Retirement planning goal (super contributions and pensions)

What to enter at the Retirement Planning step

The Retirement planning goal is under the Cash flows & Goals step (on the top menu). In this section, for each individual, you can set options for:

  • Voluntary super contributions (e.g. salary sacrifice, deductible contributions, non-concessional contributions)
  • Retirement age or date
  • Drawing a pension
  • Including an estimate for the Age Pension

Note that instructions for investments in superannuation funds and SMSFs should be given at the Review super funds step (for more, see Superannuation and SMSF (Self-Managed Super Fund))

Websolve options

Data entry tips

  • You can use the Age Lookup table to find an individual's preservation age and Age pension age.
  • If you are unsure where to start with this section, the (robot) button is a good initial option. In many cases, Pathfinder will prefer to use excess funds for voluntary super contributions over any thing else in the case, and so the results will give you a good indication of the maximum contributions that the individual can afford while meeting other goals in the case. If the contributions seem inappropriate for the case (for example, if the individuals are a long way from retirement, you can return to the Retirement planning step and place more restrictions on the voluntary super contributions (see below for placing restrictions, and to copy a scenario, see How to make another scenario for comparison).

Retirement age or date

Set when an individual plans to retire
  1. Go to the Cashflows & Goals step (on the top menu), then the Retirement planning sub-step
  2. For each individual in the case, you can enter the retirement age or date (when you enter the age, the date will be calculated for you, and vice versa)

Super contributions

Super guarantee

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Entering data for a super guarantee

The super guarantee is the compulsory amount of your salary that your employer must pay into your super account. Pathfinder has two options for calculating the super guarantee.

  • Use the legislated default super guarantee (default option) for Pathfinder to model this:
    • Add the individual's income:
      • For the income 'Type' field, make sure you choose a type which adds the super guarantee (e.g. Wages/salary).
      • The amount(s) you enter for income should be before tax and not already include the super guarantee, because Pathfinder will add the the super guarantee for you. For the list of income types that have the super guarantee added, see Income.
    • Pathfinder will automatically calculate the super guarantee based on the legislated values, including legislated future increases (if any).
  • Apply a custom super guarantee - If the individual has an agreement with their employer to receive a higher super guarantee, then:
    • Add the individual's income:
      • For the income 'Type' field, make sure you choose a type which will adds the super guarantee (e.g. Wages/salary).
      • The amount(s) you enter for income should be before tax and not already include the super guarantee because Pathfinder will add the super guarantee for you. For the list of income types that have the super guarantee applied, see Income.
    • Go to the Cash flows & Goals (top menu) > Retirement planning (sub-step), find the individual and edit these fields:
      • Custom super guarantee % - this should be the super guarantee amount that they have negotiated with their employer
      • Keep super guarantee to upper limit - There is an upper limit on how much an employer is required to contribute as a super guarantee. If the individual's super guarantee is likely to be over the legislated super guarantee upper limit, you can choose whether or not this limit can be exceeded (note that if you choose 'yes', it will not exceed the total concessional cap)

Video - How to include the super guarantee

Video

Super guarantee in the results

To view the super guarantee in the results, see: Detailed reports > (Individual - side menu) > Cash flows > Super deposits summary.  In the 'Concessional deposits' section, there are lines for:

  • Super guarantee % - this will either be the legislated value (including any legislated future increases or the custom value you entered)
  • Super guarantee - this is the dollar amount actually paid as the super guarantee

Video - Where to find super deposits information

Video



Set options for making voluntary super contributions

(i.e. salary sacrifice, self-employed deductible contributions, non-concessional super contributions)

  1. Go to the Cashflows & Goals step (on the top menu), then the Retirement planning sub-step
  2. For the selected individual, find the Voluntary super contributions field. This field has options for controlling all voluntary super contributions:

ROBOT button - this button will contribute to super as much as the individual can afford if it will maximize their total wealth under the given assumptions. The best combination of before and after-tax contributions will also be calculated. You should check the results to ensure they are consistent with their risk profile. NONE button - no voluntary super contributions will be made for the entire analysis. SET TOTAL VOLUNTARY AMOUNT button - set a maximum contribution amount and Pathfinder will optimise between before and after tax contributions. DEFINE BEFORE/AFTER TAX CONTRIBUTIONS button - Separately control voluntary before-tax contributions and voluntary after-tax contributions. NOTE: For all options, by default, Pathfinder will not exceed contribution caps.

For more information on setting a specific amount in some years and optimising in others, see How to allow a value to be optimised in the series builder by using dash.

Pathfinder will not make contributions if they contradict the legislated threshholds (e.g. the annual concessional super deposit cap). Most options in Pathfinder allow you to keep within these thresholds without any special attention (e.g. , maximum). However if you set instructions that will force Pathfinder to contradict the rules, you will get an error in the 'Solve events' (which is visible at the 'Solve' step when you click the Start solve button). In some situations, Pathfinder may still produce results, but they will follow the legislation instead of your instructions, and it is strongly recommended that you adjust your inputs and run again to ensure robust results.

Use bring forward rules

Pathfinder will apply the bring-forward rule if all of the following apply:

  • The individual can afford to do so
  • They are eligible to do so as defined by government legislation
  • The options entered by you do not prevent Pathfinder from doing so. For the Voluntary super contribution options field, it is best to choose the button (rather than trying to restrict the contributions)
  • Using the bring-forward rule will maximise net wealth at the end of the analysis under the given assumptions and goals.
Government co-contribution

The government co-contribution amount will automatically be calculated. However note that this co-contribution can only be made when:

  1. The income entered for the individual is under the co-contribution threshold
  2. The options entered in the Voluntary super contribution field allow non-concessional contributions to be made (i.e. 'None' has not been selected for all voluntary contributions or non-concessional contributions)
  3. In the results, it was found to be optimal to make a non-concessional super contribution

Pensions & income in retirement

Include/Exclude a transition to retirement pension

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Modelling TRIS

Pathfinder can model an existing or new transition to retirement income stream, or TRIS (formerly known as Transition-to-Retirement (TTR) pensions).

Entering data for a TRIS

Video

  1. If the individual has already started a TRIS:

    1. Go to the Current situation step (top menu), then the Super and Trusts step.

    2. Add the super account and then the investment to the super fund
    3. The individual's current TRIS balance should be entered in the Pension phase balance field
  2. To let Pathfinder automatically start a transition to retirement income stream To allow a TRIS to be included in the strategy:

    1. Go to the Cash flows & Goals step, then the Retirement planning sub-step

    2. For the selected individual, for the Allow transition to retirement field, choose the .  If the robot icon is chosen, a transition to retirement income stream will be started if the individual is eligible to do so and if it is required to meet expenses and/or it will maximize total wealth under the given assumptions. You should check the results to ensure it is consistent with the Individual risk profile.

    3. Pathfinder will calculate the TRIS in order to meet expenses, so ensure that you have entered all expenses at the Cash flows & GoalsCash flows step.



TRIS in the results

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In the results, you can see the TRIS in the following places:

  1. At the Strategy summary step, in the Retire section for the individual, there will be a bullet point if the individual starts a TRIS.
  2. At the Cash flows & Action items step:
    1. In the Cash flows report, the TRIS will be listed in the Revenue section with a row called 'TRIS payment'
    2. In the Action items, there will be an action item in the year the TRIS is started including some information about how much to rollover.  Plus an action item stating the withdrawal amount for every year the TRIS is drawn
  3. In the Detailed reports step, you can see TRIS in the following reports:
    1. Consolidated > Cash flows: There's a line for 'TRIS payment' (note that this will be the total TRIS payments if it is a couple)
    2. Consolidated > Cash flows (detailed): There's a line for 'TRIS payment' for each individual
    3. If the TRIS is drawn from a retail or industry super fund (note that the TRIS is drawn from the pension phase
      1. "Individual name" > "Super fund name" > "Super fund name" Pension > Pension payments
    4. If the TRIS is drawn from an SMSF: SMSF name > SMSF name > TRIS Balances

How to find out what return is being modelled for the TRIS

In the assumptions report, the ‘accumulation phase return’ for the super fund is the return that is also used for the TRIS pension.  This return is assumed to be after tax. In the results, you can check the returns in the detailed reports:

  1. Go to this detailed report: (individual) > (Super fund name)  > (Super fund name) Pension > Assets and loans > Investment – (investment name) > investment return
  2. In the ‘Investment return’ report, there’s two lines: ‘Interest rate’ and ‘Interest rate correction’.  In years where there is a TRIS pension, the sum of these two lines give you the return used. So for example, if the interest rate is 7.40% and the correction is -1.10%, the return is 7.40 – 1.1 = 6.3%, which will match the accumulation phase return.
  3. In the year the individual starts their TRIS or changes from a TRIS to an account-based pension, the correction will be lower because TRIS return only applies for part of the year, so the annual return has been adjusted to reflect this.

Common reasons a TRIS is not started

If you were expecting a TRIS to be started, but the results do not include one, some things to check are:

  • Did you allow a TRIS to be started in the input data?
  • Is the individual actually eligible to start a TRIS? e.g. has not reached their preservation age.  You can check the individual's preservation age with the Age Lookup table.
  • Typically, a TRIS is only started if it is required to meet expenses, so it might not be worthwhile for the individual to do so because they can meet their income requirements through other sources. You can review their income at the Results > Cash flows & Action items step.

If you would like to make adjustments to the TRIS (e.g. make it start in a certain year, prevent it in some years), please contact Optimo Financial.






Start an account-based pension (ABP)

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Entering data for an account-based pension

Video

An Account-Based Pension (ABP) is a pension that is drawn from a superannuation account. Pathfinder typically calculate the pension to draw based on the expenses you have entered.

To include an account based pension in a scenario:

  1. Make sure you have entered the individual's Superannuation and SMSF (Self-Managed Super Fund) details
    1. If the pension is 'Return of Capital', then change the Pension income test rules field to 'Return of capital' to ensure that any Age Pension calculations are correct (the default is 'Deeming').
  2. Go to the Cash flows & Goals step (on the top menu), then the Retirement planning sub-step:
    1. Enter the individual's retirement age or date (once you enter the age, the date will be calculated or vice versa).
    2. In the Expenses section, make sure that their expenses reflect their desired spending in retirement (for more help adjusting expense values in different years, see How to increase or decrease a value in the series builder)

In the results, once the individual has retired, an account based pension will be started as required, including calculations for:

  • How much should be rolled over from the accumulation phase to the pension phase
  • The percentage withdrawal from the pension account that should be made to meet expenses

For more information, see Retirement Planning and Build Super results.


Reading the results for an account-based pension

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If funds are being kept int he pension phase, and you were expecting them to be rolled over to the pension phase, see Understanding why funds are kept in in the accumulation phase of super instead of the pension phase.

In the results, you can see the account-based pension in the following places:

  1. At the Strategy summary step:
    1. Sections for super funds will show when the fund has a pension phase
    2. The Retire section for each individual will state if an account-based pension is started
  2. At the Cash flows & Action items step:
    1. In the Cash flows report, the ABP will be listed in the Revenue section with a row called 'Superannuation income stream'
    2. In the Action items, in the the year the ABP is started, there will be an action item saying to start a ABP which includes information about how much to rollover.  In every year an ABP is drawn, there will be a statement of how much to withdraw.
  3. In the Detailed reports step, you can see ABP in the following reports:
    1. Consolidated > Cash flows: There's a line for "Superannuation income stream" (note that this will be the total ABP payments if it is a couple)
    2. Consolidated > Cash flows (detailed): There's a line for "Superannuation income stream" for each individual
    3. If the ABP is drawn from a retail or industry super fund:
      1. Full details of the ABP pension are here: "Individual name" > "Super fund/SMSF name" > "Super fund/SMSF name" Pension > Pension payments






Include/Exclude spouse super splitting

To set the option for spouse super splitting:

  1. Go to the Cashflows & Goals step (on the top menu), then the Retirement planning sub-step
  2. For the selected individual, for the Allow spouse super splitting field, choose the appropriate option.
Government Age Pension

To include or exclude an estimate for the Age Pension for the scenario:

  1. Go to the Cash flows & Goals step (top menu), then the Retirement Planning sub-step.
  2. In the Age Pension section, for the Include Age Pension estimate field, choose 'Include' or 'Exclude'

Note that if an individual is receiving an Age Pension, you should not enter it as income as this will double up with Pathfinder's estimate.

If you choose to include an age pension estimate:

  • An estimate for the government Age Pension will be included in the results, this estimate may be zero.
  • The age pension estimate is based on the data entered in Pathfinder:

For more, see How to include or exclude the Government Age Pension

Pension income from other countries

If an individual is receiving a pension income from another country, this should be entered in Australian Dollars in the Income section of Pathfinder.

Retirement income before preservation age

If the individual is retiring before their preservation age, then Pathfinder will work out what assets it can draw on outside super to meet their expenses. This may be income from investments or selling investments or their partner's income. You can still allow Pathfinder to make deposits to super, if you choose the , Pathfinder will not make contributions to super if it means they will not have enough funds to meet their expenses before their preservation age.

Reading the results for retirement planning

See Retirement Planning and Build Super results

Strategy Development Service (SDS) options

If the case includes complex analysis that you are not able to do in Pathfinder yourself, it may need to be submitted to the Optimo Financial SDS. Complexities include, but are not limited to:

  • Defined Benefit pensions