Updates
No one in his right mind would want to retire with barely enough cash to live by every day. Financial security for your retirement years is not a gift from heaven. You need to plan and make a commitment to that plan. You need to allocate a certain portion of the money you’re currently making so that you can enjoy them later on when you don’t have to worry about work or getting successful in your career, etc.
Some people continue to work even when they are past 55 years of age. The reason? They need the money. They might have not prepared well for their retirement, that’s why they have to continue working while others are already enjoying life. Other age 55 and up just probably enjoy the mental stimulation and social interaction that a certain job offers. So they take the job even if they have more than enough to draw from their retirement funds.
In Australia, retirees are allowed to draw down some of their super benefits even if they continue working. The policy is called “transition to retirement” and it allows you to maintain a comfortable “retired lifestyle” while having the opportunity to supplement your salary. The same policy also gives you savings on tax and boosts your super funds before you really and actually retire.
A Transition to Retirement (TTR) pension may be used in two ways:
- You keep working full-time to boost your super
- You reduce work hours and soften the income reduction
The preservation age for many people is 55. When you turn 55, you can draw a pension from your super funds and still continue working. If, on the other hand, you are under age 65 and still working, some of your super funds may be transferred to a super pension. You can withdraw from 4% to 10% of your pension account balance each financial year although you are not allowed to withdraw lump sum money.
In order to enjoy the benefits of this TTR pension, there are some things you need to consider:
- Check your Fund Type
The Transition to Retirement pensions may be availed by members of accumulation super funds. If you are a member of defined benefit funds, you are not eligible for the TTR pension.
- Plan Your Retirement Strategy
You need to determine if you want to boost your super or cut back on work. One of these should suit your situation.
- Determine Income Needs
You need to know how much money is needed to support your retirement. Some may opt for reduced work hours and don’t mind the drop in income as the need for income is also reduced as you near your retirement age.
- Check Your Entitlements and Benefits
You and your partner have social security benefits. You might need to consult with a financial adviser just to check if there are implications on your social security entitlements and benefits.
- Check Tax Implications
A lot of people neglect this part and end up getting the surprise of their lives when their tax liability is calculated. A financial adviser will be able to help you determine this.
- Check Your Life Insurance
Your super fund may also be tied up to your life insurance. To make sure that your insurance coverage is not reduced or affected, check with your financial adviser.
A retirement option like the Transition to Retirement offers flexibility to super members in terms of boosting their super funds even as they continue working. A corresponding incentive for staying in the workforce is given who chose to work longer and retire later.
Take it from the co-founder and US managing director of Funding Circle, Sam Hodges, who also operated and managed a chain of successful fitness gyms back in 2007. That was when he made the discovery about the US banking system.
Hodges needed a loan for business expansion. He has a profitable business and he’s got a good credit score. But despite these, banks had declined his loan applications one after the other. When he tried online financing companies, he couldn’t understand the terms and conditions offered to him which he knew just didn’t make sense.
Believe it or not he got denied 96 times. And that made him realize that something’s not right. How can big companies making tens of millions in revenue and a hundred workforce easily get approval for loans more than US$5 million when it’s almost impossible for smaller businesses like Hodges’ with a few million dollars in sales and less than 50 employees to get their loan applications approved?
Hodges said that there is a big gaping hole, which has gotten worse over the last 5 to 6 years.
Realizing the desperate situation, Hodges decided to launch Emergence Lending Network, an online marketplace catering to peer-to-peer lending network. In 2013, Emergence Lending Network merged with Funding Circle, a UK-based online marketplace. Through Funding Circle, small business owners are provided the opportunity to borrow money directly from institutional or individual investors.
How does it work?
If you are in need of funding, you need to pass the Funding Circle’s online eligibility test that runs an approximate 15 to 30 minutes. The underwriters of Funding Circle will activate a verification process to ensure that you are qualified for the loan. The verification process requires underwriters of Funding Circle to look into a lot of data which include:
- Profitability
- Credit score
- Quality of social media visibility
- Yelp reviews
These should help determine the health of the business. Each borrower will be provided with a grade and loan terms. This would give the lenders a basis for their decision on who or which businesses are positioned properly for the loan. To complete a loan, Hodges says it takes less than 14 days (2 weeks).
Since 2010, Funding Circle has processed more than US$750 million in the United States and the United Kingdom. The company projects it would lend out more than US$1 billion in 2015. Funding Circle was able to raise over US$123 million from Union Square Ventures, Index Ventures, and Accel Partners.
Online lending platforms are growing rapidly. Funding Circle and Lending Club are part of this larger sector. Lending Club is now valued at more than US$3.75 billion. Prosper, another online lending provider was valued last at US$650 million.
Fact is, all three – Lending Club, Prosper, and Funding Circle were mentioned in a recent report for using technology to help small businesses gain better access to capital. Karen Mills, formerly from the US Small Business Administration submitted the report.
Mills wrote in her report that the technology void left by many banks is being filled up by emerging online players. Technology is pushing for innovation within the banking sector just as Amazon.com and Square had adjusted and changed the payment business of small businesses.
Clearly, Funding Circle offers more than just the traditional financial assistance. Hodges said Funding Circle is laser focused on small businesses in need of financial assistance. Hodges wants small businesses to turn online and use the marketplace to get access to finance. He didn’t want them to go through what he had been through - 96 loan applications rejected!
If you’re looking for small business loan in Australia, this company can help you achieve your dreams.
In Australia, the big banks have good business. The small, non-major banks are in the shadows of the big banks waiting to catch what is being thrown out by the big banks.
In order to create some sense of balance,
brokers have been urged to help smaller lenders by sending them more business.
Instead of focusing on getting loan clients for the major banks, brokers are
encouraged to diversify, and get familiarized with the loan policies of the
smaller lenders.
David Ure, head of the Heritage Bank’s branch
and third-party channels, is hopeful and would like to see more brokers
approaching non-major banks about their loan facilities and other financial
products.
While brokers seem to be responsive to the call,
not many have really supported the call with concrete actions. For some
brokers, they see the benefits of being able to offer another option to their
clients outside of the big four banks. But other brokers may have been hesitant
to learn new things – the policies, products and services offered by the
non-major banks.
According to Mr. Ure, if you check the number of
loans that have been facilitated in a given month through non-major banks, the
resulting percentage is almost always low.
On the part of the brokers, they argue that they
are able to best serve their customers if they have that comfort and confidence
level discussing a particular bank’s credit policy, perks and benefits. They
should know these details by heart and should be able to discuss confidently
with both eyes closed to be able to deliver the highest level of service to
their clients or customers.
Brokers have invested time in learning these
details from the major banks. To be able to sell the products of the non-major
banks, brokers have to go through the learning process again. It takes time to
get to the level of understanding they now have with major banks.
So if they are approached by customers, they are
in a better position offering the products of the big banks – which they know
by heart, than offering the products of the small lenders, which they are still
in the process of understanding and learning.
As it is important for customers to be able to
have all their queries answered accurately and correctly, brokers would be more
confident discussing the products of the major banks.
But while this is true, brokers should not forget
that it is also their role to educate their clients about alternative lending
options. If your client asks you for another option, you wouldn’t be referring
a product from another big bank, would you? They may not differ that much from
each other.
What you can offer as another option that is a
product from the non-major banks. This way, they are able to give their clients
the freedom to choose a product which they deem would be more applicable and
suitable to their circumstances rather than giving them no other option at all.
Brokers should realize that by having a wider range of lending options, they have more opportunities. Borrowers who may
potentially be turned down by the big banks can still approach you if they know
you can facilitate their needs with the smaller banks.
Or if you were approached by a client who you
know has less approval chances with the major banks, you don’t miss out on the
business opportunity because you can divert the client to the smaller banks’
financial products and facilities. The client ends up with a loan; the smaller
banks got their small share of business, and you get compensated for the deal
closed. Everybody wins!
Over a hundred of Australia’s non-major banks or
smaller lenders are represented by the Customer Owned Banking Association
(COBA). Heritage Bank and Teachers Mutual are two of them.
Mark Degotardi, acting Chief Executive of COBA
said that customer-owned banks offer quality and trusted alternative to the four
major banks. Brokers are offered some diversity and competitive pricing for
their customers. Overall, customer-owned banking institutions offer rates that
are 0.50% lower than the major banks on published standard variable rates.
If the major banks push through with their plan
to increase mortgage rates, consumers are likely to look for a better
alternative and eventually switch to a customer-owned banking institution.
For the first time, a unique report on the
Australian mortgage market has been published by the Reserve Bank of Australia
which reveals disturbing details on intrinsic market risks. An estimated 72,000
home loans between 2009 and early 2014 have been analyzed and the report
findings showed that borrowers with a higher LVR (loan to valuation ratio) loan
were more than three times to fall behind in their repayments.
An estimated 1,300 of the 72,000 home loan samples
analyzed were found to be in arrears by more than 90 days at some point of the
loan term. But loans with LVR between 90% and 100% are estimated to be 3.5
times more likely to enter into arrears compared to loans with LVR of less than
60%.
The report findings indicate only a non-linear
increase of the risk of entering arrears. And the subhazard or risk is
specifically high for loans with LVR between 90% and 100%. Loans with LVR
between 80% and 90% are found to have a subhazard of entering arrears by 1.1
times more than loans with LVR between 60% and 80%. In other words, loans with
higher LVR tend to enter into arrears more than loans with lower LVR, according
to Matthew Read, Cianni La Cava, and Chris Stewart, officials of the Reserve
Bank of Australia.
The RBA report, Mortgage-related Financial Difficulties:
Evidence from Australian Micro-level Data which was released on November 26th is
the first-of-its-kind paper to use micro-level data to quantitatively analyze
financial difficulties in Australia that are mortgage-related.
The distinctive report found evidence that suggests
significant correlations between ability-to-pay and equity factors, and the
incidence of mortgage stress.
Additionally, it established that slower repayments
indicate that an increase in interest-only loans means an equivalent increase
in risk even if interest-only loans are not as likely to enter into arrears.
What had been found to more likely enter arrears are low-doc loans compared to
other types of loans even if strict screening on the borrower’s employment
status was made.
Such clearly suggests that sound income
documentation and verification policies should be maintained by lenders and
with the supervisors continuing to monitor developments in order to ensure
timely payment of loans.
With the report’s findings, the Reserve Bank of
Australia could use the data as an input that would help Australian banks and
mortgage lenders to determine and test the risk level of their home loan
exposures. Australia’s central bank also believes the report findings and
information would be helpful in framing the design of the prudential policy
structure. In essence, RBA can use the information to help make informed
decisions about the risk level lenders, investors and regulators are willing to
accept.
A new research by IBISWorld released on 24th November reports that a record 30 billion Australian dollars or the equivalent 26 billion US dollars will be spent by Australians this coming Christmas season.
Said report predicted an increase in overall retail
sales by 35% in December, which is a 5.5% increase from last year’s record.
Sales in department stores are to lead and forecasted to skyrocket to 94%.
Apple products which include iPhones and iPads may be
the frontrunner, according to the report, being the most popular and
sought-after products this time of year. Electronic retailers are expecting a
56% boost in trading activities.
The strong seasonal demand and projected sales
increase will likely subsidize weaker trading periods throughout the year, as
the Christmas season presents both challenges and opportunities for many
businesses in Australia, explained senior analyst of IBISWorld, Stephen
Gargano.
Particularly at this time of year, department stores
are typically a one-stop-shop where they try to have a range of consumer goods
which the buying public may want or be looking for during this season. And
having almost everything shoppers would want for Christmas becomes their edge
as consumers who don’t have the luxury of time to go hopping from one store to
the other in search of the items they need, would opt to shop in just one store
which they know most likely has everything. These are the consumers that would
be shopping for Christmas gifts and holiday needs.
Retailers can also take advantage of the high demand
and high volume of shoppers during the Christmas sales period to clear their
inventory especially in their clothing, footwear and personal accessories by
offering special promotional discounts. This strategy would expectedly result
in a 66.2% increase in revenues from clothing retailing in December as shoppers
take advantage of discounted prices to update their own personal clothing
requirements.
More pronounced will be the increase in revenue from
footwear sales and accessory retailing sections, with an expected increase by
76.7% which is attributed to higher spending of consumers on popular gift ideas
such as watches, and jewelries.
Gargano also noted that December spending in liquor
retailing and restaurants are also expected to increase during this Christmas
shopping period. Spending on liquor is expected to rise by 59.4% and this would
be driven by demands from various Christmas parties occurring in many different
places in the country. Alcohol consumption is always expected to increase
throughout the holiday period. Restaurants on the other hand get busy with
bookings for Christmas functions by corporations and families, where revenues
are expected to grow by 24.9% only for this holiday season.