âI've often read recommendations by politicians and many others to "shop around" for better rates on mortgages and particularly for credit cards. I've also read where people say they have done just that only to find they then have an adverse rating on their credit file as a result of the number of applications for credit they have made. Are you able to clarify this please? M.S.
As most people know, anybody with loans and credit cards has a credit history maintained by credit agencies. What you may not know is that a "credit score", between 0 and 1200, is maintained, and is reduced by obvious events such as missing repayments, ignoring reminder notices, maxing out credit cards and, ultimately, insolvency. Credit infringements can be listed for up to five years, or seven years if serious.
While your credit history lists any loans you have applied for, these should not reduce your credit score unless there has been a default.
You are entitled to check your credit report free once a year, providing you wait for 10 days. If you need to see it more quickly, there may be a charge.Â
The Australian Securities and Investments Commission recommends that you check your credit report every year as incorrect listings can alert you to things like identity theft, one of the fastest growing areas of criminal behaviour.
You can get a copy of your credit report from credit agencies, notably Dun and Bradstreet (tel 13 23 33), Equifax (13 83 32) or Experian (1300 783 684), all available online. All three offer a variety of apps for your mobile phone. Tasmanians can check with the Tasmanian Collection Service (03 6213 5555) and Equifax.
We are 44 and 47, with four children, aged 10-15, and a mortgage of $560,000 on a modest home, with about $170,000 equity and $20,000 in an offset account. Hubby has about $772,000 in Commonwealth Super after 18 years in the APS, and I have around $50,000. I stayed at home for 10 years to care for our four kids, and I now work casually from home for 15-20 hours a week while hubby works for a state government department with a package of around $160,000 a year. One of our kids has autism and it is in his best interests that one of his parents is around most of the time. We own a 10-year-old people mover and a small 2008 runabout. The kids attend public schools and we have a savings plan for bills, Christmas, and our annual two-week holiday costing about $5000. As far as investments go, we have the house, super and my husband's ability to defy insanity and work 60-70 hour weeks. We are no extravagant spenders and never buy smashed avocado on toast. We both have poor parents so there is no chance of any future inheritance. We have life and income protection insurance for hubby and no other debts other than our daughter's braces. My question is, what are our options for life? We have lots of friends who have no mortgage, investment properties and portfolios. It seems ludicrous that, while we earn good dosh and are lucky to have a house, we just lumber on paying bills, not able to save too much and feel slightly panicked about this whole retirement thing. How do we prepare? Are we being too lazy, too spendy and not saving hard enough? How do we ditch this mortgage? How do we get a portfolio? We want to be able to help our kids too and have a financial plan in place for our autistic son. E.N.
Actually, the best approach to an avocado is to fill the centre cup (after removing the seed) of half a store-bought fruit with salted French dressing and eat with a spoon and seeded bread. Doing it at home is much cheaper but costs rise if you tell the children.
I have no advice on autism but found the recent story of Dr James Best and his autistic son Sam backpacking through Africa quite fascinating.
Since you have another 20 years or more of compulsory employer contributions ahead of you, you should end up with a reasonable super benefit allowing a comfortable if not luxurious retirement. Of course, the employer component in deferred Commonwealth Super benefits only grows at the rate of inflation, which is currently only rising very slowly. For this, you could try prayer. For your member component, be sure to be in the default fund rather than the cash fund. Invest any state super funds in growth funds although I fear there could be a downturn in the next few months.
To assist in the mortgage, I would combine your savings plan into your offset account.
If you want to change things, then one option in your current circumstances is to earn more if either of you were to educate yourselves into a more highly skilled position. Such educational programs typically take two to three years, but you are young enough.
For now, it sounds as though you have a happy family with a sense of humour. And that, money can't buy!
I am 60 years old, retired and have an accumulation account with Unisuper. Rather than leave the money in the accumulation account, would it be better to start a pension account with most of the money but leave some in the accumulation account to keep it open? I was thinking of then spending some of the payments from the pension account and re-investing the balance back into the accumulation account. I could then top up the pension account from time to time by stopping the pension account, rolling over the accumulation account and then restarting the pension with a larger sum. Are there any problems with this strategy? Are there any drawbacks with this plan or any taxation considerations? R.S.
Certainly, starting a pension (with less than $1.6 million) means that income earned by your super benefits will become untaxed as your pension will be in the newly named "retirement phase"; that is, it will not be a taxed "transition to retirement" pension, stemming from preserved benefits.
While there are percentage fees in Unisuper accounts, each Accumulation 1 account also charges a flat fee of $96 a year while the Accumulation 2 account charges $125 a year. Accumulation 1 fund allows one free rollover and then $13 each, while Accumulation 2 funds also charge $38 for a partial rollover. In other words, you are faced with additional fees when operating numerous accounts and rolling over between them, which is somewhat disappointing since such transactions are computerised and thus low cost.
So, unless you are talking about large amounts of money, you might be better off sticking with one account. Depending on the level of your non-super income, and thus your taxable income, if any, you could try accumulating unspent money and making a large contribution every two or three years.
Under current rules, you can make a deductible contribution of up to $25,000 a year and a non-concessional contribution (NCC) of $100,000 a year, or "roll up" three years worth to make a $300,000 NCC every three years. Not knowing your other income or expenses I can only suggest that, as you are aged 60 now, and retired, you will need to juggle your contributions to best fit these limitations.
If you have a question for George Cochrane, send it to Personal Investment, PO Box 3001, Tamarama, NSW, 2026. Help lines: Financial Ombudsman, 1300 780 808; pensions, 13 23 00.