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FIN200 - Investment Choice Plan

   

Added on  2021-05-31

8 Pages2604 Words37 Views
FIN200 Assignment T1, 2018

TABLE OF CONTENTSIntroduction......................................................................................................................................3Main Body.......................................................................................................................................3Defined benefit plan....................................................................................................................3Investment choice plan................................................................................................................4Inflation factor.............................................................................................................................5Taxation.......................................................................................................................................6Other Variants..............................................................................................................................7Conclusion.......................................................................................................................................7References........................................................................................................................................8

INTRODUCTIONIn past two decades focus on superannuation and motivating individuals in order to save and invest forfuture especially during the years of retirement has been more and more emphasized in Australia. Thegovernment of Australia has been particularly pro-active in this view; as it is made compulsory foremployers to contribute their minimum to fulfil superannuation or retirement funds on behalf ofemployees (Sheen, 2017). It was mandatory for employees that by this date employees have to give up apercentage of their superannuation investment. The main aim of launching superannuation policyprogram is to reduce the load from social security system towards the provision of pension payments andto encourage employees at the time of their retirement stage. Present report revolves around thediscussion relating to the choice between defined benefit plan and the investment choice plan forsuperannuation contributions. Further, the other relating variants which comprise taxation provisions andthe time value of money have been discussed in order to make appropriate discussion.INVESTMENT PLANNING FOR RETIREMENTSuperannuation in Australia can be referred as provisions which are set in place by thegovernment of Australia to support people for gathering money for an income during retirement.In Australia superannuation is partially obligatory and it is encouraged by tax benefits. Butt andet al. (2018) asserted that for minimum involvement and for management of superannuationfunds government of Australia has placed some minimum standards. Apart from wages andsalaries of employees, it is compulsory for employers to build superannuation contributions forthem. At 1July 2014 the rate of employers contribution was 9.5%, and from 2015 it was plannedto raise it steadily from 2021 to 125 in 2025 (Lok and et al., 2018). People are persuaded toincrease compulsory superannuation contributions along with voluntary contributions; it is alsocomprised of deflecting wages or salary income in superannuation contributions under supposedsalary sacrifice arrangements. An individual is allowed to withdraw funds from superannuationfund only in case he or she meets up the any of the one condition such as retirement, terminalmedical condition or permanent incapacity condition as provided in schedule one ofSuperannuation Regulations 1994.Defined benefit planA defined benefit plan can be referred as a super fund which provides the benefit on the basis offinal salary and the no. of years for which you have been working for your company orgovernment department. Gerrans, Moulang and Strydom, (2018) specified that the annual

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