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2013 MICHAEL RICE CEO 13 December 2013. © 2013 Rice Warner They have the following characteristics:  Co ntributions cannot be made into these products.

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Presentation on theme: "2013 MICHAEL RICE CEO 13 December 2013. © 2013 Rice Warner They have the following characteristics:  Co ntributions cannot be made into these products."— Presentation transcript:

1 2013 MICHAEL RICE CEO 13 December 2013

2 © 2013 Rice Warner They have the following characteristics:  Co ntributions cannot be made into these products  Minimum pension withdrawals must be made each year  The member takes on all risks including liquidity, inflation and longevity  Investment strategies are extremely flexible What are account-based pensions?

3 © 2013 Rice Warner  Annuities are a financial product issued by a life company  They provide a guaranteed series of payments over a contractual period – which could be for life What are annuities?

4 © 2013 Rice Warner Term certain  No residual value  100% residual (similar to term deposit) Variable  Investor manages assets  Guarantee is an insurance option over floor income Deferred  Pension commences at an advanced age  Price is paid much earlier – could be before or at retirement Lifetime  Annuity payments made until death  Payments are often indexed (which costs more)  Can have minimum payment terms (say, 10 year guarantee)  Joint life can pay reversionary benefit until second death of a couple Types of annuities

5 © 2013 Rice Warner Adequacy of Age Pension Age Pension ASFA Moderate ASFA Comfortable Newstart Singles$21,505$22,654$41,197$13,026 Couples$32,417$32,656$56,406$23,520

6 © 2013 Rice Warner Age Pension Benefit Impact of Assets Test CategoryAssetsNo assets$100,000$200,000$300,000$400,000$500,000$750,000 Home owner Individual $ 21,505 $ 21,378 $ 17,478 $ 13,578 $ 9,678 $ - Couple $ 32,417 $ 32,4178 $ 32,417 $ 31,598 $ 27,698 $ 23,798 $ 14,048 Non home owner Individual $ 21,505 $ 19,135 $ 15,235 $ 5,485 Couple $ 32,417 $ 29,355 $ 19,605

7 © 2013 Rice Warner Age Pension Benefit Impact of Income Test CategoryAssets$0$100,000$200,000$300,000$400,000$500,000$750,000 Income$0$6,000$12,000$18,000$24,000$30,000$45,000 Home owner Individual $ 21,504.6 $ 20,532.6 $ 17,532.6 $ 14,532.6 $ 11,532.6 $ 8,532.6 $ - Couple $ 32,416.8 $ 30,004.8 $ 27,004.8 $ 24,004.8 $ 21,004.8 $ 13,504.8 Non home owner Individual $ 21,504.6 $ 20,532.6 $ 17,532.6 $ 14,532.6 $ 11,532.6 $ 8,532.6 $ 1,032.6 Couple $ 32,416.8 $ 30,004.8 $ 27,004.8 $ 24,004.8 $ 21,004.8 $ 13,504.8

8 © 2013 Rice Warner  Four buckets used for different purposes:  Lump sum for immediate expenditure  Liquidity Pool for pension payments over the next few years  Nest Egg for emergencies  Growth Pool for later years in retirement  Retirees need to find products to place these funds. Clearly, a single investment strategy cannot cater for all these requirements  Asset pools must be separated and matched to liabilities Needs of the newly retired

9 © 2013 Rice Warner Needs vary by size of account Account balanceLump sumLiquidityNest eggGrowth <100,000ALL ,000 to 200,00075,00025,00050, ,000 to 400,00075,00045,00050,000130, ,000 to 600,00075,000 50,000300, ,000 to 1m100,000120,00080,000500,000 1m to 2m150, ,0001,100,000 >2m250,000150,000100,0001,500,000

10 © 2013 Rice Warner Small Accounts Account balanceLump sumLiquidityNest eggGrowth <100,000ALL ,000 to 200,00075,00025,00050, ,000 to 400,00075,00045,00050,000130, ,000 to 600,00075,000 50,000300, ,000 to 1m100,000120,00080,000500,000 1m to 2m150, ,0001,100,000 >2m250,000150,000100,0001,500,000

11 © 2013 Rice Warner Low Balances Account balanceLump sumLiquidityNest eggGrowth <100,000ALL ,000 to 200,00075,00025,00050, ,000 to 400,00075,00045,00050,000130, ,000 to 600,00075,000 50,000300, ,000 to 1m100,000120,00080,000500,000 1m to 2m150, ,0001,100,000 >2m250,000150,000100,0001,500,000

12 © 2013 Rice Warner Modest Balances Account balanceLump sumLiquidityNest eggGrowth <100,000ALL ,000 to 200,00075,00025,00050, ,000 to 400,00075,00045,00050,000130, ,000 to 600,00075,000 50,000300, ,000 to 1m100,000120,00080,000500,000 1m to 2m150, ,0001,100,000 >2m250,000150,000100,0001,500,000

13 © 2013 Rice Warner Moderate Balances Account balanceLump sumLiquidityNest eggGrowth <100,000ALL ,000 to 200,00075,00025,00050, ,000 to 400,00075,00045,00050,000130, ,000 to 600,00075,000 50,000300, ,000 to 1m100,000120,00080,000500,000 1m to 2m150, ,0001,100,000 >2m250,000150,000100,0001,500,000

14 © 2013 Rice Warner Adequate Benefits Account balanceLump sumLiquidityNest eggGrowth <100,000ALL ,000 to 200,00075,00025,00050, ,000 to 400,00075,00045,00050,000130, ,000 to 600,00075,000 50,000300, ,000 to 1m100,000120,00080,000500,000 1m to 2m150, ,0001,100,000 >2m250,000150,000100,0001,500,000

15 © 2013 Rice Warner Comfortable Retirees Account balanceLump sumLiquidityNest eggGrowth <100,000ALL ,000 to 200,00075,00025,00050, ,000 to 400,00075,00045,00050,000130, ,000 to 600,00075,000 50,000300, ,000 to 1m100,000120,00080,000500,000 1m to 2m150, ,0001,100,000 >2m250,000150,00100,0001,500,000

16 © 2013 Rice Warner Wealthy Retirees Account balanceLump sumLiquidityNest eggGrowth <100,000ALL ,000 to 200,00075,00025,00050, ,000 to 400,00075,00045,00050,000130, ,000 to 600,00075,000 50,000300, ,000 to 1m100,000120,00080,000500,000 1m to 2m150, ,0001,100,000 >2m250,000150,000100,0001,500,000

17 © 2013 Rice Warner Investing the Growth Component Asset ClassExpected GROSS 10 year return Value add from franking credits Total Return Australian shares 8.5%1.7%10.2% Balanced Fund6.5%0.57.0% Life Annuity4.5%- Cash3.5%-

18 © 2013 Rice Warner Contestable market for annuities Account balanceLump sumLiquidityNest eggGrowth <100,000ALL ,000 to 200,00075,00025,00050, ,000 to 400,00075,00045,00050,000130, ,000 to 600,00075,000 50,000300, ,000 to 1m100,000120,00080,000500,000 1m to 2m150, ,0001,100,000 >2m250,000150,000100,0001,500,000

19 © 2013 Rice Warner Annuities to cover fixed expenses Account balanceLump sumLiquidityNest eggGrowth <100,000ALL ,000 to 200,00075,00025,00050, ,000 to 400,00075,00045,00050,000130, ,000 to 600,00075,000 50,000300, ,000 to 1m100,000120,00080,000500,000 1m to 2m150, ,0001,100,000 >2m250,000150,000100,0001,500,000

20 © 2013 Rice Warner Account based pension + Annuity

21 © 2013 Rice Warner Account based pension

22 13 December 2013 DISCLAIMER The information contained in this presentation is provided by Rice Warner Pty Limited, ABN , AFSL (Rice Warner). It is intended as general information and is not personal advice as it does not take into account the particular circumstances of any reader. While due care and attention has been exercised in the preparation of this presentation, no representation or warranty, either express or implied, is given as to the accuracy, completeness or reliability of this information. The information presented is not intended to be a complete statement or summary of the matters referred to in the presentation. © 2013 Rice Warner. All rights reserved. Proprietary and Confidential. For Rice Warner and Rice Warner client use only.

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