Small Change Big Savings – Assumptions and disclaimer
Disclaimer
This calculator is intended for illustrative purposes only. The information it contains is of a general nature only.
The results provided by the calculator are estimates only and are not guaranteed. Actual outcomes depend on uncertain factors such as investment returns and relevant legislation.
The calculator is not intended to be relied on for the purposes of making a decision in relation to a financial product. In making any decisions about your superannuation or your retirement you should consider your own objectives, financial situation and needs. You should consider obtaining advice from a licensed financial planner before making any decisions.
Items
The costs of the everyday items are estimates and do not necessarily represent the exact cost to you if you were to give up the item, at the specified frequency, as represented by the calculator.
Contributions
In giving up one or more items in the calculator, you are then assumed to save an amount equal to the cost of the item(s).
Savings are assumed to be added as regular non-concessional contributions into superannuation. The calculator assumes that these contributions can be made within your non-concessional contribution limits (being $120,000 per annum or $360,000 in one year by utilising the “bring forward” rule), and so no tax is levied on these contributions.
Inflation
The projection allows for future wage inflation of 3.7% pa and future price inflation of 2.5% pa.
Results are expressed in today's dollars by discounting with wage inflation in the accumulation phase and price inflation in the pension phase.
Target income is also assumed to increase at this rate.
These assumed inflation rates and the approach to discounting are consistent with ASIC Corporations (Superannuation Calculators and Retirement Estimates) Instrument 2022/603.
You can change the assumed rate of inflation in the “Edit assumptions” section.
Results are in today’s dollars
Results are shown in today's dollars. This means the amounts shown are adjusted for inflation (and so take into account the assumed change in the cost of living between the time of preparing the estimate and the future time).
The assumed rate of inflation has been used to discount future amounts to today’s dollars.
Investment earnings
The default investment return and fee assumptions are:
Investment option risk level | Return (% p.a.) |
Low to medium | 3.50% |
Medium to high | 5.50% |
High | 6.50% |
The investment option risk levels are based on the Standard Risk Measure that is used by most super funds. The risk level and return correspond to the risk and the return target of Australian Food Super’s Capital Stable (Low to medium), Balanced/Mysuper (Medium to high) and Growth (High) investment options. It is important to note that:
- risk levels and returns are indicative only, and not a guarantee of the risks or returns of any investment option
- investments with higher expected returns generally carry a higher level of short-term risk.
Investment earnings are taxed at 15%.
Administration fees and insurance premiums
The Administration Fees applied in the calculator reflect Australian Food Super’s fees as at 19 June 2024:
Asset-based Administration Fee | 0.07% pa of the account balance |
The calculator assumes that saved amounts are contributed to an existing superannuation account. No additional dollar based fees would therefore be incurred in virtue of making these contributions. Dollar-based administration fee and insurance premiums are therefore ignored for the purpose of this calculator. Additional contributions into superannuation would result in a higher superannuation balance, and so higher asset based fees. Asset based fees are therefore allowed for in this calculator.
Legislative assumptions
A number of assumptions in this calculator are prescribed by legislation. These assumptions include: the tax on superannuation contributions and the tax on investment earnings.
Where there is relevant legislation, the assumptions made in this calculator reflect current legislative arrangements. One uncertainty regarding future superannuation entitlement relates to possible future legislative changes.
Although some future changes in the legislation relating to superannuation are likely, it is not possible to know what these changes may be. Where there is relevant legislation, current legislative arrangements therefore represent the most reasonable basis for estimating future superannuation entitlement.
Updates to legislative assumptions are made as soon as practicable after such changes are announced. The calculator is based on legislative arrangements as at September 2024.
Limitations
This calculator attempts to include the most significant and relevant features of the superannuation environment, and to do so in an accurate manner. However a calculator such as this is not able to address or include all facets of superannuation The most significant limitations are:
- The calculator performs a “deterministic” projection.
This means that the assumptions such as investment returns are assumed to be constant every year, at the rates indicated above. The actual investment returns will vary from year to year. More aggressive investment options, with higher expected returns, would be expected to exhibit a more significant range of outcomes. The calculator does not show the range of possible outcomes.
In this calculator, selecting a more aggressive investment option will present a more favourable outcome. However there is also likely to be more uncertainty attached to this outcome. You should consider this carefully before selecting an investment option.
- Co-contributions are not included in the calculator. As the calculator assumes that saved amounts are contributed to superannuation as non-concessional contributions, you may also be eligible for co-contributions (if your salary is less than $60,400 pa in the 2024/2025 financial year). If you were eligible for co-contributions this would potentially increase the benefit of saving amounts related to giving up an everyday item.
- Instead of savings by making non-concessional contributions, an equivalent pre-tax amount could be saved by making concessional contributions. For most people this would increase the benefit of savings due to the lower tax payable on concessional contributions compared to salary.
Retirement age
If you enter a current age less than 67, the default retirement age is 67. If you enter a current age of 67 or older, the default retirement age is your age at your next birthday.
This approach is consistent with ASIC Corporations (Superannuation Calculators and Retirement Estimates) Instrument 2022/603.
Last updated: 20 September 2024