All posts by Robert Wright
What to do next if you’re facing redundancy
By Robert Wright /October 16,2020/
Uncertainty around COVID-19 might be increasing your stress levels about losing your job, but here are five ways to soften the financial blow.
In April, Australia hit its highest unemployment rate in five years, and with the Federal Treasurer expecting an unemployment rate of around 10% by the end of the year, many Aussies may be feeling a little uneasy about their future job prospects.
Which sectors have been hardest hit?
COVID-19 has affected all areas of the workforce, but analysis by AMP reveals recruitment, retail and hospitality make up almost half of all early super release withdrawals, suggesting people in these sectors may have been more greatly affected by job losses.
Uncertainty around the reopening of interstate and international borders makes any tourism rebound also hard to predict.
How to get on the front foot with your situation?
It’s important to know that a genuine redundancy payment is made when you’ve been retrenched because there’s no longer a need for the job that you’re doing.
Here are some ways to help make sure you get what’s yours if you’re faced with a redundancy so you can be well prepared for the future.
1. Know what you’re entitled to
What your employer is required to pay you will depend on your conditions of employment, so ask your boss or HR department (which might be easier if you’re still working), or be sure to check your redundancy payment summary carefully to ensure you get what it is you’re owed.
Fair Work’s redundancy calculator (www.calculate.fairwork.gov.au/endingemployment) can help you find what redundancy pay and entitlements to expect. It’s also a good place to find details of pay and conditions if you’re covered by a registered agreement.
Meanwhile, keep in mind that apart from your actual redundancy payment, you may be eligible for things like payout of accrued annual leave and long service leave.
When the redundancy happens, if you’re under your Centrelink Age Pension age (which will be between 65 and 67 depending on when you were born), special tax treatment is also given to genuine redundancy payouts, which means some payments you receive will be tax free up to a certain limit based on your years of service.
2. Sort out your money situation, including benefits and super
The size of your payout may determine the time you can afford to be out of work, what you’ll be able to live on from week to week, along with how you’ll tackle financial responsibilities until you find another job. With that in mind you may want to:
Create a workable budget
You can do this by writing down your daily living expenses, and what you estimate any upcoming bills and loan repayments will total. This way you’ll be across all your outgoings, as well as where you may be able to make minimum repayments and cut back on other forms of spending.
Put your money somewhere useful
It might be tempting to go on a holiday, undertake renovations or pay off all existing debts with your redundancy packet, but if you don’t find work within a certain timeframe, you may leave yourself short.
Think about where you could put your money, still have access to it and potentially reap added benefits. Options may include high-interest savings accounts or a mortgage offset account that allows you to redraw funds while reducing what you pay in interest on your home loan.
Apply for financial hardship with your lenders
If your redundancy payout starts to run out and you’re struggling to make repayments, you may be able to seek assistance from your lenders by claiming financial hardship.
All providers must consider reasonable requests to change their terms in instances where you may be suffering genuine financial difficulties and feel help would enable you to meet your repayments, possibly over a longer period.
Find out if you’re eligible for government assistance
There’s a range of Federal and State government assistance available related to COVID-19. Make sure you’re across these and don’t miss out on support you might be able to access straight away.
These may change as the economy emerges from hibernation, so bookmark the pages relevant to you, in case you’re out of work for longer than you anticipate.
Depending on your age, different benefits may be appropriate at different ages – for instance most workers may look to JobSeeker payments where they’re out of work, while the Age Pension may be more appropriate for older Aussies.
Waiting periods may apply to some benefits, so keep that in mind when it comes to any payout you receive, as you may need it to cover your living expenses for a while.
Loss of a job and income in the family could also mean that you may qualify for Family Tax Benefits, or for a higher rate of payment.
Look into your super situation
See how much money you have in super and think about the effect a break from work may have on your balance.
If you have insurance inside super and are paying premiums with your super money, consider how this may affect your retirement savings if the premiums aren’t being offset by contributions.
You might also be considering early access to super during COVID-19, where the Federal Government is allowing eligible people affected by the outbreak to access up to $10,000 of their super as a tax-free payout between 1 July and 31 December 2020.
There may be short-term advantages to this, but there may also be some disadvantages that you’ll want to make sure you’re across.
3. Create a plan for your return to work
You might have a bit of leeway to take some time off, but when you do look to join the workforce again, a good place to start will be your resume. Make sure your previous roles and responsibilities are up to date and that you’ve listed all your skills and achievements.
In the meantime, set up relevant online job searches, tidy up your LinkedIn profile, touch base with recruiters in your field and don’t be afraid to target companies directly.
4. Contemplate the benefits of training
Depending on whether you want to remain in your industry or make a career change, further training could help you gain new qualifications, keeping in mind this can still cost time and money.
A new education assistance package has recently been made available to help displaced workers upskill and retrain during COVID-19. A number of free online courses are also available from TAFE, while Open University offers a range of short and longer education courses for all levels.
5. Seek further support
There’s a range of support and resources available.
Talk to your financial adviser as they may pick up on things that could otherwise be missed
Check out AMP’s free webinar – Managing through a redundancy
Find a range of articles on AMP’s COVID-19 support hub
Check out our FAQs on ways AMP is helping clients experiencing financial hardship
Seek free financial counselling from the National Debt Helpline on 1800 007 007
Take a look at the government’s Moneysmart website for further financial education.
If you’re finding it difficult to cope and need to speak to someone, there’s a range of mental health and family support services available through:
Beyond Blue – 1300 22 4636
1800 RESPECT – 1800 737 732
Lifeline – 13 11 14
Source: AMP Insights
How to keep your super safe during COVID-19
By Robert Wright /October 16,2020/
If you’re feeling concerned about how the pandemic will affect your super balance, here are our tips to help protect and grow your super.
What can affect my super balance?
In Australia, your employer is required by law to pay a minimum percentage of your eligible income to a complying superannuation fund or retirement savings account. This is known as the Superannuation Guarantee and it’s currently set to 9.5%.
Your super contributions are then invested by your superannuation fund on your behalf, according to your chosen investment options. This means your super is subject to normal market fluctuations.
Your super is also exposed to a range of administrative fees, charges and premiums, which can eat away at your balance if you’re not vigilant.
Isn’t my super protected by law?
You might be surprised to learn that your superannuation savings are not protected by the government.
Last year, the federal government introduced a package of reforms to help stop low account balances from being eroded by unnecessary insurance premiums and fees. This was called the Protecting your Superannuation Package.
However, this protection only applies to accounts that meet certain criteria, such as having a balance below $6000, and not receiving any contributions for 16-months. These inactive or low-balance accounts are transferred to the ATO for administration. You can find out more about the reforms on the ATO website.
For everyone else, it’s up to you to keep an active eye on the health of your super.
So, here are five things you can do to help conserve and grow your superannuation, even during a global economic downturn.
1. Check your superannuation investment options
Because superannuation is a long-term investment, it’s important to check that your selected investment options are right for your age and stage of life.
Taking on the wrong level of risk at the wrong time in your life can erode your super balance. For example, when you’re starting out, there’s more time until retirement to ride out some of the ups and downs that come with higher levels of risk. But as you near retirement, you might want to focus on preserving your superannuation balance.
If you’re not sure how your super is invested, take the time to check your account either online or by contacting your super fund for advice. Be sure to find out whether they charge fees for advice, as these can be deducted from your super balance.
2. Switch to a low-cost superannuation provider
Fees and charges are deducted directly from your account, so they can quickly erode your super balance. Check your statements regularly and make sure you’ve compared your super fund with other providers.
3. Avoid withdrawing your super early
Most people can access their super once they reach the ‘preservation age’, which is between 55 and 65 years old, depending on when you were born.
There are also some special circumstances where you may be able to access your super early, such as severe financial hardship, including COVID-19.
While a cash injection of $10,000 or $20,000 might sound like a welcome relief when you’re struggling to pay your basic living costs, it’s important that you exhaust all other avenues first, because accessing your super early can have a significant impact on your retirement income.
How significant? Well, the FPA estimates, conservatively, every $1000 you have in super at age 30 is worth $4500 by the time you reach 60. Multiply that by $10,000 or $20,000 and you can see what you might be missing from your retirement nest egg.
For this reason, it’s really important to explore other options first and get expert advice from a financial planner before making a withdrawal.
4. Make regular contributions
One of the ways to protect and grow your super balance is to consider making regular contributions. You can do this by salary sacrificing a set amount every week. If that’s not possible, you could consider making extra contributions whenever possible, such as depositing your tax return, gifts or bonus.
5. Get professional advice
You can’t beat professional financial advice to help you reach your retirement goals. A financial planning professional can review your unique situation and goals and advise you on the right investment and contribution strategies for you. They can also advise you on the best forms of retirement income to conserve your super balance.
With the right superannuation investment strategies in place, you’ll be well prepared to weather the economic disruption brought about by COVID-19. It’s worth taking the time now to review and optimise each aspect of your super above to get the most from your investments.
Source: Money & Life
How is your credit score affected by COVID-19?
By Robert Wright /August 28,2020/
If you’re one of the many Australians financially impacted by COVID-19, who have deferred $218 billion worth of payments this year – fear not. Your credit score is unlikely to be affected by payment deferrals or mortgage holidays due to the current state of the world.
While that’s good news, it’s still important to maintain a high credit score by understanding how it’s calculated and what you can do to maintain it in future.
So, what is a credit score?
A credit score is a number between zero and 1200 that reflects how much money you have borrowed, the way you use credit and your history paying off any loans and credit cards. This is calculated based on many sources of information including:
- Your personal details like your age, income and living arrangements.
- Financial information like how many loans and credit cards you have.
- Your bill paying history for expenses like energy and phone bills.
While your credit score is a record of positive information, such as your track record making repayments on time and in full, it also encompasses negative information such as late payments, court adjudications, bankruptcies and insolvencies.
All in all, the higher the score, the better and the more likely lenders will be to approve loan or credit card applications you might make. The lower the score, the riskier you will be perceived by lenders, making them less inclined to approve your application for a loan, which is why having a high credit score is important.
How is it calculated?
Credit bureau are responsible for consumers’ credit scores, which are calculated across the bands below:
- Excellent: 841 – 1,200
- Very good: 756 – 840
- Good: 666 – 755
- Average: 506 – 665
- Below average: 0 – 505
What is a credit report?
A credit report sits alongside your numeric credit score and contains all the information used to determine that number. The report includes detailed information about the way you handle credit, such as your repayment history, as well as any defaults or overdue payments. It also encompasses information about your active loans and credit cards such as their value and repayment amounts.
Be aware your credit report will include a record of any defaults if you miss a payment valued at $150 or more that’s overdue for more than 60 days.
What’s it used for?
Banks and other financial institutions check your credit score and your credit report to see how likely you are to be able to make your repayments on new loans or credit cards for which you apply. Banks, telcos and energy companies also check this information every time you apply for credit with them.
What might cause your credit score to drop?
There are a range of reasons your credit score could drop, such as when you pay off a loan or cancel a credit card. While this might be confusing, this is because lenders have less information to assess how reliable you are at paying off debts or assessing loan applications.
Your credit score can also drop when you successfully take out new credit. This is because the average ‘age’ of your debt drops with the new loan. Over time, when lenders see you making regular payments on your new card or loan, your credit score should increase once more. Your credit score will also drop if you miss a payment, are routinely late making payments, or, if you go bankrupt.
How can I improve my credit score?
There are lots of steps to take to improve your credit score, including:
Pay your bills and loan repayments on time, and, in full. It’s an idea to set up direct debits so all of your obligations are automatically paid. This could help minimise the risk of missing a repayment and having this affect your credit score.
Don’t apply for too many new lines of credit, for instance multiple credit cards, at the same time. Lenders can take this as a sign you’re experiencing a cash flow crisis and need access to money fast, which can put you in the higher-risk category as a borrower.
Lower your credit limit. Lenders like to see borrowers using credit responsibly by paying off their repayments on time, and, in full.
Will my credit score be affected if I have deferred my mortgage repayments?
Banks have allowed borrowers who have been affected by COVID-19 shutdowns to defer loan and mortgage repayments for up to six months. Rest assured your credit score will not be affected if you have deferred your loan repayments.
This means that your credit report will not include a record that you have missed a payment as a result of deferring your repayments due to COVID-19. However, your credit score may be impacted if you have missed a payment on a loan or credit card for other reasons.
What should I do if I think my credit score is wrong?
You can take steps to correct your credit score if you think it’s wrong. Contact the credit reporting agencies to amend details such as your name and address. If the error involves incorrect defaults or information on your file that is a result of identity theft, contact your credit provider.
Source: BT
Superannuation 101: Your guide to a happy retirement
By Robert Wright /August 28,2020/
Superannuation is a handy way of saving for retirement, so that you’ll have an income to live on once you’re no longer working.
Your employer must pay a portion of your earnings into your superannuation fund, which invests them on your behalf.
How much superannuation will I be paid?
In Australia, your employer is required by law to pay your super contributions once a quarter.
The current superannuation guarantee (SG) rate is 9.5%. So, your employer must pay a minimum of 9.5% of your ordinary time earnings (OTE) to a complying superannuation fund or retirement savings account.
Can I add to my super?
Yes, you can! Making personal contributions to your superannuation is a great way to reach your retirement goals sooner.
One way to do this is through a salary sacrifice arrangement with your employer. This simply means that you pay an agreed amount from your pre-tax salary into your chosen superannuation fund with each pay.
It’s a very tax-effective way to add to your super, as these contributions only attract tax at 15% (up to a certain level), which is generally less than your marginal tax rate.
How much to contribute depends on several factors, including how long until you want to retire and your retirement goals. Speaking to a financial planner can help you evaluate the best options for you.
Superannuation co-contribution
You may also be eligible for contributions from the government to help you save for retirement. The super co-contribution and the low-income superannuation tax offset are both ways the government can add to your super. Find out more about government contributions on the ATO website.
How much super do I need to retire comfortably?
Research shows that many of us underestimate how much we’ll need to live comfortably in retirement.
According to the MoneySmart website, how much you’ll need depends on your big costs in retirement and the type of lifestyle you want to have. “If you own your own home, a rule of thumb is that you’ll need two-thirds (67%) of your pre-retirement income to maintain the same standard of living.”
The Association of Superannuation Funds of Australia (ASFA) estimates that single people will need just over $44,000 a year to be comfortable, while a couple will need just over $62,000 (excluding housing costs).
A ‘comfortable’ lifestyle is defined as one where you’re able to take part in a range of leisure and recreational activities, while maintaining a good standard of living i.e. you can afford to purchase household goods, private health insurance, a reasonable car, clothes and domestic or occasional international travel.
When can I access my superannuation?
You’ve spent years building up your nest-egg, so when can you make use of it? You can access your super once you meet one of the following conditions:
- when you turn 65 (even if you haven’t retired)
- when you reach the preservation age and retire; or
- under the transition to retirement rules, while continuing to work.
There are also some special circumstances where you may be able to access your super early, such as severe financial hardship, including COVID-19.
Source: Money & Life