Transcript Insurance for the mining, oil and gas industry

Protecting your
retirement
Presenter:
dd month 2011
[Adviser logo]
Disclaimer/AFSL details etc
This information is current at May 2012 and is subject to change. As this information
(including any statements on taxation which are based on current laws, rulings and
interpretation) is of a general nature and has been prepared without considering your
objectives, financial situation or needs, you should, before acting on this information,
consider its appropriateness to your circumstances.
From earning to spending
• The first of Australia’s 5 million baby boomers
turned 65 in 20111
• If you haven’t already, you’ll soon be shifting
from earning phase to spending phase:
– travelling
– dining out
– socialising
1. Australian Bureau of Statistics (ABS), 3101.0 - Australian Demographic Statistics, Sep 2011
From earning to spending
• What if your spending phase got disrupted by
sickness or injury?
• You may be covered for the financial
implications...
• ... but what if it’s not you that gets sick?
When ‘non-dependent’ becomes dependent
• What are your children’s financial commitments:
– Lifestyle expenses, internet and mobile phone bills
– HECS debt, personal loans and credit card debts
– Mortgage (average new mortgage now over $3901)
– Children of their own
1. 'Mortgage Index July 2013', Australian Finance Group (AFG), July 2013
When ‘non-dependent’ becomes dependent
• Gen X parents are growing increasingly dependent on their
parents for support:
– It’s more common that both parents are working
– Child care costs are prohibitive for many young families
– Sharp increase in single parent families (from 14% in
1986-88 to 22% in 2004-061)
1. Australian Bureau of Statistics (ABS), Australian Social Trends 2007
When ‘non-dependent’ becomes dependent
• If your children needed financial support due to sickness
or injury, what would it mean for your retirement plan?
• What if you had to become a primary carer to your
grandchildren (and cease work to do it)?
• Do your children have a back-up plan to protect
themselves... and you?
Do your children have a back-up plan (other than you)?
• According to a 2010 report on underinsurance:
– One in five families will be impacted by the death of a
parent, a serious accident or illness that renders a parent
unable to work1
– 95% of families do not have adequate levels of
insurance1
1. The Lifewise/NATSEM Underinsurance Report, February 2010
So much for a comfortable retirement...
• Average super balances at age 65 in 20101:
– $198,000 for men
– $112,000 for women
• Estimated a ‘comfortable’ retirement will cost around $41,169p.a. for
a single, and $56,317p.a. for a couple2
• Estimated cost of raising two children to age 21 is $800,0003
• Where will this money come from?
• Fortnightly Age Pension rate is currently only $733.70 for a single or
$553.10 per person for couples4
1.
2.
3.
4.
Australian Bureau of Statistics, 2010
ASFA Retirement Standard, March Quarter 2013
http://www.abc.net.au/news/2013-05-23/kids-eat-into-family-budget-like-never-before/4708076
Centrelink, Age Pension payment rates as at 5 July 2013 (excludes Pension Supplement)
So much for a comfortable retirement...
• Here’s a retired couple – Joe (aged 63) and Gail (aged 58)
• Between them they have $510,000 in super and $20,000 in liquid
savings
• Spending $45,000 p.a., they can expect their living needs to be met for
27.7 years (5% pa investment returns and includes any Age Pension
they may qualify for along the way)
• What happens if they have to provide $400 per week financial
support to one of their children who is no longer in a position to work
because of ill health?
This example is for illustrative purposes only.
So much for a comfortable retirement...
Years their cashflow needs can be met
30.0
25.0
27.7
20.0
No support
15.0
10.0
9.9
5.0
0.0
No support
Providing support for
20 years
Providing support for 20
years
So much for a comfortable retirement...
•
How can they bridge the gap?
30.0
27.7
25.7
25.0
20.0
No support
19.9
Providing support for 20 years
15.0
Reduce spending to $27,450 pa
10.0
Co-fund $1,000 pa life insurance
9.9
5.0
0.0
No support
Providing support
for 20 years
Reduce spending to
$27,450 pa
Co-fund $1,000 pa
life insurance
OnePath calculations, based on the following assumptions:
1. Retiree couple - male age 63 has $300,000 in super and female age 58 has $210,000 in super.
2. Family home is owned.
3. Non-income tested super pension amount - male $16,000 pa and female $8,000 pa.
4. No capital gains tax (CGT) applies on sale or redemption of liquid savings.
5. CPI is assumed to be 3% pa for cash flow needs and Centrelink rates and thresholds indexation purposes.
6. Investment returns are assumed at 5% pa.
Future-proof your lifestyle
• To truly protect yourself, you need to make sure your
children are adequately insured as well
Protection
for yourself
Protection for
your children
Start the conversation
If you’ve never had the conversation, talk to
your children about a tailored protection plan.
Find out what cover (if any) they have
inside super, and encourage them to
investigate the types and amounts of cover
they need.
You may find they are grossly
underinsured – especially if they
have debts and/or dependants.
Types of cover available to protect your child
and your retirement!
• Life cover for death and terminal illness
• Helps families eliminate debts and stay in the family
home
• Provides an ongoing income for the family
• Pays medical bills and funeral costs
• Income replacement cover for sickness or injury
• Helps families keep up with mortgage repayments and
day-to-day living expenses
Types of cover available to protect your child
and your retirement!
• Total and Permanent Disablement (TPD) cover for
permanent incapacity
• Helps eliminate debts and cover long-term care costs
• Pays for modifications to the family home
• Trauma cover for serious illness
• Pays out-of-pocket medical costs
• Helps spouse take time off work to provide care
• Allows people to make lifestyle changes – like reducing
work hours, or taking an extended holiday
What are the odds?
• Probability of claim by age 65 – female, aged 32
2%
21%
No claims
Trauma/TPD claim
77%
Death claim
• 21.4% chance of a Trauma or TPD claim
• 47% chance of a disability lasting 3+ months
Source: IRESS Life Risk Report, 2011
Advice about protection needs
• It’s important people seek their own advice that takes
into account their income, debt levels, family status etc
• A financial adviser can help with strategies to make life
insurance more cost-effective, including insurance
inside super
• Your children may also be able to link their cover to
yours (if you have some) to receive family discounts on
all premiums
Thank you
Questions?