individual INDIVIDUAL RETIREMENT PLAN retirement plan Prepared as at 14 December 2011.

Transcription

1 individual retirement plan INDIVIDUAL RETIREMENT PLAN I N V E S T M E N T S T A T E M E N T Prepared as at 14 December 2011.

2 IMPORTANT INFORMATION (The information in this section is required under the Securities Act 1978.) This Investment Statement has been prepared as at 14 December Investment decisions are very important. They often have long-term consequences. Read all documents carefully. Ask questions. Seek advice before committing yourself. Choosing an investment When deciding whether to invest, consider carefully the answers to the following questions that can be found on the pages noted below: - What sort of investment is this? 4 - Who is involved in providing it for me? 4 - How much do I pay? 7 - What are the charges? 9 - What returns will I get? 13 - What are my risks? 16 - Can the investment be altered? 19 - How do I cash in my investment? 19 - Who do I contact with enquiries about my investment? 20 - Is there anyone to whom I can complain if I have problems with the investment? 21 - What other information can I obtain about this investment? 22 In addition to the information provided in this document, important information can be found in the current registered prospectus for the investment. You are entitled to a copy of that prospectus on request. The Financial Markets Authority regulates conduct in financial markets The Financial Markets Authority regulates conduct in New Zealand s financial markets. The Financial Markets Authority s main objective is to promote and facilitate the development of fair, efficient, and transparent financial markets. For more information about investing, go to P A G E 1

3 Financial advisers can help you make investment decisions Using a financial adviser cannot prevent you from losing money, but it should be able to help you make better investment decisions. Financial advisers are regulated by the Financial Markets Authority to varying levels, depending on the type of adviser and the nature of the services they provide. Some financial advisers are only allowed to provide advice on a limited range of products. When seeking or receiving financial advice, you should check: the type of adviser you are dealing with; the services the adviser can provide you with; the products the adviser can advise you on. A financial adviser who provides you with personalised financial adviser services may be required to give you a disclosure statement covering these and other matters. You should ask your adviser about how he or she is paid and any conflicts of interest her or she may have. Financial advisers must have a complaints process in place and they, or the financial services provider they work for, must belong to a dispute resolution scheme if they provide services to retail clients. So if there is a dispute over an investment, you can ask someone independent to resolve it. Most financial advisers, or the financial services provider they work for, must also be registered on the financial service providers register. You can search for information about registered financial service providers at You can also complain to the Financial Markets Authority if you have some concerns about the behaviour of a financial adviser. P A G E 2

4 WELCOME TO THE INDIVIDUAL RETIREMENT PLAN We congratulate you for taking the time to consider your future with the Individual Retirement Plan a flexible retirement savings plan specially designed to meet your changing needs. Your future is at stake While you may be able to supplement any Government-funded Superannuation with KiwiSaver, bear in mind that generally you will not be able to withdraw any savings from KiwiSaver until you reach 65, or possibly later, while your savings in the Plan can be accessed as of right from age 50, so membership of the Individual Retirement Plan could well provide savings that are complementary to KiwiSaver. The chances are your retirement may last longer than you think, possibly for the equivalent of half your working life. Your cost of living may not reduce, but your standard of living probably will, if you have not saved enough. Only by making sensible and affordable arrangements today will you secure your retirement income for tomorrow. A flexible retirement savings plan that meets your needs A good retirement savings plan should deliver the flexibility you need to cater for your changing circumstances throughout your working life. It should provide you with options that deal effectively with lifestyle and income changes. It should be portable and fit into, rather than inhibit, your employment opportunities. We believe the Individual Retirement Plan meets these requirements. Please read this Investment Statement carefully to find out all you need to know about securing your future with the Individual Retirement Plan. Once again, we congratulate you for taking this step towards peace of mind in retirement. Brent Anderson, Chairperson For and on behalf of the Trustees of the Individual Retirement Plan Features of the Individual Retirement Plan page - Open membership 4 - Portable benefits 4 - Continuous membership on change of employment 4 - Professional investment management 6 - Flexible contributions 7 - Choice of how contributions are paid 7 - Your employer can provide assistance 8-14 day free-look period 8 - Optional insurance cover at low rates 8 - Low-cost fee structure Retirement from age 50 onwards 13 - Investment options P A G E 3

5 WHAT SORT OF INVESTMENT IS THIS? The Individual Retirement Plan (the Plan or the IRP ) is a superannuation scheme governed by a trust deed dated 23 October 1992 (as subsequently amended) registered under the Superannuation Schemes Act You may invest in the Plan by becoming a member and making contributions to the Plan. In return, you will receive benefits, the amount of which are, on the whole, based on the contributions paid into the Plan by you and on your behalf. Who may join the Plan? Anyone employed in the state sector may join the Individual Retirement Plan. Any other person is also able to join the Plan at the Trustees discretion. There is no restriction on joining the Plan if you are already a member of any other retirement savings plan or superannuation scheme. Indeed, the Plan provides an easy way to top up any other retirement savings you are already committed to. The Individual Retirement Plan has been designed specifically for individuals and provides an ideal vehicle through which to save for retirement. No matter what your circumstances are, it can be tailored to your specific needs both now and in the future, helping you achieve your retirement savings goals and financial independence in retirement. How to join the Plan To join the Plan, simply complete the Application Form enclosed with this Investment Statement and return it to the address noted on the form. You will be issued with a membership certificate which will confirm your membership of the Plan and will advise you of your membership number. Your membership certificate should be kept with this Investment Statement. Your benefits are portable If you change employers you can either stay in the Plan or transfer your benefit to any other registered superannuation scheme whether the new scheme is operated by your new employer or not provided the trustees of the new scheme accept it. The Plan is designed to be fully portable, whatever the changes in your circumstances may be. WHO IS INVOLVED IN Providing IT FOR ME? The Plan is offered by the Trustees of the Individual Retirement Plan (the Trustees ). The Trustees have engaged Mercer (N.Z) Limited (Mercer) to assist them with the management of the Plan. Mercer is a leading global employee benefit consultancy and has over 1,400 employees in Australia and New Zealand alone. In its role as manager of the IRP, Mercer provides trustee secretarial, marketing, communication, member education and investment services. P A G E 4

6 Members contributions in the Plan are invested in the Mercer Super Investment Trust. The trustee of the Mercer Super Investment Trust is Mercer Investment Nominees (NZ) Limited. The current directors of Mercer Investment Nominees (NZ) Limited are: - Ross Butler of Nelson, New Zealand - Graeme Cosgrove of Auckland, New Zealand - Peter Promnitz of Melbourne, Australia - Martin Stevenson of Sydney, Australia The Trustees have also appointed Mercer (N.Z.) Limited to administer the Plan. The IRP was originally set up by the Global Retirement Trust ( the GRT ) as a retirement savings plan for individuals who are employed throughout the state sector and for state sector employees who wanted to provide a retirement savings facility for their employees without establishing a separate scheme of their own. However, membership of the Individual Retirement Plan is no longer restricted to the state sector. The Trustees The trust deed specifies that the Plan shall have a minimum of five Trustees and a maximum of seven. The current Trustees of the IRP are: - Ian Brent Anderson of Wellington, New Zealand - Andrew Fulbrook of Wellington, New Zealand - Phil Goulin of Wellington, New Zealand - Sumati Govind of Wellington, New Zealand - Alison Diana Timms of Wellington, New Zealand The Promoters The promoters of the Plan are Mercer (N.Z.) Limited and its directors. The current directors of Mercer are: - David Anderson of Sydney, Australia - Peter Cameron of Melbourne, Australia - Martin Lewington of Wellington, New Zealand - Peter Promnitz of Melbourne, Australia The contact address for Mercer is: Mercer also has an office at: Level 8, PwC Tower Level 18, 151 Queen Street The Terrace P O Box P O Box 2897 Auckland Central 1010 Wellington 6140 Phone: Phone: Fax: Fax: P A G E 5

7 The Administration Manager and Registrar Mercer (N.Z.) Limited takes care of the Plan s day-to-day administration and acts as Registrar. The Administration Manager of the Individual Retirement Plan: Mercer (N.Z.) Limited Level 8, PwC Tower The Terrace P O Box 1849 Wellington 6140 Phone: Fax: The Investment Managers The Plan s funds are invested in the Mercer Super Investment Trust (MSIT). The trustee of the MSIT invests its funds through the Mercer Investment Trusts New Zealand (MITNZ). Professional investment managers are appointed to manage the assets of MITNZ, either directly or indirectly via other investment vehicles. Each manager was chosen for its expertise and recognised performance. Contact Mercer for details of the current investment managers. A particular advantage enjoyed by the MSIT over many other retirement savings providers is the flexible approach Mercer takes to choosing investment managers. Many other superannuation providers choose one manager only for all investment sectors, which naturally may involve compromise where the manager s strengths lie in one particular area of investment. By contrast, Mercer selects the most appropriate manager for each investment sector, so giving the Plan access to an appropriate manager for a particular purpose. Funds are invested in accordance with the Trustees investment objectives and strategies and the performance of the investment managers is monitored on a regular basis. The annual report you receive each year contains information about the Plan s investment performance for the year. The Plan has three investment funds for you to choose from. For information about these funds please see pages 16 and 17 of this Investment Statement. The Insurer The Insurer of the Plan s insurance benefits is The National Mutual Life Association of Australasia Limited (a member of the global AXA Group). P A G E 6

8 HOW MUCH DO I PAY? You choose the amount you contribute It s up to you to choose how much you invest in the Plan there is no minimum and no maximum amount. And you can stop, restart, or change your contributions whenever you choose. So you have the flexibility to change your contributions as your financial situation changes. This means that you can stop contributing to the Plan altogether, or you can suspend your contributions for a certain period, and your Member Account will continue to have earnings applied at the end of each Plan year. However, monthly administration fees will continue to be deducted from your account while you are not contributing, in the same way they are deducted for contributing members. It s important that you commit yourself to regular contributions if you want to achieve an adequate retirement income. To ensure their value is retained, we recommend that you increase your regular contributions in line with inflation or your annual salary increases. You choose how your contributions are paid You have two options for paying your contributions to the Plan. The easiest way is through automatic deductions from your pay (with the agreement of your employer) each pay period. Or, if you prefer, you can contribute privately from your bank account at intervals of your choice. Just complete the appropriate section on the Plan application form and your contributions will be directed to the Administration Manager by your chosen method. Contributions made by either method are paid into the Plan s bank account administered by the Administration Manager. You should be aware that the monthly administration fee payable varies depending on how your contributions are paid into the Plan as explained on page 10. You can make additional payments At any time you can make a lump-sum payment (currently there is no minimum or maximum amount) to the Plan to be added to your retirement savings. Such additional payments can be made directly into the Plan by simply completing a lump sum contribution form. Transfers to and from other superannuation schemes You can transfer into the Individual Retirement Plan, and the IRP Trustees will accept the value of your benefits in any other superannuation scheme. In addition, the Trustees may accept transfers into the Plan of other amounts from any other superannuation scheme. At any time, if you so request in writing, the Trustees will transfer the balance in your Member Account into any other superannuation scheme that agrees to accept your funds. P A G E 7

9 Your employer can also provide assistance Your employer may choose to support your membership of the Plan on your behalf in one or more of the following ways: - as mentioned earlier, your employer can arrange for your contributions to the Plan to be deducted automatically from the payroll and paid into the Plan on your behalf, - your employer can also support your membership of the Plan by paying the administration fee and/or insurance premiums on your behalf, and/or - your employer can subsidise your retirement savings by making contributions to the Plan for your benefit (additional to your contributions). You may wish to discuss these options with your employer before you complete the application form. You will have your own account When you join the Plan an individual Member Account will be set up under your name. This account receives: - all regular contributions you make, - any additional payments you make (including transfers from other schemes), - any contributions paid by your employer on your behalf or for your benefit, - investment earnings credited to you (in some circumstances this could be a debit see page 13 for more information). The administration fees and insurance premiums (if any) may be deducted from your Member Account (see pages 9 and 10 for more information). If your employer chooses to pay these expenses for you, they will be paid directly by your employer and your Member Account will not be debited. You have 14 days to reconsider If after joining the Plan you decide it is not completely to your satisfaction, simply advise the Trustees in writing within 14 days of completing your application form and your contributions will be returned to you and your membership of the Plan discontinued. You should send your withdrawal notification to the Administration Manager at the address noted on page 6. You can choose to have insurance cover As a member of the Plan you can also invest in life and total and permanent disability insurance in addition to the security offered by your retirement savings. The Plan can offer you insurance cover to suit your personal needs, subject to a satisfactory statement of your health and the Insurer accepting your risk. You can choose between insurance that provides life cover only or insurance that provides life or total and permanent disablement cover. You choose the level of insurance you need in multiples of $10,000. As your needs change, you can decrease or increase (subject to your good health) the level of your insurance cover at the end of each Plan year (30 June). P A G E 8

10 The cost of the insurance depends on your age and the premiums are deducted monthly from your member account. The insurance benefits are paid upon either your death while you are a member of the Plan or, if applicable, on your total and permanent disablement while you are a member of the Plan. Total and permanent disablement means disablement while you are in paid employment (or if you are self-employed, while actively engaged in your usual profession, business or occupation for financial gain), and which satisfies the definition of total and permanent disablement under the insurance policy arranged between the Trustees and the Insurer. It is, therefore, important that you advise the Trustees or Administration Manager when you have a change in your employer status and if for any period you are unemployed. The Insurer will then make the appropriate premium adjustments to reflect the fact that you are only insured for death cover. If you have total and permanent disablement cover you will continue to be covered while on parental leave (within the meaning of the Parental Leave and Employment Protection Act 1987). To apply, you simply complete a brief personal statement giving details of your current state of health and recent medical history for assessment by the Insurer, who will then consider the terms on which your insurance may be provided. Further evidence of health may be subsequently required by the Insurer. For more information, please contact your employer or the nearest Mercer office. WHAT ARE THE CHARGES? Most superannuation schemes and retirement savings plans charge fees for activities such as administration, investment management and trustees duties. While there is a minimal joining fee, there are no commissions payable and no termination penalties if you leave the Plan. The fees set out below are the only charges that you will have to pay directly or indirectly as a member of the Plan. (In some instances your employer may choose to pay some of these fees.) The fees are reviewed each year from 1 January to reflect the annual movement in the National Average Wage Earnings Index. Therefore any increase in these fees is limited by the increase in the average ordinary time wage. Any other modification to the basis of the fees outlined below can only be made with the written agreement of the Trustees and Mercer. This could include increasing the current scale of fees. There is no dollar limit on the amount that could be charged under any modified basis for calculating the fees. Joining fee a once-only fee of $40 applies when you first join the Plan. This may be deducted from your Member Account or paid by cheque with your application form by either you or by your employer. P A G E 9

11 Administration fee a monthly administration fee is debited from your Member Account, unless your employer has otherwise agreed to pay the fee. This fee is payable even if you have suspended your contributions to the Plan. - if your contributions to the Plan are deducted from your pay by your employer this fee is currently $4.00 per month; - if your contributions are made by automatic payment from your bank account this fee is currently $5.00 per month. Fund transfer fee your first transfer of all or part of your Member Account balance from one investment fund to another in a Plan year (1 July 30 June) is free, thereafter a fee of $40 will be deducted from your Member Account for further transfers made during the Plan year. Benefit calculation fee a fee of $50 will be deducted from your Member Account if you request a calculation of your benefit. No benefit calculation fee will apply if you also make a partial withdrawal or are paid a benefit. Benefit payment fee a fee of $50 will be deducted from your Member Account for each partial withdrawal you make or benefit payment made. Insurance premium if you choose to take up the insurance cover, on acceptance by the Insurer, a premium will be deducted each month from your Member Account, unless your employer has agreed to pay this premium. Investment management fees the management fee currently for the Stable Fund is 0.67%, for the Balanced Fund is 0.74% and for the Growth Fund 0.81% per year. The investment management fees are levied on the market value of the Plan s assets invested in the particular investment fund and cover fees payable to Mercer and all investment managers. The management fees are deducted from the Plan s investments in each investment fund on a monthly basis and thus reduce the investment return on your Member Account. In certain circumstances Mercer may approach the Trustees with proposed changes to the investment management fees. These circumstances include: - Changes to legislation necessitating alterations to the investment management structure of the Plan. - Changes in industry-wide taxes and levies that impact on fund management fees as a whole (for example, GST becoming payable on the total investment management fees amount). - Any cost increases or decreases arising from a change to the investment policy or strategy for the IRP Investment Funds that is instigated by the Trustees (whether directly or on the recommendation of others, including Mercer). - Any cost decreases arising from a change to the investment policy or strategy for the IRP Investment Funds that is instigated by Mercer (with the agreement of the Trustees). The Trustees may alter any of the investment management fees if at any time they consider that there have been legislative changes or that the overall best interests of the members of the Plan require increases or decreases in investment management fees in any of the other circumstances mentioned above. There is no dollar limit on the amount of any increase that may be agreed between the parties. P A G E 1 0

12 Buy/sell spreads When you switch investment Funds, you incur an indirect cost to cover some of the transaction expenses (e.g. commissions, brokerage, etc) involved in the buying and selling of the Fund s underlying investments to facilitate your switch. This indirect cost is known as a buy/sell spread. The trustee of the Mercer Super Investment Trust (MSIT) currently charges a buy/sell spread which it may waive or reduce at its discretion. Buy/sell spreads are deducted from the amount invested at the time of investing in a Fund (or transferring an investment between Funds) and Fee not Per at Transaction the time of withdrawal. The buy/sell spreads are not subject to GST. Details of what, if any, charges are applicable to each Fund are set out in the table below. These estimated buy/sell spreads are generally set out as a percentage of an investment made into a Fund. As at the date of this Investment Statement these amounts are: Investment Option Estimated Buy/Sell Spread % Stable Fund 0.1 Balanced Fund 0.2 Growth Fund 0.3 The trustee of the MSIT may increase or amend the buy/sell spreads from time to time. There is no dollar limit on the amount of any increase or the amount of any new fees that may apply. Expenses such as brokerage fees, custodial fees and other realisation costs will also be deducted from each of the Funds on an as required basis from time to time. The expenses payable to and recoverable by the MSIT are not limited and can be increased. Other expenses Other expenses may be incurred by the Plan for professional services such as auditing the accounts, legal and accounting advice, trustees professional indemnity insurance premiums and member stationery. These expenses are paid from the Plan s total funds as necessary and are not paid directly by you from your Member Account. Annual Expense Cap Mercer maintains an annual cap on the aggregate amount of such other expenses that are payable from the assets of the Plan during each 12 month period succeeding 1 October Mercer will meet expenses for which the Plan is liable to third parties over and above the capped amount, provided always that no other party (e.g. an employer) agrees to meet those expenses. P A G E 1 1

13 The cap does not apply to expenses: - met by the members of the IRP as set out in the Trust Deed; or - which the Trustees and Mercer have previously agreed are to be met from the Plan s assets and/or any other parties; or - which relate to any of the services currently provided by Mercer by agreement with the Trustees, if the relevant agreement is terminated and those services are then provided by another party. The cap may be reviewed and, if agreed between Mercer and the Trustees, an amended basis for the calculation of the amount of the cap may be adopted. Until reviewed, the amount of the annual aggregate expense cap will be 0.10% of the average annual IRP assets invested in the Mercer Super Investment Trust. Trustees Fees The IRP Trustees are entitled to be paid remuneration for their services as trustees of the Plan. These fees are paid from the Plan s total funds (and deducted from the Plan s net investment earnings) and are not paid directly by you from your Member Account. Mercer will meet the Trustees fees to a maximum of $5,000 per annum (inclusive of GST if any) whilst Mercer provides a similar range of services to the Employee Retirement Plan ( ERP ) (a former member scheme of the Global Retirement Trust) as it provides to the Plan. As at the date of this Investment Statement, the minimum or maximum amount of the remuneration payable to the Trustees cannot be expressed as a dollar amount. However, the remuneration will be calculated on an hourly rate of time expended by each Trustee. Currently the rate is $200 per hour. If a member wishes to ascertain the amount of the Trustees remuneration when or after becoming a member, then he or she should contact the IRP Trustees (whose address details are shown on page 20). At each 1 January, the joining, administration, fund transfer, benefit calculation and benefit payment fees may be adjusted by a percentage amount no more than the then latest percentage increase published by Statistics New Zealand in the index for the national average ordinary time weekly wage over the index published in respect of the same date one year earlier. Following the expiry or termination of the administration agreement with Mercer, new administration, fund transfer, benefit calculation and benefit payment fees may be agreed and there is no dollar limit on the amounts by which these fees may be increased. You can ascertain the amount of any charge at any reasonable time by contacting the Administration Manager or Mercer. All of the above fees are gross and (under current legislation) could be effectively reduced by 28% if the Plan s Trustees pass up expenses deducted from the Plan to the Mercer Super Investment Trust and in return receive a tax credit. However, the ability to pass up expenses in each year is not guaranteed as it is dependent on the Mercer Super Investment Trust being able to use those expenses against its taxable income for the year. P A G E 1 2

14 WHAT RETURNS WILL I GET? You will receive a lump-sum benefit when you leave the Plan. This will be based on the contributions paid into the Plan by you and on your behalf and the Plan s investment performance, less the cost of your insurance cover (if any), tax payable on investment income and any fees and expenses charged against your Member Account or the Plan. Investment returns The investment return on your savings depends on the earnings achieved by the Fund in which you choose to invest. At the end of each Plan year (30 June) the Trustees will determine the investment returns for each of the three Funds on the basis of each Fund s past year s investment performance and earnings, less Plan expenses and tax. These returns, either positive or negative, will then be applied to your Member Account balance. The investment return determined for the past year will be based on investment returns determined at the end of each month of the year on the same basis. If you leave the Plan during the year, the Trustees will determine, based on the investment returns determined for each month up to the date of your withdrawal, the investment return for the period from the beginning of the Plan year (1 July) until the date of your withdrawal and apply it to your Member Account balance. Again, this return can be positive or negative depending on investment performance and earnings, Plan expenses and accrued tax during the Plan year to date. It is important in timing your withdrawal from the Plan that you are aware that the month-end investment returns rates can fluctuate. This can make the investment return for the year to date fluctuate from month to month. This is so especially in the early part of the Plan s year when the period from the start of the Plan s year and the date of your proposed withdrawal is short. Neither the Trustees, nor any other party, guarantee the performance, earnings or return from any of the Plan s Funds, as returns will fluctuate from one period to the next. The value of the investment in your Member Account relates to the value of the underlying assets of the Fund you choose to invest in and the earnings derived from the investment of those assets. P A G E 1 3

15 Benefits payable by the Plan The Individual Retirement Plan was set up to provide you with retirement benefits. The Trustees suggest it may be in your best interests to contribute to the Plan until you retire. The Trustees are legally liable to pay you any benefit to which you become entitled. The benefits payable to you from the Plan are paid tax free under current legislation (refer also to the comment on taxes on page 14), as follows: Retirement benefit From age 50 you can retire from the Plan and can request a lump-sum payment equal to the total balance in your Member Account (including interim earnings for the Plan year to date), whether or not you cease employment. While the Plan allows you to take your retirement lump sum at any time after you ve reached age 50, the Trustees recommend that you retain your savings in the Plan until you actually retire (or later). You may also continue contributing to the Plan after age 50 to allow future investment earnings and your contributions to accumulate and take the balance of your Member Account at any later time such as your retirement date. Alternatively, after you reach age 50, you can receive part of your benefit as a lump sum and take the balance of your Member Account at any later time such as your actual retirement date or later. Death benefit If you die while a member of the Plan, a lump sum will be paid to your estate equal to the sum of your Member Account balance (including interim earnings for the Plan year to date) and your life insurance cover if you have any. Total and permanent disablement benefit If you are totally and permanently disabled (as defined in the Plan s policy) while a member of the Plan and while in paid employment (or if self-employed, while actively engaged in your usual profession, occupation or business for financial gain), you will receive a lump sum equal to your disablement insurance cover (if you took up the option of disablement insurance cover with the Plan). You may also apply to the Trustees for early payment of all or part of your Member Account balance. Any part of your Member Account retained in the Plan remains in your chosen Investment Fund until you request payment. Withdrawal prior to age 50 Saving for retirement has to be considered seriously because the money you save and the earnings you receive from your savings are going to replace your income when you stop working. Withdrawals from the Plan before age 50 are, therefore, normally not permitted. Exceptions can only be made in very exceptional circumstances and require the Trustees approval. P A G E 1 4

16 Taxes At the date of this Investment Statement the following taxation regime applies to the Plan: - the Plan invests in the Mercer Super Investment Trust which is a Portfolio Investment Entity (PIE) and has elected to have its taxable investment earnings taxed at 28%. This tax is deducted directly from the Plan s investment returns; - your employer s contributions are subject to Employer Superannuation Contribution Tax (ESCT), which is deducted from those contributions before they are paid into the Plan; - member contributions are not tax deductible; and - all Plan benefits are payable free of income tax. General Comment This outline of the position on taxes is based on legislation current at the time of preparing this Investment Statement. It could, and probably will, change between the date you join the Plan and when you retire from the workforce. Reserves Currently the Trustees do not operate a Reserve Account for the Plan, although the trust deed allows for one. P A G E 1 5

17 WHAT ARE MY RISKS? On joining the Plan you are given the opportunity to select how your contributions are invested. The Plan offers you the choice of investing your contributions in any one of three investment funds, which gives you the flexibility to decide on an investment strategy which suits your changing circumstances. You select the Fund your contributions are invested in: - Once each year, at any time and for no charge, you can change your choice of Fund and redirect your future contributions to be invested in a different Fund. - At any time, and as often as you like, you can transfer all or part of your savings from one Fund to another. (The fee for this service is explained on page 10 of this Investment Statement.) Your choice of investment funds Each of the three investment funds (the Stable Fund, the Balanced Fund and the Growth Fund) has a different mix of risk and return based on the combination of the following investment sectors: Shares (international and Trans-Tasman); real assets (property, infrastructure and natural resources); alternative assets; fixed interest (sovereign and credit); cash. The Trustees benchmark strategy sets the long-term allocation to each sector and determines the long-term risk profile of the three Funds. It is the IRP Trustees intention that the Funds asset allocations should not deviate significantly from these benchmarks, but from time to time the actual asset allocations of the Funds may differ slightly due to market fluctuations. When you complete your application form you can select any one of the following three Funds: Fund Descriptions Stable Fund has a low risk profile The Stable Fund is expected to achieve relatively stable returns over the medium to long term, by investing in a relatively low risk portfolio. The Stable Fund aims to achieve a real rate of return (after tax and investment related fees) of at least 2.0% per annum over rolling three-year periods. Balanced Fund has a moderate risk profile The Balanced Fund is expected to achieve good returns over the medium to long term, by investing in a moderately high risk portfolio. The Balanced Fund aims to achieve a real rate of return (after tax and investment related fees) of at least 3.0% per annum over rolling five-year periods. Growth Fund has a high risk profile 75% Income 50% Income 25% Income 75% Growth 50% Growth 25% Growth The Growth Fund is expected to achieve superior returns over the medium to long term, by investing in a higher risk portfolio. The Growth Fund aims to achieve a real rate of return (after tax and investment related fees) of at least 3.75% per annum over rolling six-year periods. P A G E 1 6

18 Over the medium to long term (in excess of seven years) each Fund should achieve returns that reflect the risk involved and that are in excess of the return on cash invested in the bank. However, each Fund will have some years where the returns are very good and some years where the returns are not so good. All investments involve some degree of risk of capital loss, which can reduce the value of your contributions. As a general rule, the higher the potential for investment gain, the greater the chance of a capital loss in any year. Returns from higher risk investments (such as the Growth Fund) are likely to be volatile on an annual basis sometimes producing high returns and sometimes producing low or negative returns. Returns from lower risk investments (such as the Stable Fund) are less volatile. However, over the long term (10 years or more) higher risk investments tend to outperform lower risk investments. Choosing the profile that s right for you When deciding which Fund to invest in, you need to choose the risk and return profile that you are most comfortable with and that reflects your needs. You may wish to seek independent professional advice on which Fund is best for you. All your contributions are then invested in your chosen Fund and as your circumstances change you have the option of switching the investment of your contributions to one of the other Funds if you wish. The higher-risk, longer-term nature of investment funds such as the Stable, Balanced and Growth Funds, compared to bank deposits needs to be appreciated. Bank deposits are used by people to preserve capital and save short-term with a fixed rate of return for something like a holiday or new car. Investment funds which incorporate higher risk/return investments such as shares and property, are designed for longer-term goals such as retirement, where the objective is not just to preserve capital but to grow it. From time to time it may well be desirable for you to reassess your choice of the most appropriate Fund for your needs, particularly as you approach retirement. Reducing benefits While it is not expected over the longer term that your Member Account will ever reduce in value or be less than the value of your contributions, there is always the possibility that this could occur. If there was a significant fall in the value of the Plan s investments, or if you ceased contributing and the cost of your administration and/or insurance premiums were not covered by investment earnings on your Member Account balance, then potentially you could receive less than you have contributed. It is important that you understand the Plan provides a market-linked investment. The value of the underlying investments will rise and fall according to market conditions, and this will affect the value of your investment shown in your Member Account. However, retirement savings is a long-term investment and you can generally expect a rise in the value of your Member Account over the longer-term. The Trustees do not guarantee payment of any predetermined sum on withdrawal from the Plan. Adverse market conditions may result in a reduction in the value of your investments. You should, therefore, view your decision to invest in the Plan as a medium to long-term investment decision. P A G E 1 7

19 OTHER RISKS Automatic closure of your Member Account Your membership of the Plan automatically ceases after your Member Account balance and any insurance benefits have been paid out to you or, if for any other reason, your Member Account balance reduces to zero or below. Insurance cover Insurance cover is subject to acceptance by the Plan s Insurer. Also, in certain circumstances your insurance cover (if you select this option) could be reduced. For example, the Insurer may decline payment on the grounds of not having received relevant information at the time of providing the cover or the Insurer may have some other legal right to decline a claim for total and permanent disablement. Unclaimed benefits The Trustees must make all reasonable enquiries to locate a member or a member s personal representative entitled to a benefit from the Scheme. However, if after a period of six years from the date the benefit fell due for payment, the member or his or her personal representative cannot be located, the benefit shall (unless the Trustees decide otherwise) be transferred to the IRP s Reserve Account. If a claim for a benefit is received more than six years after the due date of payment, the Trustees may, at their discretion, pay the whole or any part of the benefit claimed from the Reserve Account or any other account to which the benefit has been credited. Insolvency In the very unlikely event that the Plan was declared insolvent (that is, its liabilities exceeded its assets), you would not have to pay any money to the Plan or to any person who may be owed money from the Plan. Bankruptcy The trust deed currently provides that if you become bankrupt then, to the maximum extent permitted by law, your benefits will be forfeited and may be applied as the Trustees see fit. You should be aware that the law may not allow this clause to be applied effectively in all cases. The Trustees will endeavour to apply the clause to the extent that the law allows. However, you should not expect that your benefits will be protected in the event of your bankruptcy. Where your benefits are not protected then the official assignee will stand in your shoes as a member of the Plan. Should you be bankrupt when a benefit is due to be paid, the Trustees would generally pay some or all of your benefit to the official assignee. However, no part of your benefit will be paid to the official assignee until you become entitled to a benefit from the Plan. Property (Relationships) Act If you are married, in a civil union or in a long-term de facto relationship, then your interest in the Plan is likely to be regarded as relationship property under the Property (Relationships) Act 1976, in which event it would be subject to the statutory presumption of equal sharing if your relationship ended by reason of separation or death. P A G E 1 8

20 CAN THE INVESTMENT BE ALTERED? There are a number of ways in which your savings investment in the Plan can change. Trust deed amendments The Trustees may amend the trust deed of the Plan from time to time. However, before any amendment to the trust deed can be made, which would reduce or adversely affect a member s benefit, or increase a member s contributions, the written consent of the member must be obtained. This reflects the provisions of the Superannuation Schemes Act 1989, section 9, which provides statutory protection for members against adverse amendments to superannuation scheme trust deeds. Flexible contributions and investment funds As mentioned earlier, you can change the level of contribution you make to the Plan at any time. You can also transfer your savings between the Plan s three investment funds as often as you like and once each year you can redirect your future contributions to a different Fund. The fees for these services are explained on page 10 of this Investment Statement. Changing the investment of the IRP s assets At the date of this Investment Statement all the assets of the IRP are invested in the Mercer Super Investment Trust (MSIT). However, if at any time the Trustees are of the view that ongoing investment of all or a part of the assets of the Plan in the MSIT does not satisfy their investment duties as Trustees, they shall, to the extent necessary to comply with those duties, invest some or all of the assets of the IRP in such manner as will meet their duties of investment in respect of the IRP s assets. Changing the investment funds The trustee of the MSIT may from time to time make available new investment funds to the IRP. In that event you may be given the opportunity to invest in one or more of those funds. In addition, the trustee of the MSIT may decide to close an existing investment fund. If that occurred you would be notified, together with details of the options available to you. HOW DO I CASH IN MY INVESTMENT? Your lump-sum benefit entitlement is payable on retirement after age 50. In certain circumstances you may also make withdrawals from your Member Account, while remaining a member of the Plan. A withdrawal benefit calculation fee is payable on withdrawal from the Plan. Please refer to pages 13 and 14 for further information on all the benefits you are entitled to from the Plan. On windup of the Plan It is the Trustees intention to continue the Individual Retirement Plan indefinitely. However, the Plan may be wound up if the Trustees so resolve. In the event of the Plan being wound up, all assets held would be liquidated and the total value of the Plan s funds, after deduction of liabilities, would be applied in the following way: - benefits that were payable prior to the date of winding up the Plan that had not been paid on that date would be paid first, and then - the balance of the Plan s funds would be distributed to all members in the proportion that their Member Account balances relate to the total of all members Account balances. P A G E 1 9

21 Selling your investment You cannot sell your investment or benefits in the Plan to any person or entity. Neither can you assign your benefit as security for a loan from the Plan or from any other organisation. WHO DO I CONTACT WITH ENQUIRIES ABOUT MY INVESTMENT? If you would like further information about your rights and benefits as a member of the Individual Retirement Plan you may contact either of the following: The Individual Retirement Plan Trustees c/- Plan Secretary Mercer (N.Z.) Limited Level 8, PwC Tower, The Terrace P O Box 2897 Wellington 6140 Freephone Fax: Telephone: The Administration Manager: Mercer (N.Z.) Limited Level 8, PwC Tower, The Terrace P O Box 1849 Wellington 6140 Telephone: Fax: irp@mercer.com Use of personal information The Trustees will hold personal information in respect of you for the purposes of maintaining and administering the Plan. This information may be passed on to various parties such as the Administration Manager and Insurer of the Plan, for the purposes of the Plan. You may request to see any personal information relating to you and ask that it be corrected if you believe any of the details are wrong. If you have any concerns about how your personal information is being used in connection with the Plan, please contact the Plan Secretary at the Mercer, Wellington office. Members responsibility to advise changes You have an ongoing responsibility to ensure the Trustees are kept informed of any relevant changes to your personal details in particular any change of address. P A G E 2 0

22 IS THERE ANYONE TO WHOM I CAN COMPLAIN IF I HAVE PROBLEMS WITH THE INVESTMENT? The Plan is established under a trust deed which has rules to protect your benefits and entitlements as a member and is the document of ultimate authority with regard to the duties, rights and obligations of both the Trustees and the members. The Trustees responsibilities are to protect the interests of the members and to ensure that the terms and conditions of the trust deed are satisfied. If you have any questions or complaints about the Plan or your investment in it, please contact the Trustees at the address noted on page 20. The Trustees have implemented the following disputes handling procedures: if you have a dispute or complaint about the Plan s operation you should first contact the Plan Secretary at the Mercer, Wellington office; the Plan Secretary will let you know that your complaint has been received; the Plan Secretary will check whether you have requested anonymity and advise you whether or not this is likely to be practicable; the Plan Secretary will ensure the Trustees are notified of your complaint; your complaint will be entered in a complaints register and discussed at the next Trustees meeting; the Trustees will set a realistic timetable for handling all complaints and monitor compliance with the timetable. If you have a complaint that the Plan is not being operated in accordance with the Superannuation Schemes Act 1989 or that the financial position of the Plan, the security of members benefits or the management of the Plan is inadequate, you can complain to: Financial Markets Authority Level 8, Unisys House 56 The Terrace P O Box 1179 Wellington 6140 Phone: (04) Fax: (04) Complaints If you are not satisfied with the service you have received from the Trustees you should contact them. The Trustees have an internal complaints process and undertake to investigate your concerns promptly and fairly. You may contact the Trustees to make a complaint by telephone, by or in writing (please see page 20 for contact details). The Trustees are members of an independent dispute resolution scheme operated by Financial Services Complaints Limited ( FSCL ) and approved by the Ministry of Consumer Affairs. They have 40 days to respond to your complaint. If you are not satisfied by their response, you may refer the matter to FSCL by ing info@fscl.org.nz or calling FSCL on Full details of how to access the FSCL scheme can be obtained on their website There is no cost to you to use the services of FSCL. P A G E 2 1

23 WHAT OTHER INFORMATION CAN I OBTAIN ABOUT THIS INVESTMENT? The Individual Retirement Plan aims to keep members informed on all matters relating to the Plan. Each year the Trustees will send you an update of your Member Account balance and an Annual Report covering events of the year. Plan members and prospective members who are considering joining the Plan are entitled on request to the nearest Mercer office to: receive a copy of the registered prospectus (including any certificate extending that prospectus) and financial statements for the Plan free of charge. (The prospectus and financial statements are available for inspection by telephoning the Ministry of Economic Development Business Service Centre on and quoting file reference WNSU.82.) A copy can also be obtained free of charge from the companies office website at view a copy of the trust deed or purchase a copy at a cost of no more than 20 cents per page with a maximum fee of $10. receive an estimate of your benefits at any time. receive a copy of the current Investment Statement. receive a copy of the Plan s latest annual accounts and a copy of the auditor s report relating to those annual accounts. receive brief descriptions of the Trustees investment objectives and policy for the Plan and of the means by which those objectives and that policy can be changed (except to the extent that those matters are already disclosed in this Investment Statement). view or copy (free of charge) that part of the Register of Members that relates specifically to you. You can access the Register between the hours of 2pm to 4pm by contacting the Administration Manager. TO FIND OUT MORE OR IF YOU NEED HELP irp@mercer.com Visit our website Phone the toll free helpline (0800 IRP 111) P A G E 2 2