Assumptions

Net benefit modelling for: Compare the Pair, SUPERrater 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 and research company that specialises in analysing superannuation funds, their investment returns, their fees and the relative benefits they offer to their members. The 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 2015.

Background to the 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 85 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 2015, 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

177

133

109

103

85

 Information about the 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 15 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 85 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 late August each year), and the outcomes will be reviewed quarterly.

Other assumptions for the 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.