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Financial Survival Guide

I'm worried about my retirement investments


STEP 3: Review your current portfolio



Now that you have reviewed your needs and goals, check whether your current investments are still a good way to meet them.

Even if you think you’ve weathered the financial storm of the past two years reasonably well, it is important to review your finances and investments regularly.

Within each of your investment types, a common objective will be to get a competitive return from an investment that is within your risk tolerance. Your objective should not be to recover past losses or get an exceptional return. That kind of thinking just leads to unwise risks. The only constructive way to look at financial decisions is to say: ‘Starting from where I am today, what is the best thing to do?’


Growth investments
Income streams
In a frozen mortgage trust?
Lost money in a managed investment scheme?
Other points to consider


Growth investments


The first step is to do a stocktake of your ‘growth’ assets. These are assets that you would expect to grow in capital value over the long term, such as property, shares and growth-oriented managed funds.

Look at account statements, annual reports, financial statements, prospectuses and Product Disclosure Statements for information about how your investments should be performing and how they actually are performing.
For each class of growth investment you own, you will need to examine long-term performance and fees, and then assess its prospects for future growth. You’ll also need to think about your tax situation before making any changes to your portfolio that might make you liable to pay capital gains tax or have an impact on your Age or Veteran’s Pension.

Any growth investment’s potential to make future returns depends on two key factors: Getting an accurate picture of an investment’s likely future value takes an experienced person who can access detailed, ongoing research. If that is not you, then either get expert advice, or consider investing in a diversified fund run by experts, or investing in an index fund. An index fund will give you at least average returns and have low fees.


Income streams


Some investments are designed to provide you with a regular income stream. You can get income from:
  • dividends from shares
  • dividends from managed funds
  • rent from investment properties
  • payments from an allocated pension or an annuity.
Pensions and annuities are the most common form of retirement income stream and account-based pensions or annuities are increasingly popular. The capital (usually from super) that you invest in the income stream is placed in an investment account. You can select from varying investment options offered by the fund manager, which have varying levels of risk.

There is no limit on the maximum amount of income you can draw down from a retirement income stream each year but there are requirements for minimum draw downs.

These minimum draw downs have been amended as a result of the global financial downturn. The government has reduced the minimum drawdown for 2008–09 New window; and has extended this measure for the 2009–10 financial year. This change applies to: The measure is designed to help your pension account balance to recover from the capital losses associated with the global recession. It means you are less likely to be forced to sell assets at a loss in order to meet the minimum withdrawal requirement.

For example, if you are aged 65–74 you are only required to draw down 2.5% of your account balance in the 2009–10 financial year (instead of the usual 5%). The percentage is based on the account balance on 1 July at the beginning of each financial year.



In a frozen mortgage trust?


About 50 Australian mortgage trusts have frozen or deferred their redemptions due to the global financial crisis. These are valued at around $30 billion. A decision to freeze or defer redemptions is usually made to prevent withdrawals from destabilising a fund.

The trustee decides to delay redemptions until liquidity improves instead of being forced to sell assets at a time when they may not achieve their optimal value. It doesn’t necessarily mean there has been any decline in the asset value of the trust or that investors won’t get their money back.

Many trusts with frozen redemptions continue to make regular interest payments to their members but you cannot get your capital back until the trustee decides to re-open redemptions when conditions improve.

There are some limited circumstances under which withdrawals can be made. The guiding principle is that all members must be treated equally.

From October 2008, operators can apply for permission to allow members to withdraw on hardship grounds. To be able to withdraw your capital you will need to be able to satisfy the operator that:
  • you are unable to meet reasonable and immediate family living expenses or
  • there are compassionate grounds for repaying you — for example, you need the money to cover medical costs for serious illness, funeral expenses or to prevent foreclosure or
  • you have become permanently incapacitated.
A cap has been placed on each hardship withdrawal to ensure they don’t disadvantage the other members of a trust. The most each member can withdraw is $20,000 plus 50% the balance of their investment in the trust.

Relief is also available if you invested in a frozen fund through an intermediate structure such as a superannuation fund, other managed investment scheme or an investor-directed portfolio service.


Lost money in a managed investment scheme?


There are many valid reasons for investing in a managed fund or managed investment scheme but some of these investment vehicles can be complex and some carry more risk than others.

Unfortunately some have not survived the financial turmoil of recent times. Use the links below for more information if you are an investor or client of any of the following:

Other points to consider


Shares: You may also need to review your share portfolio if you have selected particular holdings on the basis of their dividend payments. Pressure on many companies to preserve cash and support their balance sheets in the current financial environment has resulted in many making the decision to cut dividends. Others are being forced to issue more shares in order to raise capital and if a company issues more shares, the value of its dividend per share is diluted.

Insolvency: another by-product of any recession can be corporate insolvency: a situation where a company must stop trading because it is unable to pay its debts when they fall due. Find out more if you are an employee Go to ..., a shareholder Go to ... or investor Go to ... who has been affected by a company insolvency.

Managed investment schemes: before joining a managed investment scheme conduct safety checks to ensure it is running legally and properly. If you are considering an unlisted investment (one that is not traded on a stock exchange) use ASIC’s benchmarks and disclosure principles to ensure you understand the product and can make informed decisions.

Illegal early access to super: Be very wary of offers to access your super early. These are scams because early access is illegal except in very limited circumstances. Report anyone who tries to talk you into getting your preserved benefits early through a self-managed super fund or for a fee to ASIC on 1300 300 630 or the ATO 13 10 20. Such illegal schemes have been known to deliberately target people experiencing financial difficulties.


Key contacts




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