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SASS Wise

Money wisdom, tips and insights from the SASS community.

Our poll revealed that 67% of SASS members don’t tell friends or family how much they earn. But when money is one of the top causes of stress in Australia, perhaps it’s time to be more open about our finances.

In this first edition of SASS Wise, we talk SASS benefits, future proofing your finances and we answer questions from our very own SASS community.


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Getting ahead:
Know your SASS benefits

As a SASS member, you probably know you’re in a good scheme and have the potential to receive a substantial lump sum when you retire.

You probably also know that making personal contributions to SASS will help boost your final benefit.

But how does it work exactly? And what can you do to make the benefits work hard on your behalf? We’ve outlined some key things you need to know:

  • 1. Your personal contributions

    As a contributor to SASS, you can contribute between 1% and 9% of your salary to your Personal Account. This money is invested in the strategy you choose, or if you haven’t made a choice, it will be automatically invested in the Growth strategy. Your earnings in your personal account will depend on the earnings of the investment choice strategy (minus any expenses). There are four investment strategies to choose from - growth, balanced, conservative and cash.

    If you’re not sure what you’re currently contributing to SASS, you’ll find your contribution rate on your annual SASS statement.

  • 2. Your employer-financed benefit*

    The personal account contributions you make directly affect the amount your employer will pay towards your retirement benefit. The more you contribute, up to an average of 6% per annum in your personal account, the more points you will be rewarded with (until you reach the 180 accrued point maximum for the scheme).

    How does it work? For every 1% of salary you contribute to SASS, you earn 1 benefit point (up to an average of 6% per year). In turn, each of those points entitles you to 2.5%, or 3% for State Public Service Superannuation Fund (SPSSF) members, of your final average salary before tax.

    If you have accrued 180 SASS benefit points over 30 years, you will have maximised your employer-financed benefit. This benefit is calculated as 180 multiplied by 2.5% of your Final Average Salary - or in other words, 4.5 times your Final Average Salary before tax. So, increasing your final average salary will also ultimately increase the benefit you receive.

    *This is a standard SASS feature. Scheme rules vary for SPSSF members.

  • 3. Your basic benefit

    Another component of SASS is the basic benefit, which is an additional defined benefit, based on your final average salary. Your basic benefit is calculated as 3% (2.55% after tax) of your final average salary for each year of service, from April 1988.

Your final average salary

Your final average salary is the average of your superable salary on the day you exit, and as at 31 December in each of the two preceding years.

There are a number of smart ways you can maximise your final average salary before exit, and it all comes down to timing. A Aware Super financial planner1 can talk you through the strategies and options when it’s time.

For a visual overview of how SASS works, you can download our infographic below. It’s a handy reminder why it’s important to keep on track with your contributions.

1 Financial planning services are provided by our financial planning business, Aware Financial Services Australia Limited, ABN 86 003 742 756 AFSL No. 238430.

 

Recession-proof your finances? 5 tips from the experts

When was the last Aussie recession? If you’re struggling to remember, you’re probably not alone as it’s been nearly three decades since the last one hit.

Perhaps that’s why talk of a recession has got you worried. It’s only natural to be concerned about the impact of an economic downturn on your future plans and finances.

By finding out what it takes to get recession-ready, you can worry less about what the economy is up to and get on with life as you know it.

What is a recession?

There isn’t really an official definition, but some economic experts call it a recession when the economy shrinks for two consecutive months. The go-to indicator for economic growth is gross domestic product (GDP). When a country’s economy is growing, positive GDP is a measure of economic wellbeing. When GDP is in negative figures, it’s a clear sign the economy is struggling.

Some other clues to watch out for are rising unemployment and falling house prices and retail sales. When these figures move in the wrong direction, it can also spell trouble for our economy.

With much of the world living through a pandemic such as COVID 19, Even though the next one may still be years away, there’s no better time than now to future-proof your finances from a recession. Here are five essential tips on how to weather a recession with minimal stress on your lifestyle and finances:

5 tips to get your finances recession-ready

  • 1. Save for a rainy day

    An economic downturn often comes with rising unemployment and redundancies. Having a few months’ living expenses up your sleeve can see you through a period of time off work without having to borrow or fall behind on bills. A savings buffer is also a great way to give yourself some peace of mind.

  • 2. Don’t go overboard on your mortgage

    Planning to buy, refinance or borrow to renovate your home? Interest rates in Australia might be at an all-time low now, but they skyrocketed to a record high of 17.5% back in 1990. Plan to have some fat in your household budget so you can still make repayments if interest rates start rising.

  • 3. Don’t have all your eggs in one basket

    Diversification is a golden rule of investing and especially important during a recession, when particular companies and industries can be affected more than others. Diversifying across all asset classes – such as fixed income and commodities, in addition to equities and properties – can help to minimise your portfolio losses.

    When recessions strike, it’s best to focus on the long-term horizon and stick to your investment strategy. A financial adviser can look at your finances, investment goals, and risk-tolerance to help you decide on the right investment mix and strategy.

  • 4. Protect your income from the unexpected

    Income protection insurance is worth having even when the economy is firing on all cylinders. You could find yourself off work thanks to poor health or an accident at any time. Some policies may include cover for redundancy, which could come in handy in a recession when jobs are hard to come by.

  • 5. Learn to live within your means

    If you can stick to spending less than your income now, you’ll be better off if money gets tight in future. With more savings and less debts, you’ll be in a more robust financial position to ride out a recession.

    Recessions don’t last forever. But the impact on your finances can drag on beyond the worst of the slump. Staying on the front foot with your savings, cash flow and investments are all things you can do to beat the recession blues.

 

Questions from the SASS community

I'm currently employed as a casual. When I reach retirement age do I have to resign from all employment to have access to my super or can I defer my employment for a period and then keep working?

Assuming that you have a deferred SASS benefit (you need a permanent / permanent part-time role to be a contributing member), below are your options:

Commonwealth legislation says that if you’ve reached preservation age (between 55 and 60, depending on when you were born) and have permanently retired – that is, you have stopped work and have no intention of working 10 hours or more in any week in the future – then you can have access to your super. So, if you have retired before age 60, but are planning to work more hours than this, even if you’ve reached your preservation age, you won’t be able to access your super yet.

Once you reach age 60 however, the rules are different. At this point, Commonwealth legislation states you can access your super if you terminate an employment arrangement. Importantly, it doesn’t have to be all employment. If you have two different jobs for example, then stopping (not just postponing) one of them, even if it’s the job where you work the least hours, would be enough to satisfy this condition of release. The legislation is a little grey in the detail, so it’s always best to check before you make any changes.

There is another alternative if you’d like to continue working and use your super to pay yourself a regular income. If you have reached your preservation age, you can rollover or consolidate your SASS benefit to another Superannuation fund and start a transition to retirement income stream (TRIS). A TRIS permits you to access a minimum of 2%(1) of the balance of your TRIS account per annum. If you’re under age 60, the taxed portion of your transition to retirement payments would generally be taxed at marginal tax rates, less a 15% offset. These payments become tax free once you reach 60.

Of course, once you reach age 65, or permanently retire if earlier, you can have access to your super – with no restrictions or other criteria to meet.

Note: the above refers to Commonwealth legislation only. If you’re a contributing member of SASS, you’ll also need to cease employment with the employer who is contributing to SASS, before you can access your super.

1 The Government has temporarily reduced the minimum annual payment required for account-based pensions by 50% in the 2019–20, 2020–21, 2021-22 & 2022/23 financial years.

What happens when my accrued benefit points have reached 180, and I plan to keep working?

  • a) How do I keep the SASS account active?
  • b) What is the minimum contribution?
  • c) Does my employer contribute the 9% superannuation amount to my account?

a) Once you’ve reached 180 points, your SASS account will still remain active. Your personal contributions will continue to be added to your SASS Personal Account which will grow as you contribute and receive earnings. However, your employer-financed benefit (what your employer contributes) is based on a formula and is subject to the 180-point limit. So once you’ve reached this limit, your benefit can only increase as your salary increases.

b) You can choose to reduce your personal contributions to as low as 1% when you receive your Annual Adjustment notice in November / December. However, if you keep contributing the maximum level you are allowed (up to 9%), you’ll continue to build on your super savings.

c) Your employer will not switch to making the 9.5% super guarantee contribution whilst you’re a contributing member. Your employer-financed benefit will continue to increase with any increases to your final average superable salary. Your basic benefit, however, will continue to increase as your length of employment increases, and also if your final average superable salary increases. Any Additional Employer Contributions will also continue.

I recommend that you book an appointment with a Aware Super financial planner to advise you on whether continuing as a contributing member of SASS is the right option for you.

Note: Even though your employer won’t switch to making the 9.5% super guarantee, remember that over the course of your employment, your super benefit is likely to be a lot higher than if you had only been entitled to the super guarantee over your working life. The STC take great lengths to ensure this, by doing a calculation to check that the overall amount contributed by your employer is at least equal to what you would have received from the super guarantee alone.

 

Welcome to Caroline's Story

SASS member Caroline turned fear about the future into a plan for retirement.

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