Annuity Immediate Quote

Annuities are gaining a lot of publicity nowadays, as viable means of investment for people after their retirement. When people retire, they get some packages from their employers for their long years of service and dedication to the company. These packages are bought by insurance companies, and in return, annuities are sold to the retirees. These annuities will pay the retiree a fixed sum on a monthly basis. After a specified period of time, known as the surrender period, the annuity will get matured like an ordinary insurance policy, and that is when the retiree can take back the annuity amount.

There are two different types of annuities that need to be considered here. The following are descriptions of these types, which will help you in doing the annuities reviews when the time comes.

Fixed Return Annuities

As the name suggests, the fixed return annuities pay out at a fixed rate per month. The rate of return is pre-decided when the annuity is purchased, and that rate will remain fixed until the surrender period. Annuitants like the security of a fixed return rate, so that they can manage their expenses in a much better manner.

Then, fixed return annuities have the benefit of tax-deferred payments. As long as the annuity is not withdrawn, it will not be subject to any tax. That is a great advantage for tax-related savings. Money that would otherwise get deducted for tax will remain with the annuitant till the annuity is surrendered at the end of the term.

Fixed return annuities also have death benefits. In case the annuitant dies before the annuity is surrendered, then the annuity is given to the survivors of the deceased annuitant, along with any accumulated earnings.

Variable Annuities

Variable annuities are much the same as fixed return annuities. They also have features such as death benefits and tax-deferred payments. So, in that way, there is no difference between the two kinds of annuities.

However, variable annuities differ from fixed return annuities on one important point. People with variable annuities can control where their annuity value will be invested. Hence, they can take some risks, and using their acumens, they can also make higher returns than people with fixed rate annuities can. Variable annuities are much better for people who want to control their own investments and ensure that they get better returns at the end of the day.

In conclusion, we can say that both fixed rate annuities and variable annuities are great as post-retirement investments, and both can provide tax-deference and death benefits. But while the fixed rate annuities are for the more conservative investor, who wants a fixed return, the variable annuity is for the risk taker, who is confident of using his or her own skills to get better returns.

Superannuation is a method of financially preparing yourself for your retirement. Both yourself and your employer can contribute to it over time and this money is then invested into a variety of appropriate investments such as shares, property, savings accounts and government bonds.

When you retire, or qualify for your superannuation due to disability or death you will receive the money (less charges and taxes) either as regular payments made periodically, a lump sum payment, or a combination of the two.

The Superannuation Guarantee came into effect on July 1, 1992, making it compulsory for employers to contribute to an employee’s superannuation fund.

The minimum amount of the contribution is 9% of an employee’s wages. This excludes overtime, fringe benefits and leave loading).

However, not all employees are covered by this “guarantee”. The Superannuation Guarantee Act states that employers are not required to contribute to the Superannuation Guarantee in certain circumstances.

Some of these exceptions include:

• If an employee earns less than $450 per month;

• If an employee works 30 hours per week or less and is under the age of 18;

• If an employee is over the age of 70;

• If an employee is paid to do domestic or private work for 30 hours per week or less.

Can the employer make contributions above the compulsory limit?

An employer is allowed to make higher contributions than the amount specified in the superannuation guarantee, but only as:

• a reward based on the performance of an employee;

• an employers contribution that increases in line with the employees voluntary contribution;

• a ’salary-sacrifice’ – this is where the employer makes a contribution which tend to be benefits such that would otherwise be paid as salary.

By seeking advice from a financial advisor you can find out how to get your employer to pay more, but you have to remember that employers are limited by the amount that can be claimed as a deduction for superannuation contributions made.

These limits can change annually so check with your superannuation fund or the Australian Tax Office to find out.

Should employees contribute too?

If you have more disposable income than you require, and feel you are in a position to save this money towards your future, it may be wise to consider making superannuation contributions as opposed to investing it elsewhere.

There are aged limits that dictate whether or not you can contribute to superannuation — for more information on this, see the Australian Taxation Office web site.

Some of the advantages are:

• you generally pay less tax on interest accumulated from superannuation savings than you would on interest from a bank, although it is worth looking into deals on savings accounts as interest rates can work out higher, thus providing better rewards in the long-run;

• the ’salary sacrifice’ scheme automatically takes the the superannuation contribution from your salary, which eliminates the possibility of you being tempted to spend the money on anything other than savings.

• There are limits involved to the amount that can be added to the salary sacrifice;

• the interest on superannuation savings is added onto the total investment, so effectively the interest earns more interest.

• The Australian Prudential Regulation Authority (APRA) estimates that a sum of money ‘compounded’ at 7% a year will double in value in ten years;

• you may be able to take advantage of Government incentives offered such as the co-contribution scheme. This scheme allows you to be given up to $1500 from the government when you contribute to your fund.

Go to the Australian Taxation Office web site for details.

Tax advantages

• The maximum tax rate for contributions made by your employer is 15%.

• The income earned through the fund’s investments is also taxed at a maximum rate of 15%.

• Salary sacrifice contributions are taxed at 15%.

• When an employee reaches the age of 60 they can withdraw their superannuation as a one-off lump sum or tax free income stream.

laws

The main laws that apply to superannuation are the:

• Superannuation Industry Act and Regulations;

• Superannuation Guarantee Act and Regulations;

• Income Tax Assessment Act.

Jargon definitions

• Accumulation funds — this is the money is invested and the final benefit depending on the overall contributions, plus earnings of the fund.

• Annuity — This is much the same as a pension. You receive regular payments that are made periodically for either a specified amount of time or until you die.

• Benefit – the money paid to you out of the superannuation fund or kept on your behalf within the fund.

• Contribution – the money paid into the superannuation fund by either yourself or your employer.

• Lump sum — the entire fund received in a single one-off payment.

• Preserved – money that is held on your behalf that you cannot access until retirement or certain other circumstances, such as reaching a certain age or leaving employment either temporarily or permanently. This includes money contributed by an employer, interest earned on the fund or contributions made by a self-employed person which have been claimed as a tax deduction and any contributions not deducted made after 1 July, 1999.

• Rollover – moving money from one fund to another.

What you are entitled to know

You are entitled to certain information from your superannuation fund. This includes:

• a member statement showing the amount of your benefit at the beginning and end of the related period, the amount that is preserved and contact details;

• a fund report showing the fund’s financial status;

• notification of any changes that affect you;

• a statement that shows your benefit.