Financial abuse can affect clients of all backgrounds. It occurs in over 90% of all domestic violence cases. It is time for economic abuse training for advisers so they can better meet the challenge. Many advisers admit they unsure of the red flags of financial abuse. And sadly, what to do if they encounter it.
Economic abuse is when one person has control over another’s access to financial resources. It was recognised as abuse in the domestic abuse bill after calls to make it a criminal offence.
The course is a training and certification programme to help advisers understand the signs of abuse. And importantly, know how to assist clients. Therefore, the online training consists of video interviews with abuse survivors, advisers and lawyers. It includes reading materials, quiz questions, references and case studies. At the end, you will have devised your own internal Procedure to deal with cases you encounter.
Advisers need to “know their clients”
Wealth Planning Partners director Amanda Cassar says: “As advisers we must know our clients in order to give appropriate advice. And, economic abuse can occur regardless of socio-economic standing, education, race or ethnicity.”
Cassar, a global ambassador for financial abuse prevention and remediation, added: “There is no cookie-cutter approach to assisting clients. But, you can help reduce the risk of exposure to financial abuse through education. Also, through advising clients about protection options such as trusts or binding financial agreements.”
Certification
To achieve the Financial Abuse Specialist certification, course participants are invited to submit testing materials. The certification aims to help consumers identify advisers with the expertise and resources to support them.
Read more about economic abuse and how to get involved with this training programme in the magazine this week.
Have you heard about the reduction in Account Based Pensions and minimum draw downs?
Capital losses from falling share prices are realised only if the company goes into liquidation or the shares are sold. Reducing the amounts drawn down from account based pensions can help investments last longer.
Market Ups and Downs
Leaving investments intact may well offer the best chance to rebuild balances when markets pick up again, as they eventually do. But, this holding pattern can be hard for older people with account-based pensions. This is due to the requirement to draw a minimum income each year. For many people in residential care, this could be 7-15% of the balance at July 1.
Reductions in Account-Based Pension draw downs
Halving the draw-down amount is similar to a measure the government took as a result of the 2008 global financial crisis. The minimum income levels will again be halved for this financial year and next year. If the cash flow is not needed, people might wish to reduce their pension withdrawals. This could be especially so where higher Centrelink pensions may be likely.
Graham is 85 and living in an aged care facility. His account-based pension had a balance of $220,000 on July 1, 2019. He needed to draw 9% of that balance ($19,800) as income in 2019-20.
Graham regularly draws amounts of $1,650 a month, so he has already taken out $14,850 this year. Combined with share market drops and low interest rates, his pension balance has now dropped to $168,000.
Graham wants to minimise how much he draws. The halving of the minimums means he can stop drawing any more income this year and take out less next year as well as he’s also eligible for the two cash bonuses that will be paid of $750 each by Centrelink, as he’s on the Age Pension also.
If you’d like to discuss if halving your account based pension is a good idea, contact your Gold Coast advisers at Wealth Planning Partners on 07 5593 0855.
Interest rates have been falling faster and longer than deeming rates for Centrelink and Veterans’ Affairs recipients. This makes it practically impossible to earn current deeming rates from bank accounts. So, what to deeming rate cuts mean for pensioners?
High risk vs High Return
Higher-risk investments (in better markets) may potentially produce higher returns. But, these are often not appropriate for people in aged care and can cause anxiety in times of volatility.
Calls to cut deeming rates have been made as part of stimulus measures and rates will be cut by 0.75% from May 1,2020.
This means higher pension entitlements and lower aged care means-tested fees for some. But, pensions will not change if the maximum pension is already received or entitlements are calculated under the assets test.
The impact of Deeming rate cuts
Case Study
When Edna moved into residential care, she sold her home to pay her $400,000 accommodation cost. She was left with $350,000 in the bank. She receives an age pension of $849.31 a fortnight and pays $1,133.96 a fortnight in residential care fees.
When deeming rates change on May 1, her pension will increase to $899.77 and fees will decrease to $1108.65 a fortnight. This improves her income by $75.77 a fortnight, which helps with extra income to meet her expenses.
Cash bonus
Aged Care residents who receive a means-tested pension (Centrelink/Veterans’ Affairs) or hold either a Commonwealth Seniors Health Card or Veterans Gold Card will receive two $750 cash payments as a boost to income. Awesome!
As a bonus, this money is tax-free and not assessable. The first payment will be paid into bank accounts over the next two weeks. The second payment will be paid in late July so keep your eyes peeled for these.
If you’d like to learn more about what the deeming rates cuts mean for you, please reach out to the Gold Coast financial advisers at Wealth Planning Partners to review your personal situation.
Is it time to break free from being Asset rich and cash poor?
Here are four ways to boost your income…
Are you asset rich but cash poor? Turns out, you’re not alone. Data from the ABS (Australian Bureau of Statistics) shows that almost one-third of older Australians in low-income households were asset rich but cash poor.[1] Most wealth is tied up in illiquid assets, in particular the family home.
But you need not scrape by on so little. There are ways to try and boost your income.
1. TAKE ADVANTAGE OF YOUR PROPERTY
Selling up and moving to a cheaper and/or smaller house may free up money to help fund your retirement. But keep in mind that it might affect your benefits if you’re receiving an age pension. Some of the proceeds from the sale might be counted as assessable under the age pension assets test, and this might lead to a drastic cut in your pension. On the flip side, it can also help supplement any loss of pension.
2. SUPPLEMENT YOUR INCOME
Getting a part-time job or monetising a hobby, could boost your cash flow if you are retired. But remember that working when you have become eligible for an age pension may reduce your pension amount. Discuss with your adviser how you might optimise your retirement benefits while working part time. You are able to earn up to a certain amount before your Age Pension is impacted. Do you enjoy knitting, teaching or tutoring, baby-sitting, crafts, cleaning, handyman work or mowing? All can add a few dollars a week extra to your income.
3. RENT OUT YOUR PROPERTY
If you have extra space in your home, you may consider renting it out. Even just one room to a student or occasionally to holiday makers can made a difference. Or if you have another property, like a holiday home, you may look into listing it as a short-term rental? This could impact the tax you pay when you sell your home so you should seek advice on these strategies.
4. REVISIT YOUR INVESTMENTS
Have you invested in securities like shares and ETF’s? This may be a good time to meet with our financial adviser to review your portfolio. Your financial adviser may recommend strategies and ways to reduce your exposure to risk and volatility and possibly increase your income via dividends.
UNDERSTAND THE RISKS
You don’t have to be trapped in a situation where you are asset rich but cash poor. There are ways to boost your income, but keep in mind that some involve taking big risks. So, always seek financial advice to help you weigh your options and make decisions based on your own personal situation.
If you’d like to discuss your options, contact the Advisers at Wealth Planning Partners Robina to see if we can assist with your situation.
Did you know there are over 12[1] million Australians with a single superannuation account? There is also $13.8[2] billion in ‘lost super’. Is some of that yours?
Find it
Moved house over the years? Changed jobs during your career? Don’t know where your teenage self stashed your super? Pretty sure you’ve lost track of some accounts along the way? It’s easy enough to track it down. If you have a MyGov account, log in and link to the ATO. Then, you’ll be able to find superannuation linked to your name and tax file number easily enough here.
Consider Combining it
So, you want to save on fees, reduce your paperwork, keep track of your hard earned money, and grow your retirement fund? But, ensure you seek professional financial advice first to make sure combining is beneficial for you. However, there may be some drawbacks to combining if your health has changed and you have insurances in your existing fund. Your Advisers at Wealth Planning Partners can assist with advice on combining superannuation funds.
Ask your financial adviser
Many websites offer to help find and combine your super, including MyGov. It is quick, easy and free. You can ask your financial adviser for help; check with your existing superannuation provider or the Australian Tax Office. If you want to do a bit of research yourself, check out the ASIC MoneySmart website too.
Grow it
A professional financial adviser can help you find an appropriate superannuation fund that will grow your hard-earned funds. We can work out whether you are invested in line with your preferred risk profile. This can help manage the ‘sleep at night’ test in times of market movements. Also, Advisers can review the fees you are paying and check historical returns. And, we can help to ensure you have enough income for retirement. The sooner you nail it, the better!
