Roy Keenan from Yarra Capital Management shares insights with James Dunn from The Inside Network on the role of active management. The Inside Adviser
After the Hayne Royal Commission many advisers decided to steer away from large dealer groups in favour of becoming self-licensed. In the last six months, however, that trend has taken an abrupt turn.
Education bonds an investment in a smarter future: Foresters
Member-owned financial services company Foresters Financial has come to market with a new Education Bond offering, which could herald the product shedding its niche status with investors and advisers alike.
An education bond is a long-term savings plan that combines tax benefits with strategic investment specifically geared towards the education expenses of children and grandchildren. If provided by a registered life insurance company like Foresters, an education bond is considered a ‘scholarship plan’ under Australian Tax Law that allows the administrator to obtain, and pass on, a healthy tax deduction on withdrawals of investment earnings to pay educations expenses.
The tax benefits inherent in education bonds are potentially manifold. The contributions made into the education bond are tax-free, and income from the bond doesn’t need to be declared during the life of the policy. For high tax-paying individuals, the 30 per cent tax rate will likely end up lower than their marginal income tax rate.
Further, withdrawals on earnings is taxable to the beneficiary rather than the owner, which brings the tax-free threshold into sharper focus.
According to Foresters CEO Emma Sakelaris, education bonds can act as a salve for families trying to save for their children or grandchildren’s education when the cost of living is elevated.
“Financial pressures are felt immensely at the moment, and we have identified education as a key issue for parents and grandparents wanting to provide a viable long-term solution,” Sakelaris says.
“A key additional aspect of education bonds is the variety of ways it can be used and the flexibility it provides, including tax benefits, estate planning and generational transfer of wealth capabilities. Families can access funds at any time and can use it to claim anything associated with education. Whether that be anything from tuition fees, accommodation, travel, and equipment.”
The Foresters Financial Education Bond has an added feature that could be pivotal, she adds, with investors retaining the ability to appoint alternative beneficiaries. This means other members of blended families, as well as grandparents, relatives and friends can also get involved.
“The rising cost of living and education fees has subsequently had a flow on effect, impacting the ability for families to finance their children’s education which then impacts their abilities entering the ever-competitive job market,” Sakelaris says.
“An education bond allows for a long-term savings plan for families to plan and invest in their future generations educational outcomes, capabilities and reduce financial stress.”
