Skip to main content

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.

Today’s dollars

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.

Investment return

The assumed annual investment return is:

  Super investment return1 (% pa) Pension investment return2 (% pa)
Balanced 7 7.6

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

 

Salary Tax on this income
$1 to 18,200 Nil
$18,201 to $37,000 19c for each $1 over $18,200
$37,000 to $80,000 $3,572 plus 32.5c for each $1 over $37,000
$80,001 to $180,000 $17,547 plus 37c for each $1 over $80,000
$180,001 and over $54,547 plus 45c for each $1 over $180,000

Medicare Levy

Salary Medicare levy
Up to $18,839 No levy
$18,840 to $22,163 A reduced levy
Over $22,163 1.5% of salary