Statement of Advice (SoA)
Prepared for Peter & Sandra Thompson
Date Prepared: [Insert Date]
1. Executive Summary
Purpose:
This Statement of Advice (SoA) provides a tailored retirement strategy for Peter (63) and Sandra (61) Thompson. The focus is to achieve your desired retirement income, fund travel in your early retirement years, provide health security, minimise tax, plan for eventual downsizing, and preserve capital for your children.
Summary of Key Recommendations:
- Transition to Retirement (TTR) and account-based pension strategies to meet income needs efficiently.
- Consolidate and restructure superannuation to reduce costs and improve management.
- Construct a diversified, balanced investment portfolio across super and non-super assets.
- Cancel income protection insurance, retain suitable life cover, and maintain private health insurance.
- Review and update estate planning documents including super nominations.
- Set a plan to review age pension/Centrelink eligibility once closer to required age.
2. Personal and Financial Position
| Category |
Peter |
Sandra |
Joint |
| Age |
63 |
61 |
- |
| Employment |
FT Senior Project Manager |
PT Nurse (2 yrs to retirement) |
- |
| Salary (annual) |
$140,000 |
$55,000 |
- |
| Superannuation |
$780,000 (AustralianSuper) |
$410,000 (HostPlus) |
- |
| Cash Savings |
- |
- |
$110,000 |
| Managed Funds |
- |
- |
$90,000 |
| Property |
- |
- |
$1.8M Home |
| Vehicles |
- |
- |
$40,000 |
| Liabilities |
None |
None |
None |
Retirement Objectives:
- Comfortable retirement net income ($80,000 p.a.)
- $20,000 p.a. travel for first 10 years
- Maintain health security
- Tax effective income drawdown
- Consider downsizing after age 75
- Maintain a capital base for children
Risk Profile: Balanced (medium risk exposure for long-term growth and income stability)
3. Retirement Strategy & Income Planning
a) Transition to Retirement (TTR) & Account-Based Pension (ABP)
- Peter:
- Retire in 12 months, convert your super to an account-based pension (ABP).
- Eligible to commence an ABP immediately after retirement, providing tax-free income from age 60.
- Sandra:
- Retire in 2 years, consider a TTR income stream to supplement wage and add flexibility, then move to ABP upon ceasing work.
b) Income Streams & Cash Flow
- Use ABPs to provide majority of your retirement income.
- Supplement with non-super managed funds and cash as required for larger travel/lifestyle expenses.
c) Withdrawal Strategy
- Draw approximately $80,000 net per annum from combined ABPs—review annually.
- Recommend front-loading withdrawals in first 10 years to support $20,000 travel budget, then moderate withdrawal post-travel years to preserve capital.
d) Tax Optimisation
- Income from ABPs after age 60 is tax-free, maximising tax efficiency.
- Invest joint cash and managed funds in tax-efficient holdings (eg. ETFs/distribution optimised funds).
e) Centrelink & Aged Pension
- Likely ineligible until assets reduce after planned downsizing, reassess post-75.
- Recommend annual review of entitlements as rules and circumstances change.
f) Downsizing Later Life
- When/if downsizing post-75, consider making a downsizer super contribution for further retirement income support or legacy enhancement.
4. Investment Recommendations (Balanced Allocation)
Portfolio Overview
| Asset |
ASX Code |
Allocation % (approx.) |
AUD Value* |
Rationale |
Alternatives |
| Aust Shares ETF |
VAS |
32 |
$418,000 |
Core, low-cost, broad Aust equities, dividend focus. |
A200 – similar, slightly cheaper |
| Intl Shares ETF |
VGS |
22 |
$287,000 |
Diversifies outside Aust, global large caps. |
IVV – US specific, higher US bias |
| Intl Hedged ETF |
VGAD |
10 |
$130,000 |
Reduces FX risk on core global exposure. |
IWLD, but broader geography |
| Hi Div Aust ETF |
VHY |
8 |
$104,000 |
Focus on high-yielding Aust stocks for income. |
SYI, similar but different screening |
| Aust REIT ETF |
VAP |
5 |
$65,000 |
Property sector exposure, inflation hedge. |
SLF, similar focus |
| Fixed Income ETF |
IAF |
9 |
$117,000 |
Aust bonds for stability, income. |
VAF—broader mix, lower fees |
| Cash ETF |
AAA |
7 |
$91,000 |
Liquidity, cashflow management, limited risk. |
Cash deposit—less flexibility |
| Intl Ethical ETF |
ETHI |
5 |
$65,000 |
ESG/ethical tilt for value alignment. |
FAIR, similar but Aust-tilt |
| Total |
|
100 |
$1,277,000 |
|
*Allocation based on available super and investment assets to be rolled into retirement.
Rationale
- Diversification: Balanced across Australian and international shares, property, fixed income, and cash for income reliability and growth.
- Cost: Preference to Vanguard and iShares core funds for low management fees.
- Sector Exposure: Emphasis on materials, financials, energy, infrastructure via broader ETFs.
- Liquidity: Sufficient cash for known travel and unexpected needs.
- Risk Alignment: Moderate growth (approx. 60/40 split growth/defensive).
Comparative Justification
- Each recommended ETF has been compared with a relevant peer for cost, liquidity, and performance background (details in Appendix).
- High conviction in VAS for Aust exposure due to cost and scale. VGS/VGAD blend addresses currency and global asset class risk.
Existing Managed Funds
- Consider selling/rolling existing managed funds into the proposed portfolio for better cost and control. Seek advice on any potential CGT consequences.
5. Insurance Review & Recommendations
a) Income Protection
- Recommendation: Cancel both Peter & Sandra’s IP policies at/near retirement (no longer needed; not eligible if not working).
- Benefit: Reduce unnecessary premium outflows (~$4,000 p.a. total estimated).
b) Life, TPD, Trauma
- Recommendation: Review levels of cover as dependants are now adult and no liabilities exist. Retain minimal necessary life cover to cover any estate costs or final expenses.
c) Health Insurance
- Recommendation: Retain comprehensive private health insurance for both, essential for health security objective.
d) Insurance Table (Post-Review Example)
| Product |
Provider |
Coverage Type |
Premium # |
Rationale |
Comparable Product & Justification |
| Life/TPD |
AustralianSuper |
Life & TPD inside super |
$980 p.a. |
Small sum for estate/funeral costs |
HostPlus Life/TPD – similar but costs vary |
| Health Insurance |
[Your Provider] |
Hospital & Extras |
$4,500 p.a. |
Essential for health security |
Main providers compared annually |
Excluded Providers: [List excluded insurers - none flagged currently]
6. Estate Planning Guidance
- Action: Review and update wills to reflect current wishes.
- Super Death Benefit Nominations: Lodge/review binding nominations with each super fund.
- Power of Attorney & Guardianship: Arrange financial and medical POAs for both.
- Note: This is general guidance only; see estate planning solicitor.
7. Fees, Risks, Assumptions & Alternative Strategies
a) Fees
- Investment Management: 0.18%–0.25% p.a. (weighted portfolio MER)
- Platform/administration: as per selected account (quote provided upon implementation)
- Adviser Service Fee: [Insert if applicable]
- Transaction fees: costs may arise with managed fund transfer, CGT to be reviewed
b) Risks
- Market, interest rate, regulatory, sequencing risk, inflation risk, and legislative change (especially super/Centrelink rules).
- Assumed long-term returns: 4.5% p.a. gross, inflation 2.5% p.a.
- Returns not guaranteed.
c) Alternative Strategies
- Higher allocation to defensive assets for capital protection, but at the expense of growth.
- Use of annuities for longevity risk; currently not recommended due to liquidity limits.
- Direct property investment not included, as already overweight home.
d) Limitations
- Scope: Retirement income/planning only. No tax/legal advice (please seek your accountant/solicitor for personal tax/estate advice).
- If super fund consolidation or asset transfer triggers uninsured periods or significant tax liabilities, strategy to be reviewed before proceeding.
8. Retirement Projections (Summary*)
- With combined assets ($780,000 + $410,000 + $200,000 investments/cash), your retirement plan can support your desired $80,000 (net) income for at least 25 years, with travel budget for first 10 years, before downsizing even considered.
- *Detailed cashflow charts and stress tests in Appendix A.
9. Next Steps & Ongoing Review
- Meet with adviser to confirm super consolidation and ABP setup.
- Cancel income protection (timing: as employment ends).
- Update estate planning; lodge new super nominations.
- Implement recommended portfolio (coordinate managed fund roll-in/transfer, CGT review).
- Maintain annual review: Adjust for market conditions, tax rules, income needs, and post-travel spending.
Contact:
[Adviser Name & Credentials]
[AFSL Number & Dealer Group]
T: [Phone] | E: [Email]
Address: [Office Address]
10. Disclaimers & Regulatory Disclosures
- All projections are estimates based on current regulations, assumed returns, and inflation. Past performance not a reliable indicator of future performance.
- Scope is limited to retirement/wealth structuring.
- You should consider this advice in light of your objectives and consult legal/tax professionals before implementing legal/estate/tax decisions.
- Conflicts of interest: None, no adviser remuneration relates to product purchase.
Appendix
A. Modelling Assumptions & Projections
- Returns: 4.5% p.a. (growth), 1.5% p.a. (defensive), inflation: 2.5%
- ABP minimum drawdowns followed, with travel front-loaded per your plan
- Centrelink tested from age 67/68—currently asset test not favourable, but after downsizing eligibility likely (adviser to review annually)
B. ETF Comparative Table, Insurance Provider List, Cashflow Charts (on request)
Thank you for your trust in our advice. Our ongoing partnership will help ensure you retire with comfort, flexibility, and peace of mind.
Prepared by: [Adviser Name], Authorised Representative, [AFSL Number]
[Adviser to confirm all personal and regulatory details match their AFSL and practice protocols before issue.]