Assumptions
Summary of Key Assumptions
There could be a lifetime of difference in your final retirement payout if you belong to an Industry Super Fund. Examples presented in the Industry Super Funds television commercials and associated marketing show in stark dollar terms the significant amount of difference an Industry Super Fund can make to your final retirement payout.
We have commissioned SuperRatings to do the research and modelling for our advertisements. SuperRatings which is an independent ratings and research company that specialises in analysing superannuation funds, their investment returns, their fees and the relative benefits they offer to their members.
The amounts shown in our commercials are based on fee projection modelling of the average fees of a sample of two types of superannuation funds - Industry Super Funds and Retail Master Trusts. The modelling shows the effect that fee differences alone have on the growth of your superannuation. The figures shown as a result of the modelling are not predictions or estimates of actual outcomes. The effect of fee differences on your super balance will vary between individual super funds and be affected by the fund’s performance. SuperRatings also undertakes Net Benefit modelling which analyses average net returns (investment performance less fees) for a sample of Industry Super Funds and a sample of Retail Master Trusts.
Performance (Net Benefit) Modelling and Bernie Fraser Statement
The Industry Super Fund investment options included in this model are:
- Australian Super Balanced
- AUST Q Default Option
- CareSuper Balanced
- Cbus Super Balanced
- Finsuper Balanced Option
- FIRST Super Core Portfolio
- HESTA Core Pool
- HOSTPLUS Balanced
- JUST Super Balanced
- legalsuper Moderate
- LUCRF Balanced
- MTAA Super Balanced
- Print Super Prime Choice
- REI Super Trustee Super Balanced
- SPEC Super Core
- TWUSUPER Balanced
The Retail Master Trust investment options included in this model are:
- AMP CustomSuper Balanced Growth
- AMP Super Leader Growth Active
- AON Master Trust Balanced Active
- Asgard SMA Balanced
- AXA Super Directions Multi-manager Balanced
- BT Lifetime Super Balanced Return
- Suncorp Easy Super Balanced
- Legg Mason - The Corporate Superannuation Master Trust Balanced Trust
- Colonial First Choice Moderate
- ING Corporate Super Balanced
- IOOF PS Employer Balanced Growth
- Legg Mason - The Corporate Superannuation Master Trust Balanced Trust
- Mercer Super Trust Corporate Growth
- MLC Masterkey Business Balanced
- Navigator Pre Select Growth
- Spectrum Super United Capital Growth
- Suncorp Easy Super Balanced
Fee Projection Modelling:
The Industry Super Fund investment options included in this model are:
- Australian Super Balanced
- AUST (Q) Default Option
- CareSuper Balanced
- Cbus Core Strategy
- Finsuper Balanced Option
- FIRSTSUPER Growth
- HESTA Core Pool
- HOSTPLUS Balanced
- legalsuper Moderate
- LUCRF Balanced
- Media Super Balanced*
- MTAA Super Balanced
- NGS Super Diversified
- REI Super Trustee Super Balanced
- Spec Super Core
- TWUSUPER Balanced
* As at 1 July 2008 Print Super and Just Super merged to become Media Super.
The Retail Master Trust investment options included in this model are:
- AMP CustomSuper Balanced Growth
- AMP SuperLeader Growth
- AON Master Trust Balanced Active
- Asgard SMA Balanced
- AXA Super Directions Multi-manager Balanced
- BT Lifetime Super Emp BT Multi-manager Balanced
- Colonial First Choice Moderate
- ING Corporate Super Balanced
- IOOF PS Employer Multimix Balanced Growth
- Legg Mason - The Corporate Superannuation Master Trust Balanced Trust
- Mercer Super Trust Corporate Growth
- MLC Masterkey Business Balanced
- Navigator Pre Select Growth
- Spectrum Super United Capital Growth
- Suncorp Easy Super Balanced
- Tower ARC Corporate Balanced Growth
The key assumptions on which the modelling and calculations are based are set out below.
List of Assumptions
| Starting age | Varies and is disclosed in the ad |
| Age of retirement | 65 years |
| Starting income | Varies and is disclosed in the ad |
| Salary increase | 3.5% per annum |
| Starting super balance | Varies and is disclosed in the ad |
| Investment Returns | Fee Projection Modelling: 7.225% per annum, (gross of taxes and fees at 8.5%) compounded annually but with taxes of 15% deducted. Performance (Net Benefit) Modelling: Modelling is based on actual reported returns over the stated period. |
| When are investment returns credited to members’ accounts? | Annually |
| Superannuation Guarantee Contribution | 9% of Gross Salary. Assumes no salary sacrifice or voluntary contributions. |
| Contribution tax | 15% |
| When are contributions assumed to be made? | Quarterly in arrears with 4th quarter contribution being received on the last day of the year. |
| When are fees assumed to be deducted? | Annually |
| Tax rebates | Tax rebate of 15% is assumed on fees deducted from members’ accumulation accounts. |
| Employer asset size | Members’ accumulation accounts are assumed to be in a ’small’ employer size of $150,000 in funds under management (FUM) at the start of calculation. Employer size FUM increases at 11.6% per annum. |
| Inflation | 2.5% per annum |
| Average Industry Fund Fees* | See commentary below |
| Average Master Trust Fees* | See commentary below |
| Insurance | No deductions made for insurance premiums |
| Date of modelling | Performance (Net Benefit) Modelling: 30 June 2008 Fee Projection Modelling: 1 July 2008 |
All key assumptions have been drawn from the model provided on the ASIC website (www.fido.asic.gov.au) except for average fees and average returns.
Fees*
- All fees are those published in sample funds’ most recent Product Disclosure Statements
- Average Industry Super Fund fees and Master Trust fees are an average of chargeable administration, asset management and investment management fees
- Contribution fees, entry fees, exit fees, adviser fees or any other fees charged by Industry Super Funds and Master Trusts are excluded from this model.
Returns
In the ASIC superannuation calculator assumes returns are provided either before fees and taxes (8.5%) or after fees and taxes (7.47%) assuming tax of 6% (being 15% less estimated credits). We use 7.225% after taxes (at 15% flat) but before fees so that we can model in the different fees which apply in the ‘average’ master trust and industry fund scenario. We believe that this is an appropriate figure to use in projecting average returns. The return of 7.225% is used for modelling outcomes for both the average industry super fund and the average retail master trust. This is done to illustrate the effect that fee differences alone have on the growth of your super investment.
Variable Model Assumptions
We use a number of different scenarios for our modelling. The variable assumptions are the person’s age, starting balance in their super fund and their annual salary:
| Scenario | Annual salary | Starting balance | Starting
age |
Average Industry Super Fund | Average Retail Master Trust |
| Construction | $58,000 | $50,000 | 40 | $327,977 | $281,913 |
| Hospitality | $23,000 | $4,400 | 25 | $203,269 | $170,371 |
| Aged Care | $45,000 | $20,000 | 35 | $272,163 | $232,835 |
| Executives | $130,000 | $110,000 | 45 | $550,959 | $485,432 |
| Security Guard | $43,500 | $28,593 | 25 | $481,919 | $396,093 |
| Mid Management | $75,000 | $50,000 | 34 | $535,161 | $453,759 |
| High Net Worth* | $200,000 | $150,000 | 40 | $1,078,482 | $982,113 |
| Manufacturing - Ladders | $46,800 | $35,000 | 33 | $363,258 | $305,230 |
| Manufacturing - Spanners | $59,100 | $74,600 | 37 | $461,276 | $388,601 |
| Mechanics | $46,333 | $47,000 | 30 | $464,921 | $383,745 |
| Over a 40 year working life | $50,000 | $50,000 | 25 | $633,224 | $514,748 |
| Multi Industry Men | $61,200 | $69,000 | 41 | $368,124 | $315,820 |
| Multi Industry Women | $51,500 | $35,500 | 39 | $283,284 | $243,625 |
*The High Net Worth scenario is modelled on a larger employer size of $5,000,000 in funds under management (FUM) at the start of calculation.
Bernie Fraser Statement
| Scenario | Annual salary | Starting balance | Average Industry Super Fund | Average Retail Master Trust |
| Five year returns* | $50,000 | $100,000 | $166,479 | $152,248 |
*Based on actual reported investment returns and fees for a sample of Industry Super Funds and Retail Master Trusts averaged over 5 years from 1 July 2003 to 30 June 2008
Industry super funds have delivered on average, a 3% better return than retail master trusts for the last financial year, to June 2008. Based on -5.55% vs -9.23.^
Over the past five years, industry super fund investment returns have averaged over 10% a year.^
^Calculations by SuperRatings, commissioned by Industry Fund Services. Based on SuperRatings Fund Crediting Rate Survey results for industry super funds and retail master trusts within SR50 Balanced Index at June 2008. The figures shown are current at 24 September 2008 and may be revised if further information becomes available.