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Question: Analysis Alternative plans and decision making process of superannuation contribution for tertiary sector employees? Answer: Introduction In this research, the concept of superannuation contribution has been explored which is sponsored by the business organizations as a welfare of the employees. In the recent times, it has been observed that government has made many efforts to encourage and incorporate the contribution of pension fund schemes and superannuation plan in the organisation from the service sectors or tertiary sectors (Smith and Koken, 2011). The main reason behind these plans is to confer after protection to the employees and these plans act as a social security after their retirements. Not only it improves employees social status but also it encourages them the investment for future. Thus, study of influencing factors that decides the investment on defined benefit plan or investment choice plan in the superannuation contribution has been examined profoundly. Along with this, the time value of money concept that identifies and controls the decision making process of an employee has also been illustrated in this research. Lastly, efficient- market hypothesis concept with its utility to the pension fund manager in the context of applicability has been defined. Factors that influences the choice of superannuation contribution choices Superannuation contribution is the amount of money that is contributed by both employee and employer in the same amount of percentage as deposited money. This deposited money is not subject to the tax until the employee is being retired or withdrawal of the amount (Smith and Koken, 2011). The superannuation contribution is a type of pension fund scheme that is used to provide assistance to the employees after their retirement. The amount calculation of the superannuation contribution depends on the schemes chosen by the employees from the alternative. The company sponsored contribution in superannuation is compulsorily made in the deposit account at minimum of 3% to up to 6% of amount of basic salary earned by the employee (UniSuper, 2017). The Australian government is very aggressive and exhibits awareness regarding the contribution of superannuation plan in the tertiary sector for employees as an implementation of welfare scheme for public. Government has executed it mandatorily fo r all organisations in the tertiary sector for encouraging the investment plans as well as social security for the old age or retired employees. Uni Super Ltd. Company is responsible for the monitoring, managing and controlling all the superannuation contribution plans and other pension related schemes in the private and public organisations in Australia (UniSuper, 2017). Superannuation contribution has played an important role in enhancing the quality of life of many of the employees even after their completion of service life. These pension schemes are also necessary to acknowledge the general public about the concept of investment and characteristics associated with it. On the other hand, superannuation schemes are divided into two main plans that is defined benefit and investment choice plan (Pyles, 2013). These choices are given as per the government norms that provide option and opportunity to make the efforts of higher amount of return taking risk being steady in the approach. According to the organisational norms and government standards, these two choices have been offered to the employees, which can be selected with the help of external support or financial planner. All the pros and cons should be kept in mind before selection of the final scheme. There are various factors that can influence the decision making process of superannuation contribution in the tertiary sector employee to avail the best option and gain the highest return with the apt market research (Rattiner, 2010). This research demonstrates factors that affect both the superannuation contribution plan briefly which helps the employees in decision making as follows: Defined Benefit Plan Defined benefit plan is the scheme in which the organisation and employee contribute the same amount in the deposited account (Ellis, 2013). In fact the deposited amount is not imposed with the taxation and other legal procedure till the individual utilise that money in investment or withdraws the amount. It is the lump sum amount which can be calculated with the formula consisting of amount of basic salary which is used to calculate the percentage on which the organisation made the contribution equally as employees salary amount is being deducted. Furthermore, it entails the year of completion of service by the employee and age of the employee (Pyles, M. 2013). This formula enables an employee to identify the fixed amount of deposit that can be raised till last service is provided by him. This amount cannot be changed and is not subjected to tax until withdrawal or retirement of the employee. It provides the security to the employee about the fixed saving for his retirement pension and living rest of his life financially secure. The advantage of this scheme is the least risk involved in this plan and fixed rate of return (McKeown, et al., 2012). On the other hand, there is a well known disadvantage opting this choice is no chance of higher gain as per market expectation and minimum amount determination and payment of retirement amount through formulation of defined or fixed method. Investment Choice Plan In case of investment choice plan employees has to further plan about the choice of investment they want to make or they need (Nicholson, 2011). The investment choice of plan has two measurements that provide the idea of decision making in the right choice of investment plan. First, risk involved in the investment scheme and second, rate of return gained after the investment is made that is no fixed amount of money is received. Every asset has its portfolio in which all the information regarding its life, risk involved and returns policies are determined and which is also a part of market research. Moreover, this asset identifies the investment terms and last amount to be made to the employees after completion of investment period. Uni Super Ltd. manages the asset portfolio of the companies and incorporates the investment plan according to the requirement (Leow, 2009). The invested asset yields the profit which is directly subjected to imposed tax regulation and after that given to t he employees. There are four types of investment plans which are as follows: Secured Funds: These funds entailed with the fixed interest and cash securities in the market Stable Funds: Government bonds and diversified investment in the overseas and domestic shares Choice of Trustees: Shares including national and international companies, private equities and public property as well as infrastructure investment (Maginn, et al., 2007) Share Funds: only investment in the shares with both natures domestic along with international shares The employees have an opportunity to choice between either of these schemes according to the requirement. The decision making of these investment schemes are composed of risk and return features that decides the final decision. On the other hand, the comprehension and self awareness about the investment area and risk involved in this of the employee also influences the choice of investment plan (Hirt, 2010). The knowledge about the investment is very important, if employee decides to go ahead with the investment choice plan while making the superannuation plan for tertiary sector. Lastly, it does not surrender a fixed amount of money; uncertainty of returned amount is the biggest feature of this retirement investment plan. Decision making process with the concept of time value of money The time value of money concept is a very reasonable and scientific concept that provides the value of the amount in the future aspect. It determines the cash flow arises from the present money in the future period of time. In the other words, future value of the current money is calculated on the basis of formulae that is compounding of present value of money as well as discounted the future money to present date (Ehrhardt and Brigham, 2016). It is has a vital role in deciding the investment and financial accounting related matters. The time value of money is very essential for financial decision makings especially for the financial manger and planner who investigates and analysis market investments. This concept is used in the examination of decision for choosing defined benefit plan or investment choice plan. This scheme ensures the fixed amount due to be paid after certain period of time like instalments in the pension plan. The employee is free to choose the scheme whether defin ed lump sum amount or investment choice plan has to be taken for superannuation scheme. In addition to this, the last amount of both the schemes can be realised with the time value of money and advantages associated with it to analyse the future value of investment (Ehrhardt and Brigham, 2016). The defined amount can be easily calculated by compounding the amount to generate future value of money. In case of investment the assets prices can be converted into future value of money with the help of compounding. Thus, it can be sorted out that decision making is being done by considering the above factors in the superannuation fund scheme. If the efficient-market hypothesis is true, pension fund manager might as well as select a portfolio with a pin illustrate why this is not the case Efficient-market hypothesis is the concept where the entire information related to the investment assets are being disclosed to the public or investors. The entire information contains related lifetime, its position and future aspects and returns from the assets. The hypothesis suggests that all the available information is being provided to the investors that facilitates the amount of investment is equals to the return on investment (Ang, et al. 2011). The efficient-market hypothesis is controversial and denoted as myth because in case prices and all the associated information is provided to the investors related to the assets and operations in the market functions efficiently than it will become impossible to gain the higher return on investment and no fair investment of risk in the market. The function of passion fund manager is to ensure the highest rate of return and a confirmed benefit on investment to the employees that invest in pension fund scheme of investment (Ang, et al., 2011). Its role is to choose the suitable investment option and opportunity to increase the maximum amount of return for the employees. The pension fund manager assembles the assets portfolio that facilitates maximum return and hold least risk features. If the efficient-market is true then, the role of pension fund manager is will become very easy he will choose the asset that can offer the highest return on investment for the employees (Faerber, 2013). The financial economic theory of efficient market hypothesis will lead to control all the investment related decision matters convenient and simple by just choosing the maximum generating asset. In case the hypothesis is not true, the pension fund manger has to identify different and diversified assets that involve different types of risk and returns with no correlations as well. This will ensure that in case, one asset does not perform well in the market; other assets recover the rest of the amount (Faerber, 2013). Thus investment in different assets will reduce the risk and better opportunity to gain in the market with a greater pace. Conclusion In the above discussion, it can be inferred that the superannuation concept is a very useful concept for tertiary sector employees and its choice of schemes including defined benefit plan and investment choice plan are equally important. It has also been found that factors like risk return on involvement and knowledge of employee in the investment influences the decision widely. Along with this, time value of money gives appropriate opportunity to identify the cash flow raised from the investment in the future period of time. Lastly, Efficient-market hypothesis inclusion and exclusion in the financial economics influence the decision making and method of pension fund manager in a very unique way. References Ang, A., et al. 2011. The Efficient Market Theory and Evidence: Implications for Active Investment Management. Now Publishers Inc. Ehrhardt, M. C., and Brigham, E.F. 2016. Corporate Finance: A Focused Approach. 6th ed. Cengage Learning. Ellis, C. D. 2013. Winning the Loser's Game, 6th edition: Timeless Strategies for Successful Investing. 6th ed. McGraw Hill Professional. Faerber, E. 2013. All About Value Investing. McGraw Hill Professional. Hirt, G.2010. Investment Planning. McGraw Hill Professional. Leow, J. 2009. Australian Master Superannuation Guide 2010/11. CCH Australia Limited. Maginn, J. L. et al. 2007. Managing Investment Portfolios: A Dynamic Process. John Wiley Sons. McKeown, W., et al. 2012. Financial Planning. John Wiley Sons. Nicholson, C. 2011. Building Wealth in the Stock Market: A Proven Investment Plan for Finding the Best Stocks and Managing Risk. John Wiley Sons. Pyles, M. 2013. Applied Corporate Finance: Questions, Problems and Making Decisions in the Real World. Springer Science Business Media. Rattiner, J. H. 2010. Getting Started as a Financial Planner. 2nd ed. John Wiley and Sons. Smith, B., and Koken, Ed. 2011. The Superannuation Handbook 2008-09. John Wiley Sons. UniSuper. 2017. How we invest your money. [Online]. Avilable at: https://www.unisuper.com.au/~/media/files/forms%20and%20downloads/pds%20documents/accumulation%201/unis000006_how_we_invest_your_money.pdf [Accessed on: 17 May 2017].