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Forward Thinking Magazine : December 2010
25 - 5,000 0 5,000 10,000 15,000 55 56 57 58 59 60 61 62 63 64 65 Difference due to compounding effect Difference due to Net Contributions less Pension Payments Difference due to earnings tax Total $ Techtalk Assumptions - All charts and calculations are in today’s dollar value terms - Future values are discounted into today’s terms at the assumed CPI rate of 2.5 per cent p.a . - Gross salar y package is assumed to increase at AWOTE rate of 4.0 per cent p.a . - Pension payments and superannuation contributions are made in the middle of the year - Earnings are credited at the end of the year - For Strategy 2 contributions are made during an income year to a superannuation accumulation account and the balance (less a $10,000 minimum account balance) is transferred and combined with the existing proceeds of the TTR pension to commence a new T TR pension at the end of each income year - Return rate (gross after fees) is split into 38 per cent income and 62 per cent growth, income is taxed at 15 per cent and realised gains (based on 20 per cent portfolio turnover rate) are taxed at 10 per cent (i.e. assuming a 331/3 per cent discount) - Earnings in pension phase are tax free - Gross return 8.86 per cent p.a . - Pension total return 7.36 per cent p.a . (after fees) - Accumulation total return 6.53 per cent p.a. (after fees and tax) Chart 2. Sources of account balances increases: Strategy 2 less Strategy 1 Summary Recent developments in Macquarie Pension Manager administration may benefit your clients, particularly those who are consolidating funds from multiple sources to commence a pension and those who wish to combine accumulated funds with an existing pension balance to commence a new pension. The suitability of a salary sacrifice / TTR pension strategy and the benefits of regularly transferring accumulated funds into pension phase will depend on the particular circumstances of each client. Individual analysis of a client’s situation is generally required, as with most financial planning strategies. Advisers with access to the MAStech Library may find the MAStech TTR model a useful tool for this purpose. Talk to your Macquarie BDM about access to the MAStech Library.