Assumptions used for the Transition to Retirement Strategy
It is important to remember the amounts projected are illustrations only and the projected amount is not guaranteed in anyway. The projection under the TTR strategy assumes that the balance of the super account above $1,500 is transferred to an Income account at the end of each year. The starting superannuation balance at age 55 is $220,000, with a tax-free component of $24,860.
The results are shown in “today’s dollars” so they are consistent with today’s living standards. The discount rate is 3.75% per annum.
Contributions and super taxes
Employer and current salary sacrifice contributions have been indexed annually at 3.75% per annum. Salary sacrifice contributions under the TTR strategy have been calculated taking into account the Income account payments so that the after-tax income is maintained. The total of employer and salary sacrifice contributions have been limited to the concessional contributions cap.
Where the after-tax income cannot be maintained, due to impact of the concessional contributions cap, we have assumed the extra contributions required to maintain the same after-tax income are paid as non-concessional contributions.
Tax on employer and salary sacrifice contributions has been included in the projections at the rate of 15% for each contribution. For adjusted incomes of less than $37,000, the Low Income Super Contribution payable by the Government has been included. For adjusted incomes above $300,000, the additional contributions of 15% of each contribution has been included. The Government Co-contribution has not been included.
For 2013–14 financial year the concessional contribution limit is $35,000 (unindexed) for individuals aged 60 and over. For 2014/15 financial year the concessional contribution limit is $35,000 (unindexed) for individuals aged 50 and over. For all other individuals the limit remains $25,000 (indexed). It is expected that the concessional contribution cap of $25,000 for all other individuals will reach $35,000, through indexation by 1 July 2018.
No allowance has been made for, the application of the Superannuation Guarantee (SG) maximum threshold, any tax payable on the projected super benefit at retirement age and any tax payable or rebates on the projected Income account payments in retirement.
The assumed annual investment return is:
1 after investment fees and tax
2 after investment fees and tax
Administration fees and insurance costs
For the super account, an administration fee of $1.25 per week, plus 0.05% per annum of the account balance has been included in the projections.
Standard insurance premium, as detailed in the Sunsuper for life guide, has been included in the projection for Death and Total and Permanent Disability Insurance. The deduction of the insurance premium ends at the retirement age. Actual insurance costs may be higher or lower than the assumed insurance cost and this may impact on the projected benefit amounts.
For the Income account, an administration fee of $4.00 per week, plus 0.10% pa of pension account balance has been included in the projections.
2013–14 Income tax rates