RRI 2016 Assumptions l Mercer Australia

RRI 2016 Assumptions l Mercer Australia

The following assumptions were adopted to project members’ superannuation balances to age 65 for the RRI calculations:

  • Investment Return of 7% per annum net of tax but before asset-based fees
  • Salary increases of 4% per annum 
  • Administration and investment fees were allowed for according to each Fund’s default investment option
  • Insurance premiums were generally based on each Fund’s standard insurance offering.
  • Contributions are based on those over the prior 12 months increased at 4% per annum with Employer contributions increased as required to meet legislated increases in the Superannuation Guarantee rate.

We separately calculate the lump sum amount required to deliver income according to the ASFA Comfortable Standard for couples (and the amount required to deliver income of 0.85 of the Standard) based on:

  • post retirement earnings of 7% pa net of fees
  • allowance for the Age Pension, with the application of the income and assets tests based on the rules applying from 2017
  • the ASFA Comfortable Standard being indexed at 4% per annum (i.e. allowing for improvements in community standard of living)
  • the income stream lasting for 25 years.

Each member’s projected retirement balance at age 65 is expressed in terms of today’s dollars and then doubled to represent the amount available to a couple. If this balance is:

  • less than the amount required to deliver 0.85 of the ASFA Comfortable Standard the member is considered to be unlikely to be meet the Standard (i.e. in the ‘red’ zone)
  • less than the amount required to deliver the ASFA Comfortable Standard but more than the 0.85 amount the member is considered to be close to meeting the Standard (i.e. in the ‘amber’ zone)
  • greater than the amount required to deliver the ASFA Comfortable Standard the member is considered to be likely to meet Standard (i.e. in the ‘green’ zone).

Retirement Readiness Index >