ANNUAL REPORT 2011 // 2012
EISS at a glance…
• Low administration fees • Direct access to personalised service from EISS staff • Financial advice over the phone, or referrals to professional financial planning services • Range of investment options and insurance benefits • You can stay with the Scheme when you retire • A not-for-profit fund • More than $740m in funds under management at 30 June 2012 • On-line access to up-to-date information on your benefits, insurance and investment options • Worksite visits and retirement planning seminars - we come to you!
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Welcome to EISS’s 2012 Annual Report
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Who looks after your money?
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As at the 30 June 2012, the Board members were:
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Who else works for your retirement?
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Statistics
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Investments
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What more do you need to know?
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Welcome to EISS’s 2012 Annual Report
What do you do if you have questions or concerns?
Contact us. We can’t answer or fix what we don’t know about. Phone 1300 307 844 Fax (08) 8100 9974 Email inquiries@electricsuper.com.au Web www.eiss.superfacts.com Address Level 7, 99 Gawler Place, Adelaide SA 5000 Postal Address GPO Box 4303, Melbourne VIC 3001 Please note that the EISS office is unattended at times. If you wish to discuss something with us, please ring first. We may be able to sort it out over the phone. If not, we can make an appointment for a face-to-face chat. We can organise workplace or home visits if needed.
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The Electricity Industry Superannuation Scheme (EISS) is the super fund for people who supply electricity to South Australia. This annual report lets our members know what we have been up to on their behalf in the 2011/2012 financial year. This is a formal document and it is written in a formal way. If you have any questions about anything you read here, give us a ring and we’ll try to answer them.
Members of this super fund continue to receive fantastic benefits that members of most funds can only dream about, such as: • Defined Benefit members have benefits linked to their salary, and are protected against poor investment returns. • Accumulation members get their administration fees paid by their employer, and have a great choice of insurance benefits and investment options. • All members have access to personalised service from the EISS staff, financial advice over the phone, referrals to professional financial planning advice, seminars delivered to your workplace, income streams in retirement, the option to voluntarily increase their super, and Trustees who work for you.
The EISS is overseen by a Board, who are required by law to work in the interests of members (within the rules of the EISS). The EISS office manages the fund on behalf of the Board, and is always available to answer questions that you might have on your super. There is more info on the Board and the office staff elsewhere in the report. A lot of organisations work with the EISS to look after your money. These include your employer, the fund administrator, investment managers, auditors, lawyers, accountants, doctors, insurers, financial planners. A lot of expertise is called on to make sure that your retirement is looked after properly.
Who looks after your money?
Report from the Chairman and Executive Officer The Board and staff of the Electricity Industry Superannuation Scheme have put in another year of hard work to keep your super safe and growing. This has been helped by great support from all the companies that do work for the members and the Scheme. We’d like to thank everybody involved for their efforts. This year has been another tumultuous year, with lots of volatility on financial markets and significant changes in the government regulation of superannuation. Elsewhere in the annual report, the Board’s investment adviser, JANA, has provided their view of the year’s financial markets. One of the big points is the table showing how the market sentiment changed from month to month. There were seven months where sentiment was down, and five months where it was up. While it seemed for a while that we would have a good return for the year, in the end superannuation funds generally finished the year about flat, in part because of these constant changes in sentiment. The EISS earned 0.24% on the Balanced Growth option, which most members are invested in. Some of the conservative investments did very well for the Scheme to offset the 7% fall in the Australian share market. This reflects the benefit of spreading the Scheme’s investments over a range of assets. The Scheme’s Investment Committee continues to work with our investment advisers to keep the Scheme conservatively invested to reduce the volatility in returns on member accounts.
Members understandably were concerned about this volatility. Over the last 12 months the Scheme’s Cash investment option increased by 50% to $20 million, and the Conservative Growth option doubled to $8.5 million. Please remember that you can seek advice on the most suitable investment option from the Scheme on 1300 307 844. There are a large number of changes to government regulation happening at the moment (32 by last count). While the nature of the EISS means that many of these changes don’t apply to us, we are still needing to review our practices to make sure that our governance is up to scratch. We will endeavour to minimise the impact on EISS members. Towards the end of the year, the EISS was mentioned in a speech in State Parliament, due to the lobbying of a small number of members. In response, the state Minister of Finance agreed to an inquiry into one of the Scheme rules that was created by the Treasurer shortly after privatisation. The Board welcomes the enquiry and intends to fully cooperate with its terms of reference. There were 3,350 queries made to the Scheme, either by phone, email, face-to-face or in writing. This means that on average, every member contacted the Scheme once during the year. This is a great result, as it shows that members are taking an interest in their super. This, in part, reflects how the EISS members are getting closer to retirement, and their super is becoming more important to them. As always, thank you to our members for their support and interest.
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Board changes During the year there were a number of changes to the EISS Board: Member elected trustees: Eric Lindner, who is well known to many members, retired from the EISS Board after 12 years as a member-elected trustee. Eric saw the Scheme through many changes and worked tirelessly on behalf of the whole Scheme. At the election in November 2011, Janette Bettcher was re-elected and Mark Vincent elected for the first time to the Board. This continues a strong tradition of trustees that think deeply about the Scheme’s issues. Union appointed trustees: Bob Donnelly and Darryl Payne were reappointed by Unions SA to the Board during the year. Employer appointed trustees: Racheld Salkeld of Alinta Energy resigned from the Board during the year, and was replaced by Vicki Brown of ElectraNet. We are pleased to have Vicki’s experience back on the Board, as she was previously a trustee for a short time after privatisation. Patrick Makinson was re-nominated by ETSA Utilities as an employer appointed trustee. Lucky Poulos of Alinta Energy has joined the Board as an Alternate trustee, which means that he attends Board meetings when some other trustees are unavailable. Overall, the changes have given the Board a good mix of historical knowledge and new viewpoints. We look forward to working with the Board over the coming period.
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Jon Holbrook Mark Day Chairman of the Board Executive Officer
As at the 30 June 2012, the Board members were:
Mark Day
Patrick Makinson
Independent Chairman
Appointed by the Employers
Bob Donnelly
Kevin Taylor
Darryl Payne
Appointed by SA Unions
Paul Wight
Vicki Brown
Mark Vincent
Janette Bettcher
Appointed by members
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All Board members are required by law to follow the rules of the EISS, as well as any laws that apply. If the Board has any discretion under the rules, then it has to consider the best interests of members when applying that discretion. This is regardless of how they are appointed to the Board, so employer-appointed Board members have the same obligations as member-elected Board members. A decision of the Board requires two-thirds of the Board members to be in favour.
Training All Board members and staff undertake training to improve their knowledge and skills in areas that will be of benefit to the Scheme. The cost of this training is met by the Scheme. Some examples of the training that has been taken are: • attending the national conference of the Association of Superannuation Funds of Australia (ASFA) • ASFA workshops and lunches • A one day course on the duties and responsibilities of super fund trustees • the Company Directors’ Course run by the Australian Institute of Company Directors • One day conferences on investments, superannuation issues and Public Sector superannuation funds
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Board meeting attendance Board Member
Number of meetings held 6
Number of meetings attended 6
Janette Bettcher
6
5
Vicki Brown
3
2
Bob Donnelly
6
6
Eric Lindner
2
2
Patrick Makinson
6
5
Darryl Payne
6
4
Rachel Salkeld
3
3
Kevin Taylor
6
4
Mark Vincent
4
2
Paul Wight
6
5+1 Alternate
Mark Day
A quorum of 6 Board members was achieved at all Board meetings.
Subcommittees
Investment Subcommittee:
The Board has two Subcommittees, with the following members at 30 June 2012:
This committee oversees the Scheme’s investments, reviewing current managers as well as any possible new managers.
Mark Day
Patrick Makinson
Janette Bettcher
Corporate Governance Subcommittee This committee makes sure we have all the right controls and procedures in place, as well as reviewing the Scheme’s compliance with all regulations
Mark Day
Kevin Taylor
Paul Wight
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Who else works for your retirement? Jon, Mark, Lyndall and Karen work for the Board, and make sure that the Scheme is run in line with the Board’s decisions and policies.
Jon Holbrook Executive Officer
Mark Elliott Deputy Executive Officer
Lyndall Carpenter Operations Manager
Karen Davey Project Officer
Service providers The Board obtains specialist help and advice from the following companies and people:
Actuary & Administrator: Mercer Human Resource Consulting Pty Ltd Accountant: Sharyn Long Chartered Accountants Investment adviser: JANA Investment Advisers Pty Ltd Legal advisers: DMAW Lawyers | Mercer Legal Pty Limited Taxation adviser: KPMG Auditor: Auditor-General Insurer: MetLife Medical advisers: Dr Gary Hopkins and Dr Grant Tschirn
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Statistics
Membership Statistics
Contributions
During the year, the membership increased:
The EISS receives contributions from members (from both after tax salary and by salary sacrifice) and from employers. The total contributions received during the year were:
Division Members at 30 June 2011
2
3
4
5
Total
748
278
187
1,979
3,192
229
229
Entrants during the year Exits during the year Members at 30 June 2012
16
34
10
110
170
732
244
177
2,098
3,251
This includes members who have left their jobs, but have kept their super in the EISS. This is a fairly typical year, with the growth in Division 5 members outweighing the retirements among the older defined benefit members. The EISS also paid pensions to 180 members, who have retired and are receiving a regular income from the Scheme. A pension option is available to all members.
Employer
$52.9m
Salary Sacrifice member
$14.8m
Post tax member TOTAL
$1.7m $69.4m
The employers are paying all the contributions that the Board asks for. The Board has to aim to have enough money in the EISS to pay all benefits. This money is invested separately to the employers, and is held by the Board to pay for your retirement. There was also $3.5m rolled into the Scheme from other super funds. You can save money by combining your super, especially as you pay very little in administration fees in EISS.
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Benefits The Scheme also paid out a lot of benefits during the year, both as lump sums and pensions. The amounts were:
Lump sum benefits
$29.1m
Disability pensions
$0.2m
Retirement pensions
$8.1m
TOTAL
$37.4m
By way of comparison, during the 2010/2011 year, benefits totalling $23.4m were paid.
Member Queries Phone queries from members are handled by the Helpline (run by our administrator), and the Scheme office. The Helpline can help you on all matters, as well as provide financial advice on simple matters over the phone. They have access to the EISS administration data and can resolve most questions very quickly. The Helpline takes about 80% of all queries, and answers 90% of them on the spot. They will get help from the EISS office or the administrators (who know the EISS really well) if need be. However, if you want to talk to Jon, Mark, Lyndall or Karen just ask.
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You are also welcome to send us an email at inquiries@ electricsuper.com.au. We will try to answer it within two days, though we may need more time if it is a complicated question. Over the year, the Scheme office and the Helpline received 3,350 queries. This means that, on average, every EISS member (or their financial adviser) rang, or emailed, or wrote in about their super. This doesn’t include: • contributions (over 100,000 separate amounts were recorded) • benefit payments (170 exits from the Scheme) • outgoing calls made and letters and emails written This adds up to a lot of activity to keep your super ticking over.
Investments
Summary
Investment Philosophy
The Board aims to get the best return that it can, while keeping track of the risk that is being taken.
Background
The Board sets investment objectives and a strategy with a long-term view in mind. This strategy involves using ‘growth’ assets like shares and property as well as ‘defensive’ assets such as fixed interest and cash. The value of investments can move up and down with investment markets. We try to reduce the movements as much as we can, but we can and do get negative returns sometimes. The Board selects professional fund managers to invest the assets of the Scheme. Each manager is a specialist in the relevant investment sectors, for example Australian shares, and is selected after taking into account advice received from the Scheme’s investment adviser.
It is ultimately the Board’s responsibility to make all decisions relating to the investments of the scheme. The Scheme has a mix of defined benefit and accumulation liabilities. For accumulation liabilities, the investment risk is carried by the member. This means that if investment returns are poor, the member’s balance is directly affected. The Scheme provides a mix of investment options to allow members to choose the risk profile that best suits their circumstances. However, for defined benefit liabilities, the investment risk is carried by the employers. If returns are poor, then the employers have to contribute more to pay for the benefits. The Board has sought the employers’ views on the investment risk profile for the assets backing the defined benefit liabilities and will seek reaffirmation of employer views every five years. The pre-privatisation divisions of the Scheme provide a mixture of defined and accumulation benefits, hence the investment risk is shared between the employer and the member. Currently the majority of the liabilities are defined benefit. The sections of the Scheme providing defined benefits are closed to new members, and hence the timeframe over which these benefits will be paid is shortening.
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Board philosophy - Default and Defined Benefit Investment Pool In light of its role as custodian for assets supporting benefits for members, the Board considers it appropriate to take an approach to investing the scheme’s assets aimed at lowering investment volatility while maintaining an exposure to growth assets. The Board will diversify investments, both across asset classes and managers, within any constraints imposed by the asset size of the Scheme.
Use of gearing The Board may invest in funds that use gearing and leverage, where appropriate.
Asset Allocation The asset allocations for the Balanced Growth option (which is also where the assets supporting the defined benefits are invested) at 30 June 2011 and 30 June 2012 were
Asset class
Benchmark (%)
Asset Allocation at 30 June 2011 (%)
Asset Allocation at 30 June 2012 (%)
Manager Configuration The Board has no deliberate bias towards any style of investment management, but will select managers on their perceived ability to add investment value. Manager configuration is determined within, rather than across asset classes, having regard to:
Australian Shares
28.00%
29.0%
27.7%
Overseas Shares
23.00%
20.0%
22.6%
Property
13.00%
12.1%
12.7%
64.00%
61.1%
63.0%
• any decision reached on active vs passive management
Total Growth Assets Alternatives
16.00%
16.3%
17.5%
Australian and Overseas Fixed Interest
15.00%
15.1%
13.2%
5.00%
7.5%
6.3%
36.00%
38.9%
37.0%
• the merits of using a particular manager • the need for adequate manager diversification • the managers’ particular skills in the asset class in question
Cash Total Defensive Assets
• the ability to monitor managers effectively and efficiently
The changes in the asset allocation during the year were due to:
Use of derivatives
• different returns from the different asset classes (for example, alternatives had a good year, and shares not so good)
The Board does use foreign exchange instruments to manage the risk of fluctuations in the Australian dollar for the scheme’s overseas investments. In addition, Investment managers employed by the scheme are permitted to use futures, options and other derivative instruments in accordance with their particular Risk Management Statements. The Board expects that over the longer term the use of these instruments will enhance the returns and/or reduce the risk of the Scheme.
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• investment of contributions into overseas shares and alternatives
Objectives The investment strategy has three objectives against which the Balanced Growth Portfolio’s investment performance is measured. The objectives and the results are as follows:
Objective
Balanced Growth Portfolio Return
Objective return
Exceed the Consumer Price Index by 3% pa over rolling 5-year periods.
0.2% pa
5.8% pa
Not met
Exceed median return in the Super ratings survey over rolling 3-year periods.
6.0% pa
6.1% pa
Not met
Exceed indexed benchmark portfolio over rolling 3-year periods (before tax).
6.4% pa
5.9% pa
Met
The EISS did not meet two of its three objectives to 30 June 2012. The last 3 years have been an unusually difficult time on investment markets, with the global financial crisis affecting all assets. Unfortunately we were not immune from this, though the EISS returns have been more stable than many other funds. Recent Returns The returns from the Balanced Growth option over the last 4 years tell the story of how returns have been affected by the poor returns in 2008/09 and 2011/12.
08/09
09/10
10/11
11/12
Over Last 5 Years
Over Last 10 Years
Australian Shares (before tax)
-20.3%
13.1%
11.9%
-7.0%
-4.2%
6.94%
Overseas Shares (in $A, before tax)
-15.7%
7.3%
3.2%
0.1%
-6.1%
5.8%
EISS Balanced Growth option (after tax)
-11.8%
9.7%
8.2%
0.24%
0.2%
6.36%
Year
The investment earnings that are allocated to your account will depend on the division of the Scheme that you are in, which account you are looking at and in some cases, when you joined the Scheme. This is because each division has different rules about what is deducted from the declared rates in terms of administration fees and tax. The declared rates that apply to you are shown on your statement.
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2011/12 Financial Year – The Year in Review The financial year 2011/2012 was a tough year for investors predominantly exposed to risk assets. Markets and economies continue to struggle to escape the grip of what is now becoming a crisis entering its fifth year. The 2011/2012 financial year was the third negative year in the last five years for Australian equities, while global equities markets in aggregate barely managed to edge ahead, with both global and Australian equities behind over five years. On the flip side, defensive assets had a stellar run over the financial year as investors sought safe havens away from investments potentially exposed to an economic slowdown. The ‘risk on, risk off’ mentality of investor sentiment dominated the 2011/2012 financial year, and was reflected in the large differential between risk and defensive assets across countries, asset classes, and sectors. Whilst some commentators have, for some time now, been concerned about inflation due to the huge levels of government stimulus feeding through to higher asset prices, the reality has been that inflation measures and expectations have generally remained tepid over the year. The combination of cautious consumer spending, stubborn unemployment rates, lower global GDP growth and a subdued economic outlook have largely resulted in central banks keeping rates at low levels throughout the year. If inflation starts to take hold, central banks will face an awful predicament: the need to fight inflation, versus, the desire and political pressure to protect overgeared sectors (including households) and not subdue the prospect for economic recovery. Despite Australia’s strong fundamentals of low unemployment, low inflation, AAA credit rating and strong relative economic growth, Australia largely remains a two speed economy. For the time being, the Australian consumer appears content to save and reduce debt levels at the expense of spending. As such, the non-mining states and sectors (e.g. manufacturing) have struggled. In contrast, the mining states of Western Australia and Queensland are growing strongly driven by profits from the resources boom
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and mining capital expenditure programs which disproportionately benefit those states. Australia therefore has a continued reliance on China and other resource hungry economies to soak up demand for resources to sustain economic growth sufficient to offset a cautious consumer. If there was a key asset class which best reflected investor sentiment and economic conditions over the year, it was arguably the fixed interest asset class. Over the financial year, the bond yields of the major developed markets all contracted in response to investor demand for defensive assets. New lows in yields were reached for US 10-year Government bond yields, which fell from 3.2% pa to 1.7% pa, while UK 10-year Government bond yields fell from 3.4% pa to 1.7% pa. Within Europe, the bonds of debt laden peripheral European markets (including Greece, Portugal and Spain) sold off, with the yields on Greece 10 year bonds trading at distressed levels (20% plus yields). In contrast, and reflecting investor appetite for defensive assets, the yields on German 10-year Government bonds contracted from 2.6% to 1.3%. Australia remains one of the few developed market economies with a ‘AAA’ credit rating and with banks and investors looking for safety, Australian 10-year Government
bond yields fell from 5.2% pa to 3.0% pa. In this environment, it was unsurprising that the strongest performing investments globally were long duration government bonds and inflation linked bonds. Global credit continues to show its resilience, achieving a low double digit return over the financial year on a hedged basis. Australian shares finished the year down by 7%, whilst the MSCI World ex-Australia index on a hedged basis (in $A) just managed to reach positive territory (0.9%). Over the last 12 months, the Australian dollar fell against all major currencies but rallied strongly against the euro. This currency effect offset part of the gains for unhedged global equity investors, with the MSCI World ex-Australia index unhedged (in $A) returning 0.1% for the year. Country returns in local currency terms generally reflected risk sentiment, with Greece performing worst (-63.6%) while the US was amongst the best performing markets (+5.1%). Emerging market countries generally struggled due to concerns about the impact of a global slowdown on those emerging markets reliant on resources and manufacturing exports. Despite economic conditions deteriorating through the year, share returns for ‘quality’ companies with stable earnings and good balance sheets were strong. In terms of global stocks in the MSCI World ex-Australia universe, the defensive sectors of Consumer Staples (+13.2%) and Health Care (+10.6%) led the way while the cyclical sectors of Energy (-9.4%), Materials (-19.7%) and Industrials (-6.5%) lagged. Australia underperformed global markets due to the poor performance from the Energy (-20.1%) and Materials (-28.1%) sectors which sold off due to concerns about a slowdown for China and the consequent impact on stocks exposed to the China growth story. At the other end of the spectrum, the defensive sectors of the Australian share market, being Health Care
(+10.5%), Telecommunications (+38.3%), and Utilities (+16.7%), led the way. This was broadly consistent with the ‘risk off’ theme impacting on the broader global markets. In the Property sector, Australian Listed Property Trusts (LPTs) performed very strongly (+11%) due to investors being attracted to the sector’s high dividend yield and perceived defensive characteristics. Australian LPTs outperformed global LPTs. Australian unlisted property trusts (+8.8%) underperformed Australian LPTs, but generated a more stable return due to stable capitalisation rates and valuations generally increasing only on the back of rental increases. Despite 12 months having passed since the last annual comments were made, surprisingly little has changed. Equity markets are considered to be cheap based on forward earnings but risks are high and accordingly, investor sentiment remains cautious. Whilst the US has reported some promising economic data, namely an improvement to the housing sector, the prospect of a recovery remains clouded by an election later this year and the imminent requirement for an extension to the debt ceiling limit in late 2012 and early 2013. This, combined with concerns about the stability of the Eurozone and expectations for slower growth from this region make for a cautious outlook for the next financial year.
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JANA has compiled a summary of the key economic headlines from our monthly market summaries (shown in the table below). This table highlights why the 2011/2012 financial year was one of the most dramatic in recent memory. Month
Market Sentiment
Drivers
July
Down
A generally positive US reporting season was subsumed by concerns about the political wrangling in the US in relation to the debt ceiling and continuing fears in relation to European sovereign debt.
August
Down
Standard & Poor’s lowered its rating of US sovereign debt from AAA to AA+, while Moody’s placed the US on ‘negative watch’. Lower than expected June quarter US GDP growth figures sparked fears of a ‘double dip’ US recession.
September
Down
Continuing concerns in relation to European sovereign debt, fears of a ‘double dip’ US recession, and fears of a faster than anticipated slowdown in China. Commodities were hammered across both metals and bulk commodities.
October
Up
Markets experienced one of the largest intra-month rallies on record. A high level proposal was agreed to by Euro-zone leaders involving banks writing down Greek debt by 50% in return for the European Central Bank (ECB) pledging €1 trillion to a European bailout fund to help stabilize European financial institutions. The US reporting season got off to a good start.
November
Down
The US Budget Deficit Super Committee announced that it had failed to reach a consensus on measures to reduce the deficit, triggering automatic budget cuts from 2013. The RBA cut rates by 0.25%.
December
Flat to down
The number of US jobless benefit claims fell to a three year low. Fitch lowered its outlook on France's AAA credit rating from "stable" to "negative" and placed six other euro-zone nations, including Spain and Italy, on ratings watch. The RBA cut rates by 0.25%.
January
Up
US unemployment fell by 0.2% to 8.5% in December and the US Home Builders housing market index reached its highest level since June 2007.
February
Up
Positive US housing and unemployment data continued to support the US recovery story, driving up US stocks. Whilst China reported a fall in exports and imports for the first time in 2 years, this was countered with a 50bp cut to the Chinese banking reserve requirement ratio.
March
Up
Positive economic data continued to give weight to the US recovery story.
April
Flat to Down
The US Federal Reserve indicated that central bank rates will remain low until at least 2014, and expectations were that China will loosen monetary policy in an effort to stimulate economic growth.
May
Down
The Greek elections led to a stalemate with parties unable to agree on the forming of a government. The banking system in Spain deteriorated as large outflows of deposits led to concerns that Spanish banks would be unable to find funding at acceptable prices. The RBA cut rates by 0.50%.
June
Up
An EU(European Union) summit agreed for the EU bailout funds to provide direct capital injections to troubled banks contingent on the ECB becoming the joint EU bank supervisor from 1 January 2013. Euro leaders also agreed to apply €130b to measures aimed at jobs creation and investment in the region. The RBA cut rates by 0.25%.
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Investment Managers The Scheme used the following investment managers during the year, each of which is invested in a particular investment sector. The figures shown are the percentages of total assets invested with each manager at 30 June.
Australian Shares: Concord Capital Cooper Investors Dimensional Fund Advisors Goldman Sachs Solaris Tribeca Investment Partners Overseas Shares: Cooper Investors Marathon Macquarie JANA State Street Wellington Direct Property: AMP Dexus Lend Lease Alternatives: Aurora Investment Management Bentham GMO Macquarie Fauchier JANA Australian & Overseas Bonds: AFIF Colonial First State JANA Cash: Bank Deposits Perennial Macquarie Term Deposits
2012 9.1% 2.9%
2011 5.4% 9.7% 2.5%
4.2% 8.1%
9.2%
2.6%
2.3%
1.4% 2.9%
3.1%
1.3% 14.2%
14.7%
0.2% 1.9%
2.1%
4.6%
4.5%
4.7%
4.5%
3.3%
3.1%
2.7%
2.7%
5.4%
4.4%
2.7%
2.5%
1.0%
1.1%
2.7%
2.9%
2.7%
2.8%
5.1%
4.4%
4.2%
4.3%
3.9%
6.4% 0.7%
0.7%
5.5%
2.0%
1.2%
5.5%
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Growth
Investment options These are the options that your accounts can be invested in. These aren’t generally available for your employer defined benefit.
Defensive
Cash
Conservative Growth
Objective
Objective
This option aims to exceed the consumer price index and similarly invested funds over rolling annual periods.
This option aims to exceed the consumer price index by 2% pa over three years, and to exceed the return on its benchmark portfolio over 3 years.
Strategy
Strategy
This option is fully invested in short term fixed interest investments, and has a very conservative investment risk profile.
This option is around 30% invested in growth investments, and hence has a moderately conservative investment risk profile.
Investment Risk
Investment Risk
Generally a secure way to invest. However cash investments tend to earn the lowest rate of return in the longer term.
Conservative investment strategy with expected stable, but low returns.
Investment Timeframe: No minimum timeframe. Risk Profile Very low; not likely to have a negative return. This option is most suited to Members seeking to minimise their investment risk over the short term. Management Fees 0% (deducted from the returns credited to your account).
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Defensive
Investment Timeframe: 1-3 years. Risk Profile Low; the chance of a negative return is 2 in 20 years and returns are not expected to show large swings. This option is most suited to Members who prefer stable but moderate returns over the short to medium term. Management Fees 0.4% (deducted from the returns credited to your account).
Defensive Growth
High Growth
Balanced Growth
High Growth
Objective
Objective
This option aims to exceed the consumer price index by 3% pa over five years, and to exceed the return on its benchmark portfolio over three years.
This option aims to exceed the consumer price index by 4% pa over five years, and to exceed the return on its benchmark portfolio over five years.
Strategy
Strategy
This option is around 70% invested in Growth assets, and hence has a moderately aggressive investment risk profile.
This option is fully invested in growth investments, and has a very aggressive investment risk profile.
Investment Risk This option follows an investment strategy which has a balance of risk and return. Investment Timeframe: 5 years(minimum) Risk Profile High; the chance of a negative return is 5 in 20 years and returns may show large swings in the short term. This option is most suited to Members who want reasonable medium term returns and can put up with large variations in the short term. Management Fees 0.7% (deducted from the returns credited to your account)
Investment Risk This option has more volatility than the Balanced Growth option and is designed to produce higher return over the long run. However the increased variation in returns is also likely to produce the occasional negative return. Investment Timeframe: 5 to 7 years (or more). Risk Profile High; the chance of a negative return is 6 in 20 years and returns may show large swings in the short term. This option is most suited to Members who want higher returns in the long term and can put up with large variations in the short term. Management Fees 0.8% (deducted from the returns credited to your account).
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What more do you need to know?
What are the benefits?
Account-based Pensions
Scheme members belong to one of five sub-Schemes.
Lump sum benefits can be transferred to an account-based pension on retirement.
Open to new members
Insurance Benefits
The Accumulation Scheme (Division 5) Provides benefits based on contributions plus investment earnings. Members can choose the level of their insurance cover.
All members are eligible for benefits on death or disability, that can help you or your dependants if anything goes wrong. The Scheme office can help if you have any questions. More information can be found in your member booklet.
Closed sub-Schemes
What do members contribute?
The Lump Sum Scheme (Division 2)
The level of member contributions is flexible. Generally, members can choose any multiple of 1.5% of salary. Members can also choose to temporarily stop contributing.
Provides lump sum benefits based on both investment earnings and salary levels.
The Pension Scheme (Division 3) Provides lifetime pensions based on final salary and indexed with CPI. A lump sum may be paid on voluntary separation or retrenchment. Provident Account A (also part of Division 3) provides lump sum benefits based on investment earnings.
The RG Scheme (Division 4) Provides lump sum benefits based on both investment earnings and salary levels.
Full benefits from Divisions 2, 3 and 4 are achieved by contributing, on average, the standard contribution rate. This is, generally, 6% of salary, but can be between 5% and 6% in Division 3. Any voluntary contributions (AVCs) are returned to you with interest in addition to the other benefits. Division 5 members are not required to contribute, but may make contributions if they wish. Contributions are deducted from members’ salaries each pay day. The Scheme is also able to accept salary-sacrifice member contributions. These contributions are made from members’ salaries before income tax is paid. However, not all employment arrangements allow salary-sacrifice - members need to check with their employer. Contributions can also be made for a member’s spouse, which may have tax advantages.
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How are the benefits paid for? The money to pay for benefits comes from member contributions, employer contributions and investment earnings. Member contributions are set by the member according to their wishes. Employer contributions are set by the Board after receiving advice on the amounts required to pay for the benefits. Employers are required to pay contributions under the Rules of the EISS. These contributions are monitored by an independent actuary (an expert in these matters). The actuary projects the likely benefit payments, salary growth and investment returns to estimate employer contributions, and reviews this annually or as required.
What insurance does the Scheme have? The Board takes out insurance against the death and invalidity of Scheme members to protect the Scheme against those risks. Also the Scheme pays for insurance to protect the Board and the Scheme against the financial effects of any “honest mistakes” that might occur in the running of the Scheme.
How is personal information handled? The Scheme holds personal information about members, such as name, address, date of birth, salary, tax file number and so on in order to provide member super benefits. Members should realise that this personal information may be disclosed, when necessary, to the Scheme Administrator and professional advisers, insurers, Government bodies, employers and other parties. The Board has adopted a Privacy Policy that sets out in more detail the way members’ personal
information is handled. For a copy of the Privacy Policy please contact the Scheme’s Privacy Officer on 1300 307 844 or fax (08) 8100 9974 or email inquiries@ electricsuper.com.au.
Minimum Benefits All benefits paid from the Scheme are checked to make sure that they are at least equal to the minimum required under the Superannuation Guarantee legislation. Members will always receive their mandatory 9%. However, this is a minimum, not in addition to other benefits. Generally in Division 2, 3 and 4 benefits are worth a lot more than 9% of salary.
What Information Is available To Members? The first stop for information on the Scheme should be the website at www.eiss.superfacts.com Current information available to members includes: • Annual Member Statements • Annual Reports to Members • Member’s Booklets. Members are also entitled to access the Scheme Rules, the Annual Report to the Treasurer (which includes the full statistics, financial statements and the auditor’s reports), the actuary’s reports and the investment policy statement. Information sheets and brochures are available on a number of subjects. The Board is currently updating both the Member Booklets and the information sheets.
What do you do if you have questions or concerns?
Contact us. We can’t answer or fix what we don’t know about. Phone 1300 307 844 Fax (08) 8100 9974 Email inquiries@electricsuper.com.au Web www.eiss.superfacts.com Address Level 7, 99 Gawler Place, Adelaide SA 5000 Postal Address GPO Box 4303, Melbourne VIC 3001 Please note that the EISS office is unattended at times. If you wish to discuss something with us, please ring first. We may be able to sort it out over the phone. If not, we can make an appointment for a face-to-face chat. We can organise workplace or home visits if needed.
The Board also issues newsletters to keep members up-to-date. If members would like to receive any of these documents, or need more information about the Scheme or benefits, please refer to the Scheme’s website. If you can’t find what you need there, please contact the Scheme Office.
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How Do You Make A Complaint? Most queries and problems can be sorted out over the phone. We aim to get back to you within 2 working days (though it may be to ask for more time). We are happy to provide a written response if you want one via email or letter. If you are not satisfied with the response to a query you have made to the Scheme, you need to send complaints (in writing) to: The Complaints Officer Electricity Industry Superannuation Scheme Level 7, 99 Gawler Place, ADELAIDE SA 5000 The Board will examine all written complaints within 5 weeks of receipt and make a decision within 90 days. Please be assured that all written complaints will be passed to the Board. Complaints not dealt with to your satisfaction can be referred to the Superannuation Complaints Tribunal (SCT). The SCT is the government body created to resolve disputes in the superannuation industry, and can be contacted on 1300 780 808.
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Financial Details The tables below summarise the Scheme’s main financial transactions for the year ended 30 June 2012. The audit of the Scheme is expected to be completed in October 2012 and no qualifications are expected to be imposed by the auditor.
Change In Net Assets Over The Year
$'000 Net market value of assets available to pay benefits as at 1 July 2011 PLUS Income Member contributions Employer contributions Transfers from other funds Net investment income Other income TOTAL
762,102
1,657 67,782 3,584 2,066 573
75,662
LESS Expenditure Benefits paid, etc Insurance premiums Other expenses Taxation TOTAL
37,380 1,022 2,225 6,623
47,250
EQUALS Net market value of assets available to pay benefits as at 30 June 2012
790,514
Balance Sheet
Assets Investments Other assets
763,202
TOTAL
792,450
29,248
LESS Current Liabilities Benefits payable Other liabilities
1,936
TOTAL
1,936
0
EQUALS Accumulated funds as at 30 June 2012
790,514
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contacting the scheme web // www.eiss.superfacts.com
email // inquiries@ electricsuper.com.au
fax // 08 8100 9974
phone // 1300 307 844
postal address // GPO Box 4303, Melbourne VIC 3001
street address // Level 7, 99 Gawler Place, Adelaide SA 5000