Investment choice guide

Transcription

1 Investment choice guide Date prepared: 9 February 2018 Date issued: 5 March 2018 The information in this document forms part of the Accumulation account Product Disclosure Statement, Date prepared: 28 September This guide also forms Part 2 of the Pension accounts Product Disclosure Statement, Date prepared: 26 June This document has been prepared and issued by LGIAsuper Trustee (ABN AFS Licence No ) ATF LGIAsuper (ABN )

2 Contents About this guide 2 Investment basics 3 LGIAsuper s investment options 6 Making your choice 14 Fees and other costs 16 Investment switch form Investment switch form Pension accounts Contact LGIAsuper on or visit our website at lgiasuper.com.au if you would like any further information. SuperRatings does not issue, sell, guarantee or underwrite this product. Go to for details of its ratings criteria.

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4 About this guide Super is one of the best ways to save for your retirement. Your super is likely to be one of the biggest assets you ll ever own, so it makes sense to get closer to it. By understanding how super works and reviewing your retirement plans regularly, you ll have the best chance of making sure you ve got enough super to fund a comfortable retirement. Take the time to read this guide. You ll read about the basics of investing and learn how our wide range of investment options can help build your retirement savings. Trusted and reliable service you can count on Talk with us in person. Ask questions and learn more about your super. Phone or visit us for advice about your super options. Speak with someone who cares about you and understands super lgiasuper.com.au Here s what s in this guide: Investment basics (page 3) Learn the basic principles of investing (including risk and return) and about the different asset classes. LGIAsuper s investment options (page 6) Understand the investment options LGIAsuper offers and how they can help you grow your super. Making your choice (page 14) If you want to make a change, see this section for how to go about it. Fees and other costs (page 16) Compare fees across our range of investment options. LGIAsuper is run only to profit members, so we keep them low. Investment switch forms (attachment) To make a change, simply complete the form for your account type and return it to us. Or you can go to our website and switch online. Page 2

5 Investment basics Informed decisions are the best ones you ll make. Getting to know a few basic investment principles will help you understand your options so you can make better investment choices. Identify your goals and start planning For most people superannuation is a long term investment. That s because you are generally unable to access your money until you retire after reaching your preservation age (at least age 55, but up to age 60 depending on when you were born). Even if retirement is just around the corner your super investment may need to last 20 to 30 years or more after that. Identifying your needs, retirement goals and how long you have to achieve them is fundamental to a successful retirement plan and will help you when choosing an investment strategy. These questions are also worth considering: how much super do you have? how much super do you need (in today s dollars) to generate your desired retirement income? how many years do you have to save? How much you have in retirement and how long it lasts depends on the amount of money you and your employer put into super and how much that money earns through investment returns. Investing for long periods generally means you can afford to take more risk and potentially benefit from higher investment returns. If your timeframe is shorter you might need to reduce your risk and receive lower returns. Understand risk and return Super, like all investments, carries some risk. Most people are aware that there is the possibility of losing some of your money when sharemarkets decline, or when currency exchange rates or interest rates change. But there is another risk the risk that the value of your investment won t keep up with inflation and will lose purchasing power over time. Investment options with higher proportions invested in growth assets, such as shares and property, generally provide higher returns that outpace inflation over the long term than those with more invested in defensive assets like cash or fixed interest. In return for higher investment earnings though, you have a higher short-term risk of loss, as these investments regularly rise and fall in value. Other risks of investing in super include: legislative. Governments might change or introduce new legislation. This could affect your account balance, access to super or its tax treatment in a positive or negative way. economic or political. If countries or regions experience political change, economic crisis or war your account balance may be affected. significant overall market declines. The entire market could decline at the same time not just one or two asset classes. This could affect your account balance. security. One specific investment, such as shares in a particular company, could experience a major drop in value. This risk is controlled through diversification of investments. opportunity. By making one investment, you could be missing out on another investment with better opportunities for growth. timing. If you switch investment option/s just as markets peak or fall it could negatively or positively affect your account balance. Diversification is key The key to investing is to avoid putting all your eggs in one basket. Also known as diversification, spreading your money across different investments reduces the overall risk of your portfolio. That s because if one investment falls in value, other investments that are performing well over the same period could make up or exceed that loss. There are many ways to diversify, including across asset classes, investments within an asset class, or among investment managers or countries. We explain more about asset classes over the page. Page X3

6 Our investment philosophy LGIAsuper s aim is to protect our members super balances, while providing consistently optimised returns. That means we want your investment to grow when markets are performing strongly, and protect your balance when markets start to fall. We place great value on diversification, which means not having all your eggs in the one basket. To achieve this, we spread your money across a number of different asset classes to reduce the level of risk. Asset classes Traditionally, investments have been classed as either growth assets or defensive assets. Growth assets like shares and property tend to rise in value over time. Defensive assets like cash and fixed interest pay regular income. At LGIAsuper, we believe many of the assets in our fund can have both characteristics. For example, we see property, alternatives and infrastructure as having features of both growth and defensive assets. The combination of these growth and defensive features gives members the opportunity to grow their super in a rising market, while providing a degree of protection in poorly performing markets. Depending on the investment option you choose, your super will be invested across a range of asset classes, including cash, fixed interest, shares, property, infrastructure and alternative investments. Cash Cash is money held on deposit with a bank or in moneymarket securities. Cash is highly secure and usually available at call. Returns from cash are typically lower than from other asset classes. Returns from cash come from interest paid on the deposit. Cash is suited to those investing for a short period of time or those seeking a high level of security. Over time, returns from cash may not keep pace with inflation resulting in a loss of purchasing power. Fixed interest Fixed interest investments pay regular interest and mature on a specified date. They include government and corporate bonds and debentures. Fixed interest is secure if held until maturity when the full face value is payable, but there is the potential for shortterm changes in value due to the movement of market interest rates. They offer a higher level of security than shares and property, but provide a lower return over the long term. Shares When you buy shares, also known as stocks or equities, you are buying part of a company. Publicly listed shares are traded on stock exchanges like the Australian Securities Exchange (ASX). When you own a share you have the right to receive part of the company s profits, paid as a dividend. Usually, the company reinvests some of its profits back into the business, so over time the increased value of the company may result in a higher share price. Australian shares are listed on stock exchanges such as the ASX and include companies like Westpac, Woolworths and Telstra. International shares are companies listed on foreign stock exchanges like the New York Stock Exchange (NYSE). International shares include companies like Apple, Toyota and Facebook. Shares provide the potential for higher returns than other asset classes, although they carry more risk. This is because shares are volatile, which means the share price can move up and down over the short to medium term. Property Property, such as offices, shops and factories, can provide returns from both income and capital growth. Property may be listed on a stock exchange, such as listed property trusts, or owned directly. Much of the return from property comes from rental income, although well-located property can be expected to rise in value over the longer term, providing some capital growth. Historically, property has provided higher returns than defensive investments like fixed interest, but lower returns than shares. Infrastructure Infrastructure investments, such as roads, railways and airports, are the building blocks which keep an economy running smoothly. They can be attractive investments as they usually have long operating lives, generate a growing stream of income, and in most cases have little competition. The long-term nature of most infrastructure assets means they can be less volatile than other growth assets like shares and property. Alternative assets The managers of alternative assets seek to provide returns superior to those available from traditional asset classes. They include hedge funds, venture capital investments, private equity and private credit. Alternative asset managers may use complex investment strategies like short selling, derivatives trading or provision of funding to start-up companies. They generally carry higher risk than the traditional asset classes, and are often used to add diversification to a portfolio or provide a hedge against adverse market movements. Page 4

7 It s important to understand the relationship between risk and return. This chart shows you the highest, average and lowest returns for each key asset class over a 20-year period to 30 June Asset class highs and lows 7 30% 20% 10% 0% -10% -20% -30% Australian shares 1 International shares 2 Australian fixed interest 3 This graph shows you how $50,000 invested in 1997 in key asset classes would have grown over a 20-year period. Australian shares 1 International fixed interest 4 International shares 2 Cash 5 Australian Bonds 3 CPI 6 Long-term growth for each asset class 7 $300,000 $250,000 $200,000 $150,000 $100,000 International Cash 5 CPI 6 fixed interest 4 Max Avg Min Our COR Investment DNA (Consistent Optimised Returns) LGIAsuper s investment methodology is built around selecting investments that have a stable performance COR DNA. Each of our key investment options is a diversified mix of investments which include varying levels of this COR DNA. It s this COR DNA, combined with our size and philosophy, which has allowed us to deliver the reliable and trusted performance we have, even through the Global Financial Crisis 2008/09. Having over $11 billion under management delivers a powerful investment capability to our members. It gives us access to a global network of specialist advisors and allows us to take direct ownership in tangible assets that deliver consistent optimised returns. They may be property, infrastructure or specialised financial assets, but they have important features that allow them to deliver consistently over the long-term, like: Insulated from the volatility of the sharemarket Innovative direct investments that have unique qualities like infrastructure with a monopoly (gas pipelines in Europe and North America) Material stake in direct ownership, for example our 25% stake in the Sunshine Coast airport $50,000 $ Financial year ended 1 Australian shares: S&PASX 300 Accumulation Index 2 International shares: MSCI ACWI ex Australia (local currency) 3 Australian fixed interest: UBSA Composite Bond Index (all maturities) 4 International fixed interest: Citigroup WGBI Hedged AUD 5 Cash: UBSA Bank Bill Index 6 CPI: Australian Bureau of Statistics 7 Past performance is not an indication of future performance Page 5

8 LGIAsuper s investment options MySuper Lifecycle option As part of the Australian Government s Stronger Super reforms, super funds must offer a MySuper default superannuation product for members who do not make an investment choice. A MySuper product must be simple, low-cost and meet certain legislative requirement. Our MySuper product is called the LGIAsuper MySuper Lifecycle option. Like our other ready-made options on pages 8 and 9, this option is diversified across asset classes. It invests more in growth assets and aims to achieve higher returns while you are under age 75, before investing more conservatively from your 75th birthday. The chart below shows the investment objective and level of risk for each lifecycle stage. The MySuper Lifecycle option is the default option for LGIAsuper members who have an Accumulation account. Who can invest in LGIAsuper s MySuper Lifecycle option? All members with an Accumulation account can choose to have part or all their money invested in this option. You are unable to invest in this option if you are a member with a: Pension account (please read Different default arrangements for members with a Pension account) Defined benefit (the MySuper Lifecycle option is not available for the accumulation component of your super) Different default arrangements for pension members Pension account members have different default arrangements. If you do not make an investment choice your money is invested in the Diversified Growth option (if you are under age 75) or the Balanced option (if you are age 75 and over). See page 8 and 9 for information about these options. If you have not previously made an investment choice, we will write to you just before your 75th birthday to let you know we will be changing your investment option to Balanced. If you don t want this to take place you can tell us at that time. On death LGIAsuper will move your benefit to the Cash investment option (see page 11) on notification of your death (excludes pensioners who have chosen a reversionary beneficiary). We do this to protect the benefit from potential negative investment returns until we can pay it to your beneficiary or beneficiaries. The insurance component of your total and permanent disablement (TPD) benefit is also invested in the Cash option. Page 6

9 How is the MySuper Lifecycle option invested? The MySuper Lifecycle option aims for higher returns while you are under age 75, before investing more conservatively from your 75th birthday. LGIAsuper MySuper Lifecycle Under 75 Actual asset allocation at 30 June plus Actual asset allocation at 30 June 2017 Australian shares 15% Australian shares 10% International shares 38% International shares 24% Property 13% Property 13% Infrastructure 8% Infrastructure 8% Alternatives 12% Alternatives 8% Diversified fixed interest 9% Diversified fixed interest 29% Cash 5% Cash 8% Review each of our investment options Continue reading this section to take a closer look at all our ready-made options, to find out more about the single asset class options we offer (if you re DIY inclined and prefer to build your own investment mix), or to learn more about our socially responsible investment options. We give you a wide range of investment choices so there s bound to be an option or combination of options to suit you. Strategic asset allocation and ranges SAA % Ranges % Australian shares International shares Property Infrastructure Alternatives Diversified fixed interest Cash Growth assets 75.0% Defensive assets 25.0% Return target 1 Return target of 3% per year above inflation after fees and taxes over the next ten financial years. Future returns cannot be guaranteed. This is a prediction. Strategic asset allocation and ranges SAA % Ranges % Australian shares International shares Property Infrastructure Alternatives Diversified fixed interest Cash Growth assets 55.0% Defensive assets 45.0% Return target 1 Return target of 2.5% per year above inflation after fees and taxes over the next ten financial years. Future returns cannot be guaranteed. This is a prediction. Risk High Risk High low high low high Negative returns expected 5.2 out of 20 years Negative returns expected 4.3 out of 20 years Returns Past performance is not an indicator of future performance. Returns Past performance is not an indicator of future performance. At 30 June Accumulation acc % At 30 June Accumulation acc % % % % % % 5-yr avg (% ) 9.49% 5 Year excess over CPI 7.46% % % % % % 5-yr avg (% ) 7.57% 5 Year excess over CPI 5.54% 1 Investment markets are uncertain. LGIAsuper sets investment objectives for the investment options and expects to meet or exceed these between half and two thirds of the time. Page 7

10 LGIAsuper s investment options (cont.) Ready-made options These options are diversified across a mix of asset classes and each is designed to suit a particular type of investor. Aggressive Actual asset allocation at 30 June 2017 Diversified Growth Actual asset allocation at 30 June 2017 Australian shares 20% Australian shares 15% International shares 51% International shares 38% Property 13% Property 13% Infrastructure 8% Infrastructure 8% Alternatives 8% Alternatives 12% Diversified fixed interest 0% Diversified fixed interest 9% Cash 0% Cash 5% lgiasuper.com.au Get the latest earning rates and final returns for the year from the Investments section of our website. Strategic asset allocation and ranges SAA % Ranges % Australian shares International shares Property Infrastructure Alternatives Diversified fixed interest Cash Growth assets 88.0% Defensive assets 12.0% Return target 1 Return target of 3.5% per year above inflation over rolling 5-year periods. Strategic asset allocation and ranges SAA % Ranges % Australian shares International shares Property Infrastructure Alternatives Diversified fixed interest Cash Growth assets 75.0% Defensive assets 25.0% Return target 1 Return target of 3% per year above inflation over rolling 5-year periods. Risk High Risk High low high low high Negative returns expected 5.8 out of 20 years Negative returns expected 5.2 out of 20 years Returns Past performance is not an indicator of future performance. Returns Past performance is not an indicator of future performance. At 30 June Accumulation acc % Pension acc % At 30 June Accumulation acc % Pension acc % % 14.18% % 2.59% % 10.92% % 16.78% % 19.35% 5-yr avg (% ) 11.46% 12.61% % 11.45% % 3.64% % 9.29% % 13.89% % 15.21% 5-yr avg (% ) 9.49% 10.62% 5 Year excess over CPI 9.43% 10.58% 5 Year excess over CPI 7.46% 8.59% 1 Investment markets are uncertain. LGIAsuper sets investment objectives for the investment options and expects to meet or exceed these between half and two thirds of the time. Page 8

11 Balanced Stable Defensive Actual asset allocation at 30 June 2017 Australian shares 10% International shares 24% Property 13% Infrastructure 8% Alternatives 8% Diversified fixed interest 29% Cash 8% Actual asset allocation at 30 June 2017 Actual asset allocation at 30 June 2017 Australian shares 5% Australian shares 3% International shares 13% International shares 6% Property 13% Property 7% Infrastructure 4% Infrastructure 4% Alternatives 5% Alternatives 3% Diversified fixed interest 32% Diversified fixed interest 40% Cash 28% Cash 37% Strategic asset allocation and ranges SAA % Ranges % Australian shares International shares Property Infrastructure Alternatives Diversified fixed interest Cash Growth assets 55.0% Defensive assets 45.0% Return target 1 Return target of 2.5% per year above inflation over rolling 5-year periods. Strategic asset allocation and ranges SAA % Ranges % Australian shares International shares Property Infrastructure Alternatives Diversified fixed interest Cash Growth assets 35.0% Defensive assets 65.0% Return target 1 Return target of 1.5% per year above inflation over rolling 5-year periods. Strategic asset allocation and ranges SAA % Ranges % Australian shares International shares Property Infrastructure Alternatives Diversified fixed interest Cash Growth assets 20.0% Defensive assets 80.0% Return target 1 Return target of 1.0% per year above inflation over rolling 5-year periods. Risk High Risk Medium to high Risk Low to medium low high low high low high Negative returns expected 4.3 out of 20 years Returns Past performance is not an indicator of future performance. Negative returns expected 3.0 out of 20 years Returns Past performance is not an indicator of future performance. Negative returns expected 1.9 out of 20 years Returns Past performance is not an indicator of future performance. At 30 June Accumulation acc % Pension acc % At 30 June Accumulation acc % Pension acc % At 30 June Accumulation acc % Pension acc % % 7.98% % 4.68% % 7.81% % 11.14% % 11.12% 5-yr avg (% ) 7.57% 8.52% % 5.41% % 4.78% % 6.19% % 8.31% % 8.05% 5-yr avg (% ) 5.73% 6.54% % 3.30% % 4.42% % 4.89% % 6.53% % 5.61% 5-yr avg (% ) 4.25% 4.94% 5 Year excess over CPI 5.54% 6.49% 5 Year excess over CPI 3.70% 4.51% 5 Year excess over CPI 2.22% 2.91% 1 Investment markets are uncertain. LGIAsuper sets investment objectives for the investment options and expects to meet or exceed these between half and two thirds of the time. Page 9

12 LGIAsuper s investment options (cont.) Single asset class options These options can be mixed and matched to build your own investment strategy. International Shares Actual asset allocation at 30 June 2017 Australian shares 0% International shares 100% Property 0% Infrastructure 0% Alternatives 0% Diversified fixed interest 0% Cash 0% Australian Shares Actual asset allocation at 30 June 2017 Australian shares 100% International shares 0% Property 0% Infrastructure 0% Alternatives 0% Diversified fixed interest 0% Cash 0% Strategic asset allocation and ranges SAA % Ranges % Australian shares 0.0 n/a International shares n/a Strategic asset allocation and ranges SAA % Ranges % Australian shares n/a International shares 0.0 n/a lgiasuper.com.au Get the latest earning rates and final returns for the year from the Investments section of our website. Property 0.0 n/a Infrastructure 0.0 n/a Alternatives 0.0 n/a Diversified fixed interest 0.0 n/a Cash 0.0 n/a Growth assets 100.0% Defensive assets 0.0% Property 0.0 n/a Infrastructure 0.0 n/a Alternatives 0.0 n/a Diversified fixed interest 0.0 n/a Cash 0.0 n/a Growth assets 100.0% Defensive assets 0.0% Return target 1 Return target is to outperform a composite index of international shares over rolling 5-year periods. Return target 1 Return target is to outperform a composite index of Australian shares over rolling 5-year periods. Risk Very high Risk Very high low high low high Negative returns expected 6.7 out of 20 years Returns Past performance is not an indicator of future performance. Negative returns expected 7.8 out of 20 years Returns Past performance is not an indicator of future performance. At 30 June Accumulation acc % Pension acc % At 30 June Accumulation acc % Pension acc % % 20.05% % -1.21% % 19.57% % 20.10% % 29.91% 5-yr avg (% ) 15.26% 17.21% % 10.31% % 1.02% % 3.59% % 16.28% % 16.69% 5-yr avg (% ) 8.91% 9.39% 5 Year excess over CPI 13.23% 15.18% 5 Year excess over CPI 6.88% 7.36% 1 Investment markets are uncertain. LGIAsuper sets investment objectives for the investment options and expects to meet or exceed these between half and two thirds of the time. Page 10 X

13 Property Diversified Fixed Interest Cash Actual asset allocation at 30 June 2017 Actual asset allocation at 30 June 2017 Australian shares 0% Australian shares 0% International shares 0% International shares 0% Property 100% Property 0% Infrastructure 0% Infrastructure 0% Alternatives 0% Alternatives 0% Diversified fixed interest 0% Diversified fixed interest 100% Cash 0% Cash 0% Actual asset allocation at 30 June 2017 Australian shares 0% International shares 0% Property 0% Infrastructure 0% Alternatives 0% Diversified fixed interest 0% Cash 100% Strategic asset allocation and ranges SAA % Ranges % Australian shares 0.0 n/a International shares 0.0 n/a Property n/a Infrastructure 0.0 n/a Alternatives 0.0 n/a Diversified fixed interest 0.0 n/a Cash 0.0 n/a Growth assets 100.0% Defensive assets 0.0% Return target 1 Return target of 3.5% per year above inflation over rolling 5-year periods. Strategic asset allocation and ranges SAA % Ranges % Australian shares 0.0 n/a International shares 0.0 n/a Property 0.0 n/a Infrastructure 0.0 n/a Alternatives 0.0 n/a Diversified fixed interest n/a Cash 0.0 n/a Growth assets 0.0% Defensive assets 100.0% Return target 1 Return target is to outperform a composite index of Australian and international fixed interest over rolling 5-year periods. Strategic asset allocation and ranges SAA % Ranges % Australian shares 0.0 n/a International shares 0.0 n/a Property 0.0 n/a Infrastructure 0.0 n/a Alternatives 0.0 n/a Diversified fixed interest 0.0 n/a Cash n/a Growth assets 0.0% Defensive assets 100.0% Return target 1 Return target is the RBA official cash rate over rolling 5-year periods. Risk High Risk Medium to high Risk Very low low high low high low high Negative returns expected 4.8 out of 20 years Returns Past performance is not an indicator of future performance. Negative returns expected 3.6 out of 20 years Returns Past performance is not an indicator of future performance. Negative returns expected 0.0 out of 20 years Returns Past performance is not an indicator of future performance. At 30 June Accumulation acc % Pension acc % At 30 June Accumulation acc % Pension acc % At 30 June Accumulation acc % Pension acc % % 7.82% % 13.99% % 11.05% % 10.12% % 11.69% 5-yr avg (% ) 9.66% 10.91% % 0.98% % 5.20% % 4.31% % 6.08% % 2.83% 5-yr avg (% ) 3.25% 3.86% % 2.06% % 2.08% % 2.49% % 2.95% % 3.78% 5-yr avg (% ) 2.24% 2.67% 5 Year excess over CPI 7.63% 8.88% 5 Year excess over CPI 1.22% 1.83% 5 Year excess over CPI 0.21% 0.64% 1 Investment markets are uncertain. LGIAsuper sets investment objectives for the investment options and expects to meet or exceed these between half and two thirds of the time. Page X11

14 LGIAsuper s investment options (cont.) Socially responsible options The only options to take into account socially responsible or ethical criteria. See Socially responsible options on page 13 for more information on criteria used. SR Balanced Actual asset allocation at 30 June 2017 SR Australian Shares Actual asset allocation at 30 June 2017 Australian shares 36% Australian shares 100% International shares 26% International shares 0% Property 11% Property 0% Infrastructure 0% Infrastructure 0% Alternatives 1% Alternatives 0% Diversified fixed interest 23% Diversified fixed interest 0% Cash 3% Cash 0% lgiasuper.com.au Get the latest earning rates and final returns for the year from the Investments section of our website. Strategic asset allocation and ranges SAA % Ranges % Australian shares International shares Property Infrastructure Alternatives Diversified fixed interest Cash Growth assets 70.0% Defensive assets 30.0% Return target 1 Return target of 3.0% per year above inflation over rolling 5-year periods. Strategic asset allocation and ranges SAA % Ranges % Australian shares n/a International shares 0.0 n/a Property 0.0 n/a Infrastructure 0.0 n/a Alternatives 0.0 n/a Diversified fixed interest 0.0 n/a Cash 0.0 n/a Growth assets 100.0% Defensive assets 0.0% Return target 1 Return target is to outperform a composite index of Australian shares over rolling 5-year periods. Risk High Risk Very high low high low high Negative returns expected 4.8 out of 20 years Negative returns expected 7.8 out of 20 years Returns Past performance is not an indicator of future performance. Returns Past performance is not an indicator of future performance. At 30 June Accumulation acc % Pension acc % At 30 June Accumulation acc % Pension acc % % 8.40% % 0.79% % 9.79% % 12.97% % 18.50% 5-yr avg (% ) 8.95% 9.93% % 10.50% % 1.88% % 8.24% % 16.69% % 30.39% 5-yr avg (% ) 12.56% 13.14% 5 Year excess over CPI 6.92% 7.90% 5 Year excess over CPI 10.53% 11.11% 1 Investment markets are uncertain. LGIAsuper sets investment objectives for the investment options and expects to meet or exceed these between half and two thirds of the time. Page 12

15 Our approach to ethical investments LGIAsuper s investment philosophy is primarily focused on generating investment returns and managing risk. LGIAsuper does not believe it is appropriate to limit the types of investments it can consider based on its ethical views. Instead, LGIAsuper offers you two dedicated socially responsible investment options so that you can make your own investment decision. LGIAsuper recognises that environmental, social and governance factors can potentially have a positive impact on investment returns and/or investment risk over the long term. However, we do not believe the additional cost and complexity of including these considerations as a major input into the setting or implementation of the investment strategy can be justified, particularly for passively managed investments. LGIAsuper s asset consultant will consider environmental, social and governance factors in its fund manager ratings to the extent that these factors influence the risk and return objectives. Socially responsible options The two socially responsible options, SR Balanced and SR Australian Shares, are the only investment options to take into account labour standards or environmental, social or ethical considerations when making investment decisions. LGIAsuper requires investment managers to make share investments that screen out companies or sectors, or support industries, taking into account: environmental grounds, for example, energy and resource use social considerations such as indigenous relations and community involvement ethical considerations, including meeting fundamental human rights and articulating and implementing a Code of Conduct labour standards, for example, occupational health and safety, International Labour Organisation standards, working considerations and the exclusion of child labour governance considerations, such as meeting corporate governance guidelines on board structures and remuneration avoiding investments in companies that operate in sectors with recognised high negative social impact, including companies that derive a significant portion of their total revenue from the production or manufacture of alcohol, armaments, gambling, pornography, tobacco and uranium For more detailed information on the socially responsible options, please contact us on LGIAsuper may select investment managers that apply these considerations to other asset classes, such as property, or investment managers that apply socially responsible considerations in addition to the environmental, social and governance considerations outlined above. Page 13

16 Making your choice If you are ready to make an investment choice, this section gives you more detail on how you can put your choice into action and the rules that apply. You may want to seek financial advice when making your decision. Have you considered the likely investment return of your chosen investment option/s? the level of risk you are taking? how long you are investing for? if you re selecting more than one investment option, the overall asset allocation and risk profile the combination of options will produce? It s important to review your investment strategy regularly, especially if you select more than one investment option. LGIAsuper will not automatically rebalance your investment and the different options you have will grow at different earning rates, with different levels of volatility. lgiasuper.com.au Get the latest earning rates from the Investments section of our website. How do I switch? Online To review your investments or change how your super is invested without the need to complete and return documents, log in to Member online at lgiasuper.com.au. If you are not registered for Member online, simply go to the website, choose Member login at the top of the page and then Register. You ll need your member number. On paper Simply complete the Investment switch form or Investment switch form Pension accounts at the back of this guide and return it to us. Can I choose more than one investment option? Yes, however LGIAsuper will not automatically rebalance your investment and the different options you have will grow at different earning rates, with different levels of volatility. With that in mind, you will need to review your investment strategy regularly. Can I choose how my future contributions and transfers from other super funds will be invested? Yes, however when making your decision, you should consider the overall asset allocation the combination of options you choose will produce. It s important to review your investment strategy regularly, as LGIAsuper will not automatically rebalance your investment and the different options you have will grow at different earning rates, with different levels of volatility. How often can I switch? You can switch investment options as many times as you wish during the financial year. Only one investment switch will be accepted for an account on any given day. LGIAsuper reserves the right to limit the number of investment switch requests received from a member where the number submitted is considered unreasonable. Remember that super is generally a long-term investment, and by changing investment options often you might reduce your overall investment return. There is no fee to switch between investment options. Page 14

17 When will my switch take effect? If we receive your completed form or online switch by 5pm on a business day, your switch will take effect from the next business day after we receive your instructions. A business day is defined as a day between Monday and Friday which is not an Australian national public holiday. Processing withdrawals and/or switches may be suspended for up to 7 days or longer during periods of significant market volatility or other conditions that prevent LGIAsuper from determining earning rates. See the About Earning Rates section for details on how earning rates work. Can I cancel my switch? If you change your mind, your switch can be cancelled as long as we receive your cancellation by 5pm on the day your instruction was submitted. Online switch: if you have made an investment switch online you can cancel your switch directly through Member online. Paper switch: if you completed an Investment switch form, you should cancel your switch in writing (by fax, or post). Example LGIAsuper receives a completed Investment switch form: Before 5pm Monday. We work out your balance for changing your option/s on the effective date Tuesday. You will start earning returns on your new investment option/s from Tuesday. To cancel a switch received on Monday, we would need to receive a written cancellation request by 5pm Monday. Any later and the switch will still take effect from the next business day Tuesday. About earning rates An earning rate is the net investment return (after fees and tax) that applies to your account at the end of each financial year. It can be positive or negative. Earning rates are declared by the LGIAsuper Trustee for each investment option and are based on the investment return achieved by the underlying assets for that option. Earning rates are used when you withdraw money from LGIAsuper or switch investment options. Earning rates are calculated and compound on a daily basis. These rates reflect investment returns from 1 business day earlier. For example, we know Monday s investment returns on the following Tuesday. Page 15

18 Fees and other costs This section shows fees and other costs that you may be charged. These fees and other costs may be deducted from your money, from the returns on your investment or from the assets of the superannuation entity as a whole. Other fees, such as activity fees, advice fees for personal advice and insurance fees, may also be charged, but these will depend on the nature of the activity, advice or insurance chosen by you. Taxes, insurance premiums and other costs relating to insurance are set out in the relevant Product Disclosure Statement for your account. You should read all the information about fees and other costs because it is important to understand their impact on your investment. The fees and other costs for each investment option offered by LGIAsuper, are set out on the following pages. Type of fee 1 Ready-made options Aggressive Diversified Growth Balanced Stable Defensive Investment fee 0.47% % % % % 1 Administration fee 0.21% % % % % 2 Buy-sell spread Nil Nil Nil Nil Nil Switching fee Nil Nil Nil Nil Nil Exit fee Nil Nil Nil Nil Nil Advice fees Nil Nil Nil Nil Nil Other fees and costs 3 Indirect cost ratio Insurance fee: Included in the insurance premiums deducted form your account. Financial advice fee: A fee payable for the provision of personal financial product advice. 0.36% % % % % 1 1 Estimates only 2 The Administration fee is capped at $1,575 per annum across all your accounts at LGIAsuper 3 For more details see Additional explanation of fees and costs on our website at lgiasuper.com.au/fees. Page 16

19 DID YOU KNOW Small differences in both investment performance and fees and costs can have a substantial impact on your long-term returns. For example, total annual fees and costs of 2% of your fund balance rather than 1% could reduce your final return by up to 20% over a 30 year period (for example, reduce it from $100,000 to $80,000). You should consider whether features such as superior investment performance or the provision of better member services justify higher fees and costs. You or your employer, as applicable, may be able to negotiate to pay lower fees. Ask the fund or your financial adviser 1. 1 Please note that LGIAsuper works hard to keep fees low and our fees are not negotiable with members or employers. TO FIND OUT MORE If you would like to find out more, or see the impact of fees based on your own circumstances, the Australian Securities and Investments Commission (ASIC) website ( has a superannuation calculator to help you check out different fee options. Single asset class options Socially responsible How and when paid International Shares Australian Shares Property Diversified Fixed Interest Cash SR Balanced SR Australian Shares 0.40% % % % % % % 1 Deducted from investment earnings as they are applied to your account 0.21% % % % % % % 2 Deducted from investment earnings as they are applied to your account Nil Nil Nil Nil Nil Nil Nil Not applicable Nil Nil Nil Nil Nil Nil Nil Not applicable Nil Nil Nil Nil Nil Nil Nil Not applicable Nil Nil Nil Nil Nil Nil Nil Not applicable 0.08% % % % 1 Nil % % 1 Reduces the investment returns earned by LGIAsuper Page 17

20 Fees and other costs (cont.) Example of annual fees and costs This table gives an example of how the fees and costs for the LGIAsuper Diversified Growth investment option for can affect your superannuation investment over a 1 year period. You should use this table to compare the LGIAsuper Diversified Growth investment option with other superannuation products. Example LGIAsuper Diversified Growth option Investment fees* 0.45%* Balance of $50,000 For e $50,000 you have in the superannuation product you will be charged $225 each year PLUS Administration fees PLUS Indirect costs** EQUALS Cost of product 0.21 % 0.41%* And, you will be charged $105 in administration fees And, indirect costs of $205 each year will be deducted from investment If your balance was $50,000, then for that year you will be charged fees of $535** for the Diversified Growth option. This table gives an example of how the fees and costs for the LGIAsuper Balanced investment option can affect your superannuation investment over a 1 year period. You should use this table to compare the LGIAsuper balanced with other superannuation products. Example LGIAsuper Balanced option Investment fees* 0.39%* Balance of $50,000 For e $50,000 you have in the superannuation product you will be charged $195 each year PLUS Administration fees PLUS Indirect costs** EQUALS Cost of product 0.21 % 0.36%* And, you will be charged $105 in administration fees And, indirect costs of $180 each year will be deducted from your investment If your balance was $50,000, then for that year you will be charged fees of $480** for the LGIAsuper Balanced option. * Estimated costs only. See Additional explanation of fees and costs for more information ** Additional fees may apply. Page 18

21 Additional explanation of fees and costs Administration fee rebate The Administration fee is capped at a maximum amount of $1,575 per annum across all LGIAsuper accounts you hold during a financial year (excluding the defined benefit component of Defined Benefit accounts). If you are charged total Administration fees above this cap in any financial year, we will rebate the difference to your active accounts at the time the rebate is applied. Your eligibility for a rebate will be calculated at the end of each financial year while you hold an account with LGIAsuper, or at the time you close your last LGIAsuper account during a financial year. If you hold more than one LGIAsuper account at the time the rebate is applied, it will be paid in direct proportion to the account balance at that time. Insurance fee An Insurance fee of 1% (including GST) of all Death, Total and Permanent Disablement and Income Protection premiums is retained by LGIAsuper to partially offset the administration cost of managing the insurance arrangements. For example, if insurance premiums deducted from your account total $300 for a year, this will include an Insurance fee of $3. The insurance fee is included in the insurance premiums deducted from your account monthly in arrears and does not affect your sum insured. For more information on LGIAsuper s insurance arrangements, please see the Insurance guide available on our website at lgiasuper.com.au/pds Performance fees Performance fees are paid to some investment managers when they outperform a set benchmark. These fees are calculated by comparing the difference between the benchmark and actual performance for each investment, and multiplying the outperformance by the performance bonus rate payable. Performance fees of approximately $4.5 million were included in the Investment fees for 2016/17. No estimated performance fees are included in the investment fee in the table on page 16 as we do not expect the investment managers to outperform their benchmarks. Fee changes Administration and Investment fees only cover the actual costs of administration and investment management paid out of LGIAsuper, and as such, may vary from year to year. The actual investment fees deducted from investment earnings each financial year are reported to you in the annual report to members. LGIAsuper may change fees at any time without your consent. Before the start of each financial year LGIAsuper estimates the Investment fees for the year ahead and these estimates only change where necessary to ensure costs are covered. LGIAsuper will provide you with 30 days prior notice of any increase in the Administration fee. Any change in the Investment fee or Indirect costs ratio that is due to an increase in costs or an update to our estimates will be disclosed on our website. Advice fees The cost of providing general advice is included in the Administration fees charged to LGIAsuper members. Financial advice fee Some financial advice services are provided by LGIAsuper Services Pty Ltd (LGIAsuper Services, ABN ) as a corporate authorised representative (no ) of LGIAsuper Trustee (ABN , AFSL no ). LGIAsuper Services does not charge for general or single issue personal advice provided over the phone. A minimum appointment fee of $220 applies for broader superannuation advice. An additional fee of up to $660 (ie. $880 in total) may be charged depending on the level of advice required. Charges include GST. The fee charged for advice that relates to superannuation may be deducted from your LGIAsuper account on request. The fees will be explained to you in detail if you ask for this advice. For more detail on our financial advice services, please refer to our Financial Services Guide. Page 19

22 Indirect costs Indirect costs are any amounts that we know, or reasonably ought to know, will directly or indirectly reduce the return on your investments that are not charged to your account as a fee, such as transactional and operational costs, costs of derivatives and management costs charged by interposed vehicles. The Indirect costs in the table on page 16 are based on the indirect costs incurred for 2016/17. Transactional and operational costs The transactional and operational expenses of investing, such as brokerage, stamp duty, property operating costs and buy-sell spreads where applicable, are included in the Indirect costs and Indirect cost ratio in the fees and costs table. Transactional and operational costs of approximately $38.2m were incurred in 2016/17 across these investment options: Investment option LGIAsuper MySuper Lifecycle Under 75 LGIAsuper MySuper Lifecycle 75 Plus Transactional and operational costs included in Indirect costs 0.40% 0.35% Aggressive 0.35% Diversified Growth 0.40% Balanced 0.35% Stable 0.27% Defensive 0.18% International Shares 0.08% Australian Shares 0.14% Property 0.98% Diversified Fixed Interest 0.09% Cash Nil SR Balanced 0.39% SR Australian Shares 0.58% Borrowing costs LGIAsuper does not borrow money but we invest in fund managers that borrow money to facilitate the purchase of certain investments, such as real property and infrastructure. These costs are recovered from the earnings of the assets purchased with the borrowings. Borrowing costs are not included in any of the fees and costs outlined here and are an additional cost to members. In 2016/17, LGIAsuper incurred borrowing costs of approximately $8.2m across these investment options: Investment option LGIAsuper MySuper Lifecycle Under 75 LGIAsuper MySuper Lifecycle 75 Plus Borrowing costs not included in Indirect costs 0.08% 0.08% Aggressive 0.08% Diversified Growth 0.08% Balanced 0.08% Stable 0.08% Defensive 0.04% International Shares Australian Shares Nil Nil Property 0.61% Diversified Fixed Interest Cash Nil Nil SR Balanced 0.04% SR Australian Shares Nil No transactional and operational costs are charged directly to your account. Page 20

23 Defined fees Activity fees A fee is an activity fee if: a. the fee relates to costs incurred by the trustee of the superannuation entity that are directly related to an activity of the trustee: i. that is engaged in at the request, or with the consent, of a member; or ii. that relates to a member and is required by law; and b. those costs are not otherwise charged as an administration fee, an investment fee, a buy-sell spread, a switching fee, an exit fee, an advice fee or an insurance fee. Administration fees An administration fee is a fee that relates to the administration or operation of the superannuation entity and includes costs that relate to that administration or operation, other than: a. borrowing costs; and b. indirect costs that are not paid out of the superannuation entity that the trustee has elected in writing will be treated as indirect costs and not fees, incurred by the trustee of the entity or in an interposed vehicle or derivative financial product; and c. costs that are otherwise charged as an investment fee, a buy-sell spread, a switching fee, an exit fee, an activity fee, an advice fee or an insurance fee. Advice fees A fee is an advice fee if: a. the fee relates directly to costs incurred by the trustee of the superannuation entity because of the provision of financial product advice to a member by: i. a trustee of the entity; or ii. another person acting as an employee of, or under an arrangement with, the trustee of the entity; and b. those costs are not otherwise charged as an administration fee, an investment fee, a switching fee, an exit fee, an activity fee or an insurance fee. Buy-sell spreads A buy-sell spread is a fee to recover transaction costs incurred by the trustee of the superannuation entity in relation to the sale and purchase of assets of the entity. Exit fees An exit fee is a fee to recover the costs of disposing of all or part of members interests in the superannuation entity. Indirect cost ratio The indirect cost ratio (ICR), for a MySuper product or an investment option offered by a superannuation entity, is the ratio of the total of the indirect costs for the MySuper product or investment option, to the total average net assets of the superannuation entity attributed to the MySuper product or investment option. Investment fees An investment fee is a fee that relates to the investment of the assets of a superannuation entity and includes: a. fees in payment for the exercise of care and expertise in the investment of those assets (including performance fees); and b. costs that relate to the investment of assets of the entity, other than: i. borrowing costs; and ii. indirect costs that are not paid out of the superannuation entity that the trustee has elected in writing will be treated as indirect costs and not fees, incurred by the trustee of the entity or in an interposed vehicle or derivative financial product; and iii. costs that are otherwise charged as an administration fee, a buy-sell spread, a switching fee, an exit fee, an activity fee, an advice fee or an insurance fee. Switching fees A switching fee for a MySuper product is a fee to recover the costs of switching all or part of a member s interest in a superannuation entity from one class of beneficial interest in the entity to another. A switching fee for a superannuation product other than a MySuper product, is a fee to recover the costs of switching all or part of a member s interest in the superannuation entity from one investment option or product in the entity to another. Page 21

24 Let us help you achieve a stronger financial future. Our team of trusted, reliable and professional staff are dedicated to helping LGIAsuper members like you plan for a better financial future. They are here to show you how our products and services can work in your favour and give you information or advice to help you make the right decisions about your retirement however far away it might be. To start the conversation contact us on or info@lgiasuper.com.au LGIAsuper s staff are paid a salary and do not receive commissions, fees or bonuses for the information, recommendations or advice they give you.