Superannuation Investment and Retirement Plans in Australia

This article discusses the focus on superannuation and motivating people to make investments for retirement in Australia. It explores the government's role in encouraging contributions to superannuation funds and the increasing awareness of the importance of saving for the future. The UniSuper Ltd, the largest individual superannuation fund in the industry, is also discussed, along with the options of Investment Choice Plan and Defined Benefit Plan. The article emphasizes the significance of age, risk-taking ability, and financial goals in making investment decisions. It also explains the concept of time value of money and its impact on financial decisions.

Running head: QUESTION 0
CORPORATE FINANCIAL
MANAGEMENT
MAY 23, 2019
STUDENT DETAILS:

QUESTION 1
The focus on superannuation and motivating people to make investment for the upcoming period,
and specifically the year of retirement, has increasing in Australia in the previous 2 eras. The
government of Australia has specifically practical in this respect, authorising lowest contribution to
be made to obeying retirement or superannuation fund through the employers in the best interests
of the workers. The minimum level of a contribution by employer to the superannuation was
addressed by three per cent of salary of worker and has as enhanced at the least amount of
contribution of nine per cent. The workers are also obliged to provide the percentage of the earning
to a superannuation investment. The incentive for addressing the advantages related to approach
related to superannuation was a need to remove a load through a process related to social
protection for a provision of payment of pension to sustain the people at the time of retirement
phase of the life. Owing to the superannuation law and the enhancing realisation through persons of
the significance of saving for the upcoming period, there are presently there are various
superannuation contributions coming every year towards superannuation fund as well as economic
organisations, whose part is to advantageously advance the contribution to render proper earning
for financing the non-functioning constituent of life of people. In this way, the superannuation fund
as well as mutual fund is biggest investor in the financial market of Australia, specifically in the
equity security of corporations listed on local and international stake marketplaces.
The UniSuper Ltd is the biggest individual superannuation fund based on industry. It is that service as
well as handles superannuation regarding the workers in a tertiary education sector of Australia,
covering institutions, and other high education associations as well as TAFE colleges. The other
revolution in superannuation fund management and service provision in the latest period has the
important upsurge in various products of the superannuation fund, retirement plan option, and
investment, with members nowadays having great suppleness in taking decisions. Which category of
assets and funds their superannuation contribution is capitalised. In line with this enhancing

QUESTION 2
investment option, UniSuper Ltd proposes the participants 2 of superannuation plan, such as
Investment Choice Plan and Defined Benefit Plan.
It can say that, the defined benefit Plan is the plan in which benefits are provided to the workers at
the time of retiring from post, is determined utilising the formula that elements in determinants like
the salary of workers, investment objective, era, knowledge of financial products and the years,
which they have hired. In Defined Benefit Plan, the benefits related to retirements of workers are
determined as: benefits related to retirement = benefit salary interval for participation lump-sum
factor average service fraction. For the worker of tertiary academic sector of Australia who select for
accepting the Defined Benefit Plan, the superannuation contribution is combined and made
investment in the asset’s choice defined by trustees of UniSuper Ltd. As the concluding benefit pay-
out is assessed exclusively with help of this formula, the investment presentation of the asset
portfolio is positively not related. Further, it also not influences the final retirement pay-out: risks
related to investment are tolerated only through UniSuper Ltd (Cardin and Hu, 2016).
One of the most significant elements to consider when investing is the age. While this is about to
making investment, being juvenile is the benefit. The reason is that person has more disposable
earnings, not various duties, the high risks taking capability, and may wait for the long time for the
investment to get good result (Munnell, Aubry and Crawford, 2015). After getting the maturity, it will
require to consider the various elements such as the retirement plans as well as the accountability.
Additionally, the person has the lesser period for the investment to render the returns. For this
reason, the ideal investment instrument changes as per the factor of age. Prior to investing the
money in instrument, this is very significant to decide the purposes related to the investment.
Further, if the main purpose is simply keeping the money secure, then person may select option
related to investment such as bond or fixed deposit that can render moderate return. Though, in a
case when a person is searching the high profits and ready to bear certain risks, then that person
may make investment into shares or mutual fund (Chan and Rate, 2018). Furthermore, the variety of

QUESTION 3
financial products renders the various benefits in present time; however, they have complex nature.
This is very difficult to have the knowledge about the products prior to consider them to portfolio.
Having the knowledge of the details of products would make sure that they not only fulfil the
requirement, however also require to render the high profitability. For an example, at the time when
people are looking for the life cover, in that case the life insurance period that comes at the low cost,
is appropriate. Though, in a case when the person seeking return with the analysis, the person is
required to get money-back or legacy approaches that cost the little more (Joshi, 2019).
In addition of this, there is the direct connection between the risks related with the provided return
and the investment. Usually, if the risk will be higher, then the potential return will be higher.
Though, various investors have various capabilities to take risk, as per the financial situation and
preference (Hamza and Jedidia, 2017). This is significant to measure the risk level one may consider
before selecting any instruments for investment. At the time when person knows the capacity of
facing the risk, in that case that person can select from the various options existing for this types of
risk. For an example, the high risk investment involves the equity investment, while modest as well
as lower risk instruments involve the option of fixed income investment such as fixed deposit. In this
way, by evaluating these above mentioned factors, one can easily take decision in respect of the
selection of the instruments. It will be easy for tertiary education sector workers to take decision
whether to place superannuation in Investment Choice Plan or Defined Benefit Plan by considering
the factors such as the age, financial conditions, risk taking ability and objectives (Mohanty, 2016).
Furthermore, it signifies that the worker does not benefit from the gain attained through the asset
portfolio. The trustees of the UniSuper Ltd have certain obligations to be capable to totally finance
defined benefits (Johari, et. al, 2018). The trustees of this plan do have the option for making the
payment of extra accumulation benefits over the annual-adjusted basis, although it is not assured
and would create the smaller portion of complete superannuation benefits as per the defined
benefit plan. The employees who prefer Investment Choice Plan keep separate investment account

QUESTION 4
containing employers-sponsored and individual superannuation contribution and allocation of
benefits annually attained the capitalised contribution, less the administration charges or charges
related to management (Kundu, 2017).
In the addition of this, by the investment Choice Plan, the workers may recommend the kinds of the
portfolio or asset that the superannuation contribution is invested in, selecting among the below
mentioned 4 strategies related to investment
1. Secure Fund- the fixed-interest security in Australia as well as cash.
2. Stable Fund- significantly the fixed-interest as well as bond security, with the smaller
revelation to the local and international properties and shares.
3. The selection fund of trustees: Stable fund of local and international stakes, property, asset
and substructure and private equity investment
4. Share Funds: Investments exclusively within local as well as international stakes (Ries, Glock
and Schwindl, 2016).
These above mentioned strategies are different through the features related to risks and returns,
with a Secure Fund being slightest dangerous as well as possibly to render low average return and
the Share Fund considering higher risks however being anticipated for rendering higher whole
average return. In support of the workers who select Investment Choice Fund, the concluding
retirement payout is based over return made through the selected approach related to investment
and they tolerate the risks related with the investments. During a period of the retirement, UniSuper
Ltd renders the investment product’s ranges for Investment Choice Plan as well as Defined Benefit
Plan members to handle and allocate the benefits related to the retirement (Kriz and Chen, 2017).
In the addition of this, this cover the following choices related to the pension and the investment-
1. Allocated Pension-

QUESTION 5
Render the regular income (at selection level), access to the capital, if anticipated, and 4
existing approaches of investments as per this the capital may be financed. In a case of
death, the balanced pension is allocated to the people who are the depended.
2. Roll-over option-
Provide the option for transferring (roll over) the balance related to the retirement fund to
the sanctioned individual or sector related superannuation or investment fund, the
permitted deposit funds or the saving accounts related to retirement.
3. Single Life Indexed Pension-
Render the high regular income in comparison of the standard indexed pension defined
above, however not allocated to the based on the death (Yang, et. al, 2019).
4. Part-Cash Distribution-
Provide the choice to consider the some percentage of the retirement fund (the matter of
the administrative as well as tax approval) as cash lump sum to be utilised in respect of the
investment or individual consumption objectives. A member may also select the
combination of the substitutes, with the cautious opinion to fulfilling the earning and
lifestyle necessities in the retirement. In the decision-taking procedure, consideration of the
investment profile related to risk and return is supreme, as are elements like the influences
of the TVM and inflation (Cobb, 2015).
5. Indexed Pension-
Render the regular earning, which is indexed to inflation, is payable as long as the people live
and is transferred to a partner or dependent over a death.
Also, TVM is a conceptual theory that money present at a current period is valuable more than
recognised sum in future because of the future earning ability. The fundamental principle of

QUESTION 6
finance keeps that, provided money may get interest, any amount of money is valuable more
the sooner this is attained. The time value of money is very significant conceptual theory to the
investor due to the dollar on hand currently is valuable more than the dollar assured in an
upcoming period. The rendered amount may get interest, the fundamental principle of
the finance keeps that any amount of money is more valuable the earlier this is attained
(Bushnell, et. al, 2017).
The recognition of the time value of money as well as related risks is significantly important in
taking the financial decisions. In a case when the risk and periods of cash flows are not taken
into consideration, an entity can take decision that can permit it to miss the aims to maximize
the benefits of owner (Lin, MacMinn and Tian, 2015). In this way, people choose money of today
to money of tomorrow because of the pressing requirements for the costs as well as
consumption of moderation create a current consumption, fall in the value of money tomorrow
because of the inflation and probable utilisation of money while exchanged for the money of
tomorrow.
In this way, at the time when people lend money, they sacrifice all the benefits related to the
security, liquidity, and ready usability. The people refrain from current consumption while
advance to someone or made investment. These would lead to what is addressed the time
preferences for the amount. For the purpose of the compensation, the future amount would
have to be discounted to a current period (Tyler, 2017).
As per the above analysis, it can be concluded that there are various significant factor, which are
very significant for the tertiary sector employees to make decision related to the placing
superannuation contributions in the Investment Choice Plan or the Defined Benefit Plan.
Moreover, the concept of Time Value of Money states that amount got today would be more
than the intrinsic value in an upcoming period. It can say that it is because of the potential
earning ability of the provided money.

QUESTION 7
References
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Journal, 38(1).

QUESTION 8
Kundu, A. (2016) An EOQ model for time-dependent deteriorating items with alternating demand
rates allowing shortages by considering time value of money. Yugoslav Journal of Operations
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Lin, Y., MacMinn, R.D. and Tian, R. (2015) De-risking defined benefit plans. Insurance: Mathematics
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