When Lisa first came to us, she has been receiving $90,000 per annum in income protection payments from her life insurer (due to a disability 7 years prior preventing her from being able to work).
Her two main priorities when she came to see us were:
- Paying off her mortgage of $45,000
- Ensuring she would be able to provide for herself in five years’ time when her income protection payments stopped.
Lisa also suspected she might be eligible for a total and permanent disability (TPD) claim. But she was reluctant to investigate that eligibility because she was fearful it would jeopardize her income protection payments (and thus her ability to pay off her mortgage and also set herself up for the future).
Easing the TPD concern
The first thing we wanted to determine was whether Lisa could claim for TPD without affecting her income protection benefit. After close examination and analysis, we could tell her with confidence that she need not worry about losing her income protection if she claimed for TPD. In the process, we also uncovered additional TPD insurance opportunities.
Most people who do not have a background in insurance or providing financial advice would find it difficult to navigate the processes involved with doing the above. For Lisa, whose health condition affects her abilities to both concentrate and communicate, there are extra challenges involved in deciphering all the information and options.
It was very satisfying for our advice team to be able to first conduct this investigation for Lisa, and provide her with the assurance that she could pursue the TPD claims with confidence.
Paying off the mortgage
Once that question was answered, we turned our attention to Lisa’s mortgage.
When we examined Lisa’s financial situation, we found she could start accessing her superannuation and do so within the low rate superannuation cap to avoid paying high tax costs. So, within the $205,000 low rate superannuation cap, we withdrew just $70,000 from her super fund and directed $45,000 to pay the balance of her mortgage.
The remainder of the money we contributed right back into her superannuation as a concessional super contribution. Due to her income at the time, this resulted in a tax saving of $4,750.
Up to that point, Lisa had been paying approximately $850 per fortnight toward her mortgage. We redirected that into future super contributions to help her start to regrow her retirement fund.
Assistance with new insurance claims and disability benefits
After our advice team had worked through Lisa’s insurance paperwork and uncovered additional disability benefits she could receive, it was time to assist her with putting in the applications to receive them.
The first was a $72,000 claim with CommInsure. The policy was held via a superannuation master trust and we had the option to claim the benefit and either take it out into her name personally, leave it in the CommInsure Super environment or roll the benefit to a new super account.
We also discovered that Lisa had default insurance cover in her GESB super account that included a TPD benefit. We made the claim and importantly, worked with the insurer to backdate the claim amount to the effective date of Lisa’s disability which was 7 years earlier.
The TPD benefit had been reducing each year as Lisa neared retirement age, as is the case with GESB Super insurance cover. The insurer, in this case, AMP, agreed to backdate the cover amount because the premiums had been paid, resulting in this TPD benefit increasing from $70,000 to $150,000.
This increase of $80,000 in TPD benefit which added a further $150,000 to the $72,000 CommInsure benefit, was a significant boost to Lisa’s financial position.
There were no taxes levied on these TPD payouts because we advised Lisa to retain the benefits inside super.
Securing Lisa’s future
Once the above was taken care of, we worked with Lisa to invest her monies into areas with a high probability of a good investment return. Our emphasis was on low fees and taxes which is an empirically proven way to provide a better investment return over time.
The plan is that after Lisa turns 60 years of age, she can make withdrawals if/when necessary without any further tax implications. In the meantime, her income protection payments continue to meet her ongoing financial needs while her superannuation continues to grow.
Before coming to see us, Lisa lived with a considerable fear of the financial choices she had to make because she did not have the information to make the right choices, nor did she have someone who could explain all the available options with any kind of clarity.
Today she enjoys the peace of mind that comes from being mortgage-free, knowing her current income is secure and that her retirement is planned for and structured for success.