AMP Eligible Rollover Fund. Annual report. For the year ended 30 June 2012

Transcription

1 AMP Eligible Rollover Fund Annual report For the year ended 30 June 2012

2 For information on significant changes that may impact your account, please refer to your Annual member statement. In this annual report unless specified otherwise: AMP Capital Investors means AMP Capital Investors Limited ABN , AFSL No AMP Life means AMP Life Limited ABN , AFSL No Fund refers to the AMP Eligible Rollover Fund ABN we, us, our or the Trustee means AMP Superannuation Limited you or your refers to the member of the Fund who holds an account. This annual report is issued by AMP Superannuation Limited ABN , AFSL No which is the issuer and Trustee of the Fund. The Fund is registered with the Australian Prudential Regulation Authority (APRA). No other company in the AMP Group or any of the investment managers of the Fund is responsible for any statements or representations made. Except as expressly stated, no other company in the AMP Group or any of the investment managers of the Fund guarantees the performance of the Trustee s obligations to members nor assumes any liability to members in connection with the Fund. AMP Life guarantees that the rate of return for the Fund will never be negative. Neither the Trustee, nor any other company in the AMP Group or any of the investment managers of the Fund guarantees the performance of the Fund or any particular rate of return. This annual report does not take into account your financial situation, objectives or needs. Therefore, it is important you consider the appropriateness of this information before making any investment decision based on the information contained in this annual report. We recommend that anyone relying on this information obtains independent advice. The Fund invests in a life policy with AMP Life which guarantees that the rate of return for the Fund will never be negative. Otherwise, there are no other guarantees about the performance of the Fund or any particular rate of return, given by AMP Life or any of the AMP Group of companies. This annual report is for the financial year ended 30 June 2012 and contains information about the management of the Fund and details of where you can find further information about your account. For full details on how your account works, including investing, fees and accessing your benefits, please refer to the latest Product Disclosure Statement (PDS). A copy of the latest AMP Eligible Rollover Fund PDS is available: to download from our website amp.com.au/erf by contacting your financial planner, or by calling AMP Customer Service on Change to personal details Please let us know of any changes or corrections to your personal details. You can do this by advising your financial planner or calling AMP Customer Service on

3 Contents Who s who in the management of your account 2 Trustee s investment objectives and strategy 3 Fund management and financial condition 4 Keeping you informed important information 5 The investment year in review 7

4 Who s who in the management of your account The Trustee Your account is part of the Fund. AMP Superannuation Limited is the Trustee of the Fund and is a wholly-owned subsidiary of AMP Life. The Trustee has been granted a Registrable Superannuation Entity (RSE) licence by APRA and is responsible for: all aspects of the operation of the Fund ensuring that the Fund is properly administered in accordance with the Trust Deed and policy documents, and ensuring that the Fund complies with relevant legislation, that all members benefits are calculated correctly, and that members are kept informed of the operations of the Fund. The Trustee may amend the Trust Deed of the Fund following changes to the law or to introduce new features. If you require a copy of the Trust Deed please contact us. The Trustee has indemnity insurance. The relationship between the Trustee and other service providers From time to time, the Trustee may engage companies in and outside the AMP Group to provide services in relation to the Fund. The Trustee may change these service providers at any time without notifying you. AMP Life The life policy we currently hold is issued to us by AMP Life from its Statutory Fund No. 1 (AMP No. 1 Fund). Under this policy, AMP Life administers the Fund, and invests contributions received with AMP Capital Investors. AMP Life is part of the AMP Group of companies. AMP Capital Investors AMP Capital Investors is: the investment manager appointed by AMP Life under an investment management agreement with AMP Life, and the responsible entity for many managed investment schemes that AMP Life invests in. Under these managed investment schemes, AMP Capital Investors either appoints itself or companies outside the AMP Group or both to be the investment manager. AMP Capital Investors is a subsidiary of AMP Limited, and therefore is a company related to us. AMP Capital Investors has only been involved in preparing the following sections: AMP Capital Investors, and The investment year in review The auditor The Trustee has appointed Ernst & Young as auditor of the Fund. 2

5 Trustee s investment objectives and strategy For account balances over $2,500, the investment objective is to provide returns over the longer term (adjusted for costs and tax) exceeding those from cash. For all account balances, returns are guaranteed to never be negative. The Trustee invests the assets of the Fund entirely in a life policy (AMP Eligible Rollover Fund Life Policy) issued by AMP Life. The investment strategy for the Fund is to invest in a policy, issued by AMP Life, that invests in a portfolio with a core of cash and a limited exposure to shares. Derivatives We do not invest in derivatives. The underlying investment managers may use derivatives such as options, futures, swaps or forward exchange rate agreements. The use of derivatives by investment managers is in accordance with the guidelines of the investment strategy, the objectives of the investment option and the relevant risk management practices on the use of derivatives. Derivatives can be used for many purposes, including hedging to protect an asset against market fluctuations, reducing the transaction costs of achieving a desired market exposure and maintaining benchmark asset allocations. 3

6 Fund management and financial condition Detailed financial information is not included in this annual report as the benefits paid to members are wholly determined by reference to life policies. The value of total Fund assets at 30 June 2011 was $1,467,100,000 (audited). We expect the audited accounts and auditor s report for the Fund for the financial year ending 30 June 2012 to be available after 1 November You can obtain a copy of these documents after this date by calling AMP Customer Service on The assets of the Fund (except for reserves and certain amounts such as provisions for tax which are set aside to meet the expenses) are fully allocated to the accounts of members. Our liability to pay benefits to members is always equal to (or less than), the assets allocated to their accounts. At the date of preparation of this report (13 September 2012), we do not have any information that leads us to believe there has been any material change in the financial position of the Fund over the reporting period for the financial year ended 30 June On 1 July 2012, the AMP Eligible Rollover Fund received a transfer of 354,500 new members and $318 million from the National Preservation Trust under a successor fund transfer arrangement. The AMP Eligible Rollover Fund Life Policy is the only asset of the Fund. It is backed by the AMP No. 1 Fund. The AMP No. 1 Fund holds asset portfolios managed by AMP Capital Investors. AMP Life guarantees the capital value of the AMP Eligible Rollover Fund Life Policy. Crediting rates information The Fund invests in a capital guaranteed life policy issued to us by AMP Life. We are the policy owner of the life policy. Under this policy, AMP Life guarantees to us the full value of members benefits. The AMP Eligible Rollover Fund Life Policy is a participating policy in AMP s No. 1 Fund. Participating policies are administered in accordance with the Life Insurance Act Under the Act, an annual profit is determined for each class of participating policies and shared between the policy owner and the life office. At least 80 per cent of that profit must be allocated to the participating policy owner(s). Currently for the AMP Eligible Rollover Fund Life Policy, 92.5 per cent of the annual profit is allocated to the policy owner (the Trustee) and 7.5 per cent is allocated to AMP Life. The Fund s crediting rates declared are a distribution of our profit to members. How are the crediting rates determined? Under the AMP Eligible Rollover Fund Life Policy, AMP Life declares crediting rates on members accounts following an actuarial review based on: recent investment returns with the AMP No. 1 Fund, which backs the AMP Eligible Rollover Fund Life Policy an allowance for management costs, taxes, transaction and operational costs, and an assessment of future investment returns. The actuarial review allows AMP Life to ensure that it can continue to fund its guarantee from its AMP No. 1 Fund reserves. AMP Life may smooth the profit distribution, holding back some profit in good years and distributing more in bad years. This is so that crediting rates are less volatile than returns the AMP No. 1 Fund experience on the underlying assets. How are crediting rates applied? The crediting rates that apply depend on the size of your account balance and will apply to the total daily account balance. Interest is credited annually as at 30 June (or on withdrawal). Crediting rates can be zero per cent but will not be negative. Any interest accrued on a member s account to date is not affected by any future changes to crediting rates. 4

7 Keeping you informed important information You can now make a non-binding death benefit nomination If you die while you have an AMP Eligible Rollover Fund account we will pay a death benefit being your account balance. You now have the opportunity to make a non-binding death benefit nomination on your account. Before you consider making a nomination, there are a number of factors that you should keep in mind. For example, the type of beneficiary you nominate can have tax implications for your dependants when they receive your Death benefit. For this reason, we strongly recommend that you discuss your nomination with your financial planner. Making a non-binding death benefit nomination If you make a non-binding death benefit nomination, the Trustee will consider the nomination provided by you and decide which of your dependants and/or legal personal representative will receive your death benefit. The Trustee will consider your circumstances at the time of your death and may not necessarily pay according to your nominated beneficiaries. Therefore, it is important that you keep your non-binding death benefit nomination up-to-date and in line with your personal circumstances. When we receive your nomination we will not check if: the beneficiaries you have nominated are your dependants (see Who is a dependant? ) or your legal personal representative, or if you have signed or completed the nomination form correctly. A non-binding death benefit nomination will continue to apply until you cancel the nomination or make a new non-binding death benefit nomination. If you cancel your non-binding death benefit nomination without making another non-binding death benefit nomination, then we must pay your death benefit in accordance with No nomination. Nominations must be in writing and can be made, updated or cancelled by completing the Nominated or preferred beneficiary form available from amp.com.au/erf or by contacting AMP Customer Service on Am I eligible to make a non-binding death benefit nomination? If you are 18 years or older, you can nominate one or more beneficiaries to receive your death benefit. Generally beneficiaries must be your dependant(s) however you can also nominate your estate referred to as your legal personal representative. Under superannuation law, you cannot nominate anyone else as a beneficiary. If you are under 18 years of age, you or your guardian cannot make a non-binding death benefit nomination. No nomination In the event that no nomination is made, or you cancel your existing non-binding death benefit nomination and do not make a new nomination, your Death benefit will be paid to your estate. However, if your estate is insolvent or if a legal personal representative has not been appointed to manage your estate within a reasonable period of time, then the Trustee will decide if you have: dependants and which of your dependants will receive your death benefit and in what proportions, or no dependants, including who will receive your death benefit and in what proportions. If you do not make a non-binding death benefit nomination, we suggest you consider making a Will or altering your Will to include your AMP Eligible Rollover Fund account. Who is a dependant? A dependant is defined as: a spouse (see Who is a spouse? below) each child (including an adopted child, step-child or an exnuptial child) of a member, or the child of a member s spouse any person who is, or was at the relevant time, in the opinion of the Trustee in an interdependent relationship with the member (generally a close personal relationship between two people who live together, where one or both provides the other with financial support, domestic support and personal care) any person who in the opinion of the Trustee is, or was at the time of death, financially dependent in whole or in part upon the member, and any other person treated for the purposes of superannuation law as a dependant. Who is a spouse? A spouse is a person who is legally married to the member, or a person who, although not legally married to the member lives (or lived at the time of the member s death) with the member on a genuine domestic basis in a relationship as a couple and includes a same-sex partner. Temporary residents The following will not apply to you if you are a New Zealand citizen or you become an Australian citizen or permanent resident. Super funds are, under certain circumstances, required to transfer a temporary resident s super to the Australian Taxation Office (ATO) following their departure from Australia. Such a transfer would only occur when at least six months have passed since the member s temporary resident s visa had ceased to be in effect, the member had left Australia and had not taken their benefit. The member can access their benefit from the ATO by contacting them on

8 There are now limited conditions of release available to a member who is or was a temporary resident. Accounts in respect of all temporary resident members, irrespective of whether or not they have left Australia, will only be able to be released under the following conditions: death terminal medical condition permanent incapacity departing Australia permanently, and who apply in writing for the release of their benefits. (This option is not available to holders of subclass 405 and 410 visas.) Trustee payments to the ATO under the Superannuation (Unclaimed Money and Lost Members) Act 1999 If you met a condition of release allowed under a superannuation law before 1 April 2009 temporary incapacity, and/or release authorities under the Income Tax Assessment Act Note: Where a member is or was a temporary resident and unless they also meet one of the above conditions of release, they will not be able to access their benefit: on retirement, or on attaining age 65. We are not required to issue exit statements to accounts transferred to the ATO. However, if you need further information that will assist your claim to the ATO, please contact AMP Customer Service on Searching for lost super Super Search is our web-based facility that allows you to connect to the ATO s Lost Member Register to check whether you have lost super with AMP or another super fund. Go to amp.com.au/supersearch and have your tax file number (TFN) handy. If you don t have internet access you can ask the ATO to conduct a search on your behalf by contacting them on If you find lost super and would like to consolidate it to your account, call AMP Customer Service on and request a Transfer of superannuation benefit form. Super surcharge The Trustee is responsible for the collection and the remittance of any super surcharge to the ATO and will deduct any surcharge payable for any liabilities for the financial years 1997 to 2005 from your account that have been transferred from a previous fund. Super surcharge does not apply to contributions made on or after 1 July Enquiries and complaints process If you need any additional information about the operation or management of your account, or if you have a concern or complaint, then contact your financial planner or call AMP Customer Service on We will try to resolve your enquiry or complaint as quickly as possible. To help us do this, please give us as much information as possible about your enquiry or complaint. If you make a complaint, we will: acknowledge its receipt and ensure an appropriate person considers the complaint and respond to you as soon as we can. If your complaint cannot be resolved immediately, then we will keep you informed of its progress. We aim to respond to your complaint within 10 working days. If your complaint is not resolved by that time, then we will keep you advised of its status at regular intervals. If your complaint can not be resolved to your satisfaction within 90 days, then you may have the right to lodge a complaint with the Superannuation Complaints Tribunal (SCT). Superannuation Complaints Tribunal website: sct.gov.au phone: mail: Locked Bag 3060 MELBOURNE VIC 3001 If you have a complaint you should contact the SCT as soon as possible and they will let you know if they can deal with your complaint. Time limits may apply to certain types of complaints. How you can stay informed You can stay informed about your account by calling AMP Customer Service on or by visiting our website amp.com.au/erf. For your account balance and investment information follow the prompts to My Portfolio. For market updates go to amp.com.au/volatility. Important information about your TFN If we do not have your TFN a no-tfn tax of 31.5 per cent will apply to concessional contributions. If you provide us with your TFN within four financial years of contributions being made your no-tfn tax may be refunded. No-TFN tax is calculated and deducted at the earlier of 30 June each year and when you leave AMP Eligible Rollover Fund. The member details section of your latest statement will show if you have supplied your TFN. If you haven t given us your TFN, we may have to deduct higher tax on your benefit when you make a lump sum withdrawal. To provide your TFN you can call AMP Customer Service on or download the Tax File Number Notification form at amp.com.au/erf. 6

9 The investment year in review This market/economic overview is provided by AMP Capital Investors The 2011/12 financial year saw an intensification of concern about the European sovereign debt crisis and deterioration in the global growth outlook. The Australian economy remained resilient in a challenging global environment. Australia s real gross domestic product (GDP) expanded consistently throughout the year, growing 0.8 per cent in the third quarter of 2011, 0.6 per cent in the last quarter of 2011 and by a robust 1.3 per cent in the first quarter of This growth surge was primarily driven by a temporary lift in real consumer spending. More subdued readings for the Westpac-Melbourne Institute s leading index were suggestive of a more sedate 2 per cent economic growth. Labour market conditions strengthened over the year with the number of employed persons rising 0.6 per cent. The unemployment rate was reasonably steady ending the year at 5.2 per cent. Australia s inflation moderated over the year as evidenced by the consumer price index which showed subdued price pressures, recording a mild increase of 1.6 per cent for the year to March The Reserve Bank of Australia (RBA) cut interest rates by 0.25 per cent in November and December 2011, taking the cash rate to 4.25 per cent by the end of Australia s moderating growth and a milder inflation outlook were cited as reasons for the cuts. In December Europe s banking and sovereign debt problems were highlighted by the RBA as likely to weigh on economic activity there over the period ahead. A further 0.50 per cent cut was delivered in May 2012 at which point the RBA highlighted that economic conditions have been somewhat weaker than expected, while inflation has moderated. The cash rate ended the year at 3.50 per cent in June This was after a 0.25 per cent cut in June that was accompanied by an expression of concern regarding Europe s weakening economic and financial prospects. In line with this conservative assessment of the global and domestic economy, the central bank marginally revised down its Australian growth forecast for 2012 and 2013 citing weaker exports, housing construction and fiscal consolidation. The United States US economic data released over the period was indicative of weak growth. Labour market data showed inconsistent and patchy jobs growth with non-farm payrolls reaching a high of 275,000 in January 2012, before falling gradually to reach a mere 80,000 in June The unemployment rate fell consistently from 9.1 per cent to 8.2 per cent by June 2012, but remained elevated. In August 2011, Standard & Poor s downgraded America s sovereign rating from AAA to AA after an agreement to raise the national debt ceiling limit was reached, after prolonged acrimonious negotiations between Republicans and Democrats. The US Federal Reserve maintained the benchmark cash interest rate between 0.00 per cent and 0.25 per cent throughout the July 2011 to June 2012 period. The US central bank failed to introduce further quantitative easing measures (QE3) during the period but in September 2011 recognised that there were significant downside risks to the economic outlook, including strains in global financial markets and launched Operation Twist. The program, which involves selling short-dated Treasury bonds and buying longer-dated securities to lower long-term borrowing rates, was extended in June 2012 until the end of the year to make broader financial conditions more accommodative. Europe Europe was dominated by the intensification of the banking debt crisis which led to much turmoil in global markets. Political instability in Greece and Italy and concerns about Spain s financial system were the main worries. European leaders met on several occasions in an effort to address the issues. A number of key proposals were agreed on in December 2011, including a fiscal compact of limiting government budget deficits to -0.5 per cent of nominal GDP, the European Financial Stability Facility being rapidly deployed, and the European Stability Mechanism to start in July There was also a proposal to provide the International Monetary Fund with 200 billion of loans to deal with the crisis. In late June 2012, further agreements were reached, including an agreement to move to a centralised Eurozone supervision of banks, and more importantly an agreement to open up the use of its bailout funds to allow direct bank recapitalisations, which was initially very well received. Economic data released over the year was indicative of a recession. Europe s economic activity contracted in the last quarter of 2011 with the majority of European nations showing a quarterly real GDP decline. The European Commission recognised these deteriorating conditions with a downward revision to 2012 European real GDP forecast to -0.3 per cent from +0.5 per cent. The European Central Bank lowered interest rates by 0.25 per cent twice over the year at its November and December 2011 meetings, taking the key policy rate to 1.0 per cent which was maintained until the end of the period. 7

10 Asia Japan s economic conditions remained subdued. In December 2011 GDP growth contracted by -0.6 per cent quarter-on-quarter after robust +1.7 per cent growth in the previous quarter, driven primarily by Japan s deteriorating export performance. In response, the Bank of Japan introduced further quantitative easing measures, increasing the size of its asset purchase program by approximately 10 trillion in an effort to better ensure the economy s return to a moderate recovery path. While the Japanese economy continued to experience deflation, the Bank of Japan left monetary policy constant over the period. Meanwhile, in May 2012 Japan saw another downgrade to its sovereign debt rating, reflecting its huge budget deficit and debt-to-gdp ratio. After a strong start, the Chinese economy slowed to a more sustainable pace over the year, with growth moderating to +8.1 per cent in the first quarter of In February 2012, the People s Bank of China (PBoC) announced a 0.50 per cent cut in the reserve requirement ratio (RRR), taking the RRR for large banks to 20.5 per cent. This signalled a change in stance by the central bank to an easing bias in light of moderating growth momentum, slower loan growth and diminishing inflationary pressures. In May 2012 the PBoC reduced the bank RRR by a further 0.50 per cent, and cut the benchmark lending and deposit rates by 0.25 per cent in early June. Shares The 2011/12 financial year was disappointing for investors as worries about the global economic outlook continued to weigh. The leading measure of global shares performance, the MSCI World (ex-australia) Accumulation Index, returned -2.1 per cent in local currencies for the period, and -0.5 per cent in unhedged Australian dollar (A$) terms. The September quarter 2011 saw an intensification of concerns about the European debt crisis combined with a blow to confidence from the downgrading of America s credit rating and a soft patch in US economic data. Policy stimulus saw the share markets relief rally into year-end 2011 and through to the first quarter of But this again gave way to renewed worries about the global growth outlook as the European debt crisis intensified. Financial market volatility and risk aversion increased due to worries about instability in Greece, concerns regarding Spain s financial system and the activity slowdown in America and China. The Australian share market fell in line with the global trend over the year. The S&P/ASX 200 Accumulation Index returned -6.7 per cent for the year to 30 June 2012, as Australian shares suffered under the impact of high interest rates, the strong A$ and concerns about China. Volatility increased in the second half of the year as global share markets fluctuated in response to the continuing sovereign debt issues in Europe. In the second half of 2011, Australian shares proved more resilient than global shares as they benefited from heightened interest rate cut expectations. Although 2012 started off on a good note, as investors recognised the value in the local market after two years of relative underperformance, Australian shares only rose modestly over the March quarter and underperformed their global counterparts. Some gains were seen early in March but remained constrained by the relatively high interest rates in Australia, the strong A$ and concerns about a sharper slowdown in China. Australian shares fell back significantly in the June quarter on the back of worries about Europe, disappointment around the lack of further monetary stimulus in the US and continuing concerns about China. However at the end of June a more positive assessment of the European Union (EU) leaders summit saw Australian shares bounce back sharply. Cash The RBA lowered the cash rate on four occasions through the year as global growth concerns intensified. The cash rate fell from 4.75 per cent in July 2011 to 3.50 per cent in June The RBA Board cited Europe s debt crisis, Australia s moderating growth and a milder inflation outlook as reasons for the cuts. Towards the end of the period global growth concerns saw markets anticipate further rate cuts. Better-than-expected domestic economic data in June 2012 and the emergence of signs of stability in Europe after the EU leaders summit saw an improvement in bank bill rates. Over the period 90-day bank bills fell, opening at 4.97 per cent and closing 144 basis points (bps) lower at 3.53 per cent. 180-day bank bill yields also fell, opening at 5.05 per cent before falling 154 bps to close at 3.51 per cent. 8

11 Property Listed property (global and Australian) was steady over the year to 30 June Locally, the S&P/ASX 200 Property Accumulation Index returned 11.0 per cent, while global listed property returned 8.34 per cent (as per the UBS Global Real Estate Investors Index in hedged A$ terms). Listed property benefited from improved global investor confidence at the beginning of Australia also benefited from this rally with Australian real estate investment trusts (A-REITs) achieving strong returns. A-REITs leveraged to an increase in global economic activity were the standout performers. The March quarter reporting season in Australia saw results confirm stable and resilient earnings, a focus on capital management and shareholder returns, active asset recycling and the relative defensive nature of retail landlords even in a subdued consumption environment. The sector s outperformance over the period was largely due to the defensive and reliable traits of REITs in the face of global concerns. As global growth forecasts were reduced, the general market experienced earnings downgrades, while REITs consistently delivered on management s earnings projections. This was due in large part to the structure of rental income, a contractual agreement which locks in earnings at pre-determined growth, making earnings downgrades far less likely. Bonds Australian bond yields fell sharply in the year to 30 June The yields on both three- and ten-year Australian bonds finished the year 2.36 per cent and 2.17 per cent lower respectively. In the second half of 2011, bond markets rallied strongly, as yields fell in response to the continuing sovereign debt issues in Europe and erosion of risk appetite. In mid-december, Australian 10-year bond yields fell to their lowest level since 1951 as global investors pushed their yields further towards those prevailing for US and German bonds. The RBA Board cited Europe s debt crisis, Australia s moderating growth and a milder inflation outlook as reasons for the two 0.25 per cent interest rate cuts seen in November and December The bond market sold off at the beginning of 2012 on disappointing last quarter inflation data and softer data releases. Bond yields weakened further over the June quarter on lowered interest rate expectations and safe-haven demand, reaching new 61-year lows. Meanwhile, the outcomes of the EU leaders summit at the end of June 2012 led to a sharp sell-off in Australian bonds on the last day of the period. 9

12 Contact your adviser or AMP Customer Service on: phone fax web amp.com.au amp.com.au/enquiry mail AMP Customer Service AMP Life Limited GPO Box 300 PARRAMATTA NSW 2124 AMP Superannuation Limited Level 24, 33 Alfred Street, Sydney NSW 2000 NS /12