024 --> 00:09:53.278
Let's now talk about being a smart 
borrower. Borrowing money is for most

00:09:53.278 --> 00:09:59.454
people, a necessity in life, for certain
things, but not all debt is equal, it will

00:09:59.454 --> 00:10:02.828
depend on the purpose of the loan, 
it will depend on the interest rates

00:10:02.828 --> 00:10:06.378
you're paying, how often and how much
your payments are going to be, and it

00:10:06.378 --> 00:10:10.756
should be consolidating different debts,
or different loans, into one.

00:10:10.756 --> 00:10:15.489
So for example, when they say 'not all
debt is equal', if you're borrowing money

00:10:15.489 --> 00:10:18.978
from a bank or institution, as an 
example, and maybe you're borrowing it

00:10:18.978 --> 00:10:24.271
and you're having to pay, 5% interest
or 6% interest to borrow that money,

00:10:24.271 --> 00:10:27.788
but maybe you're borrowing that money
to purchase something that's going to

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

00:10:32.065 --> 00:10:36.171
'good debt'. Whereas 'bad debt' might be
be something as simple as paying for a

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

00:10:40.209 --> 00:10:44.335
when you get back by way of interest. 
So understand, borrowing money is not

00:10:44.335 --> 00:10:49.337
necessarily a bad thing, but understanding
when you should, shouldn't borrow to

00:10:49.337 --> 00:10:51.819
purchase things is something
that you have to decide.

00:10:51.819 --> 00:10:55.530
Now lets now talk about compounding 
interest, I'm gonna go through the example

00:10:55.530 --> 00:10:59.469
we quite often use. Compounding interest
is basically earning interest on top of

00:10:59.469 --> 00:11:04.242
previously earned interest. So let's look
at a case study of Jenny, who invests

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

00:11:09.121 --> 00:11:15.098
receives 5% per annum compounded interest,
compounded on a monthly basis.

00:11:15.098 --> 00:11:21.690
Now, and the end of five years, her
investments actually gonna grow to $12,834.

00:11:21.690 --> 00:11:27.476
She's not just earning 5% on $10,000, 
so let's see how this works.

00:11:27.476 --> 00:11:33.440
If she invests $10,000 at the start of 
year 1, by compounding interest at 5%

00:11:33.440 --> 00:11:38.479
per annum monthly, she's doesn't end up
with $500, which would be if she

00:11:38.479 --> 00:11:43.439
compounded once, she ends up with $512, 
it's actually more than 5% over the 12

00:11:43.439 --> 00:11:47.237
months because it's been compounded 
monthly. So at the beginning of the next

00:11:47.237 --> 00:11:52.358
year she's got $512, which she earns 5% 
interest compounded monthly, for the next

00:11:52.358 --> 00:11:58.239
12 months, she accumulates $538. 
Ends up with $11,049, and you can see over

00:11:58.239 --> 00:12:06.610
five years, the interests that's been 
compounded grows, 512, 538, 565, 594, 625.

00:12:06.610 --> 00:12:10.266
So compounding interest, when you leave 
investments alone, and they compound on

00:12:10.266 --> 00:12:14.071
top of each other. It's investments' 
interest on top of the last lot of

00:12:14.071 --> 00:12:18.203
interest returns. That's where leaving 
things long term can generate greater

00:12:18.203 --> 00:12:22.285
levels of interest, because it's not 
simple interest, it's compound interest.

00:12:22.285 --> 00:12:27.708
And that's where these slides come in,
excuse me, time is money.

00:12:29.638 --> 00:12:35.727
People often talk about 'timing the market',
it's often more important to spend time

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

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,

00:12:45.014 --> 00:12:48.956
with a starting balance of nothing, 
they want to put an extra $50 a fortnight

00:12:48.956 --> 00:12:52.761
perhaps even less, in superannuation. 
So let's just assume this is extra money

00:12:52.761 --> 00:12:56.522
you're putting into your super, above and 
beyond what you might already be getting.

00:12:56.522 --> 00:13:00.481
What difference will it make by putting
$50 a fortnight, now let's assume an

00:13:00.481 --> 00:13:04.948
annual earning rate of roughly 7.8%,
so you're probably in the growth plan.

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

00:13:10.797 --> 00:13:15.493
conversation inflation and things like
that, when you get to 60, so after 40

00:13:15.493 --> 00:13:21.388
years, you'll have $345,758 extra sitting 
in your account.

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,

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,

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

00:13:36.295 --> 00:13:41.027
they're only 10-year periods separating
each starting point, the amounts of

00:13:41.027 --> 00:13:45.345
difference are massive. Because the person
starting making contributions earlier,

00:13:45.345 --> 00:13:49.290
is getting compounding interest every
month on top of the contributions that

00:13:49.290 --> 00:13:53.167
have already grown. And that's why the 
balance can be quite large, by putting in

00:13:53.167 --> 00:13:56.829
significantly small amounts of money, 
if you start really early.

00:13:56.829 --> 00:14:01.188
Well let's now focus on that $345,000 
because we know that starting at 20,

00:14:01.188 --> 00:14:04.770
over 40 years, should generate a figure 
that's similar to that.

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.

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

00:14:14.169 --> 00:14:19.181
put in $112 a fortnight, significantly
more. If you don't start 'til you're 40,

00:14:19.181 --> 00:14:23.232
now you've gotta do $270 a fortnight, 
for a much shorter period of time.

00:14:23.232 --> 00:14:27.203
And if you don't start 'til you're 50, 
now it's $807 per fortnight.

00:14:27.203 --> 00:14:31.507
So this is where compounding interest can
work against you, the longer you wait to

00:14:31.507 --> 00:14:35.304
start making investments. And because
superannuation can't be accessed,

00:14:35.304 --> 00:14:39.314
generally until the age of 60 anyway, 
for a lot of people making extra

00:14:39.314 --> 00:14:43.486
contributions in super, the benefits of 
compounding interest come along anyway,

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

00:14:47.189 --> 00:14:52.485
start growing your super, the earlier you
start, generally speaking, the less amount

00:14:52.485 --> 00:14:55.484
you've gotta make as a contribution
a fortnight.

00:14:55.484 --> 00:14:59.917
And what is the value of superannuation
to you? Well the value of super is this;

00:14:59.917 --> 00:15:06.614
It's a very tax-advantaged saving scheme 
for retirement, often more, better tax

00:15:06.614 --> 00:15:09.227
advantages than you're gonna get through
your income tax rates.

00:15:09.227 --> 00:15:14.488
Why is superannuation compulsory, and it's
been compulsory since 1992, it's so that

00:15:14.488 --> 00:15:18.853
you have an alternative to, or a 
supplement for, the age pension.

00:15:18.853 --> 00:15:23.552
The age pension, is not going to disappear
anytime soon, but it is still seen as

00:15:23.552 --> 00:15:27.830
being only a safety net for retirement.
Because we've been getting compulsory

00:15:27.830 --> 00:15:30.237
super now since 1992.

00:15:30.237 --> 00:15:34.716
And the value of super for you might be 
to give you the options in retirement

00:15:34.716 --> 00:15:40.237
that you might not otherwise have, by just
relying on the age pension, or even just

00:15:40.237 --> 00:15:45.050
compulsory super, maybe making extra 
contributions, will meet your objectives,

00:15:45.050 --> 00:15:48.584
as to what your lifestyle might look like
in retirement.

00:15:48.584 --> 00:15:52.270
Now there are different ways of getting
money into super, and the main way is

00:15:52.270 --> 00:15:55.239
your employers' contributions. 
Now down on the left-hand side you can

00:15:55.239 --> 00:15:59.108
see, you can put money in super through 
your employers' contributions, through

00:15:59.108 --> 00:16:03.358
salary sacrifice through your payroll, 
voluntary after-tax contributions,

00:16:03.358 --> 00:16:07.050
through cheque or B-pay or even through
your payroll. There are also personal

00:16:07.050 --> 00:16:10.198
deductible contributions which we're not
going to go into great detail about today,

00:16:10.198 --> 00:16:14.562
and there's also spouse contributions. 
But across the top, there are two main

00:16:14.562 --> 00:16:20.271
forms of contributions. One is called 
concessional contributions, one is called

00:16:20.271 --> 00:16:22.022
non-concessional.

00:16:22.022 --> 00:16:26.434
What is the difference? The difference 
comes down to the name. Concessional

00:16:26.434 --> 00:16:31.380
contributions are moneys' that go into 
your super before you pay your income tax.

00:16:31.380 --> 00:16:36.861
So when I showed you before that for 
most Australians earning over $30,000 a

00:16:36.861 --> 00:16:41.695
year, most of us are paying 30% tax on a
fair chunk of our income.

00:16:41.695 --> 00:16:46.031
So for when you have a non-concessional
contribution, that means you've earned

00:16:46.031 --> 00:16:51.697
your money, you've generally paid your 
tax on your income, which could be 30%.

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

00:16:57.623 --> 00:17:01.540
super, that would be a non-concessional
contribution. But when putting money

00:17:01.540 --> 00:17:05.363
into your super as a concessional 
contribution, the money comes out of your

00:17:05.363 --> 00:17:09.775
income, before it gets taxed at your 
regular tax rate and instead goes into

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%,

00:17:15.898 --> 00:17:22.101
you're left with $850. So superannuation
concessional contributions is like earning

00:17:22.101 --> 00:17:26.997
$1000 and being able to invest $850, 
whereas non-concessional contributions,

00:17:26.997 --> 00:17:30.590
which you can invest in anywhere, might 
otherwise be earning $1000 and only

00:17:30.590 --> 00:17:34.828
getting $700 invested. That's the benefit 
of superannuation.

00:17:34.828 --> 00:17:39.360
And what this slide here is showing, 
excuse me, is normally you earn your

00:17:39.360 --> 00:17:44.253
salary, your salary gets taxed at your 
marginal tax rate, think 30-odd percent or

00:17:44.253 --> 00:17:48.051
possibly more, at the top end, and money
goes into your bank account.

00:17:49.690 --> 00:17:53.345
Money that you can buy and invest 
elsewhere, the interest or earnings are

00:17:53.345 --> 00:17:58.717
also taxed at your marginal tax rate. 
But when you put money into superannuation

00:17:58.717 --> 00:18:03.021
through your salary, through salary 
sacrifice, it'll only be taxed at 15%,

00:18:03.021 --> 00:18:06.822
either on the way into your account with 
most super funds like GESB, Australian

00:18:06.822 --> 00:18:11.777
Super and Hesta, or the money on the way
out, with West State Super, still 15%.

00:18:11.777 --> 00:18:18.087
And not just that, not only do you pay 
only 15% tax on the contributions, you

00:18:18.087 --> 00:18:22.914
only pay 15% tax on the investment 
earnings, as opposed to your marginal tax

00:18:22.914 --> 00:18:29.665
rate. Now because superannuation 
is considered to be a tax-effective savings

00:18:29.665 --> 00:18:33.475
strategy for your retirement, that's why
the government's put in place, they also

00:18:33.475 --> 00:18:36.617
understand, that by saving for your 
retirement, the government is going to

00:18:36.617 --> 00:18:40.320
receive less tax now, than if you hadn't
put it through your pay.

00:18:40.320 --> 00:18:43.581
That's why they limit the amount you're
allowed to put into your superannuation

00:18:43.581 --> 00:18:47.177
through what are called concessional 
contributions. Now for most Australian

00:18:47.177 --> 00:18:52.361
funds, being taxed funds, GESB, Hesta, 
Australian Super, that sort of fund, the

00:18:52.361 --> 00:18:57.900
limitation per year is $30,000 per year. 
And that includes your employers super

00:18:57.900 --> 00:19:02.467
contributions, so you could already be 
getting 11 and a half percent in super,

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

00:19:07.322 --> 00:19:12.108
superannuation savings. If you go above
that, you're not penalised as such, but

00:19:12.108 --> 00:19:15.442
the excess contributions will be taxed 
at your marginal tax rate.

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

00:19:20.061 --> 00:19:24.915
Super Account those concessional 
contributions of an annual $30,000 limit,

00:19:24.915 --> 00:19:29.726
do not apply to you. Instead, you've got 
what's called an untaxed plan cap,

00:19:29.726 --> 00:19:36.038
and as that currently stands, that is 
$1.78 million in your lifetime.

00:19:36.038 --> 00:19:40.038
And that gets indexed every year. 
So that means, if you've got West Side

00:19:40.038 --> 00:19:43.551
Super for example, irrespective of 
what your employer's putting into your

00:19:43.551 --> 00:19:47.655
employers' contributions, you can salary 
sacrifice above and beyond that, past the

00:19:47.655 --> 00:19:54.246
$30,000 per year, up to $1.78 million over
your lifetime.

00:19:54.246 --> 00:19:58.938
So that's an important consideration of
West State that provides benefits that may

00:19:58.938 --> 00:20:00.944
not be applicable in other super funds.

00:20:00.944 --> 00:20:04.848
However, there is one thing you need to 
consider. Whilst West State Super does not

00:20:04.848 --> 00:20:09.473
have an annual limitation, like every 
other super fund, there is a correlation

00:20:09.473 --> 00:20:14.927
between West State, and other super funds.
So what this example here is showing is

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

00:20:19.820 --> 00:20:24.003
super fund, like Hesta, or Australian 
Super, or maybe a self-managed super

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,

00:20:28.242 --> 00:20:32.399
of concessional contributions into West 
State, that's okay, I can still put

00:20:32.399 --> 00:20:36.155
$10,000 of concessional contributions 
into another fund, without breaching the

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

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,

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

00:20:51.772 --> 00:20:56.383
State counts against whatever I'm putting
into any other Australian super fund,

00:20:56.383 --> 00:21:01.463
tax super fund. So if I'm putting $30,000 
into West State through salary sacrifice,

00:21:01.463 --> 00:21:07.145
and employer contributions, at that point,
if any extra moneys' are going into a tax

00:21:07.145 --> 00:21:11.169
super fund, as a concessional
contribution, that amount is now in breach

00:21:11.169 --> 00:21:17.439
of the concessional contributions cap. 
And as per example slide three, if I'm

00:21:17.439 --> 00:21:21.971
putting $50,000 into West State, that's 
not a problem, but it means anything going

00:21:21.971 --> 00:21:25.848
into any other fund as a concessional
contribution is in breach of the

00:21:25.848 --> 00:21:30.195
concessional cap. So please be mindful 
of that if you've got multiple super funds.

00:21:30.195 --> 00:21:35.513
Now, irrespective of which super 
fund you've got, the non-concessional

00:21:35.513 --> 00:21:40.514
contribution cap is, for example, money I
might have in the bank, money I might have

00:21:40.514 --> 00:21:43.534
already saved, money I might be getting
from an inheritance.

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.

00:21:47.773 --> 00:21:51.070
I could put that into my West State
account, or GESB account or any other

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

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

00:22:01.274 --> 00:22:06.755
problem, provided I don't put in more 
than $360,000 over a three-year period.

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

00:22:11.446 --> 00:22:14.565
year, 120 the following year, no problem.

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

00:22:19.202 --> 00:22:23.145
problem, but what happens is for this year
and the next two years, the government

00:22:23.145 --> 00:22:26.849
says the most you can put in is $360,000.

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

00:22:30.912 --> 00:22:34.295
at 47%. Now, there is something else to
take into account.

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

00:22:39.201 --> 00:22:43.934
your super through non-concessional 
contributions, you can only make these

00:22:43.934 --> 00:22:50.190
contributions if your balance in super
is less than $1.9 million at the end of

00:22:50.190 --> 00:22:54.061
the financial year. So what I would say is
this, if you're planning on making

00:22:54.061 --> 00:22:57.570
non-concessional contributions to your
super, and you've got less than

00:22:57.570 --> 00:23:02.342
$1.9 million, and you're under 75, you can
still make these contributions.

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

00:23:06.808 --> 00:23:11.594
super fund, 'cos once you're within three
years of getting to 75, the amount you

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

00:23:15.494 --> 00:23:18.712
because you might exceed that cap.
So please contact your super fund

00:23:18.712 --> 00:23:20.551
to understand how that works.

00:23:20.551 --> 00:23:24.851
Now, let's start talk about the investment
side of things.

00:23:24.851 --> 00:23:29.013
Investment terms and concepts, so we're
going to talk about unit prices, share

00:23:29.013 --> 00:23:33.131
prices, dividends, and liquidity, we're
gonna talk about asset classes, we're

00:23:33.131 --> 00:23:36.540
gonna talk about risk profile and time 
horizon.

00:23:36.540 --> 00:23:40.297
So what are unit prices, 
well unit prices are very similar to

00:23:40.297 --> 00:23:44.841
shares, so in your super, when money 
goes into your superannuation fund,

00:23:44.841 --> 00:23:47.488
what happens is you don't get a set level
of return.

00:23:47.488 --> 00:23:52.142
What actually happens is, we purchase
investments at a certain price.

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

00:23:57.261 --> 00:23:59.575
investments at a dollar per investment.

00:23:59.575 --> 00:24:03.813
As the unit price goes up in value, 
the investments you've already got go up

00:24:03.813 --> 00:24:06.375
in value, your balance goes up.

00:24:06.375 --> 00:24:10.896
But it also means that extra money going
into your super, buys less and less for

00:24:10.896 --> 00:24:15.063
your dollar 'cos the new investments you're
buying are getting more expensive.

00:24:15.063 --> 00:24:19.440
Subsequently though, if unit prices drop,
and you're putting money into your super,

00:24:19.440 --> 00:24:23.328
you buy more for your dollar.
So understanding how unit prices work is

00:24:23.328 --> 00:24:27.127
extremely important with super, because 
even when markets go down, even though

00:24:27.127 --> 00:24:30.821
your balance might fall, you actually get
to buy more investments for your dollar

00:24:30.821 --> 00:24:35.739
because you're getting more purchasing
value, so please understand that.

00:24:35.739 --> 00:24:39.466
Also, unit pricing provides liquidity 
because it means that when you resign

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

00:24:43.610 --> 00:24:47.489
superannuation investments to take some
money out. Unit pricing provides

00:24:47.489 --> 00:24:51.793
liquidity, you might decide to sell off
$10,000 worth of investments to get the

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

00:24:55.909 --> 00:25:01.861
talk about risk profile, and time horizon,
in fact, I'll talk about time horizon now.

00:25:01.861 --> 00:25:07.354
Time horizon is, how soon until I need my
actual money. Why is that important?

00:25:07.354 --> 00:25:12.485
If I need my money tomorrow, from my 
retirement savings, you may not want to

00:25:12.485 --> 00:25:16.619
have your money invested in high growth or
risky investments, because if the balance

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

00:25:20.981 --> 00:25:24.680
the next 12 months, if you're invested in
a more volatile investment type,

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

00:25:28.965 --> 00:25:32.446
time when you don't have time to recover
the investment losses because you're

00:25:32.446 --> 00:25:36.511
drawing down soon. However, on the
flipside, if you don't need your

00:25:36.511 --> 00:25:41.912
superannuation for 20 or 30 years, your 
time horizon is quite far off, you might

00:25:41.912 --> 00:25:45.825
decide 'well my risk profile might be a
little bit greater, which means I can

00:25:45.825 --> 00:25:50.405
afford to take on more risk, maybe I can
afford to take on more volatility,' because

00:25:50.405 --> 00:25:54.468
the more volatile your investments are, 
the most risk they take on, the more

00:25:54.468 --> 00:25:58.399
likely it is to go up, but the more likely
it is to experience downturns.

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

00:26:03.396 --> 00:26:07.555
down, but they likely recover the losses 
in the medium-to long-term.

00:26:07.555 --> 00:26:12.268
And that's why we talk about risk in
super, super is not without risk.

00:26:12.268 --> 00:26:16.319
There's legislative risk, the risk that
the government may change the rules.

00:26:16.319 --> 00:26:19.367
It has happened in the past, will likely
happen in the future.

00:26:19.367 --> 00:26:23.939
But the extent to which those risks come 
about with legislation, often or at the

00:26:23.939 --> 00:26:28.054
top end, to reduce the amount of tax
effectiveness that people can get, the

00:26:28.054 --> 00:26:31.064
rules don't change that much or that often.

00:26:31.064 --> 00:26:36.533
Then we've got investment risk, the risk 
that your investment may not achieve

00:26:36.533 --> 00:26:39.580
your investment outcomes, that you're
looking for.

00:26:39.580 --> 00:26:44.527
So understand that even though markets
go up and down, okay, that is the

00:26:44.527 --> 00:26:48.938
investment risk. But avoiding risk might 
result in you not getting the return that

00:26:48.938 --> 00:26:51.559
you actually want, it may not give you
enough return.

00:26:51.559 --> 00:26:55.725
Increasing investment risk may increase
volatility, how much it goes up and down,

00:26:55.725 --> 00:26:58.813
but hopefully should increase what you
return in the end.

00:26:58.813 --> 00:27:03.332
And restricted access is also a risk. 
Only put money into superannuation

00:27:03.332 --> 00:27:07.264
you can afford to be without generally
until the age of 60, because that's when

00:27:07.264 --> 00:27:09.134
you get access to your super.

00:27:09.134 --> 00:27:13.640
So managing your investment risk through
the GESB website, we have an investment

00:27:13.640 --> 00:27:19.856
tool in the GESB calculators area, there's
one that allows you, called the

00:27:19.856 --> 00:27:24.908
Investment Tool, to choose what investment
profile you might want to take on.

00:27:24.908 --> 00:27:28.265
Because in your super your money gets 
invested in Australian shares,

00:27:28.265 --> 00:27:31.660
international shares, private equity, 
and other investment options.

00:27:31.660 --> 00:27:36.316
Some are less, or more defensive, less
aggressive, some are more growth-orientated

00:27:36.316 --> 00:27:38.961
providing greater levels of return over 
the long-term.

00:27:38.961 --> 00:27:43.666
Now, GESB takes what's called a
multi-manager approach, by doing this

00:27:43.666 --> 00:27:47.388
it means we spread your money far and 
wide, so whether you're in GESB Super,

00:27:47.388 --> 00:27:51.204
West State or one of our retirement income
pension options, you can choose to be

00:27:51.204 --> 00:27:55.750
invested in cash, conservative, balanced,
sustainable balanced, growth and a range

00:27:55.750 --> 00:27:59.653
of other options. But even below that,
when you look at the actual investment

00:27:59.653 --> 00:28:03.985
managers we use, within the Australian
share portfolio, we use about seven

00:28:03.985 --> 00:28:07.661
different fund managers, within the
property portfolio we use in excess of

00:28:07.661 --> 00:28:12.487
10, we do this to spread the risk far
and wide, which mitigates the chances of

00:28:12.487 --> 00:28:15.469
the managers making mistakes and impacting
you.

00:28:15.469 --> 00:28:18.959
Because as you can see, different
investments perform differently, so what

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

00:28:22.741 --> 00:28:27.207
or the other, and by taking the balanced
approached for a lot of people, whether

00:28:27.207 --> 00:28:31.377
it be in the growth plan, sustainable or
my West State plan, what this graph is

00:28:31.377 --> 00:28:35.983
showing is how the West State Super plan
has performed since 2001.

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,

00:28:39.737 --> 00:28:44.403
the reason we show West State first is 
because it goes back the furthest, which

00:28:44.403 --> 00:28:48.641
allows you to see the impact of volatility
growth has had on the investment markets.

00:28:48.641 --> 00:28:54.348
And you can see, even though growth and
the West State plan are the most important

00:28:54.348 --> 00:28:59.148
aggressive of the plans, that also 
returned the greatest investment growth.

00:28:59.148 --> 00:29:04.161
Whereas the cash plan, nice, slow and 
steady, doesn't perform overly well,

00:29:04.161 --> 00:29:06.619
but it also doesn't achieve negatives.

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

00:29:10.435 --> 00:29:14.296
line, the sustainable balanced plan, 
it only shows a short-term because

00:29:14.296 --> 00:29:16.995
we've only had it available for about
12 months.

00:29:16.995 --> 00:29:20.833
Now in West State Super there are five
ready made plans to choose from,

00:29:20.833 --> 00:29:25.178
and you get to choose from cash, 
conservative, the default plan if you've

00:29:25.178 --> 00:29:29.013
not made an option, which used to be
called the balanced plan, there's also

00:29:29.013 --> 00:29:32.638
the sustainable balanced plan as well as
growth. The growth plan is the most

00:29:32.638 --> 00:29:35.793
aggressive, the cash plan is the least
aggressive.

00:29:35.793 --> 00:29:39.281
But you can also take the option to do
a mix your plan.

00:29:39.281 --> 00:29:43.613
This is where you can choose the exact 
allocation of investment types, from the

00:29:43.613 --> 00:29:47.156
five asset classes that exist, you can 
change it as often as you want.

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

00:29:53.185 --> 00:29:56.082
first started, that's when the global 
financial crisis hit.

00:29:56.082 --> 00:30:00.445
But it still shows, that even though cash
has been very steady along the middle,

00:30:00.445 --> 00:30:04.455
the other investment plans have been more
volatile, but have provided greater levels

00:30:04.455 --> 00:30:08.412
of return. And you can actually plot these
graphs on the GESB website through the

00:30:08.412 --> 00:30:12.537
investment centre, and you can plot the
cash, conservative, balanced, the default

00:30:12.537 --> 00:30:14.586
plan, sustainable and the growth.

00:30:14.586 --> 00:30:18.794
And as I said before, you can change your
investment options as often as you want.

00:30:18.794 --> 00:30:23.585
The benefit of investing through super is
that firstly, it's a long-term investment

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

00:30:27.235 --> 00:30:30.959
suits your personality trait, you make 
those contributions, you can make extra

00:30:30.959 --> 00:30:34.578
contributions, and because you can't 
access the money generally until you're

00:30:34.578 --> 00:30:39.147
60, you get the benefit of compounding
interest, without disturbing those

00:30:39.147 --> 00:30:41.823
investments. So the next steps for you.

00:30:41.823 --> 00:30:45.702
Try out investment planning tool to help
determine what investment vehicle you

00:30:45.702 --> 00:30:49.401
should be in. You might be a conservative 
person, that might just mean simply,

00:30:49.401 --> 00:30:52.094
you need to take a less aggressive option
with your investment.

00:30:52.094 --> 00:30:55.679
However, if you understand that over the
long-term, and you understand that the

00:30:55.679 --> 00:30:59.076
ups and downs with investments might
provide you with greater outcomes,

00:30:59.076 --> 00:31:01.946
you might decide to go with more growth
orientated options.

00:31:01.946 --> 00:31:07.783
You can change as your personality changes,
as your timeframes change for retirement.

00:31:07.783 --> 00:31:11.659
You can review your investment choice 
through the member online facility,

00:31:11.659 --> 00:31:15.643
go to the GESB website, top right-hand 
corner you can log-on to member online,

00:31:15.643 --> 00:31:17.555
you can do it as often as you want.

00:31:17.555 --> 00:31:21.806
Also read the quarterly investment updates
on our website, so that you get a better

00:31:21.806 --> 00:31:25.684
understanding of how investments actually
work, rather than just listening to the

00:31:25.684 --> 00:31:30.136
news, rather than your sister-in-law,
or indeed your friends because without

00:31:30.136 --> 00:31:35.054
any disrespect intended, most of us aren't
investment gurus, we hear things through

00:31:35.054 --> 00:31:37.180
the news, we hear things through friends.

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

00:31:41.352 --> 00:31:44.948
as you can and you make those key
decisions. You can also try our

00:31:44.948 --> 00:31:49.024
contributions calculator, so on the GESB 
website, right-hand side roughly half-way

00:31:49.024 --> 00:31:52.488
down, there's a section called
'calculators', within that there

00:31:52.488 --> 00:31:56.470
is the investments tool, but there are
also tools about showing you how much

00:31:56.470 --> 00:32:00.387
your contributions could be into your
super, there are also calculators about

00:32:00.387 --> 00:32:04.548
the time and planning. How much difference
will contributions make into your super

00:32:04.548 --> 00:32:05.989
over the long-term.

00:32:05.989 --> 00:32:08.310
Have a look at them, they're very 
worthwhile.

00:32:08.310 --> 00:32:12.171
What should you be being next?
Well maybe contact at GESB if you need to.

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

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

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

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

00:32:36.920 --> 00:32:42.453
can contact us through the website. If you
found this somewhat useful, you can go

00:32:42.453 --> 00:32:45.972
back and watch this webinar at your
leisure, it is being recorded, and if

00:32:45.972 --> 00:32:50.054
you've got any questions, contact GESB 
directly. We'll be updating this webinar

00:32:50.054 --> 00:32:53.856
probably at the beginning of the next 
financial year, and there are many other

00:32:53.856 --> 00:32:58.056
webinars available on the GESB website. 
In the meantime, my name is Brad Zaknich,

00:32:58.056 --> 00:33:01.785
thank you very much for logging in, 
we hope you enjoyed this recorded webinar.