Very low & even negative interest rates all over the world
Australian savers and borrowers are very aware that interest rates have fallen to very low levels but rates are negative in many countries as the chart below from fund manager Pendal shows. Very low interest rates are expected to persist for some years. There are several key reasons for this but primarily they result from Central Banks cutting official rates to stimulate economic growth which is slowing across the world. Also, ageing populations in developed countries, like Australia, are increasingly concerned about protecting their capital from potential losses so are willing to accept very low returns on their savings. Achieving sustainable income is an increasing challenge.
Downsizer Contributions into Super
Australians who have downsized their homes have injected $1 billion into superannuation over the past year, according to the Federal Government, with average contributions around three-quarters of the maximum allowable amount of $300,000.
Since the downsizer measure commenced on 1 July 2018, 4246 people have made use of it and contributed an overall $1 billion into their superannuation funds. The average contribution into superannuation was $235,515 per person, or 78 per cent of the $300,000 that could be added to super from the sale of a primary residential property.
Making a downsizer contribution centres an individual attaining the age of 65. The only rule is that the person must be over 65 when they physically make the contribution, not when they sell the house. However, the contribution must be made within 90 days of settlement so effectively you need to be at least very close to age 65 at the time of sale.
The downsizer rules do not require that both members of the couple selling the property must be over 65, only the person who will be making the contribution. This means that if one member of the couple is over 65 and the other under age 65 then only one can make a downsizer contribution. Also, there is no upper age limit restricting the ability to make a downsizer contribution nor does an individual’s total super balance prevent them from doing so either.
Note that you can’t simply add a downsizer contribution to an existing pension account. The transfer balance cap which limits a tax-free pension to $1.6 million at commencement still applies. A person who is at their $1.6m cap can still make downsizer contribution and leave it in accumulation phase (super, not pension).
Investing for Income is not just about dividend yields
Telstra was long considered a key dividend paying stock but increased competition, legacy systems and infrastructure cost and limits to growth as the dominant incumbent, have seen Telstra lose its status. By contrast, CSL’s excellent management has steadily transformed it into a global leader in biotechnology. It has balanced the payment of dividends with significant reinvestment into areas that have generated significant growth in earnings.
The difference between Telstra and CSL shown in the chart below is a classic example of a company paying high (but not growing) dividends compared to a company which has reinvested some earnings into productive opportunities for reinvestment but also been able to steadily grow its dividends.
A resource for information on big global issues
For those interested in “big picture” information on various major global issues, “Our World in Data” can be a useful resource.They say that “our mission is to present research and data to make progress against the world’s largest problems. These problems are broad and varied, ranging from poverty, to health, education, environment, conflict and human rights”.
“We therefore present lots of charts – now more than 3000 – across many topics. All of these represent a piece in the jigsaw that gives us a perspective on the state of the world and how to make progress against the problems we face. But some metrics stand out: they are core to our work and understanding of the world. You will find them appearing again and again throughout Our World in Data. We have tried to distil this list down to 12 core metrics. Making these choices isn’t easy– all the indicators we cover matter to understanding global development. As everything else on Our World in Data, we continue to update our content as new data becomes available so you can keep coming back and see how the world is changing. It is also worth mentioning that we make sure that links to us don’t break – if you embed one of these visualizations, you can be sure that it will remain available for many years to come.
To make them more easily findable, we have gathered them together, here, in a single place:
(1) Extreme Poverty
(2) GDP per capita
(4) Child Mortality
(5) Fertility Rate
(6) Life Expectancy
(7) Hunger and Undernourishment
(8) Education – years of schooling and literacy
(9) Access to improved water sources and sanitation
(10) Energy Access
(11) Energy Use
(12) CO2 emissions
Powers of Attorney
The lawyers at SUPER Central, an independent online platform provider of SMSFs, advice and legal documentation, have provided a good outline of powers of attorney.
“A ‘power of attorney’ is a document a principal (a person or company) can sign to appoint another person (called the attorney) to act for the principal in relation to financial affairs, property matters or even, in some States, lifestyle matters, such as medical treatment or where the principal lives and how they are cared for.
The most common use of a power of attorney is the appointment of a principal’s spouse or other close relative to deal with the principal’s property if the principal becomes of unsound mind. This is the enduring power of attorney (EPOA).
But powers of attorney have wider uses than this. The first is in the area of superannuation. An EPOA allows enduring attorneys to act as trustee (or director of the corporate trustee) of a self-managed superannuation fund in place of the member and is an important exception to the member-trustee requirement of SMSFs. This enables individuals to keep their SMSF and remain a member. It gives them the freedom to pursue lifestyle interests, live overseas and become non-resident, or to enjoy the benefits of longevity without having to run their SMSF.
The second additional use of a power of attorney is for client share trading. A limited power of attorney (LPOA) can be a very useful document for authorising and implementing some aspects of share trading for the principal by their broker or planner”.
This newsletter contains general advice. It does not take into account your individual objectives, financial situation or needs. You should consider talking to a financial adviser before making a financial decision.