25 September 2023

Counting the cost: Why CSS/PSS members need to get advice

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Cameron Teague* looks at the complexities of CSS and PSS superannuation funds and why advice now can pay off when it’s most needed.

In March 2019, the Australian Financial Review’s front-page headline stated that ‘in the wake of the Hayne inquiry, investors seeking financial advice are left with tough choices’.

One “tough choice” was around paying the perceived high cost of professional financial advice.

In this article, I will make the case that the cost of not accessing good quality advice is often far greater than the planning fees you will pay.

Depending on the complexity of the advice needed, you can expect to pay around $2,000 to $3,500 for advice around your CSS/PSS superannuation.

CSS/PSS schemes are highly complex.

By paying for high quality advice you ensure that you make informed decisions:

* When claiming your CSS/PSS benefit e.g. taking a partial lump sum may be advantageous for accessing the aged pension and associated benefits.

* Around whether you take the 100/67 reversionary option versus the 93/85 option.

* If you are offered a redundancy. Redundancies bring about specific advice issues for CSS and PSS members that need to be dealt with in a time-critical manner.

* If you are planning to take a deferred benefit (54/11), as the default versus cash option is a very important consideration.

With CSS and PSS, the pension decision is a one-off decision that cannot be undone.

Making the wrong decisions could cost you hundreds of thousands of dollars.

With any lump sums taken from PSS or CSS, there will likely be an inbuilt death benefits tax issue around which getting advice would also be highly beneficial.

Many people are unaware that where a tax deduction has been claimed for a super contribution either personally or by an employer, or where earnings have been achieved inside the fund, there is an inbuilt death benefits tax associated when paid to a non-dependant.

It is not uncommon to have residual superannuation balances passing to the estate, therefore considering and dealing with this issue during the small window of opportunity available can lead to considerable long-term savings.

A $200k super fund balance made up of the ‘tax taxable’ component will incur a death benefits tax bill of $34k.

Finally, for members who are not in a defined benefit fund, including CSS/PSS members who have claimed their defined benefit, it is important to ensure your superannuation is in a high performing fund.

In late 2018, the Productivity Commission released a report examining the efficiency and competitiveness of funds across the superannuation industry.

The report concluded that:

For a typical full-time worker, being in a low versus high performing fund could reduce their super by around $660k over their lifetime.

To put this in perspective, this could equate to 20 first-class European trips in retirement for a couple.

Not getting advice will certainly save you money in the short term.

However, for CSS/PSS members, not getting advice can come at a much greater financial cost.

So make the “tough choice”, ensure you access good quality advice and gain peace of mind that you have shaped your financial future, including your retirement, in the most effective way possible.

* Cameron Teague is a Certified Financial Planner® at Cameron Teague Wealth Advisory. Further information about getting advice can be obtained from his website www.ctwealth.com.au

CTWealth Pty Ltd T/A Cameron Teague Wealth Advisory is a Corporate Authorised Representative (001275442) of MFG Advice Pty Ltd ABN 76618661108 AFSL 499010. The information contained in this article is general in nature, is not financial product advice and does not take into account any individual’s objectives, financial situation or needs. Please arrange a meeting with Cameron Teague for personal advice before you make any changes to your investments.

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