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## Purpose

This calculator has been designed as an educational tool. It provides an estimate of superannuation savings at retirement age and an approximation of what your retirement income may be, based on those savings. For details of how the calculator works see below or click here. For a summary of the basic assumptions, click here.

## Limitations

- The site operator gives no assurance that this calculator is free of errors or is suitable for any user's intended purposes.
- To the extent permitted by law, the site operator will not be liable for any damages or loss suffered by any individual from use of this super calculator, or reliance on the estimates calculated.
- Any advice in this super calculator is general advice only and does not take into account your individual objectives, financial situation or personal circumstances. Before taking any action, you should consider its appropriateness to your personal circumstances.

## How does the super calculator work?

This guide explains in detail how the calculator works, and what assumptions have been made as part of the calculations. It is intended to help you get the best out of the calculator. The figures calculated are only estimated projections and may vary depending upon your personal circumstances.

## Basic Screen

Current Age — Allows you to input your current age, using this to work out the years remaining to retirement. Current Super Balance — This is how much you currently have in Super. If you have more than one super account you should add them all up and input the total balance.

## Salary

You should input your gross annual salary. The calculator uses this value to calculate your Superannuation Guarantee (SG) contributions and other information.

- We assume that your salary increases by 4.5% per annum (p.a.) until you retire. This is equivalent to the average annual increase taken over five years using the Average Weekly Ordinary Time Earnings (AWOTE) data.
- Compulsory SG contributions are calculated at the legislated rate of your specified salary over your working life. If you receive more than the legislated rate from your employer, you are able to increase this in the section, Increase your Super.
- Your desired retirement income is a specified percentage of your after-tax salary in the year you elect to retire. The calculator defaults to 65% which is an industry benchmark. You are able to change this figure to suit your anticipated income requirements. The desired income is calculated in today’s dollars, using an inflation rate of 3%. Prevailing tax rates are used to calculate your after-tax salary.

## Retirement Age

Your retirement age defaults to 65. You are able to adjust the slider to change your assumed retirement age, between the ages of 55 and 75.

## Investment Returns

Initially, the calculator gives you three options when selecting investment returns. Subsequent to selecting the appropriate investment option for your circumstances, you are able to use the slider to change the returns. The calculator assumes:

- The investment return chosen remains constant through to retirement.
- The investment returns are net of tax and investment management fees.
- Tax on investment returns are calculated at 10% (15% gross). This allows for tax credits such as franking credits.
- Investment returns are assumed to be credited to your account on a continuous basis.

**Conservative**

Invests 60–70% in fixed interest and cash; the rest in shares or property. Aims to reduce risk of loss and therefore accepts a lower return over the long-term. A negative annual return is not expected more frequently than once every ten years.

**Balanced**

Invests 60–70% in shares or property; the rest in fixed interest and cash. Aims for reasonable returns, but less than growth funds, in order to reduce risk of losses in bad years. A negative annual return is not expected more frequently than once every seven years.

**Aggressive**

Invests 70–80% in shares or property. Aims for higher returns over the long-term but accepts a higher risk of losses in bad years. A negative annual return is not expected more frequently than once every six years.

*Investment returns can vary considerably from year to year and the above options are only given as a guide.*## Increase your Super Screen

**Employer Contributions**

This defaults to the compulsory Super Guarantee Contribution (SGC). If your employer pays in excess of this amount you can use the slider to increase it. The SGC also goes towards the concessional contributions cap detailed below.

**Concessional Contributions Cap (e.g. Salary Sacrifice)**

Salary sacrifice contributions are capped at a maximum of $30,000 p.a. (including SGC) if aged less than 50 or $35,000 p.a. if aged over 50 to age 65, and are subject to contributions tax of 15%.

**After-Tax Contributions**

After-tax contributions are capped at $150,000 p.a. There is no contributions tax applied to these contributions.

**Government Co-Contributions**

The calculator allows you to include the Government co-contribution. You can either choose to include the amount for a single year or apply it for every year until retirement. If you choose to include it every year we assume:

- You are eligible to receive the co-contribution each year.
- You make an after-tax contribution each year.
- The Government continues with the scheme until you retire.

For contributions we also assume:

- That all contributions increase by 4.5% p.a. over time. This is equivalent to the average annual increase taken over five years using the AWOTE data.
- All of the above contributions entered by the user are annual amounts. The calculator then uses these figures to simulate the real life scenario.
- The calculator will not allow the age based limits for concessional contributions to be exceeded.

**Desired Income in Retirement**

Your desired retirement income is a specified percentage of your after-tax salary in the year you elect to retire. The calculator defaults to 65% which is an industry benchmark. You are able to change this figure to suit your anticipated income requirements. The desired income is calculated in today’s dollars, using an inflation rate of 3%.

You can alter your desired income by moving the slider. The age at which your retirement income is exhausted will then change.

The stick figure in the corner is a graphical representation of a state of happiness based on a combination of the level of income achieved and the time period it is estimated to last.

We have assumed:

- Retirement age is set at 65 unless another age is selected.
- The "desired income" default setting is 65% of pre-retirement salary (net of tax) but can be changed by the user. A conventional estimate for income in retirement is 65% of a person’s pre-retirement income. In other words, 65% of your pre-tax salary just before you retired. This is in today’s dollars.
- At retirement all funds are transferred to a pension, with investment earnings (net of tax) on that post-retirement superannuation pension balance set at a default rate of 6.0% p.a.; this cannot be changed. Earnings are credited to your account on a continuous basis.
- The minimum pension factors have not been used to calculate the initial pension payment, or any subsequent payments.
- Retirement pensions are paid monthly for each year of the projection.
- The age to which your retirement income is estimated to last assumes your funds will have reduced to zero during that year. If the age is greater than 100 it will only show 100+.
- Eligibility for any deductions or offsets allowable by the ATO are not taken into consideration, nor have any benefits to which an individual may be entitled for social security purposes (i.e.: via Centrelink or the Department of Veterans Affairs).
- No allowance has been made for the effect of a reversionary pensioner.
- The fees charged during the pension phase are based on 1% p.a. of the fund balance. No allowance has been made for any entry fees, service fees, contribution fees or switching fees.
- Inflation has been used to calculate the desired income in today’s dollars.
- No allowance has been made for tax on lump sum payments from the superannuation and retirement benefits.
- If you select a retirement age past 65, it assumes you satisfy the work test to make contributions from age 65 to retirement.
- SG contributions cease at age 75, or at retirement.

The calculator does not calculate transition to retirement pensions.

## Today's dollars

You will notice that all figures on this screen are shown in today's dollars. This means that we have made an assumption taken account of inflation, applying a steady rate of 3.0% p.a. to discount the projected savings back to today's value.

Showing retirement income in today’s dollars will enable you to better visualise whether the desired income will suit your lifestyle in retirement.

In reality, the rate of inflation will obviously move both up and down over time, so it is important that you consider how this may affect your retirement income.

## Insurance

Insurance within super is both tax effective and important. However there are many ways to calculate insurance premiums within super, many of these ways include increasing premiums with age on a rate-for-age basis. Because of the complexities with these calculations, there is not an option to include the cost of insurance premiums in the calculations.

## Fees

Fees vary from fund to fund. To simplify the calculations we have set the default administration fees at 1% during the accumulation and pension phases.

We have assumed:

- Administration fees are those fees charged by your super fund for operating your account.
- Investment management fees have been deducted from the investment earnings, prior to crediting your account.
- All fees are deducted from your account on a monthly basis.
- Fees remain constant throughout the calculations and do not increase with inflation.
- No allowance has been made for the cost of financial advice during any part of accumulation or pension phases.

## Summary of Assumptions

- Salary is salary for superannuation purposes, and is the Gross Salary before tax that the SG is based on.
- Gross Salary is increased based on AWOTE of 4.5% p.a. This is the average return over the last five years of AWOTE provided by the Australian Bureau of Statistics (ABS).
- Super contributions are assumed to increase in line with Gross Salary each year.
- The default inflation rate used is 3.0%.
- The results displayed by this calculator are in today's dollars not in future dollars.
- Employer contributions are not less than the minimum amount entitled to under SG legislation. You may increase the percentage if your employer pays additional super.
- Investment earnings (net of tax) on the pre-retirement superannuation balance are credited to your plan account balance at a default rate of 7% p.a. You may change the default rates to see the effect that this may have.
- An average tax rate of 10% (15% gross) applies to taxable earnings. This allows for tax credits such as franking credits.
- The fees charged during the accumulation phase are based on 1% p.a. of the fund balance. No allowance has been made for any entry fees, service fees, contribution fees or switching fees.
- Salary increases, increases in AWOTE and inflation take effect at the end of the calendar year.
- Contribution tax of 15% is applied to all employer and salary sacrifice contributions.
- Concessional (salary sacrifice plus SGC) contributions are capped at a maximum of $30,000 p.a. if aged less than 50 or $35,000 p.a. if aged over 50 to age 65 and subject to contributions tax.
- Non-concessional (after-tax) contributions are capped at a maximum of $150,000 p.a.
- Concessional and non-concessional contributions increase in line with Salary, indexed by AWOTE.
- Government co-contribution rate is based on the Gross Salary and post-tax contributions entered.
- Contributions received, tax deducted, and investment earnings added are deemed to take place monthly.
- You are between the ages of 18 and 75 for the accumulation phase.
- Retirement age is set at 65 unless another age is selected.
- At retirement all funds are transferred to a pension, with investment earnings (net of tax) on that post-retirement superannuation pension balance set at a default rate of 6.0% p.a.; this cannot be changed. Earnings are credited to your account on a continuous basis.
- The "desired income" default setting is 65% of pre-retirement salary (net of tax) but can be changed by the user. A conventional estimate for income in retirement is 65% of a person’s pre-retirement income. In other words, 65% of your pre-tax salary just before you retired.
- The minimum pension factors have not been used to calculate the initial pension payment, or any further payments.
- Retirement income is paid monthly for each year of the projection.
- The age to which your retirement income will last assumes your funds will have reduced to zero during that year. If the age is greater than 100 it will only show 100+.
- Eligibility for any deductions or offsets allowable by the ATO are not taken into consideration, nor have any benefits to which an individual may be entitled for social security purposes (i.e: via Centrelink or the Department of Veterans Affairs).
- No allowance has been made for the effect of a reversionary pensioner.
- The fees charged during the pension phase are based on 1% p.a. of the fund balance, deducted monthly. No allowance has been made for any entry fees, service fees, contribution fees or switching fees.
- Inflation has been used to calculate the desired income in today’s dollars
- No allowance has been made for tax on lump sum payments from the superannuation and retirement benefits.
- SG contributions cease at age 75, or at retirement.
- You are fully retired at nominated retirement age. There is no allowance for transitional retirement.
- The calculation caters only for employees of accumulation style funds. No allowance has been made for members of defined benefit funds.