Ask Noel: CHESS, mortgages and investment strategies

My question is regarding CHESS statements. What length of time should I retain them? I was advised by an accountant that I should retain CHESS statements until my shares are sold. I bought shares in CBA,WBC and a few other blue chips 14 years ago, have full participation and have not sold any shares. Apparently, by the end of 2018 CHESS will offer statements electronically.

For the uneducated CHESS (Clearing House Electronic Subregister System) is the computer system used by the Australian Securities Exchange (ASX) to record shareholdings and manage the settlement of share transactions. My broker tells me there should be no need to keep CHESS statements. Your sponsoring broker should be able to provide a portfolio summary with all CHESS holding at any time.

In a recent article you said only $1.6 million in a super fund can go to a beneficiary. What happens to the balance?

The rest will be paid to the beneficiary as after-tax payment. They can invest it how they wish, but not in super. This means earnings will be taxed at their marginal rate.

I am in my late 60s and have been living in a friend’s home for a number of years but with a recent change in circumstances I will soon be moving out. I am looking to buy a small apartment for about $275,000 and I am wondering about the best way to finance it. I receive $1500 a fortnight from various pensions and income streams, as well as having $250,000 in super – from which I draw down the 5 per cent I’m required to each year – and I have about $40,000 in the bank. The super fund returns around 3 per cent a year from a cash option. Should I try to get a loan for as much as I can at a rate of 4-4.5 per cent and use money from my super to make up the shortfall or would it be preferable to use a larger percentage of my super as a deposit and take out a smaller mortgage?

The biggest problem you will have is getting a loan to buy a house at your age. I think your first job should be to talk to a couple of mortgage brokers and see what they recommend. You will need to prove you have the capacity to service the repayments and have enough in super or other assets to pay off any residual balance when the time comes. Keep in mind that costly mortgage insurance will be incurred if you don’t have at least a 20 per cent deposit.

My partner and I own our home outright, plus other properties, and have combined super of $490,000 plus $670,000 in savings. We have no other debts or liabilities, and no plans to have children. We would like to buy a holiday house, which could also be rented out as an investment property. What is the best investment strategy in planning for our retirement? Can we borrow against one of our properties, and what type of loan would be best?

Even though you have not given specific details of the value of the properties you own, you appear to be extremely well placed for retirement. I suggest you think twice before you buy a holiday home – you’re usually far better off to invest elsewhere and rent as needed. It would be a different matter if you intended to retire to this house at some time in the future as you could buy it now to lock in today’s value. You could certainly borrow against one of your properties for investment and, if you are both working, should have this loan on an interest-only basis if possible to maximise the tax benefits. You should also be trying to get the bulk of your assets into superannuation if this is possible.

Noel Whittaker is the author of Making Money Made Simple and numerous other books on personal finance. His advice is general in nature. Readers should seek their own professional advice before making decisions. Twitter: @noelwhittaker