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24Sep

What makes your super Islamic?

September 24, 2020 hejazfs Superannuation 79

It is time to get to know one of your most important investments, your super. In this article you will learn about what makes your super Islamic and how we invest Islamically, straight from our portfolio management team. 

 

Did you know that over 1/3 of your super may fund industries against your values? 

You might be surprised but the receiving of interest is strictly forbidden in Islam. If a positive, fixed, predetermined rate is attached to the maturity (i.e. a guaranteed rate regardless of the performance of the investment), it will be considered riba and is prohibited. 

Unfortunately, most superannuation funds invest on average 34% of your super in interest-bearing investments, while the remaining investments are conducted without any regard for Islamic investment principles, they invest in industries such as alcohol, pig products and many more sectors that are non-sharia compliant. 

At Hejaz, you can be rest assured that your superannuation savings will be invested into a Sharia compliant managed fund, the Global Ethical Fund. By choosing Hejaz Islamic Super services, you are choosing to invest Islamically and in accordance to your values.  

 

The creation of the Hejaz Islamic super service portfolio 

This is how we ensure that our portfolio of investments is compliant. Firstly, our Islamic investment experts analyse companies in Australian and overseas share markets (as well as gold and property investments) to create a universe of stocks that passes our strict Islamic investment criteria. Then, our investment team uses this Islamically screened universe to create the Hejaz Islamic Super portfolio. The investment team selects the Islamic stocks they believe will produce superior financial returns. Finally, our portfolio team actively looks for investments that will yield positive returns whilst monitoring current investments. 

 

4 mandatory investment screenings for sharia compliance 

  • Tainted Income: Income earnt from non Islamic dealings must be below 5% of total revenue. 
  • Debt/ Market Cap: A company’s debt must not exceed 30% of thier market cap. 
  • Liquidity: Account receivables should be less than 49% of total assets. 
  • Business Activity Screens: Businesses such as banks, alcohol, media, interest, military and pig products are not permissible under the Sharia. 

 

At Hejaz we fund industries that are Sharia compliant and industries that help make a better tomorrow, such as healthcare, utilities, technology, telecommunications, infrastructure and property.  

So, where are you investing? Is your super fund investing against your values? Is your fund performing?  

Put your super in Australia’s Best Performing Islamic Super Option FY19/20*. We invest according to your lifestyle and values and we perform in good and bad times. 

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17Sep

Frequently asked questions about super

September 17, 2020 hejazfs Superannuation 82

This article answers 5 frequently asked questions about superannuation. If the ins and outs of superannuation leave you confused, the answers to these frequently asked questions will help you understand the basics. 

 

How much do I need to retire? 

According to the Association of Superannuation Funds of Australia (ASFA), a couple requires savings of $640,000 if they wish to enjoy a ‘comfortable’ lifestyle in retirement. For a single, the figure is $545,000. 

Due to support from the age pension, a single or a couple can fund a ‘modest’ lifestyle with savings of just over $70,000 at retirement. 

 

How is my superannuation taxed? 

Broadly, contributions are categorised as either concessional or non-concessional. 

Concessional contributions are contributions on which an employer or an individual has claimed a tax deduction. 

Non-concessional contributions are made from after-tax income. They include many personal contributions and government co-contributions. 

Concessional contributions are taxed at 15% within the superfund, with a tax offset available to low income earners. Non-concessional contributions are not taxed within the fund. 

Investment earnings are taxed at 15% in the accumulation phase. Over age 60, earnings in the pension phase, and any payouts from the super fund, are tax-free. 

 

How can I contribute to superannuation? 

If you are over 18, employed, and earn more than $450 per month your employer will contribute 9.5% of your ordinary time earnings to super. You can further boost your super by: 

  • Asking your employer to make concessional salary sacrifice contributions from your pre-tax income. 
  • Making personal contributions from your after-tax income. Subject to set limits you may be able to claim a tax deduction for these contributions in which case they will become concessional. If no tax deduction is claimed they will be non-concessional. 
  • Low to middle income earners who make a personal non-concessional contribution may receive up to $500 as a government co-contribution. 
  • If you contribute on behalf of a spouse who earns less than $37,000 a year, you can claim a tax offset of up to $540. 
  • A special ‘downsizing’ contribution is available to over-65s who sell a home. 

Age limits and work tests may apply to some types of contribution. 

 

When can I access my superannuation? 

  • When you turn 65, even if still working. 
  • When you reach preservation age (between 55 and 60 depending on date of birth) and have retired. 
  • If you start a transition to retirement (TTR) income stream. 
  • If you face severe financial hardship, specific medical conditions or under the first home super saver scheme. 

 

Who can I leave my superannuation to? 

If your super fund allows binding death benefit nominations, you can elect to have your superannuation paid to your legal personal representative. The money will then be distributed as instructed by your Will. Alternatively, you can instruct your fund trustees to pay your death benefit to one or more of your ‘dependents’. Under superannuation law these are: 

  • Your spouse (includes same-sex and de facto partners). 
  • Children. 
  • A financial dependent. 
  • People you had an interdependency relationship with. 

Without a binding nomination, your super fund’s trustees decide which dependents will receive the death benefit. They will be guided, but are not bound by, any non-binding nomination. 

 

How do I make the most of my superannuation? 

Superannuation remains, for most people, the best vehicle within which to save for their retirement. However, it can be complicated and there are numerous rules to navigate. 

That creates challenges, but it also generates opportunities, many of which can add thousands of dollars per year to your retirement income. 

 

Those are the 5 frequently asked questions about superannuation. Ready to unearth those opportunities and make the most of your superannuation? Now is a perfect time, visit https://www.hejazfs.com.au/australias-best-islamic-super-option/ 

to learn more about Australia’s Best Performing Islamic Super Option FY19/20*. 

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10Sep

Three steps to your kids’ financial success

September 10, 2020 hejazfs Lifestyle 80

We all want to give our children a head start in life. This article shows you three steps that will help you instil sound financial habits in your children by setting the foundations of good money management now and lead them towards financial success. All parents want their children to be better-off than they were – more secure and financially independent, but the big question remains: where do you start?  

This article shows three steps to your kids financial success, ushering them towards financial security.

 

Step 1: Create good habits 

Start early; learning to save is one of life’s great lessons. In an increasingly cash-less society, it can be difficult for children to understand the value of money and how to save.  

Help them by: 

  • Providing a glass jar through which they can see their savings mounting up for very young children. 
  • Teaching the difference between needs and wants. Lead by example with your own savings habits.  
  • Involving them in the household budget; compare prices at the supermarket and demonstrate bill-paying. 
  • Paying pocket money for age-appropriate chores and helping them to create a mini-budget, apportioning money to: 
  • spending on anything they want. 
  • donating to charity to instil a sense of community and empathy, 
  • saving for a goal; helpful in teaching kids restraint and how to avoid impulse buys. 

Step 2: Inform 

Nothing is free; water in the tap, electricity and even the internet don’t just happen by magic. One of the best ways to teach kids about responsible money handling is to explain debt and the consequences for not meeting financial obligations, which segues neatly into a discussion about personal credit scores.  

People with better credit scores find seeking finance approval easier and often qualifies them for more advantageous lending deals. 

Helping kids understand the concept of a credit score can be a little daunting, so try these tips: 

  • Brush up on your knowledge first. 
  • Don’t focus on numbers, explain that it’s about financial behaviour over time. 
  • Avoid complexity and keep the information age-relevant. 
  • Use examples. Discuss mistakes you’ve made in the past and explain how you rectified them. Explaining to them the rationale behind some of your financial decisions will help instil good values in your child. 

Step 3: Educate  

By the age of 3, children can understand the concept of money. By age 4 your child should be able to understand the connection between money and things. You can help them by making shopping lists and bringing them to the store, this will help them make the connection between money and things at home. By age 6 you can teach them the connection between work and money, you can help them by paying pocket money for age-appropriate chores. 

With early financial education, children will be more comfortable talking and learning about finance. Searching online will reveal a range of websites, blogs and apps dedicated to engaging and educating kids about money and investments. These online resources can help in the process of educating your kids about the different types of accounts or investments available in the market to help grow their finances.  

Introduce your kids to good habits while they’re young, and you’ll be setting them up for success. 

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03Sep

Five financial tips from an older generation

September 3, 2020 hejazfs Lifestyle 79

This article provides five financial tips that all generational groups can benefit from. When it comes to money, some things stay relevant regardless of your generation. So here are five tips for getting, and keeping, control of your finances – for life! 

1. Living within your means seems obvious, but surprisingly, many people don’t. It’s why credit like store/bank cards and shop-now-pay-later facilities are so popular. Unmanageable debt has the power to keep you awake at night – and not in a good way. But you really can survive without the latest device or car.  

In short, don’t be a slave to possessions; why lock yourself into debt more durable than the item? 

2. Save. The world is full of opportunities: travel and socialising, etc., but don’t underestimate the security of a stash of cash. With a small, regular commitment, you can have a life and save too. 

Consider this example: 

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An initial $500, plus $50 per week over five years, could accumulate almost $15,000! (Assuming no withdrawals and 2.5% profit over the period).  

Additionally, developing a savings habit will help create a good credit score for, say, a future home loan. 

3. Buy quality items like clothing or furniture. Pieces in good condition will generally last longer, and with care, can become classics you won’t need to replace. 

4. Learn to cook. Nothing beats a home-cooked meal for cost-savings. Find a recipe, make a list, shop and cook. Not sure what you’re doing? YouTube is your best friend. For $30, you could cook yourself and a friend a similar meal costing around $80 in a restaurant. (There’s the week’s $50 for your savings account!) 

5. Make a budget and stick to it. Record income, then expenses beginning with non-negotiable ones like rent, home payments, insurance, transport, groceries, etc.  

If you can’t account for some of your money, a budget will help you identify areas of overspending so you can reallocate funds to savings and discretionary expenses. 

The government’s MoneySmart website provides a budget planner to get you started, or create your own using a spreadsheet. 

 

There is our five financial tips, every generation believes there’s nothing to learn from the other, but the truth is we’re all learning, all the time.  

Visit https://www.hejazfs.com.au/ to see how our investment products can help you grow your finances and have your money work for you! 

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27Aug

Salary Sacrifice V.S. Personal Contributions to Super

August 27, 2020 hejazfs Superannuation 71

Salary sacrifice v.s. personal contributions to super. This article discusses the differences between salary sacrifice and personal contributions to super. It uses a case study to explain the potential differences. 

If you are an employee, there are two ways in which you can optimise the tax-effectiveness of your additional super contributions:  

  • opt for a salary sacrifice arrangement, whereby your employer makes additional superannuation contributions beyond the compulsory superannuation guarantee (SG) amount from your pre-tax earnings and reduces your salary accordingly; or 
  • make a personal contribution and claim a tax deduction when you submit your tax return. 

Generally, higher income earners gain the greatest benefit from either of these strategies. Lower income earners may be better off not claiming the tax deduction and receiving a government co-contribution if eligible.  

Which option?  

For starters, employers don’t have to offer salary sacrifice. If they don’t, claiming a tax deduction is the only option.  

Another thing to look out for: if salary sacrifice is available, will your employer still make SG payments on your pre-sacrifice salary? Legally, employers only need to pay SG on the actual salary amount, so for every $1,000 of salary sacrifice you would lose $95 in SG contributions. In this situation, you will most likely be better off claiming a tax deduction.  

Fortunately most employers do the right thing and don’t reduce their SG contributions. The federal government has also announced plans to ensure salary sacrifice does not result in a reduction in SG payments. If this happens, it will pretty much level out the playing field between salary sacrifice and tax-deductible personal contributions, but some subtle distinctions remain.  

Let’s look at Jenny and Brian. They both earn $120,000 a year, and want to contribute an extra $12,000 pa ($1,000 per month) to superannuation as concessional (pre-tax) contributions. Jenny opts for salary sacrifice and will receive SG contributions based on her pre-sacrifice salary. Brian decides to make his own contributions and later claim them as a tax deduction.  

Both will see their overall annual income tax bill1 drop by $4,680. After allowing for 15% tax on the super contributions, they are both better off by $2,880 for the year.  

The key difference is that Jenny will enjoy her tax benefit each payday. Brian needs to wait until the end of the financial year and submit his tax return before he can receive any benefit from his choice.  

On the other hand, Brian’s regular pay will be more than Jenny’s as his gross income remains at $120,000 pa compared to her $108,000. This gives him more flexibility. For example, he can wait to make his entire contribution just prior to the end of the financial year – if he hasn’t been tempted to spend it in the meantime. However, if he makes regular contributions to his super fund, his net disposable income each month will be lower than Jenny’s. Only when he receives any tax refund might they be back on equal terms.  

Beware the rules 

While the greatest benefit of extending tax deductibility on personal contributions goes to employees who are unable to access the salary sacrifice option, it’s still a positive move that provides everyone with flexibility and choice. However, whether you opt for salary sacrifice or claiming a tax deduction, there are rules to be followed.  

Be sure to consult your financial planner about the best superannuation contribution strategy for you. Or give us a call at 1300 043 529 and we can discuss about how we can help you build your wealth in ways that aligns with your values.

Learn more about our Islamic financial products here.

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20Aug

Preparing for retirement in uncertain times

August 20, 2020 hejazfs Investments, Lifestyle 72

We know that preparing for retirement can be difficult especially during uncertain times. This article will suggest ways you can preserve your wealth so that your retirement plan is on track. As most long-term investors know, investment markets have their ups and downs. The downs are usually associated with periods of uncertainty, perhaps due to political or economic factors, or even natural disasters. Uncertainty leads to volatility – more extreme movements in asset prices – which can have a big impact on portfolio values. This can be of particular concern if you are close to retirement and preparing for your last payday. So, what can you do about it?  

 

If you are building wealth in preparation for retirement in wobbly times, there are some options: 

  1. Save more. The 9.5% Super Guarantee will not be enough. Savings of at least 15% of salary over your working life are required to produce a sufficiently large retirement investment.  
  2. Spend less now and in retirement. Review your budget and review your plans about how you will live in retirement. 
  3. Work longer. Put off retirement until later; maybe consider working part-time in the first few years of “retirement”. 
  4. Seek higher investment returns. 
  5. Implement a gearing strategy to accelerate returns. 

 

This last solution will involve taking on more risk. Investors have always accepted that the higher the return, the higher the risk. It is often easier to see the good investment opportunities after the event, but the challenge is to identify where consistent higher returns can be found.  

 

Don’t abandon shares 

Over the long term, shares have produced higher returns with greater volatility. The returns shares provide is called the “equity risk premium” – the reward for taking on the extra risk. When investment volatility is high, shares tend to be the hardest hit. But while it is tempting to sell shares in a falling market, this robs investors of the opportunity to ride the upswing when markets recover. 

 

Allocate more to riskier assets 

Fund managers have traditionally held a significant proportion of investments in blue chip company shares. Whilst they tend to pay consistent dividends, there may be other opportunities for faster growth. These include smaller companies (or small caps), unlisted shares (private companies) and overseas shares in less developed countries (emerging markets). 

Apart from shares, higher yielding debt instruments offer the potential for even higher returns but at higher risk. 

The key to investing in these areas is good research – identifying sound opportunities and eliminating those with unacceptable levels of risk. Of course, the supply of “good quality, relatively safe” investment opportunities may appear to be limited when things are uncertain. Some fund managers offer products specialising in a wide variety of assets.  

 

Active asset management 

Good investment management requires talented people and sophisticated systems and strategies. Organisations with these attributes have a better chance of identifying under- and over-priced securities and markets. By moving money between countries, currencies, sectors, and asset classes, these managers aim to produce higher returns. Funds managed according to an “absolute return” philosophy is an example of where managers aim to produce above average returns in rising and falling markets. 

 

Implement a gearing strategy 

Borrowing (or gearing) gives you a larger sum of money to invest. This magnifies any growth you achieve on your investments especially over the long term. Careful thought should be given regarding the method of gearing as some strategies may be more suitable to your particular circumstances than others. You should always bear in mind that gearing may not only increase your gains, it can also magnify any losses.  

 

Preparing for retirement in uncertain times can be difficult. Before you make any rash decisions, talk to your financial adviser first to develop a plan specifically to suit your needs.

 

Learn more about our range of Islamic financial products here.

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13Aug

8 Pearls of Financial Wisdom

August 13, 2020 hejazfs Lifestyle 70

These 8 pearls of financial wisdom will help you achieve your financial goals by shifting your focus to the long term instead of being fixated on the present.

 

What do you want and how will you get it? 

What are your retirement goals and objectives? Where are you now in relation to those goals? Create a plan that sees you enjoying the fruits of your labours and act now to make sure your financial goals are achieved. When creating or modifying your financial plan make sure to be realistic and set achievable timeframes.

 

It’s not just about returns 

Every investment has some degree of risk. Understand the differences between the various investment assets available and make your decision wisely. Everyone has a different comfort level and risk appetite, generally the more risk you take you will be awarded with a higher return. As you grow older, you might prefer stable returns as opposed to higher returns. So make sure to discuss with your adviser about your financial goals, circumstances and risk appetite to make the most suitable investments tailored to your financial circumstance. 

 

Share it around  

To help reduce risk, share your investments across several asset classes – and within those asset classes. The right balance can depend on your financial objectives, the time you have available to invest and your risk tolerance. Diversifying across a range of asset sectors and industries reduces market risk and can improve your investment potential. You don’t have to worry about trying to time the markets for the right time to invest. With a diversified portfolio, you are always in the market.  

 

Don’t forget Super 

Superannuation will be your bank account when you’re no longer working so consider ways to boost your super fund balance. At least 9.5% of your income is being contributed to your Superannuation, so make it count. How you invest your super will make a big difference to your retirement. Remember, you can choose what your Super is funding so choose a fund that aligns with your values. And if you are making additional personal contributions, be aware of the annual limits as penalties will apply if you exceed those limits.  

 

… Or Tax 

Tax is the trickiest area of all. Always seek professional advice. A restructure of an underlying asset, an investment vehicle or ownership structure could help you minimise tax and maximise your return. Determine your tax bracket and be aware of your claimable expenses and deductions. And make sure to lodge your tax returns on time to avoid any penalties.  

 

Retirement can last another lifetime 

Thanks to medical technology and improved lifestyles we are living much longer lives. Being prepared for a longer retirement means that you money must last much longer, so do not be too conservative with your investments. You can also make additional contributions to your Super, be sure to invest in a Super fund that aligns with your values and brings you positive returns.  

 

Stay Cool 

You are in this for the long term so when market fluctuate and investments unexpectedly fall in value, don’t panic and sell. Over the last 100 years global share markets have experienced many major setbacks, including the Great Depression of the 1930s, several wars, the ‘crash of 1987’ and the Global Financial Crisis 20 years later. But for every low, a recovery has followed – they just take time. Make sure to discuss with your adviser prior to making any decisions, review your portfolio and stay focused on your long-term goals.  

 

Keep Learning 

You are never too old to learn. Financial advisers have an important role in giving you tailored advice, but you still need to make your own informed decisions. Make sure you understand your plan and if not ask questions or do more research to expand on your financial wisdom.

 

Learn more about our premier Islamic financial services here, to see how we can build your wealth together.

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06Aug

Putting your Super where your heart is – Halal Super

August 6, 2020 hejazfs Lifestyle, Superannuation 72

Halal Super is increasing in popularity as millennials are setting a trend when it comes to having more say on what their super funds are investing in. This article explains what Halal investing is and how to take more control over how your Super is invested. Millennials – take a bow. Not only are you concerned about how your Super is invested, you are more likely than other age group to act on your beliefs when choosing a Super fund.  

Research commissioned by the Responsible Investment Association Australasia (RIAA) reveals that 75% of Millennials prefer to invest in a responsible Super fund than one that only considers maximising financial returns. Well ahead of Gen X on 66% and Baby Boomers on 68%.  

That’s a pretty strong trend which sends a clear message not only to superannuation and investment fund managers, but also to the wider corporate community – people care about more than just profits. They also want their investments to contribute to the greater good. 

What makes your Super Halal? 

It is important to identify a Halal Super fund to ensure that your Super and investments does not fund industries against your values. An investment is Halal when it invests in companies and industries that are operating in line with the Islamic principles of investing. There are many conventional investment products that are not Shariah Compliant, the most common ones are investments in alcohol, military, media and pig products. Additionally, the receiving of interest is strictly forbidden in Islam. If a positive, fixed, predetermined rate is attached to the maturity (i.e. a guaranteed rate regardless of the performance of the investment), it will be considered riba and therefore prohibited.  

Unfortunately, most Superannuation funds invest on average 34% of your super in interest-bearing investments, while the remaining investments are conducted without any regard for Islamic investment principles. And over 1/3 of your Super may fund industries against your values. Given the wide range of considerations, you may need to do some in-depth research to find the fund or funds that best match your values. 

Is your fund Shariah Compliant? 

While you may have an ‘out of sight, out of mind’ attitude to your Super, it’s important to remember it’s your money and you get to choose where and how it’s invested. Start with your fund’s website or disclosure documents and look for their Shariah Compliance section. A Super fund that is certified to be Shariah Compliant is one that have been through reviews, audits and have been inspected by an independent panel of experts in Islamic ethics and law. The formal certificate of compliance ensures that a fund applies Shariah Compliant filters across their entire range of investments and transactions.  

Advice moves with the times 

Fortunately, it is becoming easier to track down the investment funds that suit you and your values. At Hejaz Financial Services, ensure that the highest standards of Sharia compliance are upheld by employing a 3-tier Sharia governance process to ensure the Sharia compliance of our services. Visit www.hejazfs.com.au to learn more about our Superannuation product or call 1300 043 529 to talk to us about the issues that are important to you so we can help you invest your Super where your heart is. 

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24Jul

Superannuation… it’s not a case of “set and forget”

July 24, 2020 hejazfs Superannuation 67

The government regularly reminds us that each Australian must take responsibility for funding their future. Regardless of when you will be able to access your super, or when you choose to stop working, you need to be aware of how your superannuation is being managed and if the final balance will be sufficient when you’re ready to retire… and for the years beyond.

As a super fund member, it is your responsibility to manage your contributions (over and above your employer’s SG), regardless of whether they are being invested into a retail fund, corporate fund or your own self-managed super fund.

Superannuation is a tax structure but it should be treated like a valuable financial asset. The fundamental principles of financial planning prescribe that individual tailoring, based on your needs, objectives and personal circumstances, is paramount to ensuring you have enough money to enjoy your retirement years.

It’s a recipe for disaster to think that once you have established a superannuation account and your employer’s contributions are flowing in, you can forget about it for the rest of your working life. Financial markets will change, your own financial position will change, and your objectives and retirement plans may change, so it’s crucial that you review your super regularly.

 

Super needs are different

Additionally, it’s foolish to believe that a “one size fits all” approach with no personal advice on contribution levels or transfer issues will help you achieve your goals.

The amount of money in your super fund when you retire will determine what type of retirement you will enjoy. So, it is you, nobody else, who must take responsibility for determining what your needs are and work towards meeting them. That could mean making increased contributions after a certain age to bolster your savings or deciding who your beneficiaries will be if you don’t make it that far.

 

Super tax

Did you know that you may attract tax penalties by making large contributions to superannuation or exceeding annual limits? Don’t panic; this is something your financial adviser can help you manage and still meet your accumulation strategy.

These are critical issues that you should take the time to discuss with your financial adviser as individual advice and tailoring is essential. Superannuation is your investment for your future, so it is important that you review your super regularly.

 

Learn more about Australia’s Best Performing Islamic Super Option here. At Hejaz Financial Services, our investments are Sharia Compliant and we perform in good times and bad times.

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