FINC3024 Personal Finance and Superannuation S1 2019
Assignment 2
Contribution to Assessment: This assignment is worth 30% of your nal grade.
Groups. The assignment can be completed in groups of up to three students. Each
group must email me a list of members names and student numbers by 5:00PM 22nd
May. If a group breaks up before submission, each member of the group must submit
an individual assignment.
Submission
Submit a Business Report (within 6 A4 pages) via Turnitin as a word or
pdf document.
Submit an electronic copy of your business report via the Turnitin Assignment
Inbox under the Assignments tab on Canvas.
You MUST follow the instructions in the Turnitin guide. See the Assignments
tab on Canvas.
The group member with the lowest SID should submit the business report for
the group.
Please type the SIDs of all your group members on each page of your business
report. A 10% mark deduction will apply if you do not include your group
member SIDs. Please do not write any group member names on your assignment.
Name your assignment using the lowest SID in your group: SID Unit of study
Assignment Number Semester Year, e.g., 1234567FINC3024Ass2S12019.
Your submission has to be your group’s work. Representing others’ work or
allowing someone else to represent your group’s work is considered academic
misconduct.
Task
The Australian Government is in the development of more ecient retirement income
products, which are typically referred to as ‘Comprehensive Income Products for Re-
tirement’, or CIPRs. The aim of developing CIPRs is to \increase individuals’ standard
of living in retirement, increase the range of retirement income products available, and
empower trustees to provide members with an easier transition into retirement.”
On 17 May 2018, the Australian Government released a position paper regarding CIPRs
(CIPR Position Paper.pdf). This position paper provides the de nition of CIPRs and
proposes that superannuation fund develop and o er CIPRs to their members.
You (and your other group members) work in CaseStudy Super Fund that has a very large
pool of members. You can assume that CaseStudy Super Fund’s members have the same
demographic characteristics as the Australian population. You are given a task to write
a business report, interpreting the features of CIPRs and evaluating the Government’s
proposal that super funds develop and o er CIPRs to their members.
You come across an Excel model (MDUF Static Calculator.xlsb), which is developed by
Mine Super Fund (previously known as Mine Wealth and Wellbeing Super Fund).
This Excel model simulates outcomes and estimates utility for four di erent static retire-
ment outcome solutions. Mortality risk and investment risk are modelled stochastically
and the Age Pension is incorporated. This model has four cases that correspond to four
simpli ed retirement income products, including:
(1) 100% life annuity
(2) Minimum drawdown rule on Account-Based Pension
(3) Target constant income stream on Account-Based Pension
(4) Target constant income stream with x% in life annuity and 1 x% in Account-
Based Pension, where 0 < x < 1.
Note: After you accepted the disclaimer, you will be able to view the model. The
\Inputs” tab details the model inputs and assumptions as well as the four cases. The
\Comparison” tab shows, for each case, the simulated retirement incomes (Income), the
simulated Age Pension amount to be received (Age Pension), the simulated drawdown
amount from Account-Based Pension (Drawdown), the simulated amount of wealth if
the individual dies (Residual Account), and the decomposition of expected retirement
incomes (Average Income Sources).
In your report, address the following key points:
Demonstrate your understanding of the Government’s aim of developing a CIPR
initiative.
Demonstrate your understanding of CIPRs.
Use the provided Excel model to compare the four cases and determine if each
of these cases meets the de nition of a CIPR.
Evaluate the impact (positive and/or negative) of a CIPR on an individual’s
retirement outcome, taking into account individuals’ demographic characteristics
and nancial situations.
Make a recommendation to the board of CaseStudy Super Fund as to whether
the fund should develop and o er CIPRs to some or all of their members.
Marking Criteria
Marks will be awarded for:
Clear and concise writing in the report
Addressing the key points from the task
Thorough analysis of the four retirement cases and clear representation of quan-
titative results
Thorough evaluation of CIPRs
Appropriate recommendations
Interaction with other sources and correct referencing