Mercer LifetimePlus Calculator information

This Calculator can be used to estimate the level of your client’s superannuation benefit at retirement. Using this Calculator allows your client to:

  • See whether your client might have sufficient funds to provide them with their desired standard of living in retirement.
  • See whether your client might be in a position to receive government support in the form of the Age Pension, to supplement their retirement savings.
  • See how different market situations might impact your client's situation.

It has been designed for Australian conditions only.

Today's dollars

This Simulator will give you an estimate of your benefits and retirement income in today's dollar values after taking out the effects of inflation. Showing results in today's dollars allows you to consider your future retirement income in the context of today's goods and services and your current standard of living.

For periods up to retirement age, the today's dollar amounts have been calculated by deflating future dollar amounts using community wage growth. Wage growth is commonly described as a combination of price inflation plus a margin for improvements in living standards. It is assumed your personal salary growth is the same as community wage growth. The Simulator estimates wage growth by adding a margin to the rate of price inflation shown on the Assumptions panel. For periods after retirement, the today's dollar amounts have been deflated by price inflation (CPI is a common measure of price inflation). This means your standard of living in retirement doesn't keep pace with that of the wage earning community.

All Simulator inputs should be in today's dollars.

Current environment

Unless otherwise stated the calculations are based on legislation and rules at 1 July 2022. In particular, the Calculator allows for:

  • Age Pension asset test from 1 January 2017
  • Restricting the amount transferred to an account based pension on retirement to the transfer balance cap

The Calculator does not allow for:

  • Low Income Tax Offset
  • Senior and Pensioner Tax Offset
  • Any applicable benefit payment tax before age 60
  • Any Centrelink payments apart from the Age Pension (including supplements)

The Calculator assumes that certain legislative thresholds and limits relating to superannuation, tax and social security are increased or indexed in line with wage inflation (unless otherwise stated). The actual rate of increase in these legislative thresholds and limits may vary from the assumed wage inflation rate.

The Calculator will be updated from time to time with changes in the legislative environment.

Your client is assumed to be exactly your input age; for best results, you should use their nearest age at the current date.

Super balance

In retirement, your client's super balance is made up of an account-based pension account and an accumulation account, if applicable (see Retirement income stream).

Retirement income stream

It is assumed that on retirement at or after preservation age, your client will convert their superannuation (up to the transfer balance cap) to an account-based retirement income stream. A retirement income stream enables your client to choose how their money is invested (investment option) and how much money to draw down each year, subject to the legislated requirements. There is no tax payable on earnings or money taken out (after age 60) in respect of a superannuation account-based pension.

At retirement, if your client’s super balance exceeds the transfer balance cap (currently $1.9m), only the amount up to the cap will be transferred to a tax free account-based retirement income stream. The excess will remain in your client’s accumulation account, where earnings will be taxed at 15%.

In some circumstances your client may retire before preservation age. We assume an account-based pension will commence at preservation age, estimated based on the current age you’ve inputted.

Desired income

The Calculator works by allowing your client to nominate a desired level of income in retirement. As a default this is set to the ASFA Comfortable Standard for a single person of $51,805 (as at January 2025). Your client can adjust this to an amount that suits you. If your client chooses a lower level of desired income, their super balance will last longer in retirement, while choosing a high level of desired income might exhaust their super balance over fewer years (compared to a lower level of desired income). If your client's selected level of desired income is below the minimum pension drawdown amount as required by superannuation law, then the Calculator may assume a higher level of retirement income than your client's selected level so as to remain compliant with the legislation.

All retirement income drawn is assumed to be spent, even if over the desired amount (i.e. it doesn't add to non-super assets)

For assistance in determining a retirement income, use our Retirement Income Budget Planner.

Retirement age

The Calculator assumes your client is retired at their input current age and that they start drawing down their super from their current age, or preservation age if later.

Age Pension

The Age Pension amount for each year has been calculated based on your client's super assets and the Centrelink means tests. The Calculator assumes that your client is an Australian resident. In the projection, the Age Pension is indexed with wage inflation, while the asset and income test thresholds are indexed in line with price inflation. The Calculator assumes the Age Pension income test to be as it applies to new Age Pensioners from 1 January 2015 and asset test as it applies to all Age Pensioners from 1 January 2017. If your client has already retired it is possible that different rules apply which would change the results. Your client should seek financial advice if this is applicable.

Investment options

The Calculator lets your client model the outcome of different return assumptions.

The rate of investment return is assumed to be net of investment management fees and remain constant over the projection period.

If your client has a short investment time horizon (for example less than 10 years) your client may wish to consider current economic conditions in setting the investment return. Your client's time horizon includes the period their super will last in retirement.

Assumptions

There are a number of factors that will affect the growth of your client’s super and the retirement income it will provide. Some of the major factors, like investment returns and inflation, will fluctuate over time, but are assumed to lie within certain ranges over the long term.

For simplicity, the values for investment return and inflation remain the same for each year of the projection. Note that the Calculator imposes some limits on the fixed assumptions but the actual experience could be outside these ranges (e.g. investment returns may be negative in some years).

The results given depend on the assumptions input. If these assumptions are not borne out in practice the actual level of your client’s super balance and retirement income may be different from that projected. In particular, short-term negative investment returns could significantly reduce the amount of super your client may be able to draw on. It is recommended that your client get regular updates of the projections and run a number of projections by varying the editable assumptions to illustrate the impact of changes in these assumptions on the projections, for example, the effect of different investment returns.

There are other assumptions used in the calculations which are set by legislation and cannot be changed (e.g. tax bands and Age Pension means test limits).

Tax

The Calculator assumes that investment earnings on retirement income stream products are not subject to tax. Please note that the investment earnings on any amount exceeding the $1.9m transfer balance cap (which the Calculator assumes is kept in accumulation phase) are taxed at 15%.

Benefit payments are tax-free if your client is aged 60 or over. This is reflected in the calculations of the Calculator. The Calculator does not allow for any applicable benefit payment tax for amounts taken under age 60.

Fees

Investment fees (indirect cost ratio) and percentage based administration fees are assumed to have been deducted from the investment return assumption input (see Investment options).

Home Loan

Your current home loan amount increases with interest at the input interest rate and is reduced by the annual equivalent of the monthly repayment entered. Your home loan repayment is assumed to be paid regardless of your income, and hence is not shown as impacting your after-tax income on the Your income chart. While the Calculator does not set a lower limit on repayments, it may not be realistic to model a very low repayment amount.

At retirement, you can choose to withdraw a lump sum amount from your super to pay off any remaining home loan. The maximum you can pay off is the lesser of the outstanding loan and your super balance at retirement. If you have a spouse retiring at the same time (or already retired), the home loan repayment is taken proportionally from each partner’s super. If only one spouse is retired the repayment comes from their super.

Scope/disclaimer

This Calculator has been prepared by Mercer Financial Advice (Australia) Pty Ltd (MFAAPL) ABN 76 153 168 293. Any advice contained in this Calculator is of a general nature only, and does not take into account the personal needs and circumstances of any particular individual. Prior to acting on any information contained in this Calculator, you need to take into account your own financial circumstances, consider the Product Disclosure Statement for any product you are considering, and seek professional advice from a licensed, or appropriately authorised, financial adviser if you are unsure of what action to take. 'MERCER' is a registered trademark of Mercer (Australia) Pty Ltd ABN 32 005 315 917.

This Calculator is not intended as an advertisement for any product issued by MFAAPL or any of its related entities.

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