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Assumptions

Accumulation Net Benefit model 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 10 years to 30 June 2017.

Background to the Accumulation Net Benefit model

Sample Set: The sample set used in the modelling contains the 16 Industry SuperFunds that participate in the marketing campaign and the 77 retail super funds with a 10 year performance history which are actively tracked by SuperRatings, including superannuation investment products that are open and those that are closed to new members but continue to hold assets.

As at 30 June 2017, 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
Retail super products 166 147 109 85 77
Information about the Accumulation Net Benefit model
  • The model uses the main balanced investment option (being the balanced investment option with the highest level of assets) offered by 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 16 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 77 retail products actively tracked by SuperRatings, with a 10 year performance history.
  • 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), and the outcomes will be reviewed quarterly.
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.

ScenarioStarting SalaryBalanceIndustry SuperFund net benefitRetail super fund net benefitIndustry SuperFund account balance todayRetail super fund account balance todayNet benefit difference
General marketing claims $50,000 $50,000 $51,084 $36,142 $146,927 $131,985 $14,942
Executive ladies ‘Compare the Pair’ $90,000 $50,000 $68,161 $49,703 $200,678 $182,220 $18,458
Middle income men ‘Compare the Pair’ $59,100 $74,600 $70,028 $49,157 $198,814 $177,943 $20,871

As at 30 June 2017

Pension Net Benefit model

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 over a 10-year period, 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 2017. 

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 2012 and finishing on 30 June 2017.

Sample Set 

The sample set used in the 5-year modelling contains the 16 Industry SuperFunds that participate in the marketing campaign.

Information about the Pension Net Benefit Model

  • The model uses the main balanced investment option (being the balanced investment option with the highest level of assets) offered by each Fund.
  • 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 16 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), and the outcomes will be reviewed quarterly.

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.

As at 30 June 2017