The rent-versus-buy debate has been pulled every which way in the media. But when it comes to where you live, the possibilities are surprising. If you pay rent and invest, you may be better off than buying your own home.
The rent-versus-buy debate has been pulled every which way in the media. But when it comes to where you live, the possibilities are surprising. If you pay rent and invest, you may be better off than buying your own home.
The rent-versus-buy debate has been pulled every which way in the media. But when it comes to where you live, the possibilities are surprising. If you pay rent and invest, you may be better off than buying your own home.
Am I better off renting or buying a home? Its a hot topic. The rent-versus-buy debate has been pulled every which way in the media and laid bare in the recent Reserve Bank of Australia report 1 . But when alls said and done, the possibilities are surprising. In fact, when it comes to where you live, youre likely to have more options than youve considered. An impossible dream? The thought of buying a home can be exciting and daunting. The deposit amount and ongoing interest charges can really add up, making home ownership seem out-of-reachespecially in todays housing market. Its no wonder many potential home buyers are asking whether theyd be better off renting. The good news is renting and buying dont have to be mutually exclusive. There are ways to use the benefits of short-term renting as a strategy to buy your own placebut you may find out its better for you to rent long term, and not buy. Isnt renting just throwing money away? The answer is yes, and no. Yes, rent money can be dead money. Because if you just rent and dont invest, your money cant grow and youre simply paying off someone elses home loan or providing rental income for them. But the non-deductible interest on a home loan can also been seen as a waste. And because renting is sometimes cheaper than paying off a home loan you may be able to make renting work for you. The fact is renting (combined with investing) may work out better financially than buying your own home. Whod have thought? Heres how it could work: say you pay rent and at the same time invest in shares or super. If you invest the difference between the rent you pay and what youd pay on a home loandepending on the performance of your investmentstheres a chance youll be better off than if you bought a home. Youd need to look into whether this would suit you though.
1 Reserve Bank of Australia, Is Housing Overvalued? July 2014 YOUR PARTNER IN FINANCIAL PLANNING
Anthony Wright Authorised Representative of AMP Financial Planning Pty Limited AFSL No. 232706
ASPIRATIONS SUMMER EDITION 2014
Renting and investing in property If you dont want to live in an area thats currently affordable for you to buy in, you could consider renting in an area that better suits your lifestyle and aim to buy in an affordable area that may be a good investment. You could end up with the best of both worlds: your loan interest payments and various expenses for your investment property may be tax-deductible and you can enjoy living in an area of your choice. Its one way to enter the property market and aim to build capital growth, rather than having to save a larger deposit for a property in a more expensive area. But youd need to work out the costs involved and whether its an option you could afford. What if I choose not to buy at all? Some recent media reports suggest an investment in shares or super could work out better financially than buying a home. Because an investment in shares or managed funds could provide better returns than the capital growth of your own home. And with super providing tax concessions, it can be a very cost-effective way to build long-term wealth for your retirement. The real value of buying But aside from the potential financial benefits of renting and investing, owning a home is still part of the Australian dream. And as hard as it can be to get started, when you put your money into a home loan youre effectively forcing yourself to save, build wealth and become better off. And more than that, owning your own home means having the security of a home to live in, and control over decisions about ityou can renovate or maybe rent out a room to help you in the early days of your home loan. Deciding on the best option Theres a lot to think about when weighing up rent versus buy and whats right for youmake sure you consider: 1. The purchase price of property and the on-going costs associated with home ownership compared with the cost of renting 2. Your lifestyle and flexibility needs
And remember that whatever you decide, you can be better off by planning ahead - youll also develop good financial habits along the way to help you build wealth. What you need to know Any advice on this page is general in nature and is provided by AMP Life Limited ABN 84 079 300 379 (AMP Life). The advice does not take into account your personal objectives, financial situation or needs. Therefore, before acting on this advice, you should consider the appropriateness of this advice having regard to those matters and consider the Product Disclosure Statement before making a decision about the product. AMP Life is part of the AMP group and can be contacted on 131 267. If you decide to purchase or vary a financial product, AMP Life and/or other companies within the AMP group will receive fees and other benefits, which will be a dollar amount or a percentage of either the premium you pay or the value of your investments. You can ask us for more details.
ASPIRATIONS SUMMER EDITION 2014
Am I too young for a self-managed super fund (SMSF)? Some of my friends in their 30s have set up an SMSF. I dont have a large super balance but want control. Is it worth it? If youre under 55 and thinking about setting up a self-managed super fund (SMSF) youre not alone. SMSFs are being established by younger Australians in a shift in the age of those wanting control over their super. In March 2014, younger people represented 75% of new SMSF members 2 . Before deciding if an SMSF is right for you, consider some of the common questions AMP customers are raising with us. How much do I need? There are varying opinions about how much money you need to start an SMSF. Consider how much youll have if your super is combined with other potential fund members. And keep in mind that if your combined balance is less than $200,000 the ATO suggests an SMSF may not be the most cost-effective optionwhen compared to fees in retail, industry and corporate funds, SMSFs may cost more. What age do I need to be? By law you must be 18 to be a trustee of an SMSF although people under 18 can be SMSF members but conditions applyfor example a parent of a younger member may need to act as their trustee. Generally, all members must be trustees of the fund. They have legal obligations and are responsible for the management and decisions of the fund If youre under 55 you or your spouse may be actively contributing to superand ideally youll have built up considerable super assets already. If youve also gathered investment knowledge and experience along the way, theyll come in handy if you decide to manage your own fund. What are the risks? Generally the risks come with the increased responsibilities youd have as an SMSF trustee. Running an SMSF means youalong with other trusteeswill be responsible for all of the decisions regarding the investments and activities of the fund. If youre pretty savvy when it comes to investing you may like the idea of selecting and managing investments from asset classes across the world. But the risk is your funds investment performance will ultimately rest with you and your fellow-trustees. One of the most important duties of an SMSF trustee is to keep abreast of strict superannuation laws and understand how theyd be applied to you and your fund. Penalties for breaches were introduced on 1 July 2014 and can be applied to trustees (corporate or
2 Those aged under 55 years establishing an SMSF, ATO Statistical Report March 2014. ASPIRATIONS SUMMER EDITION 2014 individual) but cant be paid with SMSF monies. That means you could be personally liable for a penalty if your fund is found to be in breach.
What are the opportunities? While there can be a lot of work involved in running an SMSF you have more opportunity in several areas. You can pool your superannuation with that of up to four family members (including yourself). Not only does that provide the opportunity for costs savingsthe bigger the fund balance the greater the potential for savingsbut you also have full transparency of all the costs and returns for your super. That can help you manage your tax effectively too; another benefit of an SMSF. An SMSF gives you ultimate investment flexibility too. So not only can the fund invest in direct propertyresidential and commercialbut it can borrow to invest. If you are a business owner your SMSF has the potential to buy premises that your business can lease back. Special rules apply so if this is an opportunity youd like to explore, make sure you seek advice first. SMSFs also provide flexibility in retirement. When it comes to accessing your money down the trackand how youll hand down your assets when you dieyou have several options. Its another area youll need expert advice in so speak with a financial adviser. What next? Before setting up an SMSF look into all your options. There are ways to manage the administration without using up all your spare time. Youll need to consider your strengths and weaknesses and those of each trustee toowe can help you do this so contact us today to learn more about what might be suitable for you.
What you need to know Any advice on this page is general in nature and is provided by AMP Life Limited ABN 84 079 300 379 (AMP Life). The advice does not take into account your personal objectives, financial situation or needs. Therefore, before acting on this advice, you should consider the appropriateness of this advice having regard to those matters and consider the Product Disclosure Statement before making a decision about the product. AMP Life is part of the AMP group and can be contacted on 131 267. If you decide to purchase or vary a financial product, AMP Life and/or other companies within the AMP group will receive fees and other benefits, which will be a dollar amount or a percentage of either the premium you pay or the value of your investments. You can ask us for more details.
ASPIRATIONS SUMMER EDITION 2014
New rules for government pensions Will the changes reduce the amount you receive? From 1 January 2015 new Centrelink rules could affect your government age pension entitlements for the rest of your life. Lets look at what the changes could mean for you. Have you spoken with a financial adviser recently? It pays to be aware that if you receive a government age pension and set up or make changes to an account-based pension after 1 January 2015, you may be worse off. You have limited time to work out whether reviewing or setting-up an account-based pension before 1 January 2015 will help youits a good time to seek advice. What will the changes mean for you? All account-based pensions (ABPs)including allocated pensionsset-up after 1 January 2015 will be assessed the same way as other financial assets. So if youre receiving a government age pension it may be reduced as a result. This also applies to those ABPs set up before this date that are not eligible to preserve the old rules. If youre eligible, its not too late to set up an ABP before 1 January 2015 under the current rules. In fact, doing so may preserve your government age pension entitlements.
Are you eligible? If you have money in super but you havent set up an ABP yet, you may be able to preserve or maybe even increase your government pension entitlements if you are: Male or Female and aged over 65 at 31 December 2014 Receiving a government age pension by 1 January 2015. Whens the best time to set-up an ABP? As an example lets take a look at Jane and Michaels situation to see how the changes to Centrelink will work. Jane and Michael are about to retire in November 2014 as they will reach age pension age of 65. They own their own home and have super of $$150,000 (Jane) and $135,000 (Michael) and no other assets.
ASPIRATIONS SUMMER EDITION 2014 If they leave their money in super then Centrelink will deem it to earn 2%pa on the first $79,600 and 3.5% pa on the balance (ie income of $14,481). They are currently entitled to an age pension of $32,337 pa combined under the income test. If the deeming rate was to increase to say 4% and 5.5% respectively, then their age pension would reduce to $29,487 pa combined, a drop of $2,850. On the other hand, if Jane and Michael used their super balances to start ABPs before 1 January 2015 and draw the minimum income of $14,250 combined, then only $31 is counted under the income test and they would receive the full age pension of $33,035. This is $698 pa more than if they left their money in super. The reason for this is that under the current income test for ABPs, an amount is ignored each year worked out by dividing the initial start balance by their life expectancy at that time. In this case Jane and Michael can draw up to $6,938 pa and $7,281 pa before anything is counted under the income test. And better still if the deeming rate was to increase to say 4% and 5.5% respectively, then their age pension would not be impacted and remain at the full level. But if they wait until 1 January 2015 to transfer their super money to ABPs, then they will be subject to the new deeming income test for ABPs, which will deem their ABPs to earn 2%pa on the first $79,600 and 3.5% pa on the balance (ie income of $14,481). This is no different to leaving their money in Super and they will receive a reduced age pension of $32,337 pa. What if you make changes to your existing ABP? Any changes you make to your ABP after 1 January 2015 could make your ABP assessable under the new rulesfor example, if you: Change your ABP provider Combine multiple ABPs or consolidate super into your ABP Add or remove a reversionary beneficiary (a person youve nominated to receive your pension income when you die) Cease receipt of a government payment Start a death benefit pension for anyone other than a reversionary beneficiary. Its important to seek financial advice about whether setting up or reviewing your ABP now will help you preserve any age pension entitlements you may have.
What you need to know Any advice in this document is general in nature and is provided by AMP Life Limited ABN 84 079 300 379 (AMP Life). The advice does not take into account your personal objectives, financial situation or needs. Therefore, before acting on the advice, you should consider the appropriateness of the advice having regard to those matters and consider the Product Disclosure Statement before making a decision about the product. AMP Life is part of the AMP group and can be contacted on 131 267. If you decide to purchase or vary a financial product, AMP Life and/or other companies within the AMP group will receive fees and other benefits, which will be a dollar amount or a percentage of either the premium you pay or the value of your investments. You can ask us for more details.
ASPIRATIONS SUMMER EDITION 2014 Saving in a material world... Its not easy to be thrifty in our consumer society. Were surrounded by so much temptation that it can be difficult to avoid spending money. So why not try taking a break from spending this spring. If you can tighten your belt over the spring months, it could help you save for the upcoming Christmas expenses. Here are some creative ways to cut your spending. Get smarter with your spending... Negotiate on your utility bills Its a competitive market, with energy companies chasing your business. So dont be afraid to ask your provider for a better deal, or switch providers for a better offer. Many companies also offer bill smoothing so you make even payments throughout the year and dont have to worry about a jump in your bill when the season changes. Give up the daily latte! For many of us, the morning coffee has become an integral part of our working routine. But just for spring, why not try the coffee machine at work. By the start of summer, you could have saved more than $360. Buy in bulk...and get to the market More Australians are realising the benefits of buying home brands and in bulk. Stock up on daily household staples to make some real savings. And for your fruit and veg, its worth trying the market. Buying directly from market traders can mean less mark-up. Get there half an hour before stalls close and youll find that prices go down rapidly as traders sell off their stock. Shop online Theres also a reason marketers pay a lot of money to put their products at the end of the aisle. Its just too easy to pop them into your trolley. So why not go online? You might not get quite so many bargains. And you might pay a little for delivery. But youll avoid those impulse purchases. And by consuming less, you could spend less. Leave the car at home Spring is in the air. So with the weather warming up, you could try walking or cycling to work. Youll save money, get fit and you might even get to work more quickly by avoiding the gridlock. And if your workplace is simply too far away, what about cycling to the nearest train station?
...and get smarter with your finances Put more into super You can sacrifice some of your take-home salary to boost your super and potentially make immediate tax savings. These concessional contributions carry tax advantages. Contributions are taxed at only 15% (or 30% if you earn over $300,000pa), which for many people is lower than their marginal income tax rate. You can put up to $30,000 into your super at the concessional tax rate (or $35,000 if youre 49 or over as at 30 th
June 2014). Bring your super accounts together More Australians are realising the power of one super fund. We can help you bring your super together for immediate savings if you are paying multiple sets of fees.
ASPIRATIONS SUMMER EDITION 2014 Consolidate your debts Having a number of debts could potentially mean you pay higher interest rates and multiple sets of fees. So think about bringing them together into the debt with the lowest interest rate, which could be your home loan. The lower interest rate means youll pay less interest from day one. And down the line youll pay off your debt sooner. Set up an offset account for your home loan An offset account is a day-to-day savings account typically linked to a variable rate home loan. Your savings reduce the balance of your home loan for the purpose of calculating interest charges. Its a simple tool that can help you make immediate savings on interest. And over the life of your home loan you could save thousands of dollars. Get your tax return done! The official tax return deadline is the end of October. And if youre using an accountant youve got even longer. But why wait until the last minute? The earlier you receive any tax return, the earlier you can start getting your money working for you. After all, its your money.
Come the start of summer, your combined spring savings on fees, groceries, utility bills, interest and so on could easily run into four figures. And come Christmas you might find you have a bit more in the kitty.
Keep it going! Of course, were all different. So its important to find your own way to save and make the sacrifices youre prepared to make to achieve the outcome you want.
What you need to know Any advice in this document is general in nature and is provided by AMP Life Limited ABN 84 079 300 379 (AMP Life). The advice does not take into account your personal objectives, financial situation or needs. Therefore, before acting on the advice, you should consider the appropriateness of the advice having regard to those matters and consider the relevant Product Disclosure Statement before making a decision about the product. AMP Life is part of the AMP group and can be contacted on 131 267. If you decide to purchase or vary a financial product, AMP Life and/or other companies within the AMP group will receive fees and other benefits, which will be a dollar amount or a percentage of either the premium you pay or the value of your investments. You can ask us for more details.
ASPIRATIONS SUMMER EDITION 2014
The essential tool for any renovation: our budget tracker More than 43% of Australian homeowners are planning a renovation according to a recent survey 3 . If that sounds like you, make sure youre not one of many people also poised to blow the budget. According to research 4 , the average renovation goes over budget by nearly $3,000 due to unexpected material and labour costs. But thats not all. The same research shows that the average renovation takes 58% longer than expected. If youre renovating an investment property, extra time could also mean more time without a tenant, and less rental income which could really inflame costs. What causes a renovation to go over budget? Renovation projects usually go over budget because costs are inaccurately projected. Costs for any renovationno matter how smallneed to be calculated before any work is carried out. And for a prospective property in need of renovation, the renovation costs should be worked out before an offer to buy is even made. That means instead of conjuring a ballpark budget figure of say $40,000, you need to work up from exact costs to a realistic total cost. For example, you need to factor in everything from the number of power points required to the doors that need replacing to arrive at a true cost in time and money rather than a vague estimation. The solution to staying on track Whether youre updating or undertaking a complete overhaul, you can keep your renovation on budgetand on timeby keeping the unexpected at bay. The AMP renovation budget tracker has been invaluable to the contestants on The Blockand the good news is its now available for you via www.tracker.qandamp.com.au Manage all the costs of your renovation from your desktop, and make sure you stay on track throughout your project.
1 Mortgage Choice 2013 Homeowners Intention Survey conducted in May 2013, completed by 1,032 Australian homeowners of over two years with a mortgage.
4 Commonwealth Bank of Australia study conducted in May 2013 among 1,030 Australians with home loans aged 18 years and over, who have undertaken home renovations in the last ten years. ASPIRATIONS SUMMER EDITION 2014
Top tips Consider our tips for your keeping your renovation budget on track: 1. Use the AMP renovation budget tracker at www.tracker.qandamp.com.au 2. Thoroughly plan everythingfor example, map out your floor plan in detail and finalise the placement of permanent fixtures in your kitchen and bathroom before undertaking any work. 3. Project-manage the renovation yourself but beware unexpected traps. Speak with professionals about realistic time frames and the time youll have to invest. 4. Shop around and negotiatecompare quotes for materials and tradespeople but remember cheapest may not always be best. Ask for references when choosing tradespeople and get referrals whenever possible.
What you need to know The above tips should be used as a guide only. AMP and its related companies are not liable for any claims, losses, damages, costs and/or expenses sustained or incurred in connection with the above tips. Any advice on this page is general in nature and is provided by AMP Life Limited ABN 84 079 300 379 (AMP Life). The advice does not take into account your personal objectives, financial situation or needs. Therefore, before acting on this advice, you should consider the appropriateness of this advice having regard to those matters and consider the Product Disclosure Statement before making a decision about the product. AMP Life is part of the AMP group and can be contacted on 131 267. If you decide to purchase or vary a financial product, AMP Life and/or other companies within the AMP group will receive fees and other benefits, which will be a dollar amount or a percentage of either the premium you pay or the value of your investments. You can ask us for more details.
ASPIRATIONS SUMMER EDITION 2014
What happens if I let my insurance lapse? Like many Australians you may be wondering if your cover can adapt to your needs. If you let your insurance lapse, you risk being unable to make a claim when you may really need to. Take a look at our claims statistics below and youll see that, more often than not, its our older customers who understand first-hand the true value of their insurance. Life claims by age Under 30 years 30 to 39 years 40 to 49 years 50 to 59 years 60 years+
6% 12% 18% 30% 34% Source: Claims Paid 2013, AMP Life Limited and The National Mutual Life Association of Australasia Limited Claims. Based on the statistics above, if youre over the age of 50 there is a higher chance youll need to make a claim on your policy at some point in the future. So its worthwhile considering the value of your insurance before and your personal situation before you let it go. Health, age and changing legislation If you let your insurance lapse, you need to think about whether you will be able to get the same cover back again, should you ever want to. And its important to know its not just age and health-status that can affect a new insurance application. As an example, new legislation means some policy options 5 held in super are no longer available for new applicants at all. So for some people, cover that was once in place and then lapsed is now gone for good. Investing where it counts As your dependants leave home and your debt levels reduce you should probably reconsider the level of cover you need and have. While you need to understand your own circumstances and changing needs, often one of the main reasons customers let their insurance lapse is to save money. An insurance policy can seem like an unnecessary expense and with any luck it may not be necessary at all. But ironically, not being covered for an event that actually happens can be far more expensive than the cost of a policy.
5 The own-occupation option is no longer available on new total and permanent disablement policies held in superannuation.
ASPIRATIONS SUMMER EDITION 2014
There are a few ways to manage the affordability of insurance.
Insurance through super is an option where you dont have to pay for your policy from your household budget however it does come out of your super. Accordingly, you need to carefully consider your personal circumstances and decide whether this option is right for you. Insurance can give you peace of mind as you near retirement. If you need to claim, your regular super payments may be covered too so youd be boosting your retirement savings even if youre out of action. The key is to make sure your insurance always meets your current needsthat way, the cost of your policy can reduce if your needs become less. And if youre 50 or older, make it a priority to speak with us today about your insurance needs. What you need to know Any advice in this document is general in nature and is provided by AMP Life Limited ABN 84 079 300 379 (AMP Life). The advice does not take into account your personal objectives, financial situation or needs. Therefore, before acting on the advice, you should consider the appropriateness of the advice having regard to those matters and consider the Product Disclosure Statement before making a decision about the product. AMP Life is part of the AMP group and can be contacted on 131 267. If you decide to purchase or vary a financial product, AMP Life and/or other companies within the AMP group will receive fees and other benefits, which will be a dollar amount or a percentage of either the premium you pay or the value of your investments. You can ask us for more details.
ASPIRATIONS SUMMER EDITION 2014
Glass half empty or glass half full? Dr Shane Oliver answers question submitted by reader Russell from Altona, Victoria about whats been happening on the markets in recent years. When I left work in 2007 the ASX was around 6500 and Im still waiting to recoup my initial investment. We didnt go into recession, our interest rates are at record lows, unemployment is manageable and we have a triple AAA rating. So why has the Australian market been wobbling around like a drunken sailor while overseas markets have improved?
Its understandable to be concerned about market ups and downs, particularly when youre retired. But there is a perception issue here. People often take the starting point of the high, ignoring that the high was far higher than you would have got elsewhere. The graph below takes a different starting point. As you can see, an investor since 2000 would have been better off in Australian shares than in global shares. In 2007, global shares had just got back to where they were at the turn of the century, while Australian shares were double the levels in 2000.
The US sharemarket really span its wheels in the years leading up to the GFC. When the S&P 500 made a new high in 2007 it was only marginally above what it was in March 2000. In contrast, Australian shares had a fantastic run up to 2007. So our starting point before the GFC was a lot higher. We had a higher high. Playing catch-up The GFC saw both the Australian and the US markets fall about 55%. But since then our market has recovered more slowly and remains roughly 20% below its 2007 high. Lets look at some reasons why. The natural ebb and flow of the markets. You typically find that you go through long periods of time when Australia is the place to be and then you go through long periods of time when the US is the place to be. The US had the tech boom in the 1990s while we were seen as old economy and out of fashion. And then it all reversed when their tech boom collapsed. We didnt have any tech stocks and we got a huge lift-up from the commodities boom, emerging markets and the low Australian dollaras recently as 2002 our dollar was at 48 US cents. Now the cycle has turned again. 0 50 100 150 200 250 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 Australia - ASX 200 MSCI World ex-Aus Australian versus global shares Share price indices, Jan 2000 = 100 ASPIRATIONS SUMMER EDITION 2014 Our resources boom was underpinned by strong growth in China. But over the past few years there have been more question marks about China, with worries about Chinese economic growth and property weighing down our share market. When the US produces more oil and gas, it stays in the US and leads to lower prices. But when Australia ramps up its gas production, it leads to higher prices as that gas is destined for international markets. So their commodities story has been more positive whereas our recent commodities story has been more negative. The US dollar is still running at pretty low levels compared with its peak in 2002, while the Australian dollar is still running at pretty high levels after reaching a peak of US$1.10. This has impacted the competitiveness of Australian companies while their American counterparts get the benefit of a lower currency. Theres been a manufacturing renaissance in the US, with companies like General Motors expanding production, while in Australia GM is shutting down and vacating the market as a producer. And finally the US has had very easy monetary conditions, with zero interest rates and new money being printed through the Federal Reserves quantitative easing program. You cant ignore any of these factors in creating support for financial assetsfor example, low interest rates have encouraged more Americans to put their money in the sharemarket. Future headwinds The slower bounce back in our market is indicative of a long-term change. Were not down and out but its a lot tougher now. The commodities tailwind has become a headwind. We still have to contend with a relatively high Australian dollar. And our household sector has a debt to income ratio thats about 30% higher than the US. All these are likely to act as a constraint on our markets. So for an investor looking for a diversified portfolio, theres a case to have more in international shares than you might have had a decade ago. But you need to be careful. It depends on what youre after. If youre looking for capital growth then there may be potential offshore. But in chasing that you could miss out on the higher income flows you may get from Australian shares. Australian assets offer higher income generally. For example, our bond yield is 3.5%, while the US is 2.5% and Japan is 0.5%. So its hard to pass the Australian market up even though it hasnt recovered as quickly since the GFC. And you cant ignore the power of dividends. Dividends in Australia are much higher than the US and Australian investors also get franking credits, which mean the company has already paid tax. The dividend yield for Australian shares is about 4.5%, whereas in the US and other markets its nearer 2%. ASPIRATIONS SUMMER EDITION 2014 So even investors who put their money down in 2007 should now be ahead if they reinvested the franked dividends they got along the way. Safety first? When youre retired, perceptions change and its difficult to see the investment glass as half full. It can be tempting to look at the relative safety of defensive assets like bonds and term deposits. And while there is some sense in becoming more defensive in retirement, youve got to be careful. Historically we tend to think of bonds and term deposits as the place to go for yield. But the current bond yield is very low and so are bank interest rates. One alternative investment option that seeks to deliver both income and capital growth is the AMP Income Generator. The Income Generator takes account of the fact youre going to get a pretty low yield from cash, bonds and term deposits, given the present low interest rates and market conditions, and therefore actively seeks out higher yielding opportunities like corporate debt or shares which offer income flows. What you need to know This document was prepared by AMP Capital Investors Limited (ABN 59 001 777 591, AFSL No 232497). This document, unless otherwise specified, is current at Monday 15 September 2014 and will not be updated or otherwise revised to reflect information that subsequently becomes available, or circumstances existing or changes occurring after that date. While every care has been taken in the preparation of this document, AMP Capital Investors Limited makes no representation or warranty as to the accuracy or completeness of any statement in it including, without limitation, any forecasts. Past performance is not a reliable indicator of future performance. This document has been prepared for the purpose of providing general information, without taking account of any particular investors objectives, financial situation or needs. An investor should, before making any investment decisions, consider the appropriateness of the information in this document, and seek professional advice, having regard to the investors objectives, financial situation and needs. This document is solely for the use of the party to whom it is provided. ipac asset management limited (ABN 22 003 257 225, AFSL 234655) (ipac) is the responsible entity of the AMP Capital Income Generator Fund (Fund) and the issuer of the units in the Fund. To invest in the Fund, investors will need to obtain the current Product Disclosure Statement (PDS) from AMP Capital Investors Limited (ABN 59 001 777 591, AFSL 232 497) (AMP Capital). The PDS contains important information about investing in the Fund and it is important that investors read the PDS before making a decision about whether to acquire, or continue to hold or dispose of units in the Fund. Neither AMP Capital, ipac nor any other company in the AMP Group guarantees the repayment of capital or the performance of any product or any particular rate of return referred to in this document. This document is solely for the use of the party to whom it is provided and must not be provided to any other person or entity without the express written consent of AMP Capital.