Summer 2011
australian property market: fears, facts and focus by Paul Clitheroe
foreign investment paves the way for brighter economic outlook by Jeff Rogers
a positive
future ahead
contents
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Summer 2011
p age 2 introduction and appy days
p age 3 australian property market: fears, facts and focus by Paul Clitheroe
p age 4 & 5 emotions of retirement
page 6 foreign investment paves the way for brighter economic outlook by Jeff Rogers
p age 7 moving in – tips to help make the day a little bit easier
page 8&9 a life less frantic
p age 10 facing up to retirement – issues facing the over-50’s
welcome to First they're down, and then back up again. For anyone who's been taking notice of markets recently, it's fair to say that even the most experienced of economists are failing to predict exactly what will happen from one day to the next. Market uncertainty has the potential to affect everyone. But where there's uncertainty there's also opportunity and as our latest edition of infopac shows we sometimes have to take the glass half full approach when viewing the bigger picture. In this edition, Paul Clitheroe brings reality into talk of a housing bust (page 3) and ipac's Chief Investment Officer, Jeff Rogers, explains how investing overseas offers investors light at the end of the tunnel (page 6). Our main feature (pages 4 and 5) explores the ‘emotions of retirement’ and looks at how the exhilarating experience of retirement as we know it today, is different to that of yesteryear. As aged care continues to be a prime concern, we share some tips on how to make the day of the move a little easier. Regardless of the tough market climate it's important that we continue to look after our health and well being. A Life less Frantic (pages 8 and 9) looks at time management and how we can strive to create a better lifestyle for ourselves. We hope you enjoy this edition and welcome your feedback at inews@ipac.com.au.
p age 11 & 12 noticeboard
appy days Smart phones such as the iphone and blackberry or tablet computers like the ipad are fast becoming popular with the baby boomer market, so much so that the older generations have been singled out as the fastest growing group of users! Gone are the days when a mobile phone was exactly that. Smart phones now offer their users the option to choose from hundreds of ‘apps’ (applications) enabling us a whole online world of information. Apps enable your computer or device to perform useful tasks and functions. For instance you can find your nearest bank ATM at the touch of a button, play a game of scrabble in real time with a friend and even have a face to face video conference with someone on the other side of the world. Somewhere there is an app to suit both your lifestyle and your interests.
downloading apps When it comes to downloading an application the world really is your oyster. A smart phone will usually come pre-installed with an application store. An application store works in exactly the same way as any other store. You can visit the store as often as you want and purchase the items that you like usually for a small fee - and some apps are even free!
top free apps Facebook: Your friends use it, your kids live on it and your pets more than likely have their own fan page. Forget the books, movies and advertising - Facebook allows people to stay in touch with each other easily, in real time and remains the best free app for doing this. Twitter: Yes I know, why on earth would you want to tell people what you’re doing every second of every day? Despite some people’s negativity, Twitter is leading the social media revolution in terms of ‘on the spot’ online news updates. Want to know the very latest of any news going on around the world? You’re likely to find it here. Skype: Skype allows you to make calls to people via the internet on your computer or smart phone. If you have a camera you’ll even be able to see the person you’re chatting to, normally for free or at small cost. ABCiView: Keep up to date with all your favourite ABC shows with news, drama, documentaries and comedies all available at the slide of a finger on a screen. Scrabble: The all time family favourite board game is now available as an app. Play your friends or family in real-time on line.
Summer 2011
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Australian property market: fears, facts and focus by Paul Clitheroe In the middle of significant share market volatility, which is attracting much media attention, one of the more interesting debates is whether Australian property is grossly overvalued, reasonably priced or totally unaffordable for a new generation of buyers.
" There is no doubt that Australian housing is expensive on any global measure"
The Economist magazine has been consistently pointing out that Australian property is expensive. In the March issue they reported that “Australia's homes are the most overvalued in the index. The ratio of prices to rents in the country is fully 56 percent above its long-run average”. Now there are plenty of economists who disagree with this. They point to fundamentals such as rapid population growth, the existing undersupply of housing and while we have a huge continent, not much is well suited for building new cities. The Economist goes on to speculate about why our prices are so high. Firstly, the obvious stuff such as high immigration of skilled workers, relatively low interest rates, growth in income and the now typical two income household. But it also muses about our commodity boom. “What marks Australia out of course is its extraordinary resource boom. The country's terms of trade, the price it can fetch for its exports, relative to the price it pays for its imports, is at its highest since the 1950s. So perhaps lucrative exports of iron and coal justify rich valuations for bricks and mortar? In a recent paper, Patrizia Tumbarello and Shengzu Wang of the IMF show that a 10 percent improvement in the terms of trade tends to lift Australian property prices by about 5 percent.” Time will tell, but I tend to avoid the extremes of boom and bust arguments, because the truth generally lies somewhere in the middle. There is no doubt that Australian housing is expensive on any global measure, but the arguments about population growth and even our terms of trade are also valid. So I side with the fundamentalists who feel the boom in Australian housing prices will deflate gradually, rather than experience a dramatic bust. An interesting report from RP Data says that the average Australian home now costs $417,500, which is very close to the average price 6 years ago and around $66,000 less than two years ago.
Inside our markets we also see quite different results. In Sydney for example, top end property is really doing it tough. Yet the popular inner west is showing good price growth. The Gold Coast and Sunshine Coast are very weak, and I doubt the recent ‘no reserve’ sale of some 77 properties in the ski resort of Falls Creek, where properties sold for as low as $40,000 will do the snow property market any good, and no matter where you are, I think selling a holiday home would not be a pleasant experience. So add this mixed bag together and that is where RP Data got the “no growth on average for six years”. But if we accept these figures, it does represent a healthy deflation of the property bubble. Fortunately the Economist magazine is an economics magazine, and we property owners are just humans. So if we owned the mythical average home worth $417,500 six years ago and it is still worth the same today, I suspect we will be arguing at dinner parties that we have not gone backwards. While the average house is still worth $417,500, the Economist magazine, quite correctly says that in real terms it is worth about $347,500 and so in real terms we have lost over 18 percent, or some $70,000. They must think that we are economic idiots, and thank heavens for thatt. If we actually stripped inflation out of the value of our homes, after the costs of maintaining, insuring, buying, selling and renovating, it would look like a dog of an investment. But if RP Data is correct, and anecdotal evidence certainly supports their claim, an average real decline in property values of 18 percent over the last six years, plus higher household income actually means that property is relatively more affordable. Now don’t get me wrong, I’m not saying it is cheap, and in some areas it is still really expensive, but given the underlying strength of our economy plus significant population growth, I still think a long-term plan to own a home in a growth location is a good one. But don’t hurry. In this climate, while I do not expect a crash in values, I think we will see soft to flat values for some years. Paul Clitheroe is a founding director of financial planning firm ipac, Chairman of the Australian Government Financial Literacy Board and chief commentator for Money Magazine.
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Summer 2011
‘ I don’t just want to retire, I want to live’ the emotions of retirement Retirement’s changing. Australians no longer just retire - they want to live a lifestyle where they can ease into parttime work, consulting, volunteering and still enjoy an active social life.
Having a clear plan is really important, especially in these uncertain economic times where constant media coverage about falling share prices creates enough panic among investors that some may act on emotions rather than logic.
Celebrations, new hobbies and world travel are just some of the items on an agenda for a retiree earlier on in the retirement phase but it is important to also plan for the other phases that follow.
the four phases
In the majority of cases this is exactly what people receive. However, there’s no guarantee that everyone will have this positive experience.
The fact is people need to begin their retirement plans early and have a clear agenda for what they want to achieve from their retirement from the outset. Retirement planning specialist John Dani, National Manager Advice Development, ipac, says retirement for baby boomers has been likened to a new midlife crisis. And with the first wave of boomers turning 65 this year – they need to be aware and prepare.
Baby boomers with one eye on retirement have to make some important decisions over the next period of their lives to ensure they have enough money for the type of lifestyle they want.
“It’s a minefield,” Mr Dani says, “We hear a lot about planning for the financial side of retirement and that’s obviously very important – but the emotional side can really bring people unstuck.”
hints & tips
“I’ve seen retirees in emotional turmoil, simply because they haven’t thought enough about life after the champagne cork pops.”
Retirement can be seen as an exhilarating time, a new exciting era in life when the day to day grind of the working week is over and the finances and investments that have been carefully built up over the course of our working life, begin to pay us back.
Early planning which encompasses all aspects of retirement means these challenges can be carefully considered and worked through. ~~Consumer spending levels usually go down as we age, however health spending increases as priorities change to securing long-term health. ~~Friendships forged from adolescence and early adulthood are likely to remain strong, while you encourage the formation of new friendships from similar social circles.
Many people only think of retirement as being one phase in life after working but there is really four phases of retirement, each with unique emotional and financial issues that need to be considered.
When planning for retirement it’s important to consider the four stages – each with its own unique burdens, or emotional and financial issues.
1. the defining phase So just how much money is enough? It’s a question that many boomers will be asking themselves at this phase and the outcome is indeed different for everyone. Retirees in particular have to make a call as to how and when they decide to retire. Sometimes lowering work hours and responsibilities might be an option through taking a part-time role, for others it might be ‘tightening the belt’ and saving. Whatever your preferred method of preparation it’s important to make a plan, stick to it and make the money last.
2. active freedom phase (1 month to 6 years) All of a sudden you’re giving up your work and your health and vigour may be at their peak. Swiftly lifetime dreams become a focus and time with family and friends optimum. A reliable source of income is required; this phase generally lasts from one month to six years.
Summer 2011
defining phase: ~~serious consideration of retirement ~~consider part-time or consulting work ~~making money last and determining how much is enough
active freedom phase: ~~work becomes less of a priority ~~health and vigour peak ~~focus on lifetime dreams ~~time spent with family and friends highly prized ~~reliable source of income required
consolidation phase: ~~quieter, more domestic lifestyle ~~less consumer spending and increased health spending ~~current and long-term health become priority ~~social activity kept strong.
dependency phase: ~~need for aged care contingencies such as home nursing or assistance, or a move to an aged care facility ~~most spending on health ~~less involvement in daily financial affairs ~~focus on maintaining maximum pension and estate planning.
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3. the consolidation phase
4. dependency phase
Arguably the most difficult phase of the retirement process is ‘the consolidation phase’. This is when people begin to reflect on retirement and the positivity that comes with leaving the workforce, but battling other issues and concerns.
Last but not least many boomers will need to consider aged care requirements throughout their retirement – whether future planning for themselves, or for a loved one with declining health.
Individually boomers might have the following financial pressures: ~~fluctuating markets ~~changes in the relationship between partners – who may have lost some of their social and financial independence and boredom ~~lack of social connection due to the removal of normal working life. Boomers may face the following personal challenges: ~~parents are living longer lives, so the expectation of an inheritance to fill the gap between goals and financial realities is becoming doubtful ~~boomers haven’t thought beyond the fun part of retirement and what will keep them happy for a long time. This makes them ill-prepared when reality sets in ~~geographic distance is coming between retirees and their families (Dani notes that retirees using social networking seem happier) ~~boomers have been forced to work longer, or tighten purse strings, because of fluctuating markets.
From basic home assistance through to permanent full-time requirement of an aged care facility, boomers should investigate and prepare for this eventuality. At this stage the majority of your spending is likely to be on your health and less involvement in daily financial affairs. Focus tends be on maintaining maximum pension and entitlements to estate planning, as well as managing spending and risk in the face of volatile markets. If you would like any further information on planning your retirement, contact your financial adviser today.
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Summer 2011
foreign investment paves the way for brighter economic outlook by Jeff Rogers, ipac’s Chief Investment Officer While global share markets have fallen recently, investors have grown impatient with the dithering of policy makers and their slow action to help countries with serious economic challenges, such as Greece. Notwithstanding these challenges, investing in overseas companies offers important diversification benefits and the potential for strong returns over the medium term.
above average growth outlook While you might not know it, the world economy is currently experiencing above average growth relative to the past several decades. Even though the International Monetary Fund (IMF) recently downgraded its economic growth forecasts for the current year, growth expectations remain close to 4 percent which is above historical averages. Emerging economies are expected to remain the key source of growth in the global economy.
challenges ahead for advanced economies We are aware of the issues along the way that may make overall global growth a bumpy ride. Europe faces significant challenges. While Germany remains a powerhouse, many other European nations face serious problems stemming from slower than average growth and high debt levels. In the United States, there continues to be severe political disagreement on how to best generate higher economic growth and job creation while incrementally paying off debt. This will hinder US business and consumer confidence until a clear path ahead has been identified. While the economic environment represents the global backdrop for investing, it is important to remember we invest in companies, not economies.
consumer demand in developing countries remains strong Companies are generating strong returns from across the globe because they can increasingly sell their goods and services in countries where their opportunities were previously limited.
China has more than 1.3 billion people and India more than 1.1 billion. An increasing number of these people have the opportunity to buy consumer products such as smart phones, computers and cars. Explosive growth in consumer demand can also be seen in other parts of emerging Asia and in Latin America, where places like Brazil are enjoying the rise of a larger middle class. Emerging economies now account for 80 percent of all mobile phone sales and more than 60 percent of car sales across the globe. Global companies providing products that range from electronics to healthcare to consumer staples are well positioned to benefit from the rise in consumer demand that is occurring around the world. This is a cause for optimism about the mediumterm opportunities for many companies in the advanced economies as well as the emerging markets.
what sort of opportunities are there? Investing globally helps investors capture this global growth by providing access to strong companies operating in the emerging economies, as well as a vast array of high quality companies located in developed economies that have grown their businesses and revenue streams. Everyday household names such as Nestle, GE, Apple and Google have goods and services that are well-regarded in their home markets as well as in fast growing emerging economies like China, India and Brazil that, on a whole, are producing an economic growth rate above 6 percent. Recent gains in business investment in the US highlight that global companies are seeking to re-invest in their business and looking beyond the current volatility of share markets. Overall, even with a moderate level of economic growth over the next few years due to the financial strength of corporates and their current share prices, global shares are well placed to deliver above average returns over the medium-term.
" Emerging economies now account for 80 percent of all mobile phone sales and over 60 percent of all car sales across the globe."
Summer 2011
moving in – tips to help make the day a little bit easier Making the decision to move a loved one, be it a family member or friend, into aged care is never an easy thing to do. It is however a call that many of us will need to make at some point during our lifetimes - often at short notice and with little time to prepare or research. Often the need will arise following injury or serious illness that disables someone from being able to care for themselves in their own home. Whatever the reason, it can be a very confusing time for everyone concerned. For many people, moving a family member into a facility will be their first contact with the aged care industry. The pressure of finding the right home and doing so quickly, combined with the concerns for the wellbeing of a parent make for both a stressful and daunting combination.
the first day Make sure that you utilise the expertise of the facility staff – as they are there to assist and support you. The first day for the person moving in especially can be a very stressful and emotional time. Here are some simple tips to make it easier for your parent, partner or loved one on the day of the move:
preparing a room No matter how nice a facility is, for a first timer it will still look and feel like an institution – not a home. This can be unsettling. To help your loved one settle in, it is important to set up their belongings before they arrive so their first sight of the room will look like a mini-version of home.
FRAGILE HANDLE WITH CARE
~~lay out some recent magazines, or activity books like crosswords or suduko
position as possible, while offering yourself and your family at least some peace of mind.
~~make sure your electrical appliances and cords comply with facility standards.
Additionally;
It’s inevitable that some things will get left behind or forgotten in the move, so bring a pen and paper to make a list.
arrival If you’re able to determine your time of arrival it’s probably worth moving in during the day. There are usually more staff on a day shift, including a receptionist who can assist you with questions and admission paperwork. Regardless of when you arrive, make sure the facility staff knows what time you are coming in.
settling in Spend the time to make sure that your loved one will be comfortable when you are not around. Ask them what they are unsure of, and patiently run through how things work. Some ideas worth considering: ~~make sure the call button works ~~check that the radio and TV are plugged in and work, and remote controls are within easy reach ~~adjust the room temperature to suit the day and time of year ~~explain when the next meal time is and how the dining process works ~~take them on a tour of the facility ~~take them to the dining room at the next meal time.
Some suggestions for personalising the room:
Stay with them for as long as you feel is appropriate. If you have planned ahead and booked a meal, you could eat with him/her too. This will give you a great opportunity to introduce them to other residents and staff.
~~bring in their doona cover and make the bed with their usual linen
leaving
~~set out their favourite photographs – so that they are easily visible ~~if the room allows – put up some of their favourite artwork ~~put fresh flowers or pot plants around
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Leaving a loved one at the facility on the first day is arguably the hardest part of the move for everyone concerned. It’s worth considering ways in which you can leave your loved one in as comfortable
~~tell them when you will next visit, or who will be visiting next ~~be totally honest and don’t make promises or set up false expectations ~~there may be tears or signs of upset, so try to respond with understanding and don’t be patronising or dismissive ~~this could potentially be a very emotional time for you and your family so make sure that you consider taking some time out following the move - eg dinner with family or friends where you can talk about the day. Lastly, be prepared to feel emotional and make sure you have support after you leave the facility.
the first day: Make sure that you utilise the expertise of the facility staff – as they are there to assist and support you.
preparing a room: It’s inevitable that some things will get left behind or forgotten in the move, so bring a pen and paper to make a list.
arrival : Regardless of when you arrive, make sure the facility staff knows what time you are coming in.
settling in: Stay with them for as long as you feel is appropriate. If you have planned ahead and booked a meal, you could eat with him/her too. This will give you a great opportunity to introduce them to other residents and staff.
leaving: Be prepared to feel emotional too – and make sure you have support after you leave the facility.
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Summer 2011
a life less frantic With the ever increasing demands and pressures that are thrown at us, we consider how you can live the life you want, and stay calm in the process. But no one can survive this frantic pace purely on adrenalin, no matter how exciting, challenging or stimulating their life may be. Mastery of time is an essential ingredient to achieving a sense of wellbeing and balance. If we do not learn to master time then inevitably, it masters us.
the consequences of poor time management With Australians now working longer hours and taking less annual leave than most developed nations it’s no wonder our rates of heart disease, obesity, fatigue and stress are also increasing. These outcomes, in turn, have led to substance abuse, sleeplessness and a growing drug dependency as we ‘work ourselves sick’. The Japanese have a word for this malaise – ‘karoshi’ meaning ‘death by overwork’. A study of Japanese workers found that more than two thirds of those who died from heart attacks had worked excessively in the period before their attack.
strategies to reclaim balance What can we do about better managing our frantic lives? Here are some strategies to help:
the ‘focus’ strategy The ‘focus’ strategy relies on our ability to prioritise what’s important in our lives. It follows three simple steps: step 1 – define what’s important These are the longer-term ambitions and aspirations that drive your life. They should be attended to every day, making small investments regularly will better contribute to a meaningful life. But because we become overwhelmed with matters that demand ‘urgent’ attention we sometimes postpone these less urgent but more important issues.
it will soon become your natural mode of operation. You’ll benefit from a new found focus and you’ll be spending your precious time on what’s important to you. There is a well-known Buddhist teaching – if you want to fill a beaker with rocks and sand then it is best if you place the rocks in first. The rocks represent our priorities, or what’s most important to us, and the sand represents everything else.
the ‘control’ strategy Many people think of stress as a loss of a sense of control over life’s challenges. Coping is central to controlling the way we respond to life and there are five disciplines that can work very effectively to assist: rule 1 – plan ‘block-out’ time in your day
Setting priorities helps us to navigate the constant choices and changes we experience. Priorities also help us to ‘unbundle’ and unburden unnecessary activities, especially the demands of others.
‘Block-out’ time blocks out other people and activities and allows you some important space to think. Use this time to consider new challenges and issues (before they get out of control) and to plan your actions. Don’t use this time as a reserve for others – it’s your time, use it wisely.
step 3 – action your priorities
rule 2 – control the ‘incoming’
Make sure you change your behaviours to align with your priorities. At first you’ll find it difficult to adapt, but if you stick to a plan
In war-time, ‘incoming’ often meant bombs, these days it means phone calls and emails. They can be just as disruptive because
step 2 – prioritise what’s important
Summer 2011
others control their arrival. So exercise your control and turn your phone off for periods where you don’t want to be interrupted. Meal times are a great start. You may find this difficult, but it’s OK, you’re allowed to turn them off! And you’ll love the freedom and sense of power it will give you. rule 3 – master one thing at a time It’s tempting to do several things at once but that’s the trap of the frantic life. So when you sit down to read a report, finish it. When you take time for a coffee, enjoy the moment without distraction, and when you walk the dogs, get rid of the mp3 player and absorb your surroundings. rule 4 – find simple pleasures Our lives have increasingly relied on ‘retail therapy’ and commercial stimulation for relaxation. Yet we are surrounded with life’s simple pleasures that thankfully come at no price. For example, try a family picnic instead of a restaurant, a walk in the park with a loved one instead of an hour at the gym, or an afternoon with the music collection instead of at the movies. Simple pleasures give us control and time to enjoy ourselves and escape from our complicated lives.
rule 5 – say ‘no’ more often Have you noticed that successful people always seem to have more time to do things well? That’s because they plan their time to achieve balance and they focus their energies on what’s important. Don’t overload your life just to please others. Map out your priorities and allow plenty of space in your days.
the ‘relaxation response’ strategy The well documented ‘relaxation response’ (see especially ‘The Relaxation Response’ by Dr. Herbert Benson of the Harvard Medical School) can help to clear away mental clutter and improve your ability to concentrate, so that your performance and skills in such areas as solving problems may improve. The relaxation response, based on simple breathing techniques, is one safe and tested way to open our valves and release their pressure. But it takes time to re-train the body to achieve the desired response. Over time, a heightened sense of calm from relaxation will extend throughout the day and helps to protect us from the inevitable and unexpected stress factors in our lives.
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The two components to perfecting the relaxation response are: ~~Deep breathing – practise breathing deeply using your diaphragm for 10 minutes twice a day. Slowly inhale and hold your breath for 30 seconds. Slowly exhale and relax. Repeat this procedure and stay focused on how your body responds. The deeper your concentration, the better the relaxation response. ~~Progressive Muscle Relaxation – lie on the floor, in a comfortable position and relax completely for one minute. Now tense all muscles in your head and neck and hold the tension for ten seconds, then gradually relax the tension until your head and neck are perfectly relaxed. Repeat this procedure once or twice for each major muscle group moving from head to feet. At the completion of the process, lie still and concentrate on the sense of relaxation of all muscles. This procedure re-trains your body to relax, over time, and reinforces the automated relaxation response you want, longer-term. Time is a precious asset that we should use wisely to our benefit. The key strategy is to secure your own sense of control over your time and convert to a ‘life less frantic’, a life with less stress and more meaning.
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Summer 2011
key issues facing baby boomers today. setting a retirement date
facing up to retirement – issues facing the over-50’s Regardless of the current global market uncertainty, Australia’s baby boomers have a number of issues to contend with. Whether considering a financial portfolio, health or fitness and well being the over 50s still need to consider their middle to senior years and what that means for them and their families. We took some time out to catch up with National Seniors Australia CEO, Mike O’Neill, and discuss just a few of the issues facing baby boomers today. No one understands the breadth of questions and concerns facing the over 50s better than National Seniors Australia (NSA). NSA is a not-for-profit, membership-based community organisation which looks to provide economic and social benefits for the over 50s. With a rapidly growing membership of more than 250,000, it represents the views of its members in government and provides service and advice to charitable institutions across the country. Mike O’Neill has been the CEO of NSA for five years, however he came from a background of mining and agriculture lobbyist groups. “We enable older Australians to have a collective voice around a diverse range of issues. Our members are provided with an enormous opportunity to trumpet their cause and I’ve seen personally how powerful a collective voice can be,” said Mr O’Neill.
volatility in the markets The current market volatility continues to dominate headlines and in turn continues to cause concern for many people. “Understandably people are feeling uncertain and concerned about the state of the current financial markets, where they are headed and what it means for them and their families”, says Mr O’Neill.
For some it will seem too far away to contemplate, for others it will be knocking very heavily on the door, but the fact remains it’s never too soon to consider your options for retirement
keeping a job With the threat of a ‘double-dip’ recession still lingering and unemployment on the rise older workers, despite their earthly experience can sometimes be the first to be laid off. For many, remaining in the workforce remains a priority.
health
“The question on many of our members’ lips as an over-50s person looking ahead to retirement is will the current financial uncertainties cause me problems?” The general cost of living is also of great concern.
There’s no hiding the fact, Australia has an ageing population. But while we’re all living longer the chances of illness and disease affecting us remains very real.
Australia is by no means the cheapest place to live - in fact a recent survey issued by the Economist Intelligence Unit (EUI) had Sydney at number 6 on the ‘expense list’ eclipsing world capitals such as London and New York.
property
“I think it’s a case of living pressures on society” says Mr O’Neill. “Our members are experiencing issues all the time. Something as simple as an increase in a gas or electricity bill can have a huge impact on many people. If you’re uncertain about your general cash flow then market volatility is bound to reinforce that concern.” He added, “In the short term, for people at this time, retirement planning presents a significant challenge.” As if retirement were the only issue, the majority of baby boomers have to consider aged care options for their parents. In fact aged care has been a hot topic for many people over the past few weeks. The Productivity Commission (PC) recently submitted a report recommending that reforms be made to the current law to enable integrated care funding. The PC recommended that the value of the family home should be taken into account when determining how much a person should contribute towards the cost of their aged care, as the system struggles to cope with our aging population. Under the new improved arrangements people would be given the means to be able to pay an accommodation bond, and therefore contribute their own money up to a certain amount.
While the capital growth of yesteryear is not nearly as rapid as it used to be, property generally remains a key asset.
relationships Finance and retirement investing remains a top priority for most people when nearing retirement but the consideration of personal relationships often gets left behind. Whether that loved one is a partner, family or friend times of economic hardship can bring these relationships into question.
consumer behaviour A relatively strong Aussie dollar might enable some to travel and purchase goods overseas at great prices. However, its effect on everyday staples such as groceries can make it very difficult for many on a daily basis. Credit card debt remains rife.
aged care Despite recent reformative measures in aged care making the headlines, handling aged care for our parents or planning for our own old age can be a minefield of complications and difficulties.
stress Regardless of age, stress continues to be the cause of illness to many. Current economic conditions make it a difficult time to relax.
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noticeboard ipac iAccess updates BPAY® enhancements
The bond would then be returned to them according to how long they've been in care and essentially the money to cover capital costs. While the government has generally reacted favourably to the report, it remains to be seen if it is likely to support the recommendations. The implications of such drastic reform change could affect anyone considering an aged care facility for family in the near future. Mr O’Neill said; “we (NSA) fully advocate the Productivity Commission’s report. It’s now up to the government to make a firm decision if they are going to support, reject or consider the recommended reforms within the report.”
share your views and receive a free 1-year NSA membership ipac and NSA are pleased to be able to offer a free 1 year NSA membership to the first 50 responses from infopac readers on the issues of concern to the over 50s. NSA membership offers some great rewards including; ~~savings on a number of goods ~~information on the issues affecting the over 50s ~~opportunity to meet like minded people at NSA events ~~six free issues of the award winning 50-something magazine throughout the year. Simply complete our form by visiting www.ipac.com.au/nsamembership and let us know your top three concerns about retirement. The first 50 entries will receive a free membership! Good luck!
We’ve made it simpler for you to make additional contributions to iAccess via BPAY®. Instead of requesting a new BPAY payment reference number every time you wish to make a contribution, you now have a unique personalised BPAY reference number, which can be used each time you contribute. You can find your own personalised number in the My Accounts section of ipacweb. superannuation annual statements updated In response to the Corporations Amendment Regulations 2011, superannuation annual statements have been updated to include 5 and 10 year annualised returns for the portfolio(s) you were invested in at the end of the statement period. choice of competitive term deposits with iAccess Term deposits with competitive rates and flexible options are available via iAccess. With a broad choice of terms ranging from 30 days to 5 years, and a range of providers such as AMP, ANZ and Westpac, you can plan your cash flow needs for specific events over specific timeframes. For terms greater than a year, you have the option to have your interest paid monthly, quarterly or half yearly. You can also opt to automatically reinvest the initial capital and interest earned at the end of the term. Your financial adviser can provide further information. iAccess enhancements continue: regular savings plan information You can now see detailed information about your regular savings plan on ipacweb. Information you can now view online includes next payment date, frequency, contribution type and whether indexation applies.
ipac portfolio updates increased exposure to foreign currencies in diversified portfolios Portfolio returns benefited from ipac’s approach to currency management in
the last financial year as the Australian dollar rose significantly against other major currencies. With the Australian dollar above ipac’s view of its long-term fair value, ipac responded by increasing the exposure to foreign currencies in diversified portfolios to enhance return prospects and to also better manage risk. Powerful cyclical influences have driven the Australian dollar well above its longterm value. These influences are; higher interest rates in Australia, relative to other advanced economies, plus Australia’s booming terms of trade helped by rising commodity prices. Over the medium term, ipac anticipates these forces will reduce. By slightly increasing the amount of foreign currency in the portfolios we are well placed for this scenario. international shares restructure The performance of the International Shares component of portfolios has been ahead of its benchmark (MSCI World exAustralia Index) over the past two years. ipac continually looks for opportunities to enhance portfolios. Our research led to recent enhancements that aim to deliver increased returns and improve the consistency of outcomes for International Shares. These enhancements aim to: ~~improve the return by appointing specialist managers to deliver more concentrated investment mandates. These mandates are designed by ipac to give full voice to the investment ideas the managers believe have the greatest potential for success ~~improve the reliability of returns relative to benchmark by further increasing the diversification of investment approaches. ipac has introduced more differentiated investment processes in the ‘growthoriented’ segment of the sector Four new managers were added – Harding Loevner, Carnegie Asset Management, AllianceBernstein Global Thematic Research and Pzena Investment Management. These managers provide differentiated investment processes delivered through concentrated investment portfolios. To effect these changes, investment mandates with AllianceBernstein in both growth and value and a growth mandate with GMO have been withdrawn.
12
Summer 2011
noticeboard portfolio performance
ipac Conn@ct
performance of ipac Pathways to 30/09/11
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5 Year % pa
3 Year % pa
2 Year % pa
1 Year %
6 Mths %
Pathways 30
2.48
4.26
4.07
1.77
-2.28
Pathways 70
-1.54
0.33
0.54
-2.90
-8.86
Pathways 85
-2.31
-0.59
-0.66
-4.42
-11.18
Pathways 95
-3.93
-2.13
-1.63
-5.60
-12.85
Pathways Value
-0.94
0.64
2.48
-0.34
-6.24
Australian Shares
-1.63
-0.36
-4.73
-8.61
-14.84
International Shares (unhedged)
-9.52
-8.71
-5.54
-7.32
-12.65
International Shares (hedged)
-4.65
-2.04
1.70
-4.60
-16.00
-16.48
-13.02
-5.90
-7.46
-8.85
Pathways
Australian Property
performance of Strategic Investment Service to 30/09/11 5 Year % pa
3 Year % pa
2 Year % pa
1 Year %
6 Mths %
Inflation Plus 2 Strategy
1.55
3.30
3.11
0.83
-2.74
Inflation Plus 4 Strategy
-2.41
-0.57
-0.36
-3.80
-9.29
Inflation Plus 6 Strategy
-3.16
-1.47
-1.55
-5.31
-11.62
Inflation Plus 7 Strategy
-4.77
-3.01
-2.54
-6.55
-13.30
Australian Cash
4.55
3.51
3.64
3.98
1.97
Australian Fixed Interest
5.63
7.30
6.80
7.18
6.11
International Fixed Interest
5.46
8.11
7.19
4.19
5.62
-2.46
-1.17
-5.52
-9.38
-15.20
Australian Property
-17.17
-13.70
-6.79
-8.38
-9.27
International Shares
-10.37
-9.61
-6.46
-8.21
-13.02
Global Emerging Markets
-3.96
-4.26
-7.37
-19.15
-20.98
Global Prop & Infrastructure
-7.97
-4.91
8.28
-2.44
-11.88
International Smaller Companies
-5.35
1.83
-1.40
-5.17
-15.92
Strategic Investment Service
Australian Shares
To help you further connect online we’re pleased to announce that we now have four blogs available for you to access through the ipac website. Blogging is a simple, effective and informative way to keep updated with some of the hot topics affecting you. Our blogs include; Paul Clitheroe Paul Clitheroe a founding director of financial planning firm ipac, Chairman of the Australian Government Financial Literacy Board and chief commentator for Money Magazine. Paul regularly comments on current events, opportunities for investors and hints to help you make the most of your money. ipac news The ipac news blog offers readers the very latest on topic issues of a host of issues affecting people close to retirement. reflections Covering everything from money to health and well being, community, family and career, reflections encourages you to spend some time thinking about what’s important to you. money mentors
Performance figures are calculated using month-end hard close exit prices, are net of management fees, ongoing fees and expenses, assume distributions are reinvested and tax is not deducted. Returns for 2 years, 3 years and 5 years are annualised. Past performance is not necessarily representative of future performance. If you’d like to know more about your portfolio performance, please speak with your adviser.
Planning your finances takes good foresight and sometimes even courage to be successful. Money Mentors blog offers you regular updates direct from some of our experts who share their expertise on current finance news and opportunities.
The information provided is of a general nature only and does not take into account the particular needs, objectives or circumstances of any individual. Professional advice should be obtained before implementing any investment strategy. Any reference to ipac portfolios includes the Strategic Investment Service and ipac Pathways.
To visit or subscribe to any of the blogs above simply visit www.ipac.com.au and click on the blogs tab on the homepage.
ipac asset management limited ABN 22 003 257 225 AFS Licence No. 234655 is the responsible entity of the Strategic Investment Service and ipac Pathways. You should read the Product Disclosure Statement before making a decision about whether to invest in these products. We believe the information contained in this publication to be accurate and reliable, but no warranty of accuracy is given and no responsibility arising in any other way for errors or omissions including responsibility to any person by reason of negligence (except as required by law) is accepted by ipac asset management limited, its directors, employees nor any other member of the ipac or AMP Group. ipac asset management limited and other companies of the AMP Group do not guarantee the return of capital and/or the performance of any strategy. Copyright 2011 ipac asset management limited. Both the written and graphic content of this publication is copyright to ipac asset management limited. Nothing in this publication may be reproduced in whole or part without prior written authorisation. ipac asset management limited Level 31 Grosvenor Place, 225 George Street, Sydney NSW 2000 Telephone 02 9373 7000 Facsimile 02 9373 7111
want us to keep you updated? Did you know that we also offer a subscription service? You can now register your email address with us at the free e-newsletter section on the homepage of www.ipac.com.au and receive regular alerts from us when a new article is published.