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 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.

The Industry Super Fund investment options included in this model are:

• Australian Super Balanced
• AUST Q Default Option
• Care Super Balanced
• Cbus Super Balanced
• Finsuper Moderate Growth
• FIRST Super Core Portfolio
• HESTA Core Pool
• HOSTPLUS Balanced
• JUST Balanced Fund*
• LUCRF Balanced
• MTAA Super Balanced
• Print Super Prime Choice*
• REI Super Trustee Super Balanced
• TWUSUPER Balanced
• Spec Super Core
• Legalsuper Moderate

* 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 Custom Super Balanced Growth
• AMP Super Leader Growth
• AON Master Trust Balanced
• Asgard 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 Balanced Growth
• Mercer Super Trust Growth
• MLC Masterkey Balanced
• Navigator Pre Select Growth
• Spectrum Plan – Balanced

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	7.225% per annum, (gross of taxes and fees at 8.5%) compounded annually but with taxes of 15% deducted. Note: Net benefit modelling uses the same return on a non-compounding basis.
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	31 March 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 Public 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	$327,467	$278,987
Hospitality	$23,000	$4,400	25	$202,911	$167,210
Aged Care	$45,000	$20,000	35	$271,723	$229,821
Executives	$130,000	$110,000	45	$550,231	$483,485
Security Guard	$43,500	$28,593	25	$480,768	$390,113
Mid Management	$75,000	$50,000	34	$534,143	$449,322
High Net Worth*	$200,000	$150,000	40	$1,076,717	$972,179
Manufacturing - Ladders	$46,800	$35,000	33	$362,561	$301,118
Manufacturing - Spanners	$59,100	$74,600	37	$460,406	$384,688
Mechanics	$46,333	$47,000	30	$463,882	$378,665
Over a 40 year working life	$50,000	$50,000	25	$631,837	$507,494
Multi Industry Men	$61,200	$69,000	41	$367,627	$312,928
Multi Industry Women	$51,500	$35,500	39	$282,906	$240,984

*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.