Insurance – giving you peace of mind

If you’re a member of a super fund, it’s more than likely you have insurance through your super. The cost of this insurance is deducted from your super account balance – so you’re effectively paying for it – unless your employer is covering the cost on your behalf. To help you, we’ve identified some key things to ask yourself when it comes to your insurance inside super.

1. Is insurance inside super something you need?

Deciding whether you need to have insurance, is something that only you can answer as it really comes down to your own personal circumstances. We’ve listed some scenarios below to help you with this.

Scenario 1 — dependants

If you have people depending on you financially, and you died unexpectedly, could your dependants continue to live the same lifestyle without you? Would you and your family be able to meet your mortgage repayments, and what if you’re self-employed? How about if you were ill, or injured, and as a result unable to work for a period of time, or permanently? In these cases, having Death only, or Death and Total & Permanent Disability insurance, could help to provide financial security.

Scenario 2 — no dependants

If you don’t have anyone financially depending on you, but you were unable to work for an extended period of time due to an illness, would you be able to cover your expenses without an income? If not, perhaps Income Protection insurance is something to consider.

2. Which types of insurance inside super are most appropriate for you?

There are three main types of insurance cover available through your super.

  1. Death insurance cover

    This type of cover is designed to provide your family, or any nominated beneficiaries, with a sum of money if you were to die. It may also come with Terminal Illness cover which provides financial support if you are diagnosed with a terminal illness.

  2. Total and Permanent Disability (TPD) cover

    If you were unable to work ever again in an occupation that you are suited to, because of a disability, this type of cover pays you a lump sum which could help to pay for things like your living expenses or repay any debt you may have, such as your mortgage.

  3. Income Protection (IP) cover

    If you’re injured or suffer an illness, or have a disability and are unable to work for a temporary period of time, this cover would provide you with a short-term income stream to help you pay for things like living expenses or cover debts.

So, what is income protection?

Income protection insurance is designed to provide an income stream if you can’t work due to certain reasons, like injury or illness.

Generally, income protection insurance will replace part of your income (up to 75%) if you’re unable to work due to injury or sickness and can’t work. However, this is usually subject to certain monetary caps. To receive benefit payments, insurers will typically require you to be totally or partially disabled or have a specific injury or sickness that renders you unable to work.

Key features of income protection

  • This type of insurance is designed to step in and replace your income should you become sick or injured. You can just set up your monthly payment and have peace of mind knowing you’re covered if something happens.
  • You should look at income protection insurance as a financial safety net – it pays you a percentage of your wage, for a set period if you’re unable to work due to a sudden illness or injury. So, if you had a serious car accident, and couldn’t work for six months, you’d get regular payments from your insurer – meaning you could focus on getting better without falling behind on bills.
  • For a monthly payment – usually around 1-2% of your salary – income protection insurance gives you peace of mind if you become too sick or injured to work.

3. How much insurance inside super do you need?

Insurance calculators are a good starting point to work how much insurance you may need, depending on your personal circumstances. You may also want to consider speaking with a financial adviser as they’ll be able to assess your situation and advise which types of policies could work best for you.

Some things you may want to consider include:

  • The amount you’d need to cover your current lifestyle if you were unable to work for an extended period or permanently.
  • Whether you or your family could rely on other financial resources if you were unable to work or died.
  • Any debts you have such as a mortgage.

Bottom line: when deciding if having insurance inside super is beneficial, it really comes down to being clear about your own circumstances and what’s best for you. A financial adviser may be able to help in making this decision.

If you have questions and would like your financial situation to be evaluated, please email us on with your contacts, for an exploratory meeting, at our cost, not yours.

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The history of money and where it is headed.

Around 600 BC, the Chinese were among the first to invent money when they used coins worth the metal within to overcome the hassle of bartering. Around the first century AD, the Chinese invented paper and in the following centuries devised printing presses. These inventions plus the heaviness of coins – the standard unit was 1,000 bronze coins on a string and weighing at least three kilos, even heavier in Sichuan where only iron was in abundance – fostered the next monetary innovation. In 995, a merchant in the Sichuan capital of Chengdu let people leave their coins with him. In return, he gave them standardised receipts for reclaiming the coins. People used the receipts as a means of exchange and paper money backed by assets was born. Other merchants copied the idea. So did counterfeiters. China’s government took control of printing money to ensure it was trusted.

The next innovation came after 1250. Genghis Khan’s grandson Kublai introduced an ‘inaugural treasure exchange voucher’ redeemable for silver or bronze for mandatory use throughout the world’s then-biggest empire. In 1287, Kublai, low on treasure after two failed invasions of Japan, issued paper notes backed by nothing. And the Chinese trusted the world’s first fiat currency, as Italian explorer Marco Polo reported.

Europe hosted the next advance in money. In the 1600s, UK goldsmiths, having long issued receipts Chinese-style for people’s coins, started to lend people receipts on the proviso that the sum was repaid with interest. Thus was born fractional-reserve banking whereby banks create money. This banking system persists to this day, as does the risk of fatal runs on banks should too many depositors seek their money at once.

The most recent monetary innovation is the rise of cryptocurrencies after Bitcoin appeared in 2009. The ability to pay over the internet by computer code (rather than moving money electronically in bank-to-bank wire transfers) has prompted governments to investigate what would be the next leap in money. They are thinking of issuing digital national currencies.

The Bank of International Settlements says that close to 60 central banks are studying how app-based money could co-exist with cash, a piece of paper that is a claim on the government, and bank deposits, a traceable claim on the bank.Sweden’s Riksbank is the western central bank most advanced in testing e-money, a paperless form of cash on a digital ledger held by the central bank. The Riksbank this year released inconclusive results from a pilot project and postponed any e-krona launch until at least 2026. The result typified how western governments have seen e-currencies as a niche quest of no urgency.

The apathy, however, vanished in March when China unexpectedly became the first major country to unveil a digital national currency.(The Bahamas launched a digital ‘Sand Dollar’ in 2020 though others say Finland’s failed chip-based Avant Card of 1992 was the first central-bank digital money.) Beijing’s motivations for trialling an e-yuan in selected cities include reining in the country’s payments companies and gaining even more control and visibility of transactions for political-control purposes. Another incentive is to create a yuan-based international payments system, to escape the reach of the US-controlled financial system and help the yuan approach the US dollar’s reserve status.

In response to China’s efforts, the eurozone, UK, the US and elsewhereare intensifying research into ‘govcoins’. Apart from catching up to China, they see that a cyber currency would allow for instant payments, lower transaction costs and better crime detection, and help government budgets by boosting ‘seigniorage profits’ – an issuer’s profit from the nominal value of money exceeding the cost of creation (almost nil). Online accounts with central banks would help authorities reach the unbanked, micro-target fiscal stimulus, impose negative interest rates, spur innovation and enable ‘programmable money’. Digital money, as well, would give non-banks greater access to the central-bank balance sheets and instant settlement systems, check the data-gathering of payments companies and counter the use of unsafe private cryptocurrencies or foreign digital national money.

But don’t expect the mass use of an e-dollar or e-pound soon. While cash makes for untraceable transactions, e-money is traceable and thus raises privacy concerns. Hurdles include cyber-security risks and how to enable offline use and the threat to payments companies. The core drawback of central-bank money under capitalist systems, however, is the soundness of such money. The (implicit) government guarantee undermines a financial system based on private banks and fractional-reserve lending. That people would prefer to hold e-money deposits at the central bank means private banks might struggle to attract and retain deposits. The trust mismatch would boost the risk of bank runs. Commercial banks might be forced to turn to costlier and unstable sources of funding. One solution would be to shift to full-reserve banking but that would be another experiment. Another would be to limit the amount of govcoin that could be issued but that curbs its benefits.

An e-yuan is bound to inspire greater use of China’s currency outside China and help a country with a state banking system (where lending is based on collateral) insulate itself from US sanctions. But, as ‘hot money’ flows could boost the yuan and make exports uncompetitive, Beijing is wary of the yuan approaching the US dollar’s pre-eminence. While e-money will appear in coming years, central-bank money is likely to remain peripheral while its mass use comes with systemic threats.

It must be stressed that state e-money would be little like stateless cryptocurrencies (or ‘stable coins’, ones that are backed by financial assets such as Facebook’s proposed Diem). Private cryptos are easy-to-outlaw, peer-to-peer code that are an inconvenient means of payment. Unlike speculation-prone cryptos, government e-money would trade in line with the physical currency. So what if China launches an eCNY in 2022. Chinese multinationals would still rely on the US-dollar-based financial system and an e-yuan’s arrival wouldn’t do much to overcome how China’s currency manipulation, closed capital account and limited capital markets retard the currency’s ascent to proper reserve status. Beijing would be wary of issuing too much (government-guaranteed) eCNY so as not to undermine the deposit-taking of commercial banks.

The foreseeable future of central-bank money harks of one where, done prudently, government e-money, especially the Chinese version, will be a catalyst for some change but not enough to match the hype.

Not yet reserved

From 1979 to 1994, China banned visitors from using the yuan and forced them to transact in foreign-exchange certificates that were accepted only in tourist spots. The political aim of this two-track currency system was to prevent foreigners wandering about China. The economic motive was to prevent the yuan’s conversion into other currencies. How times change. For some years now, Beijing has campaigned to make the yuan a reserve currency like major western currencies, which are widely used around the world as a store of value.

Just as China’s forex certificates had a political and an economic purpose, so too does China’s pursuit to make the yuan a reserve currency. Politically, a reserve currency would grant China more global power. Economically, reserve status would lower trade and financing costs for Chinese companies. To the benefit of Chinese savers, a yuan of reserve standing would promote the development of financial markets and risk-management instruments. The feat would encourage better macroeconomic management of China’s economy because policymakers would need to consider how foreign investors might react to decisions.

Beijing’s biggest success in its quest for yuan reserve status occurred in 2016. That year, the IMF deemed the yuan “freely usable” – even though it’s not – and included the currency that features portraits of Mao Zedong in its special drawing rights. This is the term for a basket of reserve currencies that includes the US dollar, euro, yen and sterling that IMF members can access in emergencies.

But apart from the IMF push, the yuan has fallen well short of attaining genuine reserve status. China has only ‘internationalised’ the currency since it was first used to settle trading on Hong Kong’s border in 2009. This term means that people outside China accept payment in yuan, the proper name of which is the renminbi or ‘the people’s currency’. (The yuan is the biggest unit of account, like pound is for sterling.) In January this year, cross-border payments in yuan reached a five-year high of 2.4% of global transactions compared with 38% in US dollars. The US dollar’s dominance is similar in forex markets, trade finance and among official reserves.

To attain a reserve glow akin to the US dollar’s, the yuan needs to be market set, China’s capital account needs to be fully opened and China’s capital markets deepened and widened. The problem is that these goals clash with China’s illiberal political system. Dictatorships favour stability. Beijing is thus reluctant to open its capital account so much that its interest rates and currency – and hence its economy – are vulnerable to movements of capital under the control of foreigners.

China’s promotion of an e-yuan can be viewed in the context that China is the only major world economy to lack a haven currency, a drawback that leaves the country vulnerable to US sanctions and at a disadvantage in attracting capital. The e-yuan’s mission is to help create a parallel yuan-based international payments system that overcomes these problems. Beijing wants the digital money to be used by countries in Africa, Asia Pacific and Latin America that are part of its Belt and Road Initiative and expects it to appeal to allies such as Iran, North Korea and Russia that too are vulnerable to US financial sanctions. Being first might allow China to gain the ‘first-mover advantage’ in setting global standards for digital currencies. But there is no network effect to attain because other countries have their currencies.

As Washington’s deteriorating finances cast doubt on the US dollar’s long-term value (as shown by how the US dollar’s share of global forex reserves has dropped to a 25-year low of 59%), China is bound to improve the yuan’s use in global trade and finance. But genuine reserve status and immunity to US sanctions are chimeras while China is a semi-closed economy, even if tourists can use the yuan nowadays.

A fraction-less world?

In 2018, the Swiss government was forced to hold a referendum (or ‘federal popular initiative’) on the ‘Sovereign Money Initiative’ that, by neutering the ability of banks to create money, sought to prevent another financial crisis. The proposal decreed that only the central Swiss National Bank should have the authority to create money. By calling for ‘full-reserve’ banking, the initiative sought to end five centuries of private banks creating money when they lend amounts not fully backed by assets.

As 76% of Swiss voted against the proposal, fractional-reserve banking survived in Switzerland, as it has elsewhere. During the Great Depression, for example, famous economists in the US including Irwin Fisher called for bank loans to be fully backed by deposits, as did Milton Friedman in the 1970s.Such critics saw fractional-reserve banking as the source of instability in capitalist financial systems because it comes with the spectre of bank runs. And they happen – the IMF in 2008 identified 124 bank runs (or “systemic banking crises”) from 1970 to 2007.

A financial system based on private banks and fractional-reserve banking is inherently unstable because it cannot cope when too many depositors want their money at the same time. To limit the risk that bank runs might crash the financial system, governments create safeguards around banks.

In a world of full-reserve banking, private banks as we know them might disappear. Bank-lites might accept deposits but the volume of loans would be restricted to the amount of deposits. In the absence of the lending (money creation) that is the lifeblood of capitalism, the system would operate almost as did the Soviet banking system under its only bank, Gosbank.

This is a likely prospect of life under govcoins unless people devise a system whereby retail deposits at private banks are regarded as secure as those held at central banks. As people need only log on to switch their money from a private to a central bank (rather than line up at a bank), giving people the option of e-deposits at the central bank would probably risk such bigger and quicker bank panics that a digital national currency could never be made available for unlimited mass use.

The US government (and Microsoft and others) first tested using e-money in the 1990s when it investigated the thoughts of US computer scientist David Chaum. He foresaw that the disappearance of cash would lead to a world of traceable transactions and devised a digital money that would be harder to track. Chaum’s paper of 1985, ‘Security without identification. Card computers to make Big Brother obsolete,’ inspired the crypto-anarchist Tim May to form the cypherpunks who sought to write the code to enable digital money. UK professor Adam Back then devised the computation called a ‘hash’ that became the ‘hashcash’ that prevents computers creating infinite amounts of money. The next advance was when US coder and cypherpunk Wei Dai invented public ledgers that gave digital money its anonymity.These developments helped whomever used the pseudonym Satoshi Nakamoto to invent Bitcoin.

Central bankers, however, have no radical anarchistic bent. These ‘first do no harm’ types might take a while to formulate central-bank money that doesn’t threaten fractional-reserve banking. That might mean limiting the amount of money individuals can hold in central-bank e-accounts to a few thousand dollars. It might mean e-currency could be held in mandated banking institutions rather than with central banks. It could mean making explicit the lender-of-last-resort benefit that central banks offer private banks. Or it could mean that central banks will deposit the e-currency it issues with the banking system or create facilities where central banks compensate banks for the loss of deposits during a crisis . Or policymakers could allow the banking sector to shrink in favour of a shift towards lending via capital markets or by super funds.

These suggestions, however, come with problems that beg the question: Why bother with the experiment of e-money? The reality is that in the 500 years of fractional-reserve banking, no one has devised a better money-creating system for driving economic growth that is immune to panic.

While official e-money will appear at some minimum level and have its uses, especially for China’s global aspirations and perhaps widening the types of institutions that have access to central banks to improve wholesale markets and international transactions, govcoins are unlikely make redundant 2,600-year-old cash and other traditional money.

If you have questions and would like your financial situation to be evaluated, please email us on with your contacts, for an exploratory meeting, at our cost, not yours.

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Key changes to super from 1 July 2021

Key takeaways

  • Compulsory super contributions are legislated to increase from 9.5% to 10% as of 1 July 2021
  • Caps for your own super contributions will also increase, enabling you to add more to super
  • The maximum amount of super that you can transfer into a retirement pension account will increase by $100k.

There are changes affecting super from 1 July 2021 which could impact you.

In this article we outline what those changes are so you can be better prepared.

Compulsory super contributions increasing

Your compulsory super contributions—paid by your employer—are legislated to increase from 9.5% to 10% as of 1 July 2021.

But it won’t stop here.

The rate will continue to increase incrementally by 0.5 percent every year until it reaches 12 percent by 2025.

The intention behind this measure is to see a greater proportion of retirees relying less on the age pension and more on their retirement savings.

Changes to your own super contributions

Currently there is a limit to the amount of super contributions you can make yourself, whether you make these using your take home pay or through your employer.

As of 1 July 2021, this limit is changing so you may be able to add more to your super.

Before tax contributions

The current cap or limit you can contribute to super using your income—before it’s been taxed—is $25,000 a year.

From 1 July 2021, this limit will change to $27,500 a year. You can also add any unused cap amounts that you may have accrued since 1 July 2018 if you’re eligible.

Your own contributions

If you currently make contributions with your own money into super—that is using income after it’s been taxed or from your savings—the current limit you can contribute is $100,000 a year.

From 1 July 2021, this will change to $110,000 a year. If you’re eligible you can also contribute up to three years’ worth of your own contributions ($330,000) under the bring-forward rules.1

1Assumes the person is under the age of 65 at some time during the year when a contribution was made and that the total super balance was less than $1.48m at 30 June 2021.

Increase in super transfer limit for retirement pensions

The maximum amount of super that you can transfer into a retirement pension account will increase by $100k from 1 July 2021.

Currently you can transfer up to $1.6 million from your super into a retirement pension account. This will change to $1.7 million to meet the rising cost of living. It won’t apply to everyone though.

The main benefit of moving your money from a super account into a retirement pension is you don’t pay tax. This is because the earnings you generate from your investments are tax-free.

Note: if you exceed the limit, you will be liable to pay tax on the excess transfer balance earnings.

Who does the change apply to?

How much you’ve already moved into your pension account, if you have one, may affect whether this increased limit applies to you.

The table below highlights the various conditions.

First transfer date* Transfer amount Transfer balance cap from 1 July 2021
On or after 1 July 2021 Up to $1.7 million $1.7 million
Before 1 July 2021 Less than $1.6 million $1.6 million – $1.7 million
Before 1 July 2021 $1.6 million $1.6 million

*Transfer date refers to the day that you first commenced a retirement pension.

Impact on other limits

Other caps and limits, which may apply to you, will also be adjusted on 1 July 2021.

The limit on making your own contribution into super—using your take home pay—will increase from $1.6 million to $1.7 million.

If you have a total super balance of $1.7 million or more, you will not be eligible for the bring-forward arrangements from 1 July 2021.

The limit on whether you are entitled to a government co-contribution will increase to $1.7 million, as will the limit on whether you can claim a tax offset for super contributions you make on behalf of your spouse.

If you have questions and would like your financial situation to be evaluated, please email us on with your contacts, for an exploratory meeting, at our cost, not yours.

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5 top investment truths

Many of us have probably received in our in-boxes spams for get-rich-quick-schemes with promises of making great amounts of money, effortlessly. If only getting rich was so easy.

Rather than pipedreams being sold by spammers, here’s a list of 5 investment principles that have stood the test of time.

1. Asset allocation is very important

Asset allocation – how you spread your money across various asset classes like shares, bonds property, infrastructure and alternatives – helps to balance the risk and return potential in your investment portfolio, anchoring it through different economic and investment cycles.  It’s a key driver of long-term investment performance.

By including multiple asset classes with investment returns that move up and down under different market conditions within a portfolio, an investor can protect against significant losses. This is because, historically, the returns of the major asset classes have generally not moved move up and down at the same time.

By investing in more than one asset class, you’re likely to reduce the risk that you’ll lose money and your portfolio’s overall investment returns should have a smoother ride. If one asset class’ investment return falls, you should be in a position to counteract your losses in that asset class, with potentially better investment returns in another asset class.

The process of determining which mix of assets to hold in your portfolio is a very personal one. The asset allocation that works best for you at any given point in your life will depend largely on your time horizon and your ability to tolerate risk.

2. Diversification matters

The practice of spreading money among different investments to reduce risk is known as diversification. Through diversification, the overall performance of your investment portfolio isn’t overdependent on the performance of a single asset class or any single investment.

By spreading your money across a group of investments, such as in your super fund, you should be better able to limit losses when financial markets are volatile, and reduce the fluctuations of investment returns without sacrificing too much potential gain.

Asset allocation, along with diversification, is important because it can have a major impact on whether you’ll meet your financial goals. If you don’t include enough risk in your portfolio, your investments may not earn a large enough return to meet your goal.

For example, if saving for a long-term goal, such as retirement, most financial experts agree to including at least some ‘growth investments’, such as shares, for example, in your portfolio.

On the other hand, a portfolio heavily skewed towards shares would probably be considered inappropriate for a short-term goal, like saving for a holiday or buying a car.

3. Higher returns come with higher risks

Risk is unavoidable when investing. No discussion of potential investment return or performance is meaningful without also considering the level of risk involved.

If you want the potential to earn a higher return on your investments, then you have to be willing to accept more risk or volatility (ups and downs in the value of your investments). But investment success isn’t always about chasing higher returns by taking on relatively high risk – it’s about finding the right balance between risk and return that works for you.

An aggressive investor, or one with a high-risk tolerance, is more likely to risk losing some money occasionally, in order to get better long-term results.

A conservative investor, or one with a low-risk tolerance, tends to favour investments that will preserve their original investment. Conservative investors are concerned with a “keeping bird in the hand,” while aggressive investors seek “two in the bush.”

4. Your time horizon can influence your investment choices

Your time horizon is the expected number of months, years, or decades you will be investing to achieve a particular financial goal. An investor with a longer time horizon may feel more comfortable taking on a riskier, or more volatile investment because they can wait out inevitable financial market ups and downs.

By contrast, an investor saving up for a near-term goal, would likely take on less risk because they have a shorter time horizon.

5. Time in the market is more important than trying to time markets

All financial markets, including share markets, have good days and bad days. From this, it might be assumed that the key to successful investing is simply to be invested on all the good days and not invested on all the bad days.

It sounds tempting, but very difficult to do consistently and successfully, even for investment professionals.

Consider the fact that market timing entails two decisions. One decision is regarding when to get into the market whereas the other decision is regarding getting out of the market.

Getting just one of those two decisions right is difficult enough. Getting both right is a very tall order.

Market timing can be costly

One of the biggest costs of market timing is being out when the market unexpectedly surges upward, potentially missing some of the best-performing moments.

The opposite of market timing is staying invested with a long-term view as the market goes through its cycles.

Here’s something to consider: a hypothetical investment of $US1,000 in the global share market as measured by the MSCI ACWI index, made in 2010, would have grown to $US2,060 by the end of 2019.1

But if an investor missed the 30 best trading days of that period, they would have lost 99% of that return; and missing the 40 best trading days in that period would have seen the investor with a smaller amount than the original investment.

This emphasises the importance of patient capital – giving the market, in this instance, the global share market, time to grow your money rather than trying to pick the best time to invest. Even experienced investment professionals find it difficult to accurately and sustainably time markets.

One more thing

Sitting down with a financial adviser can help you will all aspects of investing, including investing your super.

If you have questions and would like your financial situation to be evaluated, please email us on with your contacts, for an exploratory meeting, at our cost, not yours.

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