Pension Net Benefit model

AustralianSuper has commissioned SuperRatings to undertake research and modelling to be used in select AustralianSuper advertisements and communications. 

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.

SuperRatings’ proprietary Pension Net Benefit model focuses on the drawdown phase of a member in retirement.  The model seeks to replicate the decumulation of a member’s pension benefit over a range of time periods as at June 2020. The outcome presented assumes a starting account balance of $300,000 and a drawdown rate of 6% per annum.

Sample Set 

The sample set used in the modelling is summarised as follows;

Sample set 1 Year 3 Year 5 Year 7 Year 10 Year
Master Trust 77 61 50 48 34
NFP 64 61 60 59 50
Total 141 122 110 107 84

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 model assumes no additional withdrawals over the relevant comparison period.
  • The model is 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 6% per annum 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.

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

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