Question 1

I’m looking for a financial adviser for the first time. How can I tell whether they’re focused on my needs rather than trying to sell me a particular investment strategy?

One of the easiest ways to tell is to pay attention to the questions they ask.

A good adviser will spend most of the first meeting learning about you – what you’re trying to achieve, what’s important to you and what concerns you may have about your financial future.

For some people, that’s retiring comfortably. For others, it could be helping adult children, reducing financial stress, improving Age Pension outcomes or simply feeling more confident about their finances.

It’s also worth asking how they are paid.

Many advisers charge a fixed fee for a specific piece of advice, while others offer an ongoing service for a regular fee.

Neither model is necessarily better, but you should clearly understand what you’re paying and what services you’ll receive.

Some useful questions to ask include:

• How are you remunerated?
• Do you recommend products from a range of providers?
• Can you advise on broader issues such as retirement, superannuation, tax, insurance and Centrelink?
• What if I only need advice on one specific issue?

One potential red flag is when the conversation quickly turns to investments before the adviser has taken the time to understand your circumstances and objectives.

The best advice is rarely about finding the perfect investment. More often, it’s about helping people make informed decisions that align with their goals, values and stage of life.

Question 2

What tax will my children pay if they inherit any funds remaining in my account-based pension when I die?

The answer depends largely on who receives the benefit and the tax components that make up your superannuation account at the time of death.

If the beneficiary is a spouse or another person who is considered a tax dependant under tax law, the benefit is generally received tax-free.

However, if your beneficiaries are adult children who are financially independent, they will usually be treated as non-tax dependants for tax purposes. In that case, any taxable component of the superannuation death benefit may be subject to tax when it is paid to them.

Many retirees are surprised to learn that the account-based pension payments they receive during their lifetime can be tax-free after age 60, but different rules can apply when superannuation is passed to adult children.

The actual amount of tax will depend on the mix of tax-free and taxable components within the account.

For example, if a pension account consists entirely of a tax-free component, adult children may receive the benefit tax-free.

Conversely, where most of the balance is a taxable component, tax may apply to some or all of the payment.

The good news is that most super funds can tell members what proportion of their account is tax-free versus taxable, which can provide a useful indication of the likely outcome for beneficiaries.

It’s also important to remember that superannuation generally does not automatically form part of your estate.

Ensuring your death benefit nominations are current can help provide certainty about who receives any remaining funds and how they are paid.

Question 3

I have overseas retirement savings. Can I bring in money from overseas super funds and combine it with Australian super funds?

In some cases, yes, but it depends on the country and the type of retirement fund involved.

Many Australians accumulate retirement savings while working overseas and later want to consolidate their finances back home.

While some overseas retirement schemes can be transferred into Australia’s superannuation system, others can’t.

The rules vary significantly between countries. For example, a retirement account established in Britain may be treated differently from a US retirement plan, a New Zealand KiwiSaver account or a pension arrangement from another jurisdiction.

Even where a transfer is possible, there can be taxation considerations. Depending on when the overseas benefit was accrued and when it is transferred, some of the growth in the account may be assessable for Australian tax purposes.

There are also practical considerations. Exchange rates, local overseas rules, fees and restrictions imposed by the foreign retirement fund can all influence whether a transfer is possible or worthwhile.

For some people, consolidating retirement savings into Australia creates administrative simplicity and makes retirement planning easier. For others, retaining assets overseas may be preferable because of taxation, access or investment considerations.

The key point is that overseas retirement savings cannot automatically be rolled into an Australian super fund in the same way that one Australian super fund can be consolidated into another.

The rules depend on the country involved and the specific retirement arrangement.

Disclaimer: The responses provided are general in nature, and while they are prompted by the questions asked, they have been prepared without taking into consideration all your objectives, financial situation or needs.

Before relying on any of the information, please ensure that you consider the appropriateness of the information for your objectives, financial situation or needs. To the extent that it is permitted by law, no responsibility for errors or omissions is accepted by IFS and its representatives.