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Assumptions

  • Value of Super commercial assumptions

    Industry Super Australia estimates that a couple could lose up to $170,000 by the time they retire and that a person on a median wage could lose about $1500 in superannuation contributions a year in today’s dollars if the superannuation guarantee rate does not increase from 9.5% to 12% as currently scheduled. These estimates are based on the following assumptions:

    • A starting wage of $59,800;*
    • The assumed salary increase of 3% per annum has been adopted as an average figure based on a 37-year projection — that is, from the age of 30 to the retirement age of 67;
    • An annual investment return after tax before performance fees of 7.5%;
    • An asset‑based performance fee of 0.58%;
    • An annual administration fee of $78 per annum in today’s dollars;
    • Insurance premiums are excluded and presumed to be $0 per year;
    • An annual inflation rate of 2%. In addition, a further annual increase of 1% is included to take into account the cost of meeting increases in community living standards. This means a total assumed inflation rate of 3% is allowed for;
    • Employer and voluntary contributions, fees and the concessional contribution cap increase with wages;
    • Each of the couple will satisfy the Work test at older ages and so are able to contribute to superannuation;
    • When the couple exceed the concessional contributions cap ($25,000 in 2020/21), they pay contributions tax according to their adjusted taxable income on any additional superannuation contributions;
    • Retirement at the Age Pension age of 67;
    • This model works for accumulation funds only. It will not work for defined benefit funds;
    • This model does not allow self-employed people to project their retirement balance;
    • Outcomes are based on contributions being made annually, at the mid-year point, on fees being deducted annually and investment returns being credited to the accounts annually;
    • Super is invested in a balanced option;
    • Superannuation Guarantee Contribution is currently 10% of ordinary time earnings and is presently legislated to incrementally increase to 12% by 2025;
    • The LISTO applies from 1 July 2017;
    • No tax is payable on fees;
    • That Tax File Numbers have been provided;
    • All amounts are in today's dollars, which means they are adjusted for inflation.

    The assumptions used to estimate the potential impact of changes to the Superannuation Guarantee are, in our opinion, reasonable for the purposes of working out the estimates. The assumptions are based on objective evidence on long-term net returns, fees, relevant economic forecasts and analysis on wages, prices and productivity.

    *based on ABS median wage data, August 2020.

  • Super Guarantee commercial and Super Guarantee calculator assumptions

    The assumptions used to estimate the potential impact of changes to the Superannuation Guarantee are, in our opinion, reasonable for the purposes of working out the estimates. The assumptions are based on objective evidence on long-term net returns, fees, relevant economic forecasts and analysis on wages, prices and productivity.

    Investment return

    7.5% per annum.

    Salary Increase

    3.0% per annum.

    Inflation

    3% per annum.

    Admin fee

    $78 per annum.

    Asset fee

    0.58% per annum.

    Insurance

    No deductions are made for insurance premiums.

    Advisor Fee

    No deductions are made for advisor fees.

    Other Assumptions

    • This model works for accumulation funds only. It will not work for defined benefit funds.
    • This model does not allow self-employed people to project their retirement balance
    • Outcomes are based on contributions being made annually, at the mid-year point, on your fees being deducted annually and your investment returns being credited to your account annually
    • We assume that your super is invested in a balanced option
    • Superannuation Guarantee Contribution is currently 9.5% of ordinary time earnings and is presently legislated to incrementally increase to 12% by 2025
    • The LISTO applies from 1 July 2017
    • No tax is payable on fees
    • We assume that you have provided your Tax File Number to your superannuation fund
    • All amounts are in today's dollars, which means they are adjusted for inflation
    • The assumed salary increase of 3.0% per annum has been adopted as an average figure based on a 37-year projection — that is, from the age of 30 to the retirement age of 67.
    • We assume that an annual inflation rate of 2%. In addition, a further annual increase of 1% is included to take into account the cost of meeting increases in community living standards. This means a total assumed inflation rate of 3% is allowed for. Employer and voluntary contributions, fees and the concessional contribution cap increase with inflation
    • We assume that you will satisfy the Work test at older ages and so are able to contribute to superannuation
    • We assume that when you exceed the concessional contributions cap ($25,000 in 2020/21), you pay contributions tax according to your adjusted taxable income on any additional superannuation contributions
    • Assumes retirement at the preservation age of 67

    Scenario Model

    Age Starting Salary Difference
    30 $58,900 $85,246
  • Accumulation Net Benefit model assumptions for: Compare the Pair advertising, the Compare the Pair tool and general performance claim in advertising campaigns

    We have commissioned SuperRatings to undertake the research and modelling for some of our advertisements. SuperRatings is a ratings, research and consultancy company that specialises in analysing superannuation funds, their investment returns, their fees and the relative benefits they offer to their members. The Accumulation Net Benefit model, prepared by SuperRatings, calculates the variance in earnings and fees between Industry SuperFunds and retail super funds (also known as retail master trusts) over different time periods, with the default comparison being the 5, 10 and 15 years to 30 June 2020.

    Background to the Accumulation Net Benefit model

    Sample Set: The sample set used in the modelling contains the 15 Industry SuperFunds# that participate in the marketing campaign and the retail super funds which are actively tracked by SuperRatings, including superannuation investment products that are open and those that are open and those that are closed to new members but continue to hold assets.

    # Note that since the date of the comparative modelling the number of funds qualifying as Industry SuperFunds has changed from 15 to 13. This change does not reduce any comparative differential shown in the modelling. Revised modelling will be undertaken in the near future.

    As at 30 June 2020, the number of retail super products included in the sample set for each comparison period is:

    Timeframe 1 Yr 3 Yr 5 Yr 7 Yr 10 Yr 15 Yr
    Retail super products 172 136 119 94 57 39

    Information about the Accumulation Net Benefit model

    • The model uses the ‘main Balanced option’ being the fund’s largest Balanced option where 60% to 76% of the fund’s assets are invested in growth investments. This is generally the fund’s default option. Where a fund does not have a Balanced option, the option closest to SuperRatings benchmark range of 60% to 76% growth investments is used. This is done for so for each product provider in the sample set.
    • The model uses return and fee data that is submitted by funds to SuperRatings, made publicly available by funds or contained within formal fund disclosures as at 30 June each year.
    • Using the starting account balance and salary, the contributions, earnings and fees are calculated using 30 June data each year to derive the closing account balance at the end of each year.
    • The closing account balance for the previous year is then used to calculate earnings and fees on the account in the following years with the process being repeated for each year of the comparison.
    • The net benefit for each product refers to the cumulative earnings less fees for the relevant comparison period.
    • The average net benefit of Industry SuperFunds is calculated by taking an average of all net benefit outcomes at the end of the comparison period for the 15 funds in the campaign as at 30 June 2019.
    • The average net benefit of retail super funds is calculated by taking an average of all net benefit outcomes at the end of the comparison period for the retail products actively tracked by SuperRatings.
    • The net benefit is calculated for each product which has sufficient return and performance history information available over the entire comparison period. Where this information is not available, those products are excluded from the calculation.
    • The model assumes no additional contributions or withdrawals over the relevant comparison period.
    • The model will be updated annually with 30 June figures (available in approximately October each year).
    • Modelling was performed on 2 October 2020 using data as at 30 June 2020.

    Other assumptions for the Accumulation Net Benefit model

    Salary increase

    3.5% per annum.

    Investment Returns

    Performance (Net Benefit) modelling is based on actual reported returns over the stated period.

    When are investment returns credited to members’ accounts?

    Annually.

    Superannuation Guarantee Contribution

    The Superannuation Guarantee rate used for each year's calculation is in accordance with the Superannuation Guarantee (Administration) Act. The modelling assumes no salary sacrifice or voluntary contributions.

    Contribution tax

    15%

    When are contributions assumed to be made?

    Quarterly in arrears (i.e. the first contribution is made 3 months after joining the fund)

    When are fees assumed to be deducted?

    Annually.

    Tax rebate

    A 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.

    Inflation

    2.5% per annum

    Fees

    All fee information is taken from the sample funds’ product disclosure statements or other formal disclosures at the end of each year in the calculation. Contribution fees, entry fees, exit fees, additional adviser fees or any other fees charged are excluded from this model.

    Insurance

    No deductions are made for insurance premiums.|

    5 year outcomes

    Scenario Starting Salary Balance Industry SuperFund net benefit Retail super fund net benefit Industry SuperFund account balance today Retail super fund account balance today Net benefit difference
    General marketing claims $50,000 $50,000 $19,665 $15,615 $91,316 $86,816 $4,500
    Executive ladies ‘Compare the Pair’ $90,000 $50,000 $21,788 $16,911 $110,760 $105,882 $4,877
    Middle income men ‘Compare the Pair’ $59,100 $74,600 $28,697 $22,210 $128,888 $122,401 $6,487

     10 year outcomes

    Scenario Starting Salary Balance Industry SuperFund net benefit Retail super fund net benefit Industry SuperFund account balance today Retail super fund account balance today Net benefit difference
    General marketing claims $50,000 $50,000 $72,089 $59,683 $168,677 $156,270 $12,407
    Executive ladies ‘Compare the Pair’ $90,000 $50,000 $86,443 $71,570 $220,301 $205,428 $14,873
    Middle income men ‘Compare the Pair’ $59,100 $74,600 $102,424 $84,894 $232,091 $214,560 $17,530

    15 year outcomes

    Scenario Starting Salary Balance Industry SuperFund net benefit Retail super fund net benefit Industry SuperFund account balance today Retail super fund account balance today Net benefit difference
    General marketing claims $50,000 $50,000 $118,803 $87,918 $244,646 $213,761 $30,885
    Executive ladies ‘Compare the Pair’ $90,000 $50,000 $154,208 $115,377 $340,725 $301,894 $38,831
    Middle income men ‘Compare the Pair’ $59,100 $74,600 $164,221 $121,207 $328,468 $285,454 $43,014

    As at 30 June 2020

  • Pension Net Benefit model assumptions

    Unlike the Accumulation Net Benefit model (above), which looks at the growth in an individual's benefit during a member's contributory phase of their superannuation, the Pension Net Benefit model focuses on the drawdown phase of a member in retirement. The model seeks to calculate the de-cumulation of a member's benefit within the pension phase over a 5-year period to 30 June 2020.

    The 5-year timeframe tracks the de-cumulation of a member's benefit utilising each fund's pension product between ages 65-69, commencing from 1 July 2015 and finishing on 30 June 2020.

    Sample Set

    The sample set used in the 5-year modelling contains the 15 Industry SuperFunds# that participate in the marketing campaign.

    # Note that since the date of the comparative modelling the number of funds qualifying as Industry SuperFunds has changed from 15 to 13. This change does not reduce any comparative differential shown in the modelling. Revised modelling will be undertaken in the near future.

    Information about the Pension Net Benefit Model

    • The model uses the ‘main Balanced option’ being the fund’s largest Pension Balanced option where 60% to 76% of the fund’s assets are invested in growth investments. This is generally the fund’s default option. Where a fund does not have a Balanced option, the option closest to SuperRatings benchmark range of 60% to 76% growth investments is used. This is done for so for each pension product provider in the sample set.
    • The model uses return and fee data that is submitted by funds to SuperRatings, made publicly available by funds or contained within formal fund disclosures as at 30 June each year.
    • Using the starting account balance, the drawdowns, earnings and fees are calculated using 30 June data each year to derive the closing account balance at the end of each year.
    • The closing account balance from the previous year is then used to calculate drawdowns, earnings and fees on the account in the following years with the process being repeated for each year of the comparison.
    • The net benefit for each product refers to the cumulative earnings less fees for the relevant comparison period.
    • The average net benefit of Industry SuperFunds is calculated by taking an average of all net benefit outcomes at the end of the comparison period for the 15 funds in the campaign.
    • The model assumes no additional withdrawals over the relevant comparison period.
    • The model will be updated annually with 30 June figures (available in approximately October each year).

    Other Assumptions used for the Pension Net Benefit Model

    Opening account balance

    Each calculation timeframe assumes an opening account balance.

    Investment Returns

    Performance (Net Benefit) modelling is based on actual reported returns over the stated period.

    When are investment returns credited to members' accounts?

    Investment returns are credited annually, however, the total investment return is adjusted to take into account pension payments and fee deductions.

    Pension drawdowns

    Pension drawdowns are calculated utilising a drawdown level of 5% per annum (which is broadly aligned with the minimum legislated drawdown level for a member aged 65 at the commencement of the pension) and are assumed to occur monthly.

    When are fees assumed to be deducted?

    Annually.

    Fees

    All fee information is taken from the sample funds' Product Disclosure Statements or other formal disclosures at the end of each year in the calculation. Establishment fees, buy/sell spreads, entry fees, exit fees, additional adviser fees or any other fees charged are excluded from this model.

    Insurance

    No deductions are made for insurance premiums.

    Modelling was performed on 9 November 2020 using data as at 30 June 2020.