The BFG Report

Welcome to the 2015 Summer Edition of the BFG Report.

Aged Care — Make the Right Retirement Living Choice

Many of us save and plan for retirement, with our main focus on ensuring we have enough money to live the type of lifestyle that we want. Although this is an important aspect of planning ahead, another key consideration is planning where we will live during our retirement.

The answer to this question will depend on a number of factors, the major one being your ability to live independently. Knowing what options are available will help you or your loved ones to move into the next phase of retirement. By planning ahead, you can lessen the impact of a situation that can be emotional, stressful and uncertain.

Retirement Villages

Retirement village living offers those aged 50 or over a convenient lifestyle and a community. They offer flexible services so, as your needs change, you can adjust the services that you receive. The services and costs vary. Sometimes upfront payments may be required as well as ongoing fees and exit fees.

Accommodation options may include independent living units and serviced apartments. Serviced apartments generally have one or two bedrooms and some daily living assistance. A small kitchenette is often included within the living unit but meals are provided in a dining room setting.

Home and Community Care

If you prefer to stay in the comfort of your home, but require support, there are a number of services available. You can get assistance with domestic chores such as cleaning and laundry, personal care, meals, home maintenance and modification, nursing care and transport assistance. This help is available through federal government subsidised services or private businesses that offer home care services.

Costs for home support services and home care packages vary according to each provider but if the provider is approved to receive Commonwealth funding then there are limits on the amount they can charge. Before you can access these services, you need to be formally assessed.

Residential Aged Care

If you can no longer live at home, perhaps due to illness or an emergency, residential aged care may be the next step. Living or staying in an aged care home provides 24-hour nursing care. The operation of aged care homes, including the maximum costs that you may have to pay, are regulated by the Australian Government.

If you are living in a retirement village but are then assessed as needing residential aged care, you may be able to move to aged care accommodation that is located in the same retirement village — making moving much easier. However, you may need to make a separate accommodation payment.

Don’t Leave It Until It Is Too Late

Don’t wait until your health starts to fail, or when your mobility starts to deteriorate as there may be a waiting list. Wherever you choose to live, as you require more support the costs will increase. How you choose to fund your accommodation may affect your Centrelink entitlements so it is important that you understand the choices you are able to make.

Investment Market Review – Quarter Ending 30 September 2015

Asset Class – Australian Shares
1 year return is -0.66% p.a.
5 year return is 6.29% p.a.
10 year return is 5.22% p.a.

The S&P/ASX 300 Accumulation Index experienced a significant quarterly decline of -6.5%. The energy sector was the worst performer, down 24.1%, as crude oil prices came under renewed selling pressure. The better performing sectors were industrials, which rose 3.4%, utilities gained 2.4% and consumer staples climbed 1.5%. Capital management initiatives were an important theme during the quarter as Ansell, Computershare, Downer EDI, Dexus and Seven West Media all announced share buybacks. Important ASX top 50 stocks, such as, Commonwealth Bank of Australia, ANZ, and Origin raised equity capital during the quarter.

Asset Class – Listed Property Trusts
1 year return is 20.08% p.a.
5 year return is 13.64% p.a.
10 year return is 2.04% p.a.

The REIT sector generated a positive return of 1.1% for the September quarter. Falling Australian and international bond yields impacted the sector after the US Federal Reserve kept interest rates at zero. Over the quarter, the property sector outperformed the broader market by 7.6%. A major driver of REIT sector outperformance was a steep fall in domestic bond yields during the quarter. The 10 year Australian bond yield fell 41 basis points. Earning’s results of A-REITs during the recent reporting season were broadly in line with market expectations. The A-REITs exposed to the retail sector reported an improvement in fundamentals as consumer sentiment improved.

Asset Class – International Shares
1 year return is 18.24% p.a.
5 year return is 15.43% p.a.
10 year return is 5.63% p.a.

Major international markets finished in negative territory, with the S&P 500 down 6.9%, the European Stoxx 50 losing 9.5% and the Nikkei 225 falling 14.1% (after adjusting for the weaker Australian dollar). The MSCI World Index, in Australian dollar terms, produced a slight gain of 0.20% in the September quarter. Heavy market falls in China during the September quarter precipitated large declines in international markets. In the US, the VIX ‘fear index’ spiked to a post-GFC high in August pointing to a high degree of risk aversion by investors. US economic data was generally positive with GDP growth in the second quarter revised up to 3.9% and the unemployment rate falling to 5.1% as a result of stronger jobs growth. The People’s Bank of China cut interest rates by 25 basis points and also reduced Chinese banks’ required reserve ratio (RRR) by 50 basis points.

Asset Class – Fixed interest and cash
1 year return is 6.91% p.a.
5 year return is 6.64% p.a.
10 year return is 6.41% p.a.

International bond yields moved lower over the quarter. The benchmark 10 year Government bond rate in the US and Australia fell by 32 and 41 basis points to close at 2.04% and 2.61% respectively. In Australia, falling yields on short to medium term maturities was driven by growing concerns around China’s economic slowdown, heightened risk aversion in share markets and weaker commodity prices. These bearish signals resulted in stronger demand for the perceived safety of government bonds.

Asset Class – Cash
1 year return is 2.47% p.a.
5 year return is 3.51% p.a.
10 year return is 4.61% p.a.

The RBA left the cash rate unchanged during the September quarter at 2.0%. Economic data was relatively weak with June quarter GDP growth of only 0.2%. Economic growth was dragged lower by weaker than expected net exports and business capital investment, as the resources sector transitioned from the investment phase to the production phase.

High Yielding Internet Savings Accounts

Financial Institution and Interest Rate

ING Savings Maximiser – Rate 3.50% p.a.

UBank – USaver with Ultra – Rate 3.37% p.a.

St George – Maxi Saver – Rate 3.25% p.a.

BankWest – Hero Saver – Rate 3.15% p.a.

Westpac ESaver – Rate 3.10% p.a.

ANZ – Online Saver – Rate 2.85% p.a.

Rates are subject to conditions and change.

Rates are correct as at 2/12/2015.