The proposed superannuation changes in the 2016 Budget generated the full range of emotions, from outrage to praise. The comments among the 700 responses reveal as much as the overall scores.
The benefit of setting investment objectives is most apparent in times of market turmoil, but at any time, defining a preference for maximum returns or minimum risk will help to achieve the right outcome.
The way retirement risks and outcomes are visualised and communicated needs to move from simplistic assumptions on returns to calculating a range of outcomes and probabilities to better represent the real world.
The commodities market is impossible to predict in terms of cyclical highs and lows, and nobody ‘rings the bell’ at either point. One strategy is to scale in or out gradually on early detection of a new trend.
Public or private ancillary funds are tax-effective vehicles to manage charitable giving. Not only are there immediate tax advantages, but it can set up a family for generations of giving and engagement.
Keeping superannuation savings in term deposits will protect the capital but doesn’t optimise the retirement outcome. There are many alternatives that should provide higher sustainable income over the long term.
Articles from previous editions
In recent months, both sides of politics have explained what they mean by ‘retrospective’ changes to policy, and their new superannuation rules fall into their own definitions.
Among the Budget’s proposed super changes, little has been said about the broad impact of the new transition to retirement rules. Those who intend working beyond the age of 60 may now pay tax on their entire balance.
SMSFs transferring funds to a tax-free pension account under the proposed cap of $1.6 million will not need to sell or segregate assets from an accumulation account for the same member.
Given how difficult it is to forecast statistics such as GDP, employment or inflation, investors should ignore macroeconomics. Even if forecasts were accurate, they are not very useful for valuing shares.
The current level of fear in the market could be signalling a downturn or even another GFC. Investors should remember the lessons from the last crisis, and be in a position to take advantage of the next one.
The wealth management businesses of major banks may be efficient uses of their capital, but it comes with scrutiny of the vertical integration model and culture risks. There’s increasing focus on whether it’s worth having.
Although the proposed changes to superannuation might be worryingly detrimental to retirement outcomes, super will remain the most tax-effective retirement saving vehicle for the majority of people.
Click 'Next' to go to hundreds of archived articles on investing.