Date

PRIVATE & CONFIDENTIAL

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Barristers and Solicitors
DX
HOBART

Dear ........................

RE: FullMemName

Your reference: ..........................

I refer to your letter of 21 March 2001 regarding the calculation of the present value of potential superannuation benefit entitlements on behalf of Mr/s. FullMemName.

Methodology

The loss of future superannuation benefit entitlements can be taken as the present value of the superannuation benefits that would result had Mr/s. Surname remained in employment until retirement less that which he/she has already received from the fund (if any). If the plan design is an accumulation /defined contribution arrangement, unless the benefit already paid out contained an amount above or below the total account balances (e.g. the proceeds from a total and permanent disablement insurance cover, or a termination penalty etc.), the above difference is simply the present value of future contributions after deduction for expenses and tax applicable.

I have calculated the present value of the future superannuation benefit according to the applicable Superannuation Guarantee contribution schedule. The relevant contribution table is:

Tax Year	For employers with payroll less than $1 million	For employers with payroll greater than $1 million
1 July 1992 to 31 December 1992	3%	4%
1 January 1993 to 30 June 1994	3%	5%
1 July 1994 to 30 June 1995	4%	5%
1 July 1995 to 30 June 1996	5%	6%
1 July 1996 to 30 June 1998	6%	6%
1 July 1998 to 30 June 2000	7%	7%
1 July 2000 to 30 June 2002	8%	8%
1 July 2002 and thereafter	9%	9%

The task has been divided into two parts. The first is to project the potential lost retirement benefit at the anticipated date of retirement as realistically as possible. We have made allowance for the level of contribution, the age of the member, tax on superannuation contributions, administration charges, offset of tax for administration charges, anticipated retirement date, salary increases etc.

The second part of the task is to discount this value to a present value. This has been calculated in accordance with the Common Law (Miscellaneous Actions) Act 1986 i.e. a rate of discount of 7% p.a. The Act has been assumed to apply only to the second part of the task i.e. the projection has been carried out as realistically as possible.

Data

Date of Birth:	........ / ........ / 19......
Accident Date:	........ / ........ / 19......
Date from which loss is calculated:	........ / ........ / 19......
Retirement Age:	65 years
Current Gross Salary used in Calculation:	$ ........ gross per week ($............. gross per annum)

Part 1: Projection of Potential Lost Retirement Benefit

In these calculations I have projected the retirement benefit as realistically as possible.

Assumptions

Calculation Date:	........ / ........ / 19......
Interest on Balances:	7% p.a. (net of investment taxes)
Salary Increases:	4% p.a.
Tax on employer contributions:	15%
Allowance for administration charges:	$178 p.a.
Concessional tax threshold for 2000/01 year:	$100,696

Results

Based on the above information and assumptions, I have calculated the expected value of Mr/s. Surname's Superannuation Guarantee benefit entitlements had he/she retired on his/her 65th birthday. I have also calculated results as if Mr/s. Surname were employed by an employer with payroll of greater or less than $1,000,000 in the relevant year.

The results are as follows:

Part 1: Projection of Potential Lost Retirement Benefit

The gross projected superannuation benefit is as follows:

Retirement Age	Expected Value on Retirement
Age 65

Part 2: Present Value of Potential Lost Retirement Benefit

Using a 7% discount in accordance with the Common Law (Miscellaneous Actions) Act 1986, the present value of the future component is:

Retirement Age	Discounted to ......................
Age 65

Comments

Tax is paid on contributions, investment income and on benefits. The contribution tax has been explicitly allowed for. The tax on investment income has been allowed for by assuming a net investment return. No end benefit tax has been deducted from the above amounts.

Currently upon retirement after the age of 55, tax at a rate of up to 16.5% is payable upon benefits received above the concessional limit. If no other superannuation benefits have been received, I calculate that the following will be the combined past and future net of benefit tax results:

Net Projected Superannuation Benefit

Retirement Age	Expected Value on Retirement	Discounted to ........................
Age 65

i.e. no end benefit is expected to be required.

The present value of any benefit is largely determined by the real rate of return assumed, rather than the individual nominal values of the economic assumptions.

Please do not hesitate to contact me should you wish to discuss any aspect of the above.

Yours sincerely,

BRIAN BENDZULLA, B.Sc., UED
Fellow of the Institute of Actuaries of Australia
Director

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