Enhancements to BOC Super Pension investment options

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1 Enhancements to BOC Super Pension investment options The BOC Super Trustee is pleased to advise that some enhancements are being made to the way our Pension options are invested to better meet the needs of our Pension members during retirement. This Significant Event Notice provides you with details of the changes that will apply to the Pension options from 30 September Why the change? Members would be aware that we are currently experiencing very low returns for cash and bonds, in a very difficult investment environment which includes large swings in the share markets. This has presented particular challenges for Pension members who want a secure income in retirement. In response to this complex investment situation, the Trustee and its investment adviser, JANA, have spent considerable time reviewing the investment structures for Pension members. Some changes are being made which aim to provide: More effective tax management to take advantage of the zero tax that applies to pension investments, and More consistent, less volatile returns. What is changing? Changes are being made to the investment objectives and asset allocations of the Aggressive, Moderate and Conservative options (there is no change to the Cash option). Exposure to share markets will be reduced and more investment will be made in alternative assets such as private (unlisted) equity and infrastructure. New managers are being appointed to implement this approach. Alternative assets offer more diversification in times of volatility. All BOC Super assets are invested through professional investment managers with particular expertise. The investment fees charged to the BOC Super Trustee are directly passed on to Fund members. As a result of changing the way the pension assets are invested, including greater use of alternative assets, there will be an increase in the investment fees and indirect costs for Pension members. This increased allocation to alternative assets is an important change. Investing in alternative assets is more expensive than in most other asset classes, including equities, and some fee increases are inevitable. The trade-off is an expectation of greater stability of investment returns, with more consistent investment yield and added protection against market volatility. These changes are expected to reduce both the likelihood of negative returns and the overall risk profile of the options. The long-term investment objectives have been adjusted, and the recommended investment timeframes have also changed slightly. What do I need to do? The Trustee believes that these changes are in the best interests of BOC Super Pension members. No action is required unless you wish to change how your super is invested. Please review the changes to ensure you remain comfortable with how you have instructed the Fund to invest your Pension account. If you have concerns about any of these changes you may wish to speak to a financial adviser about how the changes will affect you. As a BOC Super Pension member, you have access to free limited financial advice about your Pension account via the BOC Super Helpline on

2 Pension investment options new details strategy* objective Aggressive Aims to deliver the maximum possible long-term return, by accepting increased volatility in returns over the short to medium term. It is potentially invested in fewer markets than the other diversified options and has a very high exposure to Australian and international share markets. CPI + 4% per annum over rolling 10-year negative returns between 4 6 years in every 20 years. Moderate (default option) Aims to deliver a high level of long-term return, within a portfolio invested across a diverse mix of assets and markets, including shares, property, alternative assets and bonds. CPI + 3% per annum over rolling 5-year negative returns between 2 3 years in every 20 years. Risk profile** High Medium Minimum investment horizon 10 years 5 years Target asset allocation*** Australian shares 53.0% 46.0% Australian shares 36.0% 26.0% shares 34.0% 33.0% shares 24.0% 18.0% Property 10.0% 10.0% Property 10.0% 10.0% 3.0% 11.0% 3.0% 16.0% 7.0% 12.0% Fixed Interest Cash Fixed Interest 15.0% 18.0% Cash 5.0% 0.0% *The Trustee is required by law to set an investment objective and strategy for the Fund and for each investment option that it offers. The investment objective is expressed after management fee and expense recoveries, i.e. performance is measured relative to the benchmark after fees and costs are deducted. Please refer to the Pension PDS for details on fees and costs. Whilst the Trustee has sought professional advice in setting the objectives and believes their objectives are reasonable, they do not constitute a forecast or guarantee of future returns. They are merely indications of what each option aims to achieve over the medium to long term on the assumption that share and bond markets remain relatively stable throughout time. **The Standard Risk Measure used is based on industry guidance to allow members to compare investment options that are expected to deliver a similar number of negative annual returns over any 20-year period. The Standard Risk Measure is not a complete assessment of all forms of investment risk, for instance it does not detail what the size of a negative return could be or the potential for a positive return to be less than a member may require to meet their objectives. Further, it does not take into account the impact of administration fees and tax on the likelihood of a negative return. Members should still ensure they are comfortable with the risks and potential losses associated with their chosen investment options. ***This table shows the target asset allocations. Actual allocations will vary to take advantage of current investment conditions. 2

3 Pension investment options new details strategy* objective Conservative A substantially more defensive option than the Moderate option, although it aims to deliver higher long-term returns than the Cash option with commensurately higher risk. It is also invested across a diverse mix of assets and markets, including shares, property and bonds. CPI + 2% per annum over rolling 5-year negative returns between 0.5 and 1 year in every 20 years. Cash Aims to preserve capital after fees, and match the return of the bank bill index (the common measure of the institutional cash rate). It offers minimal scope of positive returns after inflation. To earn a positive rate of return (net of fees) over rolling 1-year periods, with negligible chance of a negative annual return (perhaps one half in 20 years). Risk profile** Low Very low Minimum investment horizon Target asset allocation*** 5 years - Australian shares 12.0% 10.0% Australian shares shares 8.0% 7.0% shares Property 10.0% 5.0% Property 3.0% 8.0% 7.0% 13.0% Fixed Interest 40.0% 47.0% Cash 20.0% 10.0% Fixed Interest Cash 100% 100% *The Trustee is required by law to set an investment objective and strategy for the Fund and for each investment option that it offers. The investment objective is expressed after management fee and expense recoveries, i.e. performance is measured relative to the benchmark after fees and costs are deducted. Please refer to the Pension PDS for details on fees and costs. Whilst the Trustee has sought professional advice in setting the objectives and believes their objectives are reasonable, they do not constitute a forecast or guarantee of future returns. They are merely indications of what each option aims to achieve over the medium to long term on the assumption that share and bond markets remain relatively stable throughout time. **The Standard Risk Measure used is based on industry guidance to allow members to compare investment options that are expected to deliver a similar number of negative annual returns over any 20-year period. The Standard Risk Measure is not a complete assessment of all forms of investment risk, for instance it does not detail what the size of a negative return could be or the potential for a positive return to be less than a member may require to meet their objectives. Further, it does not take into account the impact of administration fees and tax on the likelihood of a negative return. Members should still ensure they are comfortable with the risks and potential losses associated with their chosen investment options. ***This table shows the target asset allocations. Actual allocations will vary to take advantage of current investment conditions. 3

4 New investment fees Following are the new investment fees which will apply to Pension members from 30 September Fees are increasing due to the higher cost of investing in alternative assets. fee Option Range Expected fee How and when paid Old fee New fee Old fee New fee Aggressive 0.65% 0.69% p.a. ($6.50 $6.90 per Moderate 0.61% % p.a. ($ $6.50 per 0.73% 0.77% p.a. ($7.30 $7.70 per 0.66% 0.70% p.a. ($6.60 $7.00 per 0.68% p.a. ($6.80 per 0.64% p.a. ($6.40 per 0.75% p.a. ($7.50 per 0.67% p.a. ($6.70 per This percentage-based fee is deducted from the investment earnings of each investment option prior to determining the crediting rate for that investment option. It includes estimated performance fees. Conservative 0.43% 0.47% p.a. ($4.30 $4.70 per 0.42% 0.46% p.a. ($4.20 $4.60 per 0.46% p.a. ($4.60 per 0.44% p.a. ($4.40 per Cash 0.13% 0.15% p.a. ($1.30 $1.50 per 0.13% 0.15% p.a. ($1.30 $1.50 per 0.14% p.a. ($1.40 per 0.14% p.a. ($1.40 per Indirect cost ratio* Option Old fee New fee How and when paid Aggressive Nil 0.13% p.a. ($1.30 per This amount is Moderate 0.05% ($0.50 per 0.25% p.a. ($2.50 per Conservative 0.05% ($0.50 per 0.19% p.a. ($1.90 per Cash Nil Nil deducted proportionately from investment earnings. The amount shown is an estimate. * The indirect cost ratio reflects additional charges by some of JANA s underlying investment managers which are not included in JANA s investment fee. These particularly relate to alternative asset allocations and there can be considerable variation. The amounts shown are current estimates. 4

5 Need more information? The Pension Product Disclosure Statement (PDS) is currently being updated and will be available on the website by the end of September. Ring the BOC Super Helpline on if you need assistance about your Pension account or your investment options. This leaflet has been prepared for the general information of members of BOC Super. It does not take into account any person s individual personal circumstances, financial objectives, financial situation or needs. It is not a substitute for investment or financial advice. The Trustee recommends that you consult a licensed or appropriately authorised financial adviser before acting on any of the information contained in this leaflet or making investment decisions for your future. Nothing in this leaflet is intended to convey any guarantees as to the future investment performance of any asset or class of assets. While the Trustee has taken all due care and diligence in the preparation of this leaflet, it reserves the right to correct any errors or omissions. If there are any inconsistencies between the terms of the BOC Super trust deed and this leaflet, the terms of the trust deed prevail. All financial advice offered via the BOC Super Helpline is provided by Authorised Representatives and Representatives of Mercer Financial Advice (Australia) Pty Ltd, ABN , Australian Financial Services Licence (Mercer). BOC Super does not provide, recommend or endorse these financial advice services and does not accept any liability for loss or damage caused by or related to the services. You should consider the terms and conditions that apply to the services. BOC Super does not receive any commissions from Mercer as a result of members using its financial advice services. BOC does pay fees to Mercer for the provision of financial advice services, which are included in the fees paid to Mercer for administering the Fund. You are responsible for any fees related to comprehensive advice. Issued by BOC Superannuation Pty Ltd ABN , AFS Licence No as Trustee of the BOC Gases Superannuation Fund ABN (BOC Super). MySuper Authorisation number August