Welcome to the Summer Edition of the BFG Report.
This quarter we take a look at what happens to your super when you die and we review the markets for the quarter ending October 2012.
What happens to your Super when you die ?
Perhaps, like many people, you assume that it will become part of your estate and will be distributed according to your Will. But, this is not necessarily the case. Unless you have completed a valid binding death benefit nomination, or the payment of the death benefits is otherwise fixed, the trustee of your superannuation fund will have discretion as to how your super death benefits will be paid.
Certainty and Peace of Mind
Having a binding death benefit nomination in place gives you certainty and peace of mind – especially if you have a complex family structure, such as a blended family – because the trustee of the super fund is bound by the nominations you make regarding the payment of your death benefit. A binding nomination can also help speed up the benefit payment, which could be important if someone is relying on those funds.
Nominating a Beneficiary
There are rules around who you can nominate; you can’t just pass your super to anyone. Your beneficiary has to be a ‘super dependant’. Commonly, the fund rules will allow you to nominate one or more of the following:
Your spouse – a person legally married to you or a de facto spouse who is living with you on a genuine domestic basis – this can include opposite and same sex spouses.
Your children or your spouse’s children – including adopted, foster, step or ex-nuptial children (although care must be taken if nominating a step child).
A financial dependant – a person who is financially dependent on you to maintain their normal standard of living, whether or not they are related to you.
A person in an interdependency relationship with you – this is evidenced by a close personal relationship, if you are living together, where one or each of you provide the other with financial support and one or each of you provide the other with domestic support and personal care. This relationship can also exist if a close personal relationship exists but the other requirements are not satisfied because of a physical, intellectual or psychiatric disability.
Your legal personal representative – which means the executor of your Will or the administrator of your estate.
Don’t forget to renew your binding death benefit nomination every three years (where required by the fund’s rules or legislation) or whenever your circumstances change.
Investment Market Review – Quarter Ending 31 October 2012
|Asset||Index||1 year return %||5 year return % pa||Comments|
|Australian shares||S&P/ASX 300 Accumulation index||9.85||-3.61||The ASX300 index finished the quarter on a new high for the year and gain for a fifth consecutive month in October. However, volumes remained light. Defensive sectors such as property and telecommunications remained in favour while materials came under pressure. Banks lagged the market but were still positive over the quarter.|
|Listed property trusts||S&P/ASX 300 A-REIT Accumulation index (property)||30.81||-11.37||The listed property index had a good quarter as it continues to be market leader for returns. Yield hungry investors continued to chase up property stocks through post-GFC highs. We have been quite positive towards this sector for some time as it returns to its core defensive characteristics of low gearing and rental-based income, underpinning the attractive distribution yields. These defensive attributes have held up relatively well in the current uncertain environment.|
|International shares||MSCI World Accumulation index (AUD)||12.06||-5.09||The MSCI World Accumulation index posted a strong 6 per cent return over the past quarter. Gains were tempered in the final week of October, driven by a number of US companies revising down their earnings guidance as quarter three results were released. Financials and materials were the best performing sectors, as investor risk aversion subsided somewhat due to increasingly accommodative monetary policy in the US and Europe.|
|Fixed interest and cash||UBS Warburg Comp. Bond All Maturities index||10.22||8.29||Corporate hybrids remained an asset class of choice for yield oriented investors.|
|Cash||UBS Bank Bill index (interest rate earned on short term to maturity of approx 45 days)||4.23||5.06||The RBA cut rates in October to 3.25 per cent and the futures markets are pricing in significant rate cuts over the next 12 months. If all the cuts which are priced-in actually occur, the cash rate would hit record lows. In our view, we would need to see a sharp deterioration in unemployment domestically and further macroeconomic issues offshore for this scenario to play out. We acknowledge the risk to growth posed by an end to the mining capex boom, high Australian dollar and structural change throughout the Australian economy and, as a result, lower interest rates are expected.|
High Yielding Internet Savings Accounts
|Financial Institution||Interest Rate|
|Citibank Online Saver||5.35% p.a.|
|Rams Saver||5.17% p.a.|
|RaboDirect Savings||5.11% p.a.|
|ING Savings Maximiser||5.10% p.a.|
|ANZ Online Saver||5.00% p.a.|
|Westpac – Reward Saver||4.92% p.a.|
|NAB – iSaver||5.00% p.a.|
Please note the above rates are sourced from RateCity.com.au and are correct as at 23/11/2012.
Rates are subject to change and conditions.