Should I help pay off my kids’ student debt or add to their super?

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I have two children aged 26 and 24 who both work full-time and have HELP debt of approximately $50,000 each. I would like to gift each of my children $20,000 but am not sure of the most prudent way to do this. Shall I give them $20,000 each to pay down some of their HELP debt or is it better to put it in their superannuation fund?

The HELP debt is indexed to inflation which is currently around 7 per cent and shows no sign of abating. Given it may be more than 35 years before your children can access their superannuation, and there may be many changes to the laws in those years, I think putting the money towards the HELP debt is the best option. It’s giving them a good foundation for life and you are getting a guaranteed 7 per cent per annum on the money.

If you’re thinking of giving your kids a financial gift, consider helping pay down their HECS debt.Credit: Steven Siewert

I have a question about the transfer balance cap. Suppose a person retired last year and transferred $1.8 million to pension mode. The drawdown for their age is 5 per cent per annum but if the market performs well it could be over $2 million by 30 June next year. This is way above the present cap of $1.9 million. What is the fund member required to do, and when are they required to do it?

I have good news for you – the transfer balance cap (TBC) only regulates the amount you can transfer to pension mode within your superannuation fund. Once you’ve maxed out the TBC, as has happened in this case, the money is free to grow to any level provided you keep taking out the minimum pension.

Just bear in mind if a person has money in both pension mode and accumulation mode, and they wish to take a lump-sum payment, it’s best to take it from the accumulation fund.

I am 76 years and thinking about retirement villages. As our money is invested in term deposits and superannuation, what happens to the payment for the village? Will they wait until you sell your house or do you have to pay the full price before moving in? Taking the money from term deposits would mean losing the interest and the super funds would not have enough for the full price. Nobody seems to be able to give me an answer.

Creator of Village Guru, Rachel Lane, explains that most retirement villages only require a small deposit (often it is in the order of $1000 to $5000) to hold the property for you. Your contract to buy the property would then be either unconditional (if your property has already sold or you are selling other assets to fund the purchase) or it would be conditional on the sale of your home within a certain period of time (again it varies, but 90 days is not uncommon).

Normally you can’t move into a property prior to settlement (paying). However, some villages may be willing to offer you what’s known as a Deferred Payment Arrangement where you can settle on your new home and pay the balance when your home is sold.

If the village doesn’t offer a Deferred Payment Arrangement and you want to move in straight away then you may need to look at using your investments or borrowing through what is called bridging finance, which gives you the money now to buy your new home and is repaid when your old home is sold.

Before you decide on which property to buy in the village make sure you get a Village Guru report, it crunches the numbers on the village costs and can provide you with an estimate of your Age Pension and Rent Assistance entitlements, and your Home Care Package fees and funding.

During my working life, I have bought shares and usually gained more via dividend investment programs, so the shares were bought over a number of years. Hence, the cost of my shares is a complex question. Would it be worth my while to calculate the cost of my shares, and leave that information with my will? Do I need to indicate the year of purchase for any reason?

Good records are critical as a lack of records can cause your executors much pain and cost. Therefore, I think the more detailed the records you keep the better off your estate will be. The date of purchase is only important if any of the shares were bought before the 20th of September 1985 when CGT came in.

Noel Whittaker is the author of Retirement Made Simple and other books on personal finance. Email: [email protected]

• Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.

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