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Multiple portfolios beneficial for high-balance retirees
More retirees in the future will hold multiple super and non-super portfolios using strategies to help their portfolios operate smoothly, according to Rice Warner.
In an analysis by the research house, it said the Budget highlighted that older wealthier Australians entered a different tax regime from age 55, and that became even better at 65.
"Financial planners are likely to increasingly focus on Australia's dual tax system (one being for older individuals, the other for the rest of us) when planning their clients' investment portfolios inside and outside superannuation," the analysis said.
"This should provide advisers with greater flexibility and opportunities to ‘re-engineer" their clients' affairs using a multiple-portfolio approach."
It said this would be a result of the Budget changes not allowing super members to pump huge contributions into super and receiving all savings as a tax-free pension.
The analysis gave an example of a high-balance, high-income retiree over the preservation age being able to benefit from three portfolios: an account-based super pension (or a transition-to-retirement pension if still doing some work), a super accumulation account, and at least one non-super portfolio.
The account-based super pension would allow a six per cent earning rate and $1.6 million would (initially) produce $96,000 a year tax-free or twice as much for a couple with equal balances of this size, it said.
The analysis said the accumulation pension account would allow retirees to "potentially keep building-up their accumulation accounts into old age and would be able to make concessional contributions of up to $25,000 by claiming personal tax deductions against their non-super investment income".
"The third portfolio [non-super investments] could be seen as being like a self-managed super fund portfolio without all of the stringent rules and the oversight of the tax office as regulator of self-managed super," it said.
"Financial planners will increasingly develop strategies for clients such as using discretionary trusts to deal with this proportion of a retiree's assets."
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