Page 12 - FWP Wealth Adviser newsletter - June 2025: Issue112

ISSUE 112
MAY 2025
Ask a Australians aged 67 to 74 who wanted to make voluntary
The Work Test is a rule that previously applied to
Q&A: Question superannuation contributions. Essentially, it required you

to work at least 40 hours within a 30-day period during the
financial year in which you made the contribution. However,
from 1 July 2022, the rules were relaxed. If you are making
Question 1: non-concessional contributions (such as after-tax contribu-
I heard that some people are using their super to hold tions) or using the bring-forward rule, you no longer need to
insurance. Should I consider that, and are there any meet the Work Test. The Work Test still applies if you want
downsides? to claim a tax deduction for your contributions (conces-
Having insurance through your superannuation can offer sional contributions) once you are over 67. Given your age
several benefits. It is often more affordable due to group and work situation, understanding these rules is critical to
discounts negotiated by the fund, and premiums are paid making the most of your super.
directly from your super balance rather than your take-home Seek advice from a financial adviser who can clarify how
pay, making it easier to manage cash flow. You are also gener- these rules apply to you and help ensure you maximise your
ally not required to undergo extensive medical assessments retirement savings.
when you first obtain the cover, making it more accessible.
However, there are also potential downsides. Premiums Question 3:
deducted from your super will reduce your retirement I’ve heard the term annuity mentioned when talking about
savings over time, which could impact your future balance. retirement income. What exactly is an annuity, and how
The default cover provided may not be sufficient for your does it work?
needs, and policy terms can be more restrictive, with limited An annuity is a financial product that provides a guar-
definitions or exclusions that may make it harder to claim. anteed income stream for a specified period or for life,
Additionally, your insurance may be cancelled automatically depending on the type of annuity you choose. When you
if your account becomes inactive or has a low balance. purchase an annuity, you pay a lump sum to an insurance
It is also possible to hold retail insurance through super, company or financial institution, and in return, you receive
which offers more tailored cover, better definitions, and regular payments. These payments can be structured to
more certainty at claim time. This means your cover can occur monthly, quarterly, or annually and can be set at a
be customised to suit your needs, but it may come at a fixed amount or adjusted for inflation. Annuities can be
higher cost. Your financial adviser can help you determine either fixed (providing a guaranteed, consistent payment)
if holding insurance in super is the right choice for you and or variable (where payments may vary based on investment
whether retail or group insurance through super may be performance). They are popular among retirees who want
more suitable. certainty in their income, as they provide protection from
market fluctuations. However, they can have limited access
Question 2: to capital and may not always offer the same growth poten-
My friend mentioned something about the Work Test for tial as other investments.
super contributions. I’m still working part-time at 68, do I Your financial adviser can help you determine if an
need to worry about this? annuity is a suitable option for your retirement strategy.

Future Wealth Planners

Level 1, 176 Main Street
Osborne Park WA 6017

P.O. Box 16
Osborne Park WA 6917

P: 08 9207 3844
W: www.fwplanners.com.au
E: clientservices@fwplanners.com.au

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