Assumptions (App) | SuperWiser

Assumptions

Accumulation Super Products Only

All calculations assume super products are accumulation products as opposed to defined benefit products.
As such, all calculations assume that your super account balance will receive all income and outgoings mid-year.

Results are in Today’s Dollars

All calculation output values are shown in today’s dollars, which means they are adjusted for inflation.

Inflation Factors

The following assumptions are made relating to inflation:

2.5% each year due to the rising cost of living (CPI inflation).
A further 1.5% each year due to the cost of rising community living standards.

Date of Birth

Super Setup Assessment – Indicative Results:

Initially the calculation will assume your Date of Birth to be exactly {age years – 1 day} years ago (i.e. that your birthday is tomorrow).

Confirmed Super Setup – Semi-Personal & Personal Results:

Confirmed actual Date of Birth value will be used in all subsequent calculations.

Calculation Date

All calculations will utilise the “current date” (i.e. the date that the user clicks on the calculate button)

Concessional Contributions – Employer

Initially it is assumed that your employer contributes the mandatory super guarantee (SG) rate of 10.5% of your gross annual salary.

In future years we assume that:

Your employer and voluntary contributions will increase with inflation.
You will satisfy the work test at older ages and so are able to contribute.
The employer contribution rate will increase by 0.5% per annum from 1 July 2021 until SG rate reaches and stays at 12% from 1 July 2025 onwards.

Where your employer pays over and above the mandatory SG rate this value will be captured as part of the “Goals & Objectives” section of the SuperWiser journey and subsequently used within Confirmed Super Setup calculations.

Voluntary Contributions – Salary Sacrifice

After-Tax Contributions

Initially, no after-tax contributions are included within the Super Setup Assessment Indicative Results calculations.
Semi Personalised calculations will include an after-tax contribution value as confirmed by your current super provider.
The after-tax contribution value can be reviewed via the Variables hyperlink located on the Semi Personalised dashboard screen.
As part of the “Goals & Objectives” section of the SuperWiser journey, you will be asked to confirm any after-tax contribution values. The confirmed value will then be used within your Personalised calculations

Government Contributions

No allowance is made for co-contribution within any of the calculations.

Low Income Superannuation Contributions

No allowance is made for low-income super contributions within any of the calculations.

Excess Contributions Tax

No allowance is made for excess contributions tax, whether concessional or non-concessional within any of the calculations.

Additional Tax for High Earners (Division 293)

No allowance is made for additional tax paid by high earners within any of the calculations.

Results Shown As At 1 July

Your projected super balance is shown as at 1 July after you reach the indicated age on the chart. For example, the super balance shown for age 65 is the balance at 1 July after your 65th birthday.

Investment Options

All current super setup calculations assume you are invested in your current super product’s default investment option (i.e. MySuper Default).
All proposed strategy calculations assume you are invested in a SuperWiser model portfolio aligned to your confirmed investor type.
In setting an expectation around future returns, SuperWiser has an adjustment factor as a methodology to provide a unique “differentiation factor” to identify the superior fund.
A superior fund is defined as a product which is likely to maximise income in retirement as an outcome for the individual client.
Whilst fund performance was considered as a very important factor, there are other elements of the fund structure, such as transparency or liquidity of investments, and the level of risk with internal assets to achieve a better overall performance.
Long term returns are usually promoted by all products wherever they are most favourable.
Superior product as defined must demonstrate consistency over the long term, (usually 10 years).
It is noted that warnings by the regulators are generally provided to discourage the public not to rely on past performance as an indicator of future returns.
In addition, performance alone is not the only factor determining the adjustment factor.
Standard Deviation was also considered as part of a group of other elements as being a more important element, but the level of risk was identified as being the most important element to influence the choice of fund over the medium term.

Adjustment Factor

The use of a unique “differentiation factor” referred to as the Adjustment Factor has been used to identify the superior fund options utilised within the SuperWiser application, which are likely to maximise the income in retirement as an outcome for the individual client.

Whilst fund performance was considered as an important factor, there are other elements of the fund structure, such as transparency or liquidity of investments, and the level of risk the fund takes with assets to achieve this return.

The key assessment and evaluation criteria used:

MySuper design (growth / defensive asset allocation);
Asset valuation methodology (i.e. levels of unlisted assets and liquidity);
Investment choice menu suitability (i.e., asset sector access and core / satellite approach);
Costing (i.e. administration and investment fees for standard member both High Growth and MySuper);
De-risking model (i.e. investment choice versus model type used to reduce asset management risk in MySuper); and
Insurance options (i.e. flexibility of the product to accept external insurers and overall product offering).

Within each of these key assessment and evaluation criteria there are sub-criteria depending on if the product is “Corporate” or “Personal” that score points. The total points scored under the assessment and evaluation criteria above determine a Total Outperformance Return (TOR) for each investment profile portfolio type.

Depending on the total score received the TOR awarded ranges from a maximum 0.8% for the High Growth profile to Nil in the Conservative profile. The TOR is the reward for consistency of performance, risk and volatility measures, supporting transparency indicators, and high-quality choice investment options.

De-risking Methodology

The SuperWiser application, as part of providing client outcomes and recommendations, undertakes a super projection to calculate estimated annual income in retirement figures (both current and proposed) taking into account various assumptions, client/provider inputs, data sets and other factors.

While looking to promote a more active approach to both product selection and investment strategy selection (aligned to risk profile), and an active approach to asset management, SuperWiser developed a set of rules around de-risking the investment strategy.

This development effectively lowers the potential investment risk as an individual approaches’ retirement, and reduces the impact of significant market downfalls and sequencing risk closer to retirement. It also reduces the impact on an individual’s level of capital within super.

SuperWiser’s De-risking Rules

In order to provide a more reasonable outcome and in line with best practice in provision of advice, it has been decided to apply some general rules around de-risking a client’s investment strategy within the SuperWiser application as follows:

Investor Types

High Growth

Definition:

“You are seeking high returns over the long term (i.e. 7 years or more) of roughly 3.5% in excess of inflation. To achieve this, you’re willing to invest 100% in higher risk, growth assets. Security of capital is secondary to your goal of wealth accumulation.”

Strategic Asset Allocation (SAA):

100% Growth
Nil Defensive

Return Objective:

CPI + 3.5% p.a.

Asset Class Allocations (no Alternatives)[1]:

Australian Equity 44%
International Equity 50%
Property & Infrastructure 6%
Fixed Interest Nil
Cash Nil

Market Return [2]:

6.0% p.a.

Target Return (above Market Return):

0.8% p.a.

Minimum Investment Timeframe:

7 years

Growth

Definition:

“You are seeking more capital growth than income over the longer term (i.e. 6 to 7 years or more) and returns of roughly 3.0% over inflation. To achieve this, you’re prepared to accept high levels of volatility and invest predominantly (approximately 80%) in growth assets, with the remainder (approximately 20%) in defensive assets.”

Strategic Asset Allocation (SAA):

80% Growth
20% Defensive

Return Objective:

CPI + 3.0% p.a.

Asset Class Allocations (no Alternatives)[1]:

Australian Equity 35%
International Equity 39%
Property & Infrastructure 6%
Fixed Interest 15%
Cash 5%

Market Return [2]:

5.5% p.a.

Target Return (above Market Return):

0.70% p.a.

Minimum Investment Timeframe:

6 years

Balanced

Definition:

“You are seeking slightly more capital growth than income over the longer term (i.e. 5 to 6 years) and returns of roughly 2.5% over inflation. As you’re keen to moderate the effects of tax and inflation, you’re prepared to invest predominantly (approximately 70%) in growth assets, with the remainder (approximately 30%) in defensive assets.”

Strategic Asset Allocation (SAA):

70% Growth
30% Defensive

Return Objective:

CPI + 2.5% p.a.

Asset Class Allocations (no Alternatives)[1]:

Australian Equity 30%
International Equity 34%
Property & Infrastructure 6%
Fixed Interest 20%
Cash 10%

Market Return [2]:

5.0% p.a.

Target Return (above Market Return)

0.60% p.a.

Minimum Investment Timeframe:

5 years

Cautious

Definition:

“You are seeking returns greater than cash and roughly 2.0% over inflation, with a low risk of capital loss over the medium term (i.e. 4 to 5 years). To achieve this, you’re comfortable investing approximately 55% in growth assets and 45% in defensive assets.”

Strategic Asset Allocation (SAA):

55% Growth
45% Defensive

Return Objective:

CPI + 2.0% p.a.

Asset Class Allocations (no Alternatives)[1]:

Australian Equity 27%
International Equity 22%
Property & Infrastructure 6%
Fixed Interest 30%
Cash 15%

Market Return [2]:

4.5% p.a.

Target Return (above Market Return)

Minimum Investment Timeframe:

4 years

Conservative

Definition:

“You are seeking a very low-risk investment over the medium (i.e. 3 to 5 years) term. You’re prepared to accept lower returns of roughly 1.5% over inflation and the adverse effects of tax and inflation, provided there is minimal loss on your investment. To achieve this, you prefer to invest predominantly (approximately 60%) in defensive assets, with the remainder (approximately 40%) in growth assets.”

Strategic Asset Allocation (SAA):

40% Growth
60% Defensive

Return Objective:

CPI + 1.5% p.a.

Asset Class Allocations (no Alternatives)[1]:

Australian Equity 22%
International Equity 12%
Property & Infrastructure 6%
Fixed Interest 40%
Cash 20%

Market Return 2:

4.0% p.a.

Target Return (above Market Return):

Minimum Investment Timeframe:

3 years

[1] Where “Alternative” investment options are available on an investment menu the APL Committee (APLC) may include this asset class subject to normal selection criteria and appropriateness of investment in the overall portfolio. The availability of alternatives is extremely limited on most corporate super fund menus. There are usually options available on wrap account menus. In the circumstances that an alternative is selected the APL would normally reduce the allocation to equities and property / infrastructure and reallocate accordingly.

[2] The “Market Return” reflects the return objective incorporating an assumed CPI rate of 2.5% p.a. This is the default inflation rate set out in the ASIC (Superannuation Calculators and Retirement Estimates) Instrument 2022/63 from January 2023. It is important to note that CPI is moving figure and when actually measuring performance of the portfolio over the investment timeframe the CPI figure may vary. The return objective is net of investment costs and tax only with these amounts deducted from fund earnings before declaration of final unit prices / returns (i.e. before deduction of administration and advice costs).

Assumed Tax Rates on Investment Returns

Investment Option – Cash

What it means:

100% in deposits with Australian deposit-taking institutions