Appendix 2
Assumptions made by the Department of
Finance and Deregulation in the example provided on 11 September 2009
In order to make comparisons between the superannuation
arrangements, the following assumptions have been made:
-
the member retires from Parliament in August 2010 at age 60;
-
the backbench salary at the time of the member’s retirement is
the same as the current rate of $127,060 per annum;
-
the member had received the backbench salary (per historic salary
data) for the duration of his/her service;
-
the PCSS member’s retirement is considered involuntary for the
purpose of calculating benefits for service periods that are less than 12 years
(and thus qualifying the member for a pension entitlement after eight years of
service or three occasions);
-
for a member covered by the post 2004 arrangements:
-
the member had received employer contributions of 15.4% each year
(notwithstanding that Superannuation Guarantee was introduced progressively
from 1992) and in addition, has salary sacrificed an amount each year
equivalent to the after tax contribution of 11.5% (or 5.75% after 18 years of
service) made by a member in the PCSS;
-
the salary sacrificed amounts were calculated based on historic backbench
salary and income tax rates (to which a Medicare levy of 1.5% was added);
-
administration fees and insurance fees that are charged by AGEST
were applied;
-
15% contributions tax on employer contributions was applied; and
-
a fund earnings rate, after investment fees and taxes, of 6%
(this is based on the target asset return for the Balanced investment option in
AGEST of CPI plus 3.5% per annum over the investment timeframe);
-
for the purpose of calculating the after tax superannuation
benefits:
-
the member does not have any other assessable income besides the
superannuation entitlement; and
-
the tax rates for superannuation benefits in 2009-10 (plus a
Medicare levy of 1.5%) were applied.
Based on these assumptions, the tables below provide a
comparison of the superannuation entitlements payable from the PCSS and the
post 2004 arrangements for a backbencher, given the duration of service.
Under eight years of service (lump sum entitlements only
for PCSS members)
Eight years of service or over
Note: the above results are dependent on specific
assumptions. Changes to any of the assumptions listed above may lead to a
significant change in the results.
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