Disclosures, Assumptions and Limitations

The information in this document has been prepared by Super Fierce Pty Ltd ABN 22 632 423 575. Super Fierce Pty Ltd is a corporate authorised representative (CAR no. 001283307) of BR Advice Pty Ltd (AFSL 488655).
  • Any financial product advice provided in this Disclosures, Assumptions & Limitations document is general in nature. It does not take into account your personal needs, financial situation or objectives. Before acting on the advice, you should consider whether it is appropriate to you in light of your personal needs, financial situation and objectives. You should look at the relevant Product Disclosure Statement before making any decision about any products we refer to
  • The information in this document applies to any content prepared by us. That includes content on our website, downloadable apps, emails, other electronic messaging and disclosure documents, which includes any Statement of Advice, Financial Services Guide or other reports
  • To the extent permitted by law, no responsibility or liability is accepted by Super Fierce, BR Advice Pty Ltd or any third party who has contributed to the services or information provided, or for any of the information provided or for any action taken by you or any of your officers, employees, agents or associates

Disclaimers

  1. This is a model, not a prediction
  2. The amounts projected by this model are estimates only and are not guaranteed
  3. The results from the Super Fierce Superannuation Calculator (‘the Calculator’) are based on:
    1. The limited information you have provided;
    2. Information about your superannuation which you have provided to us; and
    3. Assumptions made about the future
  4. The calculator cannot predict your final superannuation benefit with absolute certainty. That’s because your personal circumstances may change based on unexpected events in your life. There are also certain external factors such as investment earnings, tax and inflation which may impact your results. The predictions are also based on the other assumptions set out in this document.
  5. The calculator assumes that you can make steady, predictable contributions and that all assumptions, including these external factors, will operate at set, steady rates for as long as you remain in the fund, even if the events turn out differently from that which is assumed. These assumptions are essential so the calculator can show the effect of things you may be able to control, such as choosing a lower-fee fund
  6. While Super Fierce has taken all reasonable steps to ensure the quality of its estimates regarding the impact of costs and projected savings, as with any analysis, there are limitations that come from necessary assumptions. Those limitations are detailed below in the Assumptions Summary. The assumptions in the calculator are valid at the time of publishing
  7. Estimations produced by the calculator are based on various underlying assumptions which are explained in this document. You can elect to change certain assumptions to reflect your personal situation and preferences. Any changes you make may impact the accuracy of the estimates
  8. You should consider updating the projections provided by this model regularly as your circumstances may change. You can also change and update some of the assumptions to reflect your personal circumstances
  9. Super Fierce focuses on the impact of fees on superannuation savings. Therefore, the calculator isn’t suitable for choosing the best performing funds, the most ethical funds, or any comparison other than savings over a lifetime based on an analysis of comparative fees and costs
  10. You should not rely solely on the calculator to make decisions about your retirement as there may be other factors to take into account. Please consider your own investment objectives, financial situation and needs. You may wish to get advice from a licensed financial adviser
  11. Please remember, past performance is not a reliable indicator of future performance

Super Fund Fees

Publicly available data

Superannuation funds are required by law to disclose all fees in their PDS which is updated periodically. We have used the current fees disclosed in the latest Product Disclosure Statement (PDS) of each superannuation fund. We have assumed that these fees do not change, other than to increase the fixed fees (those stated in dollars instead of percentages) by the annual CPI assumption.

Given the importance of the accuracy of this data, we have not relied solely upon external research services for this data. We have used a combination of external sources with our own audits or the data, particularly for funds with complicated fee structures. We review fee data ourselves from each fund’s latest PDS and check this regularly. We have considered all fees charged by each fund, including any discounts for larger balances.

There are around 15 different types of fees, however, most are only payable if you elect to receive additional services. Most people will only pay:

  1. The annual fixed Member Fee (typically around $78 per annum or $1.50 per week)
  2. One of the several different variable fees that are paid as a percentage of the amount you have with that superannuation fund (typically ranging from 0.05% to more than 2% and averaging around 1% per annum)
  3. An exit fee if you leave the superannuation fund
  4. A buy/sell fee when you make contributions, leave a superannuation fund, or switch between options within the fund

This assumption CANNOT be changed

The accuracy of each fund’s fees is the most important assumption made when comparing the impact of fees. The fees payable to each fund are fixed by the fund and therefore cannot be altered by you. Where you would like to compare estimated savings for consolidation into a fund not shown in the calculator, we can prepare this analysis upon your request.

Retirement Age

67 Years Old 

This is the age at which the Australian Government will pay Age Pensions from 2023. As most Super Fierce users will likely retire well beyond 2023, this is a reasonable assumption.

This assumption CANNOT be changed

Aside from the fees themselves, retirement age is the variable which can have the greatest impact on the differences between each fund compared.

The major reason for this, and the easiest to understand, is that by consolidating your funds, you are saving money every year from the time you consolidate until the time you retire. If that time is short, you have less years of savings, so the total savings are lower. If that time is long, you have more years of savings and the total savings are higher.

There are several other reasons why your remaining time to retirement is the largest driver of how much you can save when you reduce fees. You can learn more about this in our FAQs.

Future Contributions

There are two major types of Super Contributions:

  1. Personal Contributions which are voluntary. As we cannot predict your voluntary contributions, and as only 1 in 8 people currently choose to make these contributions, we have assumed zero dollars in voluntary contributions. In future, we will be expanding the capability of our superannuation calculator so you can incorporate voluntary contributions; and
  2. Compulsory Contributions (called the Superannuation Guarantee Charge or ‘SGC’) which is currently 10% of your income and the legal amount your employer is required to pay on your behalf

To estimate your SGC (compulsory) contributions, we need two things:

  1. The government-set SGC rates (currently 10%); and a
  2. Forecast of your income

The first one is easy. Whatever the current legislation says, that’s what we use. At the time of writing, in late 2019, SGC is set at 10% and will rise slowly to 12% by 1/7/2025. If legislation changes this amount and the timing, we will change our assumptions accordingly at the time any new legislation is enacted.

Forecasting your income is much harder. There are variables which are in your control, and others which are not. We ask a series of questions to help you plan for the variables in your control and to help us set a reasonable assumption for your future income. The key questions we ask are your current income (within ranges because people can be shy about sharing the specifics).

From the answers to these questions, we use a few assumptions to build forecasts of your future income:

  • Annual increases in income

The average person experiences two types of pay increases: 1) Increases for doing the same job (“Pay Rise”); and 2) Increases in pay due to a promotion (yay!) or changing jobs (“Promotion Rise”). Unsurprisingly, the Promotion Rise tends to slow down as we get older, tends to be lower for those with less education, and also tends to be lower for those with kids (Australian Government, Treasury, 2019). The biggest impact is age. So, we assume that you’ll get the average increase in pay for someone of your age each year until you retire.

  • Career Breaks

We assume no career breaks. That’s because it’s impossible for us to predict if or when you might take time out of the workforce to have kids, to study, take a sabbatical in an Asram in India, set up your own business, care for an elderly relative, or anything in between. It’s also impossible to predict how long that timeout might be. Everyone is different.

  • Full-time to Part-time (or vice versa)

Again, this is impossible to predict as everyone is different. We start with your current income and increase this each year as above. It’s your income, and not the hours worked, that determine your superannuation contributions.

This assumption CANNOT be changed

Increasing your future contributions will likely increase the estimated savings from consolidating into lower cost funds. Reducing your future contributions will likely reduce the estimated savings. This means that if it makes sense for you to consolidate to a fund using our assumptions, it will probably make even more sense at higher contribution levels.

Superannuation Guarantee Contributions Rate

9.5% until 2021, increasing to 12% by 2025

  • Increasing by 0.5% each year from 1 July 2021 until it reaches 12% on 1 July 2025 (in line with regulatory requirements)
  • Subject to maximum contribution limits of $25,000 per annum, rising with wage growth
  • Your employer is assumed to contribute this percentage of before-tax salary in each projection year

This assumption CANNOT be changed

The higher the additional contributions, the greater the quantum of savings in each fund option presented. However, it is unlikely to change the lowest fee fund, or even the order of estimated savings of other funds compared. This is because with a higher contribution rate you are putting more money into your super. Therefore, any fees are applied to a greater sum of money. All super funds have a variable (%) fee component, so all super funds will cost more when you have more.

Additional Contributions

Zero

We have assumed that neither you nor your employer will make additional contributions.

This assumption CANNOT be changed.

Asset Allocation / Risk Profiles

Balanced or My Super

Every super fund offers a range of asset allocations from low risk (conservative) to high risk (aggressive) for consumers to choose according to their risk appetite (‘Risk Profile’). Your Risk Profile is linked to your preferences and therefore will be the same regardless of which super fund you choose.

Super Fierce allows you to compare all open super funds on a like-for-like basis. If you then choose to consolidate or switch into one of those funds, after your new fund is set up you can contact the fund directly to select the Risk Profile that suits you.

As the default, we have selected the Balanced Investment Option, the equivalent mid-level Risk Profile option, for every fund as it is the only option that is included in every super fund. Not all Balanced Investment Options have exactly the same mix of asset classes. Balanced is defined by the industry as having between 60% and 76% allocation to “Growth” assets such as shares. We have assumed that where the super fund defines their investment option as being balanced, that they are fairly representing their investment mix.

In most funds, the My Super option is the balanced fund. As this option is typically the cheapest, this assumption also means we are likely underestimating the savings you could achieve by consolidating or switching.

This assumption CANNOT be changed

You cannot vary the asset allocation assumption in the Super Fierce Calculator. Changing the asset allocation will change the rate at which your total super balance will rise each year. If you choose a more aggressive risk profile, it is reasonable to expect that over your working life the performance of your super will be higher. The higher the performance, the higher your total super, and the larger the difference that variable (%) fees can make each year. However, comparing two funds on a like-for-like basis, for example comparing the “Aggressive” Risk Profile options of two funds, should not change the rank of these funds in terms of total costs. The cheapest fund should still be the cheapest regardless of which Risk Profile is chosen.

A licenced financial adviser can help you to understand your options and to choose based on your personal objectives and risk profile.

Investment Performance – Market Returns

7.5% per annum

This is the Balanced Fund returns assumption used by Australian Treasury in their modelling of retirement incomes (see 2019 Treasury Research Institute paper ‘Accumulation of superannuation across a lifetime’) and referenced by ASIC in their superannuation calculator. We believe it to be a reasonable assumption for the foreseeable future.

Actual returns will vary significantly from year to year and could be negative in some years, particularly for investment mixes where more is invested in shares and property. This calculator does not allow for such variations.

This assumption CANNOT be changed

You cannot vary the performance assumption in the Super Fierce calculator because Super Fierce has been purpose built to help Australians save money by avoiding multiple and high fees. It has not been designed to select the best performing asset allocations or fund managers.

We have made the decision not to allow changes to this assumption because the rate of performance makes little difference in determining which funds are cheapest. If this assumption is changed the estimated lifetime fees of every fund will change proportionally.

However, you can change the asset allocation to a more or a less aggressive investment strategy after switching to a fund, by contacting them directly. This means the rate of return will rise or fall. We understand this may seem contradictory, but it isn’t. In simple terms, what we are assuming is that fund managers will not outperform or under-perform over your life to retirement. This means that the only way you can impact your returns is to be more aggressive (take more risk) or more conservative (take less risk).

Investment Performance – Individual Manager Performance

No out-performance or under-performance

We have assumed that all funds will perform in line with their asset allocation. There is a large body of research which suggests past performance is not indicative of future performance.

This assumption CANNOT be changed

You cannot vary the performance assumption in the Super Fierce calculator because Super Fierce has been purpose built to help Australians save money by avoiding multiple and high fees. It has not been designed to select the best performing asset allocations or fund managers.

We have made the decision not to allow changes to this assumption because the rate of performance makes little difference in determining which funds are cheapest. If this assumption is changed the estimated lifetime fees of every fund will change proportionally.

However, you can change the asset allocation to a more or a less aggressive investment strategy after switching to a fund, by contacting them directly. This means the rate of return will rise or fall. We understand this may seem contradictory, but it isn’t. In simple terms, what we are assuming is that fund managers will not outperform or under-perform over your life to retirement. This means that the only way you can impact your returns is to be more aggressive (take more risk) or more conservative (take less risk).

Taxation Impact on Returns and Contributions

Returns: 7% per annum
Contributions: 15% per annum

Superannuation is taxed at different rates to personal and business tax.

Concessional contributions, up to a maximum of $25,000 per annum, are taxed at 15% per annum.

Profits inside super are taxed using 15% for income and 10% for capital gains. We assume that all administration, management and indirect costs charged are tax deductible within your super.

As returns each year are not realised profits (which means the value of shares and other investments have gone up, but they haven’t been sold to realise the profit from that higher value), the average tax rate on a balanced fund is only 7% per annum. This is the assumption used by industry calculators based on actuarial evidence. We therefore adopted the same assumption.

This assumption CANNOT be changed

You cannot vary the taxation rates in our superannuation calculator as the calculator’s purpose is to estimate the impact of consolidating or switching between funds. Furthermore, taxation rates will usually make a very minor difference to estimated savings as they will impact all funds in the same proportions.

Inflation (CPI)

2% per annum

Inflation refers to a rise in prices. Consumer Price Index (CPI) is an official measure of inflation for the average consumer. We have assumed inflation of 2.0% per annum in line with commonly used calculators’ inflation assumption and the midpoint of the Reserve Bank of Australia’s target inflation range.

If inflation is higher than we have assumed, the impact would be to further increase the savings where you have switched to lower fixed costs funds and reduce the savings where you have switched to higher fixed costs funds. Higher inflation would likely also result in higher wage growth, which would mean higher contributions and therefore higher savings, but the impact when shown in “current dollars” would be negligible.

This assumption CANNOT be changed

CPI is applied to fixed fees, meaning we assume that a fixed fee of $100.00 today will be $102.00 next year and increase by 2.0% each year thereafter.

Variable fees are not increased by inflation as they are a percentage of Funds Under Management (FUM) and not a fixed cost.

Costs of Changing Your Super

Cost of using Super Fierce and average transaction costs charged by funds

The savings estimates we present are net of the costs of consolidating or switching, meaning the estimated savings is after we have removed the consolidation and/or switching costs. Included in the costs are the exit and buy/sell fees charged by each super fund and the Super Concierge Service Fee we charge if you ask us to make a change to your super on your behalf. These fees are all applied in the first year of analysis and therefore subject to the effects of compounding.

Where you are consolidating to one of your existing funds, you obviously won’t have exit fees or sell fees from that fund.

This assumption CANNOT be changed

You cannot vary this assumption as the exit and buy/sell fees are fixed by each super fund and the Super Concierge Service Fee is fixed for each customer.

The higher the fees paid for exit, buy/sell or to Super Fierce, the lower your savings for consolidating. The estimates account for all costs and the impact of different funds is almost identical. Therefore, varying this assumption should not change the estimate of which fund is your cheapest option.

Self-Managed Super Funds (SMSFs)

Not Included

SMSF costs depend entirely upon how they are set up and used, so it is impossible to include them as a generic option in the Super Fierce Superannuation Calculator.

This assumption CANNOT be changed

Super Fierce is not able to advise you on the fee savings impact of consolidating or switching to an SMSF. This is an area that requires personal advice. You should contact your financial adviser if this an option you wish to investigate.

Insurance Premiums

No difference between funds

Super Fierce calculations do not consider insurance. This is because insurance is not, despite popular beliefs, a compulsory component of super. You can opt-out of insurance at any time. This means that leaving insurance premium differences out of the analysis makes the fees comparison easier and allows the user to separately assess insurances should they wish to.

Insurance is complex as it is highly dependent upon individual age and occupation, with little variance for any given person across funds. Furthermore, what differences there are between the insurance options will make little difference to the comparison of costs between super funds as the premiums are largely consistent.

However, you should consider the importance of the insurance included in one or more of your super funds before deciding to consolidate if you rely upon those insurance products.

You should be aware that if you decide to switch or consolidate your super, your existing insurance will be affected and may be cancelled. Therefore, we recommend that you seek financial advice before consolidating or switching your super to ensure there is no negative impact on your insurance coverage, especially where you are over 55 years of age or have a pre-existing medical condition.

This assumption CANNOT be changed

While determining whether insurance with one super fund will be more expensive than insurance with another, the differences should at most be around 0.02% per annum of Funds Under Management (FUM). Furthermore, different insurers are often available across multiple super funds.

Once you move into the 55 – 65 age brackets, that difference can grow to 0.15% per annum. That is one reason why we recommend reviewing what insurance is embedded in your super at around the age of 55 to ensure you have appropriate cover at the right price.

Rounding to the nearest year

No difference on the comparison between funds

For the purposes of determining income tax, contribution limits, fees and investment returns, it is assumed that the projection is run on the first day of the financial year and that you retire at the end of the financial year of your retirement age birthday. The calculator projects your superannuation balance over a whole number of years. This assumption will not materially impact anyone other than those with less than 5 years to their retirement.

This assumption CANNOT be changed

Footnote

  1. All data is updated annually on 1 July
  2. Average Weekly Ordinary Time Earnings (“AWOTE”) is a statistic used to index certain superannuation thresholds and a range of Commonwealth legislation including Child Support, Higher Education Funding and certain Excise Tariffs. The figure used is the original release value for the middle month (i.e. May or November) of the relevant quarter, not later adjusted by trend
  3. While some guidelines recommend allowing users to vary assumptions that make a difference, Super Fierce is designed to show the impact of fees. Therefore, performance makes little difference to the order of funds compared from lowest fees to highest fees