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Investing for children and grandchildren

Meet Alana and John Parker. These Sydney-based recent retirees are the proud grandparents of Harvey, an energetic and trouble-making six year old who spends his days running around, pretending to be a dinosaur. While he plays without care, Alana & John would like to set aside something for his future.

Alana and John were both self-made entrepreneurs and appreciate the support young people need when they reach adolescence. They want to set aside some money for Harvey to take on one day, but they want to do so in a tax efficient way that will grow over time.

That’s why they chose Centuria LifeGoals, which as well as being a simple, flexible and tax efficient investment solution, can also be extremely useful for passing wealth onto grandchildren (and children).

The Centuria LifeGoals solution

Centuria LifeGoals works for investors by using the increasingly popular investment bond structure which is essentially a mixture of a managed fund and a life insurance policy. The most exciting features of Centuria LifeGoals include:

  • The investment bond structure has a 30% tax rate, and you can access your entire Centuria LifeGoals investment with no additional tax to pay if you hold it for 10 years (and meet the 125% rule).
  • There’s no initial investment amount limit when establishing your Centuria LifeGoals account and you can start from as little as $500.
  • After this, you can invest up to 125% of the previous year’s contributions, allowing you to put away more money each year (if you exceed this the 10 year period simply resets).
  • Unlike superannuation, you have the freedom to withdraw money whenever you want, and if you do so before the 10 year mark the only tax to pay is the difference between the 30% tax paid and your own tax rate1.
  • You can easily transfer ownership of your account with no tax liabilities.

A Centuria LifeGoals investment gives you real flexibility so you can tax efficiently invest in a way that adapts to your financial situation as it evolves. And, because so many investors want to create future wealth for their kids and grandkids, we’ve specially created the Centuria LifeGoals Child Plan. To understand how this works, let’s go back to the Parker’s scenario.

Case Study: How the Centuria LifeGoals Child Plan worked for the Parkers and Harvey

First, Alana and John set up a Centuria LifeGoals Child Plan which is the same process as opening a regular Centuria Life Goals account, except with an additional section in the investment application.

When setting up a Child Plan, the child it’s intended for has to be below the age of 16 at the time of the application. Ownership will automatically transfer to them by the time they reach a ‘vesting age’ which is between 10 and 25 years old. The vesting age can be changed at any time and doesn’t alter the original commencement date of the account.

Alana & John set up a Centuria LifeGoals Child Plan for Harvey at six years old with an initial investment of $30,000 and contribute $200 per month in the first year. They will increase the regular contribution by 25% per annum. Because they are investing for the long-term they chose to invest 50% in the Australian share option and 50% in the International share option. They’re planning to gift Harvey the whole amount when he is 16 years old and set this as his vesting age.

When Harvey reaches his vesting age, the account automatically transfers to him. No tax is incurred by the transfer for either Harvey or his parents and by this point, following regular and increasing contributions (totaling $293,248), the total value of the account is $383,261 after tax and fees.

Centuria LifeGoals Child Plan will have allowed Harvey’s grandparents to create a considerable sum on his behalf and easily transfer it to him. The responsibility of the money will then be his and at 16 we’re sure he will be optimistic about the options now open to him (although to Alana and John he’ll always be their little dinosaur).

Build wealth for future generations with LIFT like Alana and John who were looking to set something aside for their grandson

This scenario has been produced purely to illustrate how Centuria LifeGoals can be used by different investor profiles and are is fictional.
1. In years 9 & 10 this difference is discounted by one-third and two-thirds respectively.

Which investor profile are you?

LifeGoals can be used for a number of investment scenarios. Which investor profile are you?

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