GPL Financial Group GPL Partners

January 2021

Vaccination rates as they happen around the world

 

A new resource is now available that shows the rates per country of COVID-19 vaccinations.  We all suffered in many ways as COVID number increased, now, as expected, let's watch them start to drop.

 

             

How many people have received a coronavirus vaccine?

Click here or on the image to go to the live site.

Tracking COVID-19 vaccination rates is crucial to understand the scale of protection against the virus, and how this is distributed across the global population.

Country-by-country data on COVID-19 vaccinations

 

 

Source: ourworldata.org

Returning expats reminded on tax snares with pensions, investments

 

With thousands of Australian expats still hoping to return home following COVID-19, a mid-tier firm has highlighted some important tax implications and considerations, including the foreign pension transfers.

 

           

For expats recently returning to Australia or planning to return, HLB Mann Judd Sydney tax partner, Peter Bembrick warned there can be hefty tax bill involved, depending on the jurisdiction and the length of time spent overseas.

Mr Bembrick said in addition to income tax, expats will need to account for any share holdings, employee share schemes – particularly in the event of a redundancy, cash in offshore banks accounts, and pension funds.

There are a lot of considerations that need to be made with the transfer of money out of foreign pension funds in particular, he said, given the tax nuances in this area.

“You need to make sure you’re across the local requirements and what you need to do to get the money out because there’s usually a fair bit of red tape involved and tax issues on the other side,” he said.

For example, the pension system in jurisdictions such as the UK – where an estimated 40,000 Australians reside at any given time – can create adverse tax consequences, he warned.

In order for an expat to be able to transfer a UK pension benefit to an Australian superannuation fund, the fund must be must be registered with HMRC as a Qualifying Recognised Overseas Pension Scheme (QROPS). If it is transferred to a non-approved fund, a tax of up to 55 per cent may apply.

To be included on the QROPS list, an Australian superannuation fund must agree to provide ongoing reporting to HMRC, and the fund must restrict the payment of benefits to members aged 55 or older, except in instances of retirement due to ill health.

In terms of US pension funds, Mr Bembrick said there is “still a fair bit of ambiguity around whether some the different US funds such as 401k plans and other types of US pension funds are regarded as being equivalent to an Australian superannuation fund”.

He also noted that for some clients, deciding to leave the money overseas may actually be the best option.

“I was speaking to someone with large amounts in the US and there’s going to be a lot of tax triggered in the US if he takes this money out, so for the moment he’s just going to leave it in place,” he explained.

Its also important, therefore, that expats also consider where they want to retire, he said.

“If they’re not sure that Australia is the place where they’re going to retire then moving everything here may not always be the best answer,” he said.

Mr Bembrick said expats should also be aware that there is a six-month rule where the foreign super interest will generally be tax-free if it is transferred to Australia within six months of them becoming a resident of Australia or their foreign employment terminating.

He also stressed the important of expats seeking specialist advice in this area, given the complexity of the tax laws.

Property is another key consideration that they need to make, he added.

“Some countries charge non-residents a higher rate of transaction tax or tax capital gains on profits from property investments and, in Australia, if you’ve retained property while abroad, you may be better to move back first before selling,” he said.

“This applies particularly to the former family home, as non-residents selling property are now excluded from the CGT main residence exemption and the related ‘six-year absence’ rule.”

Mr Bembrick noted that the CGT discount on the sale of investment properties is not available for any period after 8 May 2012, during which someone is a non-resident.

“For investment properties already owned at the time they left to move overseas, there will need to be an apportionment of the CGT discount for the relevant periods. A similar apportionment applies for periods between the date they return to Australia and a later property sale,” he explained.

Shares and managed funds will also need to be carefully assessed, he said, particularly if someone has become a non-resident during their time overseas.

“These types of investments are generally treated under the CGT rules as having been sold at their market value at the time that tax residency changed, triggering deemed capital gains or losses,” he said.

“The good news is there would be no further Australian CGT implications if these assets are actually sold while a non-resident. However, if they are still owned when Australian tax residency is resumed, they – along with any new investments – will be deemed to be re-acquired at that time for their current market value, so any future capital gains or losses on sale would relate only to the movement in value during the second period of Australian tax residency.”

 

 

Miranda Brownlee
07 January 2021
smsfadviser.com

 

Approaching the dawn

 

COVID-19 has completely, and mercilessly, dictated the direction of economies and financial markets through most of this year. So, as we rapidly approach the end of an extremely unpredictable and volatile year, what's in store for 2021?

 

         

COVID-19 has completely, and mercilessly, dictated the direction of economies and financial markets through most of this year.

So, as we rapidly approach the end of an extremely unpredictable and volatile year, what's in store for 2021?

It should come as no great surprise that the global economic outlook and the likely behaviour of financial markets remain hinged to COVID-19, and more specifically to health outcomes and responses.

That's a key finding from our just-released report: Vanguard Economic and Market Outlook 2021: Approaching the dawn.

Authored by senior economists and investment strategists from across Vanguard, the VEMO 2021 report highlights that the pace of economic recovery ultimately will be driven by the rate at which populations develop COVID-19 immunity.

As the human immunity gap narrows, the current reluctance gap – the fear of spending – will also narrow, leading to stronger economic growth.

Room for economic optimism

With the rollout of COVID-19 vaccines increasing, there is room for optimism.

In the VEMO report, we outline our base case that major economies will achieve infection immunity (when the person-to-person spread of COVID-19 becomes unlikely) by the end of 2021.

This would result in economic activity normalising by the second-half and output reaching pre-pandemic levels by the end of 2021. If infection immunity does not occur, economies may only see marginal progress from current levels.

But assuming immunity rates do rise, unemployment levels are set to fall, and a cyclical bounce in inflation is expected to occur around mid-year. This brings some risk that markets could interpret higher inflation with a more pronounced, but unlikely, inflation outbreak.

However, overall, there's more upside than downside to our economic forecast based on vaccine developments.

Country-specific economic growth rates will be varied, with our base case forecast for Australia at 4 per cent. This will trail the United States and the euro area, which are both forecast to grow at 5.4 per cent in 2021.

The strongest forecasts are for the United Kingdom at 7.4 per cent, albeit from a low base, and for strong growth of around 9 per cent in China due to its more successful navigation of COVID-19.

The outlook for markets

The key investment lessons to absorb from 2020 are that it's vital stay the course with your strategy and not become distracted by short-term market events, no matter how severe they are at the time, and that portfolio diversification will ultimately smooth out volatility.

The benefits of diversification played out over the most recent market cycle where investors holding a global equity portfolio would have outperformed someone holding an all-Australian equity portfolio by about 5 per cent in year-to-date terms.

In the period ahead, Vanguard predicts the Australian market should slightly outperform globally as economic conditions improve.

Vanguard's Capital Markets Model projections for global equity returns are in the 5 per cent to 7 per cent over the next decade, and in the 5.5 per cent to 7.5 per cent ranges for Australia over same period.

Although below the returns seen over the last few decades, equities are expected to continue to outperform most other investments and the rate of inflation.

In Australia, equity prices have rebounded roughly 40 per cent from the trough in March and valuations are considered to be in the middle of their fair value band.

US and China valuations are not overly stretched but at the higher end of their value bands given the recent stronger rebounds in those markets.

Despite rising equity valuations, the outlook for the global equity risk premium is positive and has increased since last year given record low bond yields.

Low interest rates will remain a feature in 2021, and Vanguard expects bond portfolios of all types and maturities will earn yield returns close to current levels.

But we continue to believe in the diversification properties of bonds, particularly high-quality bonds, even in a low or negative interest rate environment.

An investor holding a diversified portfolio (60 per cent equity and 40 per cent fixed interest) during the most recent market sell-off in March would have fared better than someone with an all-equity portfolio.

Rather than used as a returns enhancer, bonds are a risk reducer to balance out cyclical risks in portfolios.

In 2021, it will be important for investors to remain disciplined and focused on long-term outcomes, and to accept that current macro-economic events may mean medium-term investment returns will be lower than those recorded over recent decades.

 

 

15 Dec, 2020
By Tony Kaye
Senior Personal Finance Writer, Vanguard Australia
vanguard.com.au

 

Retirees need new super investment approach

 

The needs of retiree clients may not be properly serviced by traditional portfolio investment approaches, an investment expert has warned.

 

           

Traditional portfolio investment approaches for superannuation may fail to meet the needs of retiree clients, a retirement investment expert has warned.

Pointing out the bulk of superannuation assets in Australia now sit with people aged over fifty, Fidelity International head of client solutions and retirement Richard Dinham said financial advisers had to ensure traditional portfolio construction approaches evolved to meet this demographic’s financial needs.

“In Australia, the retiree client group is growing in size and it is essential that financial advisers have the right tools and resources to meet their particular needs,” Dinham said.

“As such it is important to understand the motivations and drivers behind the behaviour of retiree clients as they move from accumulation to decumulation.”

He highlighted Fidelity International’s recent research paper, “Building Better Retirement Futures”, developed in conjunction with the Financial Planning Association of Australia and CoreData in an effort to help financial advisers develop better investment strategies for their retiree clients.

“The paper outlines some of the key financial issues and considerations specific to retirees and helps advisers design the best strategies for post-retirement decumulation,” he noted.

“Financial advice is invaluable in helping retirees understand how long their money will last and what steps they can take to minimise the risk of outliving their savings.

“Determining the best strategy, or combination of strategies, is a significant part of the value a planner brings to the table.

“Advisers that understand the types of risk specific to retirees, the fears and challenges they face in retirement, how their needs differ from accumulators, and the strengths and weaknesses of different retirement investment strategies, will be best placed to help their clients throughout their retirement.”

In November, Allianz Retire+ chief executive Matt Rady said retirees needed a more innovative approach to investing than that offered by traditional investment portfolios in order to navigate the current low interest rate environment.

 

 

January 11, 2021
Tharshini Ashokan
smsmagazine.com.au

 

Retirement the ‘number one trigger’ for financial advice

 

Approaching retirement still remains the top reason for seeking advice from a financial planner, with healthcare costs, outliving their savings and aged care costs some of the biggest concerns, according to a recent research paper.

 

       

A research paper developed by Fidelity International in conjunction with the Financial Planning Association of Australia and CoreData, has found that approaching retirement is still the number one trigger for people to see a financial planner.

The Building Better Retirement Futures paper found that almost a third or 31.7 per cent of those who currently receive it as and when needed, nominated approaching retirement as the reason they sought advice.

This was a greater trigger than buying a property at 23.1 per cent and significantly more likely to make people see a planner than coming into a substantial sum of money at 9.8 per cent.

“Around half of these people or 46.7 per cent, seek advice specifically to help them plan a better retirement, as distinct from the more general aims of help with investing and help with managing or growing wealth,” the paper stated.

The paper noted that clients who are nearing retirement find themselves dealing not only with the financial aspects of helping them lead a comfortable and dignified life in retirement, but the emotional and psychological impacts of transitioning into retirement as well.

“Despite the best-laid plans and the most strongly held expectations, around half of Australians do not retire for the reasons they think they will, nor at a time of their choosing,” the research paper said.

The research indicated that in terms of worries in retirement, health was overwhelming the highest at 47.2 per cent.

The research paper noted that those who retired involuntarily due to health issues are likely to have lower incomes to begin with, and that lower incomes are correlated with lower superannuation balances.

“Also, those who have long-term health problems will likely face additional health expenditure in retirement, especially when pharmaceuticals are involved,” it said.

The next biggest worry was outliving retirement savings at 12.2 per cent and aged care costs at 9.9 per cent. Nineteen point three per cent of the respondents stated that they had no worries and were very comfortable in retirement.

 

 

Miranda Brownlee
06 January 2021
smsfadviser.com