Members Alliance has been a true journey one of learning, experiencing and growth. I have worked with true professionalism on a personal basis, for a team to work with you on your level of understanding and be able to produce not what they promise but what they say will happen has been exciting results for me. Heartfelt thanks from the day I stepped into your office and went one on one in the meeting room I have loved every moment and never looked back.
In all respects a professional team and a company that works best to accomplish your achievements. They clearly work to the best of all parties and have never faulted in their endeavour to make decisions simple and realistic. Communications have been brilliant, friendly and very up to date.
On a personal level you are all awesome fast efficient and so patient thank you, I loved that you all could still function when I was screaming at the bit because of the computer problems I have had, I have had a wonderful experience something I will treasure always. My memories and experience will be gladly passed on to others as all good times a shared.
The “Millionaire Pensioners” Tony Abbott speaks of sound like they belong in a fairytale. An article in the Financial Review references “Millionaire Pensioners” in regards to those with a healthy superannuation.
The sad truth is there are 2.3 million people receiving an Age Pension in Australia, a figure that is steadily climbing as the population ages.*
Even households with good incomes can struggle in retirement due to poor planning. It’s a huge shock when they realise how much they actually need for only a ‘modest’ or ‘comfortable’ lifestyle in retirement.
92.4% of Australians over the age of 65 currently receive a full or part government pension or allowance.* Having visibility over your finances and your financial future is critical.
If you don’t want to count your pennies now or in retirement, Members Alliance will help.
The client is a single female aged 57 and her only real asset is her superannuation. She is renting and does not have a residential mortgage, but owns a car and has a credit card.
Due to the client nearing retirement age and no wealth created thus far, the immediate goal was to maximise her superannuation as much as possible for her remaining working years. “A transition to retirement strategy “
It was extremely important at this stage of the client’s life to have the right plan in place to ensure that her dividends were optimised. The second part of the approach was risk management, to ensure adequate protection for the client.
We discussed her superannuation plan and the risk versus the return and being able to transition her into a suitable retirement pension plan. The client completed the risk profiles and wanted to be a ‘balanced investor’. The risks involved with investing at this level were fully explained. She was very comfortable with the balance, as she wanted to make the most out of the current market’s performance.
We consolidated the client’s various superannuation accounts to reduce the overall fees being paid to each fund and the high investment management fees. The superannuation accounts were:
Colonial Mutual – SuperWise Series 5 – Personal Super Policy – $37,047
Colonial Super Retirement Fund – Colonial Select Personal Super – $17,758
Partial Rollover – QSuper – $130,000 approx.
The fund of choice for the client was Macquarie’s Pension Manager Wrap Account. This was because her balance is over $50k and the way the super manager fee is calculated is 0.77% for the first $50k, then only 0.10% for everything after. This will save her significantly on management fees. The investment management fee was reduced from as high as 2.85% to 0.34% with the Vanguard Balanced Index Fund.
The next step in the strategy was to save money via tax benefits. The best way to achieve this is to invest a portion of the client’s income via salary sacrifice to her current super fund, in order to reduce her taxable income.
She is recommended to salary sacrifice $20,375 each year to her QSuper Fund. This will increase her super by the difference of the taxable amount, which will achieve the goal of $65,924 extra in her super at her retirement age of 67.
The Macquarie Pension Manager Wrap Account was structured by using the consolidated 3 super funds, valued at approximately $184,000. The yearly pension draw down will be $16,536 and paid on a monthly basis into her bank account. This tops up her take home pay so that she is not out of pocket and retains the same amount, prior to the strategy implemented.
Due to the concessional contribution cap changing, a review will be required to ensure that the strategy is being used to its full potential.
Finally, we discussed the client’s needs for insurance. The client had a CommInsure policy that she had been paying for years. After investigating other risk management options, it was deemed cheaper for her to retain her current policy.
A great outcome was achieved for this client. Minimising the fees and tax paid and optimising the income generated from the remaining working years, put the client on the right financial path.
Note that the figures and projections used in this example are used only to illustrate potential achievable outcomes. Figures that have been used to calculate projected outcomes are based on researched data and are not intended to be a guarantee of future performance. Although this information is provided in good faith, it is also on the basis that no person using the information, in whole or in part, shall have any claim against Capricorn Securities Pty Ltd (or any other company within the Members Alliance group), its servants, employees or consultants.
The problem lies in a shortage of desirable stock, not affordability
Hysteria is a funny thing – People seem to get ‘so’ worked up about the latest meme that it blinds them to obvious truths – one being that housing is still very affordable.
Australian Bureau of Statistics (ABS) – Medium Household Income is $75,000 to $80,000
House price–to–income ratios on the east coast of Australia are high;
At around 9.7 times the medium household income in Sydney
Melbourne house prices are around 7.3 times the medium household income
Brisbane house prices are around 6.0 times the medium household income
Brisbane is still regarded as unaffordable, because it is higher relative to what you see around the globe and well up on ratios seen in the 1980’s & 1990’s, which were around 3 to 4 times the medium household income.
These aggregated numbers will often hide the real picture:
Take Sydney’s ratio (9.7 times) on the face of it – someone on an average salary is paying nearly two- thirds of their income just in interest – this is clearly not affordable.
However not every household earns between $75,000 to $85,000
Recent research from Barclays used a figure of $122,000 which lowers some of these ratios considerably and makes housing much more affordable.
It’s probably fairer to use a higher income estimate as the ABS figures would include groups like pensioners, the sick and people who aren’t generally in the property market at any price.
According to current ABS data, 16% of Australian households – more than one million households – earn more than $150,000, whereas just over one third (approximately three million households) earn more than $100,000 per year.
Most of these households would be in the capital cities.
Consider this – A household on $150,000 could afford a $1million –plus house. Someone on $100,000 could afford anything in the vicinity of $650,000 to $800,000. (These estimates are based on a 70% loan to value ratio (LVR).
Looking at the figures in this light, prices don’t seem so crazy.
The fact is you can still buy a house in the Sydney region for around $450,000 to $500,000.In Sydney – houses can be purchased in the $300,000 range and that’s affordable for a household on the median income, and that is not even including apartments.
This highlights that as a general principle, housing is still very much affordable.
So when you hear pundits and politicians talking about a housing affordability crisis, what they are really referring to is the fact that people can’t find a dwelling they can afford in the area they want – usually the inner city.
That is a different issue. That is not a housing affordability crisis, it is basic economics and a scarcity issue. It just reflects good old fashioned supply and demand.
The population is growing, but there is only a fixed amount housing stock available in suburbs close to the city like Newtown, Paddington, Carlton or Mosman and this can’t meet the demand.
Some 10 to 15 years ago the ABS reported that only about 250,000 households earned over $3,000 per week ($156,000pa). Now more than a million households do.
The number of people earning $5,000 or more per week ($260,000) has more than tripled, however it is unlikely that the housing stock in the fashionable areas has tripled.
So when people complain of unaffordable housing, it isn’t an affordability crisis, because there is ample stock of affordable housing around the country.
It’s simply that with population growth, income growth and low interest rates, the competition for desirable areas, which are in finite supply, is becoming fiercer.
The push towards “higher density” living is only going to exacerbate this problem and its naïve to think that scrapping negative gearing or banning foreigners is going to help. At best, it may slow the process, but it won’t end it because it does nothing to stop the problem of scarcity!
Due to an increasing number of people living in a handful of cities, housing prices can’t fall because of the simple economic law of supply and demand.
If you would like more information about the property market, please contact Members Alliance on 1300 365 731.
Young buyers are sacrificing stamp duty and first-home buyer grant concessions by entering the market as investors rather than owner-occupiers in an effort to reach home ownership at a faster rate.
This phenomenon is being driven as a result of young first-home buyers being out-bidden by Baby Boomers with existing equity, but still eager to enter the market according to Members Alliance.
Members Alliance CEO David Domingo says young buyers are choosing to invest rather than become owner-occupiers because it also reduces any shift in lifestyle.
“In most cases we have clients in their mid-20s who know they have to take action early on in life in order to set themselves up financially – but are unwilling to move workplace or away from friends and family to live in their first home,” says Mr Domingo.
“This has actually encouraged smarter investing; it’s forced young buyers to think of what will make a great investment compared to buying a property they would only live in.
“This method also helps young buyers get ahead financially by having someone else, the renter, servicing their home loan.”
According to the Australian Bureau of Statistics (ABS), the number of first-home buyer commitments as a percentage of total owner-occupied housing finance commitments fell to 12.3% in April 2014 – the lowest figure since data collection commenced in July 1991.
The ABS is currently investigating how strong its first-home buyer loan data is after concerns were raised that ‘under-reporting’ could be occurring if some lenders were only able to accurately report buyers receiving a first-home buyer grant – something not every first-time buyer is eligible for.
“Young investors are stretching their dollar even further by pooling their funds with family members or partners to afford an above average investment in order to achieve long-term return,” says Mr Domingo.
“When the time comes to look at a second investment we’ll see these investors move out from their family home and into their first-bought home which they are closer to owning thanks to their strategic investment decisions.
“It’s one way to get ahead and it’s creating a new type of investor.”
If you need help with your first investment property, call 1300 365 731 to find out how Members Alliance can help.