Assumptions
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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 20 years to 30 June 2022.
Background to the Accumulation Net Benefit model
Sample Set: The sample set used in the modelling contains the 11 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.
As at 30 June 2022, 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 20 Yr Retail super products 93 87 69 55 32 21 12 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 11 funds in the campaign.
- 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 5 October 2022 using data as at 30 June 2022.
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, fee caps/tiering, 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 $20,250 $15,137 $92,145 $87,032 $5,113 Executive ladies ‘Compare the Pair’ $90,000 $50,000 $22,444 $16,516 $111,855 $105,926 $5,929 Middle income men ‘Compare the Pair’ $59,100 $74,600 $29,555 $22,239 $130,035 $122,718 $7,317 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 $79,543 $61,357 $176,875 $158,689 $18,186 Executive ladies ‘Compare the Pair’ $90,000 $50,000 $93,773 $71,492 $228,972 $206,690 $22,281 Middle income men ‘Compare the Pair’ $59,100 $74,600 $113,615 $88,077 $244,162 $218,624 $25,539 20 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 $246,648 $151,257 $408,288 $2312,897 $95,391 Executive ladies ‘Compare the Pair’ $90,000 $50,000 $328,659 $204,620 $579,611 $455,571 $124,039 Middle income men ‘Compare the Pair’ $59,100 $74,600 $337,429 $205,926 $543,987 $412,485 $131,502 As at 30 June 2022
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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 2022.
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 2017 and finishing on 30 June 2022.
Sample Set
The sample set used in the 5-year modelling contains the 11 Industry SuperFunds that participate in the marketing campaign.
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 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 11 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 11 November 2021 using data as at 30 June 2022.
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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
4% per annum.
Inflation
4% 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 10.5% 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 shown in today's dollars (present value), which means they are adjusted for an assumed annual inflation rate of 4% between now and your retirement. You can adjust the inflation rate above to see the impact this will have on the projected amount.
- The assumed salary increase of 4% 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 when you exceed the concessional contributions cap ($27,500 in 2022/23), 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 $65,000 $48,600