FIRE AND EMERGENCY SERVICES SUPERANNUATION FUND GUIDE FOR PENSION MEMBERS PRODUCT DISCLOSURE STATEMENT

Transcription

1 FIRE AND EMERGENCY SERVICES SUPERANNUATION FUND GUIDE FOR PENSION MEMBERS PRODUCT DISCLOSURE STATEMENT Issued by: Fire and Emergency Services Superannuation Board ABN AFS Licence Prepared: 14 December 2015

2 Table of Contents Page What s this Guide about? 2 General information 3 Summary of Account Based Pension Features 4 Terms and conditions Account Based Pension 5 Fees and charges 6 Choosing investment options 8 Understanding risk/return 9 Smoothed investment option 10 Cash option 12 Capital Stable option 13 Growth and Share option 14 Australian Share and International Share option15 Fixed Interest option 16 Frequently asked questions 17 Historical investment performance 18 Transition to Retirement Pension 19 Summary of Transition to Retirement Pension Features 19 Terms and conditions Transition to Retirement Account Based Pension 21 Taxation of Pensions 21 Attachment 1 calculation of minimum payment limits for Account Based Pension 23 Attachment 2 calculation of payment limits for Transition to Retirement Account Based Pension 24 Attachment 3 Preservation age 25 Attachment 4 Key Feature comparison between Pensions 26 Pension Application Form

3 What s this Guide About? This Guide (also known as a Product Disclosure Statement) contains information about the Fire and Emergency Services Superannuation Fund for those members about to commence or those who are receiving, a pension benefit from the Fund. Members who have retired, who have retained their money in the Fund and have attained their preservation age are able to take their superannuation monies as an Account Based Pension. Members who have an accumulation account in the Fund who have attained their preservation age but have not yet retired from employment may be able to take their superannuation monies as a Transition to Retirement Pension. The information in this Guide outlines the key features, terms and conditions of each type of available pension. Please note that the information contained in this Guide is general information only and does not take into account your particular objectives, financial situation or needs. You should seek professional financial advice before acting on this information. If you have any questions after reading this Guide, please contact the Superannuation Office at the address below. Secretary Fire and Emergency Services Superannuation Fund 242 Rokeby Road Subiaco WA 6008 Telephone: (08) Facsimile: (08) admin@fessuper.com.au 2

4 General information ACCOUNT BASED PENSION OPTION Members who retire after their preservation age (see Attachment 3 for your preservation age) and who have retained their money in the Fund in an accumulation account are able to take their superannuation monies as an Account Based Pension. Account Based Pensions are very different to the more traditional type of pension and offer members considerable flexibility and control over their retirement incomes. Account Based Pensions are very popular among retirees, and are a very flexible and tax effective way of drawing on your superannuation in retirement. One attraction of taking your superannuation in the form of an Account Based Pension on or after retirement is that no investment tax is paid on the investment earnings of the assets supporting your Account Based Pension account balance. However, tax may be payable when you make withdrawals from your Account Based Pension account (see later for more details). If you elect to take an Account Based Pension, you can nominate the amount of your superannuation monies that will form the starting balance of your Account Based Pension account. Your Account Based Pension account will be: debited with any withdrawals or pension payments made to you; debited with any fees that apply; and allocated with earnings (the amount of earnings will vary and depend on which investment option(s) you have selected). Please note that earnings may be positive or negative (i.e. your account balance may reduce if the investment of the account falls). This is more likely to occur within the Growth, Australian Share and International Share investment options of the Fund, since these options have a higher exposure to shares and target return investments, but can also occur in the other investment options offered. Each year, you can select the amount of the pension you would like to draw from your Account Based Pension account within certain prescribed limits. You can also withdraw lump sums from your Account Based Pension account at any time subject to any government restrictions. If you die, the balance of your Account Based Pension account can either be paid to your dependants, to your estate or alternatively, your spouse could continue to receive the pension if you nominated them as a reversionary beneficiary at the commencement of the pension. You can only nominate a reversionary beneficiary for your pension on or before the establishment of the pension and not once the pension has commenced. However, you can change your reversionary beneficiary for your pension by terminating the pension and restarting a new pension with the new nominated person. A reversionary beneficiary pensioner takes your place as the primary beneficiary of the pension in the event of your death and continues to receive the pension payments from your Account Based Pension after your death. One of the attractions of Account Based Pensions is that the money in your account is yours to access as you require it, subject to certain government restrictions. However, the pension payments will only last while there is sufficient money remaining in your account. Once your account balance reduces to nil, your pension and all entitlements from the Fund will cease. 3

5 Summary of Account Based Pension Features Starting balance of your Pension account: Pension payments: You determine how much of your superannuation monies form the starting balance of your Account Based Pension account. You determine the annual pension payments you receive each year subject to them being within the minimum payment limits set by the government. See Attachment 1: Calculation of Minimum Pension Payment Limits for Account Based Pensions. No maximum payment limit applies. At the start of each financial year, you will be advised of your minimum limit and asked to nominate the total pension you want to receive over the coming twelve months. You have the choice of your pension payments being paid to you in arrears either: Weekly, every Wednesday; Fortnightly, on a Wednesday of each fortnight; Monthly, on the 15 th day of each month; Quarterly, on 15 th day of September, 15 th December, 15 th March and 15 th June; Six monthly, on 15 th day of December and 15 th June; or Annually on the 15 th day of June each year. These pension payments will be deducted from your Pension account. Lump sum withdrawals: Investment options: You can withdraw lump sum amounts from your Account Based Pension account at any time. You choose where your Account Based Pension account is to be invested from the range of investment options offered by the Fund. On commencing an Account Based Pension, all of the Fund s investment options are available for selection (including the Smoothed investment option). However, once you have commenced your pension, you cannot move any additional monies from other investment options into the Smoothed investment option at a later time. You may split your investment over one or more investment options and later on switch your investment between these investment options. The Fire and Emergency Services Superannuation Fund gives you a say in how your superannuation is invested. With effect from 1 January 2016 there are seven different investment options to choose from, which are: Smoothed (explained further below); Cash; Moderate (formerly Capital Stable); Growth; Australian Share; International Share; and Fixed Interest Each investment option has different risk/return characteristics and the most suitable option(s) for you will depend on your individual circumstances. If you are unsure which investment option you should choose you should seek assistance from a professional adviser. The Superannuation Board uses professional fund managers to manage most of the Fund s investments, and these managers are regularly monitored. The Board is able to replace any fund manager if it is not satisfied with them. 4

6 Information about these options is provided below. If your Account Based Pension account is split between more than one investment option, then your pension payments and any lump sum withdrawals will be withdrawn from each option in accordance with your chosen investment split, unless you advise otherwise. Rollover: You can rollover all or part of your Account Based Pension account balance to another superannuation fund at any time by notifying the Superannuation Office in writing. Account Based Pension account balance: Your Account Based Pension account will be debited with your pension payments, any lump sum withdrawals you make and any fees applicable. Your account balance will be allocated with earnings which may be positive or negative based on the net fund earning rate of the investment option(s) you have chosen. Tax free investment earnings: There is no income tax paid on the investment earnings on your Account Based Pension assets. Tax on pension payments/lump sum withdrawals: There is no tax payable on pension payments or lump sum withdrawals if you are aged 60 or over. PAYG tax less any applicable tax offset will be automatically deducted from any pension payments if you are under the age of 60. If tax is payable on any lump sum withdrawals you make, this will also be deducted prior to payment. Terms and Conditions Account Based Pension Minimum Account Based Pension Opening account balance: $10,000 If your account balance reduces to $1,000 or less at any time, your remaining pension account balance will be paid out to you prior to the next 30 June. Minimum lump sum withdrawal: Investment switches: $2,000, with a maximum of eight lump sum withdrawals per financial year. You can change your investment mix at any time during the year (up to four changes per financial year without cost). Your investments will be switched on the first day of the month following the receipt and acceptance of your instructions by the Superannuation Office (provided your instructions are received no later than 5 working days prior to the end of the month). Variation in pension payments: With effect from 1 st July each year. You can change the amount and frequency of your pension payments during the year, subject to them meeting the minimum annual payment limit. 5

7 Fees and charges: Government mandated Consumer Advisory Warning DID YOU KNOW? Small differences in both investment performance and fees and costs can have a substantial impact on your long term returns. For example, total annual fees and costs of 2% of your fund balance rather than 1% could reduce your final return by up to 20% over a 30 year period (for example, reduce it from $100,000 to $80,000). You should consider whether features such as superior investment performance or the provision of better member services justifies higher fees and costs. You may be able to negotiate to pay lower contribution fees and management costs where applicable. Ask the fund or your financial advisor. TO FIND OUT MORE If you would like to find out more, or see the impact of the fees based on your own circumstances, the Australian Securities and Investments Commission (ASIC) website ( has a superannuation calculator to help you check out different fee options. This product disclosure statement shows fees and other costs that you may be charged. These fees and costs may be deducted from your money, from the returns on your investment or from the Fund assets as a whole. The statement made regarding being able to negotiate lower contribution fees and management costs in the Consumer Advisory Warning is one required by legislation and does not apply to the fees and management costs of the Fire and Emergency Services Superannuation Fund as its fees and costs are not negotiable. You should read all the information about fees and costs because it is important to understand their impact on your investment. All fees advised in this product disclosure statement are inclusive of GST (less any reduced input tax credits) and stamp duty where applicable. There are no special establishment or entry fees for commencing an Account Based Pension. The fees payable by pension members are the same as those for a member of the Fund. These are: Management costs Amount How and when paid Administration fee: This is the fee to cover the general administration of your pension account. The amount may vary from time-to-time depending on the actual running costs of the Fund. An asset based fee of 0.38% per annum, or $3.80 per year for every $1,000 in your account, applies for the 2015/16 financial year. This fee is reviewed annually in July and is based on the actual administration costs incurred during the previous financial year. The fee for the 2016/17 financial year will be set following the next review. Deducted from your investment returns before they are allocated to your pension account. 6

8 Investment management fee: This is the fee for managing the Fund s investments (and is charged by the investment managers). Additional service fees 1 Switching fee: This is the fee charged when you switch between investment options offered by the Fund. Cash option: approximate fee of 0.00% per annum. Moderate (formerly Capital Stable) option: approximate fee 2 of 0.43% per annum, or $4.30 per year for every $1,000 invested. Smoothed option: approximate fee 2 of 0.48% per annum, or $4.80 per year for every $1,000 invested. Growth option: approximate fee 2 of 0.48% per annum, or $4.80 per year for every $1,000 invested. Share option (closed on 31 December 2015): approximate fee 2 of 0.69% per annum, or $6.90 per year for every $1,000 invested. Australian Share option: approximate fee 2 of 0.58% per annum, or $5.80 per year for every $1,000 invested. International Share option (available with effect from 1 January 2016): approximate fee 2 of 1.35% per annum, or $13.50 per year for every $1,000 invested. Fixed Interest option (available with effect from 1 January 2016): approximate fee 2 of 0.40% per annum, or $4.00 per year for every $1,000 invested. Nil for first four switches each financial year; $50 per switch thereafter. All investment returns declared by the Fund are net of investment management fees. Investment management fees are NOT charged directly to your pension account. Instead, the investment management fees are deducted from investment earnings before investment returns are credited to your pension account. Deducted from your pension account at the time of your switch (1) Fees relating to family law may also be payable. Further details are provided in the Additional explanation of fees and costs below. (2) As the investment managers and investment management fees change from time to time it is not possible to determine an exact fee in advance. These fees are based on declared fees and assets invested at 30 June Additional explanation of fees and costs All fees and charges are current and may be adjusted by the Board from time-to-time. No commissions are paid by the Fund to any person. Any government taxes payable by the Fund will also be deducted from your investment returns as appropriate. Fees relating to Family Law Type of fee or cost Amount How & when paid Family Law information request: Application for information for family law purposes by nonmembers. $165 (incl GST) Payable on application. Flagging or splitting a benefit for family law purposes. Nil N/A 7

9 Investment Fees Additional Information The Board monitors the Fund s investments with various professional investment managers and from time-to-time may change its investment managers. Where this occurs, there may be a difference between the application price when investing in a new investment manager and the withdrawal price. This difference is known as the buy-sell spread and relates to the costs incurred when buying or selling the underlying assets where investments or withdrawals are made. The cost can range from 0.0% up to 0.7% of the affected assets (that is, $0 to $7 per $1,000 of affected assets). The costs are paid at the time the Fund invests or withdraws funds from an investment manager and are deducted from investment earnings prior to returns being credited to your account. Therefore, the cost is an additional cost to the member. The buy-sell spread is paid to the investment manager. Brokerage refers to fees incurred when trading shares. This fee is incorporated in the buy-sell spread and management costs outlined above. Example of annual fees and costs for the Growth investment option The table below gives an example of the fees and costs in the Growth investment option over a one year period for a pension member. Please refer to the table to compare this product with other superannuation products. Suppose you are a pension member and your account balance totals $200,000 (as you have retired, you make no contributions during the year). PENSION MEMBER EXAMPLE the Growth Investment Option BALANCE OF $200,000 Contribution Fees Nil Not Applicable. PLUS Management costs Administration fee: An asset based fee of 0.38% per annum For every $200,000 you have in the Fund, you will be charged: $760 in administration fees (0.38 %); and Investment management fee: An asset based fee of 0.48% per annum $960 in investment management fees (0.48 %) EQUALS Cost of Fund If your balance was $200,000, then for that year you will be charged fees of: $1, What it costs will depend on the investment option you choose. The total yearly fee would be $1, (which equates to 0.86% of your pension account balance). However, the Management Costs (the administration fee and the investment management fee) are deducted from the Fund s earnings by the investment managers prior to the Fund allocating those earnings (which may be positive or negative) to your pension account. You cannot make any further contributions to your Account Based Pension account once you have commenced a pension. However, you can commence another Account Based Pension if you have other superannuation monies available to you. How do I choose which investment option is right for me? In order to determine which option is right for you, it is important for you to understand the potential risks and rewards involved with each option. 8

10 Understanding the risk/return trade-off As a general rule, the more an investment is expected to earn over time, the more likely that it will fluctuate (or move up and down) in value on a shorter term or year-by-year basis. For example, investments in shares have had many ups and downs over the years and in some years have even gone backwards. The 1987 stock market crash and the sharp downturn in share markets during 2001 to 2003 and more recently in 2008/9 stand out as examples of years when share markets lost money. 2008/9 in particular produced large negative returns which meant investments went backwards. However, there have been other years when share markets have done very well, for example 2005 to Investments in cash, on the other hand, have always produced positive returns, year in, year out, but over the longer term, the average return from cash is usually less than the return from shares. Just 1% or 2% more each year can make a big difference! The power of compounding interest over time means that even an extra 1% or 2% average return each year can make a big difference to your pension account balance. The trade-off is: Higher expected long-term investment returns versus more stable year-to-year investment returns. In order to get that extra 1%-2% per year on average (which can add up over the longer term), you are likely to see more ups and downs in the value of your pension investment in any one year. The significant risks that relate to investing in the Fire and Emergency Services Superannuation Fund are: Market risk economic, technological, political or legal conditions and even market sentiment can (and do) change, and this can mean that changes in the value of investment markets can affect the value of the investments in the fund; Currency risk Certain investment options invest in overseas investments, and if the currencies of any of those countries rise or fall in value relative to the Australian dollar, the value of the investment can change; Liquidity risk this is the risk of being unable to convert an investment into cash with little or no loss of capital and minimum delay. Some investments, such as direct property and private equity, are relatively illiquid;. Interest rate risk changes in interest rates can have a positive or negative impact directly or indirectly on investment value or returns for example, the income return on a fixed interest security can become more or less favourable; Inflation risk the risk that inflation may exceed the return on your investment thereby eroding the purchasing power of your money; Individual investment risk individual assets under each investment option can (and do) fall in value for many reasons, such as changes in the internal operations or management of a fund or entity in which the fund invests, or the business environment in which it operates; Derivatives risk derivatives are used to reduce risk or gain exposure to other types of investments when appropriate. Each investment manager may invest directly or indirectly in derivatives. Risks associated with derivatives include the value of the derivative failing to move in line with the underlying asset, potential illiquidity of the derivative, not being able to meet payment obligations as they arise and counterparty risk (this is where the counterparty to the derivative contract cannot meet its obligations under the contract); Changes to superannuation law changes are frequently made to superannuation law which may affect your benefits or your ability to access your benefits; Changes to taxation changes may occur to the taxation of superannuation, which may affect the return on your investment; and Negative returns there is a risk that the investment options have negative returns and that you do not receive the repayment of capital or may have a reduction in your investment amount. Where should I be investing? The extent to which you invest in shares and target return investments (known as growth assets) as compared to fixed interest and cash (known as income assets) determines the extent to which you are trading off higher expected longterm returns for greater year-to-year stability. The more you invest in shares and property, the more you would expect to achieve: 9

11 Higher long-term investment returns (as compared to cash and fixed interest); Greater protection against the impact of inflation on your savings; and Greater risk that investment returns could be low or even negative in any one year. Target return investments include directly held property, infrastructure, hedge funds and real return funds. As a general rule of thumb, if you are not willing to accept both the ups and downs in the value of your pension account, you may wish to look for greater stability rather than the extra long-term return by selecting an option with a lower exposure to growth assets and a higher exposure to income assets. You should consider to what extent you can tolerate the ups and downs in the value of your pension account versus the comfort of more stable year-to-year returns. If you are willing to accept investment losses on your pension account from time-to-time in return for higher expected long-term gains, you may wish to consider selecting an option with a greater exposure to growth assets and a lower exposure to income assets. You should seek professional financial advice if you require assistance in determining which investment options are right for you. The Smoothed Investment Option The Smoothed Option is the Fund s default investment option. If you do not notify the Superannuation Board of your preferred investment option(s), your pension account will be invested in the Smoothed Option only. The Smoothed Option has been specifically designed for pension members who: want to be invested in the higher growth sectors over the longer term; but want greater certainty in their year-to-year investment returns; and are willing for the Fund to set aside a portion of the investment return in a reserve in the good investment years (i.e. when returns are high) in order to supplement returns in poor investment years (i.e. when the markets may lose money). The Smoothed option uses an averaging process to smooth the year-to-year investment returns credited to members. Generally, the smoothing (or averaging) process works by setting aside a portion of the Fund s earnings to a reserve when investment returns are higher. In these years, a reduced investment return is paid to members accounts. Then, in years of lower investment returns, the reserves can be used to increase the investment return credited to members pension accounts. Using a smoothing or averaging process provides members with less fluctuation in year-to-year investment returns than if their money was exposed to full market movements each year. The Superannuation Board may use its discretion from year to year to set aside a portion of the Fund s earnings to a reserve for the Smoothed option and in some years may decide that this approach is not in the best interests of the members invested in this option. Important: Capital losses can occur within the Smoothed option. However, the smoothing/averaging process reduces the likelihood of negative returns (i.e. investment losses) being credited to your pension account in any one year. Moving monies out of the Smoothed option is a one-way move In order to protect any investment reserves in the Smoothed option, once you move monies out of the Smoothed option, you cannot transfer these monies back to the Smoothed option at a later time. 10

12 Selecting from the options Each of the investment options has different investment aims, objectives and strategies (ways to achieve the aims). These are described below. The charts show the long-term benchmark allocations for each option. Smoothed Option (65% exposure to shares and target return assets) Fixed Interest 19% c Cash 16% Target Return assets 16% Australian Shares 30% Overseas Shares 19% Aim Objective Strategy Targeted investments Suitable for Historical performance Risk Level Risk negative returns of To provide a competitive growth investment with smoothed investment returns on a year-toyear basis. To earn at least CPI + 4% per annum over a rolling 10 year period (net of tax and fees). Invest approximately: two thirds in shares/target return assets; and one third in cash/fixed interest. Australian shares 10%-50% Overseas shares 0%-40% Target Return assets 0%-35% Fixed Interest 10%-50% Cash 0%-30% Members who: have a medium to longer time frame for their investment (5 years or more); would like exposure to growth assets; and want less ups-and-downs in their year-toyear investment returns. For details on the historical investment performance of the Smoothed Option, refer to later pages of this Guide. Medium to high To achieve less than three negative annual returns (after smoothing) in any 20 year period (on average). The composition of the Smoothed Option is similar to that of the Growth Option. However historically the Smoothed Option has produced a smaller frequency of negative returns. This is due to the use of an investment fluctuation reserve in which a portion of the Fund s earnings are set aside in the good investment years (i.e. when returns are high) in order to supplement returns in poor investment years (i.e. when the markets may lose money). 11

13 Cash Option (0% exposure to shares) 100% Cash Aim To protect members capital at all times. Objective To earn investment returns competitive with other cash investments adjusted for tax and fees. Strategy Invest in cash or other short-term investments. Targeted Cash 100% investments Suitable for Members who: have a short to medium investment horizon (0-3yrs); do not like risk; and are willing to accept lower returns for protection from short-term investment losses. Historical performance For details on the historical investment performance of the Cash Option, refer to later pages of this Guide. Risk Level Very low Risk of To preserve capital every year. negative returns 12

14 Capital Stable Option (Moderate Option from 1 January 2016) (34% exposure to shares up to 31 December 2015) Cash 33% Fixed Interest 33% Australian Shares 34% Moderate Option (40% exposure to shares from 1 January 2016 includes 10% in overseas shares) Aim Objective To earn higher investment returns than cash while maintaining a conservative approach so the risk of capital losses in any one year remains low. To earn at least 1% per year more than cash adjusted for tax and fees. Strategy Up to and including 31 December 2015 Invest approximately: one third in Australian shares; and two thirds in cash/fixed interest. With effect from 1 January 2016 Invest approximately: two fifths in both Australian and overseas shares; and three fifths in cash/fixed interest. Targeted investments Suitable for Historical performance Risk Level Risk negative returns of Up to and including 31 December 2015 Australian Shares 24% - 44% Fixed Interest 13% - 53% Cash 13% - 53% Strategic Asset Allocation with effect from 1 January 2016 Australian shares 30% Overseas shares 10% Fixed interest 30% Cash 30% Members who: have a short to medium time frame for their investment (3-7yrs); would like a small exposure to growth assets; and want to limit the potential for short-term investment losses. For details on the historical investment performance of the Capital Stable Option, refer to later pages of this Guide. Low to Medium To achieve less than three negative annual returns in any 20 year period (on average). 13

15 Growth Option (65% exposure to shares and target return assets) Fixed Interest 19% Target Return assets 16% Cash 16% Australian Shares 30% Overseas Shares 19% Note: Whilst the investment mix of the growth and smoothed options are similar there is no smoothing of the returns under the growth option. Aim Objective Strategy Targeted investments Suitable for Historical performance Risk Level Risk of negative returns To provide a competitive growth investment. To earn at least CPI + 4% per annum over a rolling 10 year period (net of tax and fees). Invest approximately: two thirds in shares/target return assets; and one third in cash/fixed interest. Australian shares 10%-50% Overseas shares 0%-40% Target Return assets 0%-35% Fixed Interest 10%-50% Cash 0%-30% Members who: have a longer time frame for their investment (5 years or more); would like exposure to growth assets; and can accept short-term investment losses. For details on the historical investment performance of the Growth Option, refer to later pages of this Guide. Medium to high To achieve less than four negative annual returns in any 20 year period (on average). Share Option (will be closed as an investment option for members on 31 December 2015) (100% exposure to shares) Cash 2% Overseas Shares 47% Australian Shares 51% Aim To provide a diversified investment in Australian and Overseas shares. Objective To earn at least the benchmark return (50/50 Australian/overseas shares) adjusted for tax and fees. Strategy Targeted investments Suitable for Historical performance Risk Level Risk negative returns of Invest all of the assets in the Australian and international share markets. Australian shares 50% Overseas shares 50% Members who: have a long time frame for their investment (7 years or more); can tolerate risk and investment losses from time-to-time; and understand the gains and losses that can occur in any share market. For details on the historical investment performance of the Share Option, refer to later pages of this Guide. High To achieve less than six negative annual returns in any 20 year period (on average). 14

16 Australian Share Option (100% exposure to Australian shares) 100% Australian Shares Aim Objective Targeted investments Suitable for Historical performance Risk Level Risk negative returns of To provide a diversified investment in Australian shares. To earn at least the benchmark return for Australian share returns adjusted for tax and fees. Australian shares 90%-100% Cash 0%-10% Members who: have a long time frame for their investment (7 years or more); can tolerate risk and investment losses from time-to-time; and understand the gains and losses that can occur in any share market For details on the historical investment performance of the Australian Share Option, refer to later pages of this Guide. High To achieve less than six negative annual returns in any 20 year period (on average). International Share Option (open to investment from 1 January % exposure to overseas shares) Aim To provide a diversified investment in overseas shares. Objective To earn at least the benchmark return for overseas shares adjusted for tax and fees. Targeted Overseas shares 90% - 100% investments Cash 0% - 10% Suitable for Members who: 100% have a long time frame for their investment (7 years or more); can tolerate risk and investment losses Overseas shares from time-to-time; and understand the gains and losses that can occur in any share market Historical None, first introduced with effect from 1 performance January Risk Level High Risk of To achieve less than six negative annual negative returns in any 20 year period (on average). returns 15

17 Fixed Interest Option (open to investment from 1 January % exposure to fixed interest) Aim To provide a diversified investment in Australian Fixed Interest. Objective To earn at least the benchmark return adjusted for tax and fees. Targeted Australian Fixed Interest 90% - 100% investments Cash 0% - 10% Suitable for Members who: 100% have a short to medium time frame for their investment (3-7yrs); want to limit the potential for short term Fixed Interest investment losses. Historical performance Risk Level Risk of negative returns None, first introduced with effect from 1 January Low to medium To achieve less than four negative annual returns in any 20 year period (on average). Social, environmental and ethical issues The Superannuation Board takes into account social, ethical and environmental considerations and labour standards when selecting, retaining or realising the Fund s investments only to the extent it is expected to achieve superior risk-adjusted returns consistent with the Board s objectives. The Board s policy is not to impose any additional requirements on its appointed investment managers in relation to the extent to which labour standards or social, environmental or ethical considerations are to be taken into account and relies on investment managers to adopt appropriate policies. The managers are therefore free to develop, apply and refine investment processes to take these considerations into account in the manner they best see fit, provided it is expected to achieve superior risk-adjusted returns. 16

18 Frequently Asked Questions about the investment options Can I see details of my pension account investment option(s) and balance online? Yes, you can do this by logging into the Member Login area of the website using your account details. What happens if I don t make a choice? If you do not advise the Superannuation Office of your preferred investment option(s), your money will be automatically invested in the Smoothed Option until you advise otherwise. Can I move monies in and out of the Smoothed Option? You can move monies out of the Smoothed Option into any other investment option that you wish, but you cannot move monies back into the Smoothed Option at a later time. Moving monies out of the Smoothed Option is a one-way move. What are the costs of each option and the Fund as a whole? All fees that may be charged are shown in the Fees and charges section on pages 6, 7 and 8 of this Product Disclosure Statement. Can I choose more than one option? Yes, you can mix and match any combination of the investment options offered for your pension account. You are not restricted to just one option. What if I change my mind about my investment choice? If you wish to change your investment option choice (called switching ), you can do so by completing the appropriate form and lodging it with the Superannuation Office, or by advising the Superannuation Office in writing. You can change your investment mix at any time during the year. You can make up to four changes in each financial year without incurring a fee. Your investments will be switched on the first day of the month following the receipt and acceptance of your instructions by the Superannuation Office subject to the following condition. Your instructions must be received by the Superannuation Office no later than 5 working days prior to the end of the month in order for them to be processed at the start of the following month. Details of the costs associated with switching are set out in the Fees and other costs section of this Product Disclosure Statement but for each switch of investment option you make after your fourth switch in any financial year, you will incur a fee of $50 which will be debited to your pension account. Withdrawing your money If you want to make a lump sum withdrawal from your pension account, you will need to nominate to the Superannuation Office which investment option the withdrawal is to be made from. If you do not nominate the option the withdrawal is to be made from, the lump sum will be withdrawn from each option you are then invested in based on your current investment split. Investment returns For all options except the Smoothed Option, the investment returns allocated to your account each month will be the actual earning rate of the relevant investment option, net of any fees. These investment returns may be positive or negative, in other words your balance may increase or decrease depending on market performance. Where your total benefit is withdrawn part way through any month or prior to the earning rate for that month being calculated, an interim earning rate (net of fees) will be applied for the portion of the applicable month. For the Smoothed Option, the final investment return credited to your account each year will be determined following the 30 June annual review. Any benefits withdrawn during the year will be credited with earnings at an interim earning rate. For details of the current interim earning rate for the Smoothed Option, contact the Superannuation Office. I m still unsure about which option I should choose, what should I do? If you are unsure about how your superannuation monies should be invested in your Account Based Pension, then you should talk to a licensed financial adviser. 17

19 Historical Investment Performance The Fund is a 'not-for-profit' superannuation fund. With the exception of the Smoothed investment option, all earnings in the investment options are distributed monthly to Fund members after expenses have been deducted. Therefore the investment return that is credited to your account reflects the earnings from your chosen investment option(s) (after expenses have been deducted). Earnings are calculated and credited to your account on a monthly basis. Because it takes several weeks to obtain the required information to calculate the earning rate, an interim monthly earning rate is used if you withdraw your benefit from the Fund before the final earning rate for a particular month has been calculated. The Smoothed Option uses an averaging process to smooth the year-to-year investment returns credited to members invested in the option. Generally, the smoothing (or averaging) process works by setting aside a portion of the Fund s earnings to a reserve when investment returns are higher. In these years, a reduced investment return is paid to members accounts. In years of lower investment returns, the reserves can be used to increase the investment return credited to members accounts. For pension members, the assets are invested in the same manner as for other members, with the only difference being there is no tax payable on the investment earnings of the pension assets. The investment returns of each of the investment options for the Fund s pensioners accounts allocated for the five years to 30 June 2015 are shown below (after investment fees have been deducted). The three, five and ten year annual averages for each investment option for pensioners accounts are also shown. Returns paid to pensioners accounts (after all asset based fees have been deducted) Year ending 30 June Cash Capital Stable Smoothed Growth Share Australian Share % 4.2% 7.5% 8.6% 15.4% 5.3% % 10.6% 12.5% 13.2% 20.5% 23.2% % 11.2% 15.0% 17.5% 30.1% 28.6% % 1.4% 0.3% 1.2% - 5.6% - 9.1% % 8.3% 8.2% 8.1% 7.6% 12.2% 3 Year Ave (pa) 3.3% 8.7% 11.6% 12.8% 21.1% 18.6% 5 Year Ave (pa) 4.0% 7.1% 8.6% 9.4% 12.5% 11.2% 10 Year Ave (pa) 4.7% 6.1% 6.4% 6.4% 6.9% 7.9% Smoothed Option earning rate The table above shows the investment returns credited to pension members accounts for each period. For completeness, the table below shows the actual earning rate for the Smoothed Option (after investment fees), before the smoothing process was applied. Earning rate for Smoothed Option (after investment management fees) Year ending 30 June Earning rate before smoothing applied % % % % % 3 Year Ave (pa) 11.8% 5 Year Ave (pa) 8.6% 10 Year Ave (pa) 6.3% 18

20 TRANSITION TO RETIREMENT PENSION Members who have attained their preservation age and who would like to access their superannuation benefits without having to retire or leave their job are able to withdraw their superannuation money from the Fund by way of a Transition to Retirement Pension. Transition to Retirement Pensions allow members to access their accumulation account balances by drawing down their superannuation as a non-commutable superannuation income stream. It is important to note that Transition to Retirement Pensions can only be accessed from members accumulation account balances and NOT from defined benefit balances. One of the main attractions of taking your superannuation in the form of a Transition to Retirement Pension is that you can continue working in any capacity while at the same time receive some of your superannuation benefits by way of a regular non-commutable income stream. No investment tax is paid on the investment earnings allocated to your Transition to Retirement Pension account balance. Additionally, if you are over the age of 60, no tax is payable on the pension payments made to you from your Transition to Retirement Pension account. If you elect to take a Transition to Retirement Pension, you can nominate (some conditions apply) the amount of your superannuation monies that will form the starting balance of your Transition to Retirement Pension account. Your Transition to Retirement Pension account will be: debited with any pension payments made to you; debited with any fees that apply; and allocated with investment earnings (the amount of earnings will vary and depend on which investment option(s) you have selected). Please note that earnings may be negative (i.e. your account balance may reduce) if the investments of the account falls. This is more likely to occur within the Growth, Australian Share and International Share investment options of the Fund, since these options have a higher exposure to shares and target return investments, but can also occur in the other investment options offered. Each year, you can select the amount of the pension you would like to draw down from your Transition to Retirement Pension account subject to the prescribed minimum and maximum payment limits. You cannot withdraw lump sums from your Transition to Retirement Pension account. If you die, the remaining balance of your Transition to Retirement Pension account can either be paid to your dependants or to your estate (generally as a lump sum payment). If you become permanently disabled whilst in receipt of a Transition to Retirement Pension your disablement benefit calculation will be adjusted to reflect your pension arrangement with the Fund and your pension account balance will then be transferred to your accumulation account. Summary of Transition to Retirement Pension Features Starting balance of Transition to Retirement Pension account: Earliest Commencing Age: Finishing Age or event: You determine how much of your accumulation account monies form the starting balance of your Transition to Retirement Pension account. However, you must nominate an amount of at least $10,000. Your Preservation Age (see Attachment 3 for your preservation age). Your Transition to Retirement Pension will cease upon: your retirement from employment or at an earlier age at your discretion (you can transfer your pension account balance back to your accumulation account balance in the Fund at any time) you attaining age 65 even if you continue to work beyond this age (in this case your Transition to Retirement Pension will be converted to an Account Based Pension that will allow you to access lump withdrawals as well as pension payments) your death or permanent incapacity (where the Fund has accepted your claim for permanent incapacity). 19

21 Pension payments: You determine the annual pension payments you receive each year subject to being within the minimum and maximum limits set by the government. (See Attachment 2: Calculation of Pension Payment Limits for Transition to Retirement Pensions). A maximum annual payment limit of 10% of the account balance applies. At the start of each financial year, you will be advised of your minimum and maximum limit and asked to nominate the total pension you want to receive over the coming twelve months within these limits. You have the choice of your pension payments being paid either: Weekly, every Wednesday; Fortnightly, on a Wednesday each fortnight; Monthly, on the 15 th day of each month; Quarterly, on 15 th day of September, 15 th December, 15 th March and 15 th June; Six monthly, on 15 th day of December and 15 th June; or Annually in arrears on the 15 th day of June each year. These pension payments will be deducted from your transition to retirement account based pension account. Lump sum withdrawals: Investment options: Rollover: Transition to Retirement Pension account balance: Tax free investment earnings: Tax on pension payments: You cannot withdraw any lump sum amounts from your account while receiving a Transition to Retirement Pension. You choose where your Transition to Retirement Pension account is to be invested from the range of investment options offered by this Fund. On commencing a Transition to Retirement Pension, all of the Fund s investment options as set out above for the Account Based Pension are available for selection (including the Smoothed option). However, once you have commenced your pension, you cannot move any additional monies from other investment options into the Smoothed option at a later time. If your Transition to Retirement Pension account is split between more than one option, then your pension payments will be withdrawn from each option in accordance with your chosen investment split, unless you advise otherwise. You cannot rollover all or part of your Transition to Retirement Pension account to another superannuation fund but you can rollover your pension account balance back to your accumulation account in the Fund at any time. Your Transition to Retirement Pension account will be debited with your pension payments and any fees applicable. Your account balance will be allocated with earnings which maybe positive or negative based on the net fund earning rate of the investment options you have chosen. There is no income tax paid on the investment earnings of the assets supporting your Transition to Retirement Pension. PAYG tax will be automatically deducted from any pension payments if you are under the age of

22 Terms and Conditions Transition to Retirement Account Based Pension Minimum Transition to Retirement Pension account balance: Minimum lump sum withdrawal: Investment switches: $10,000 No lump sum withdrawals are permitted. You can change your investment mix at any time during the year (up to four changes per financial year without cost). Your investments will be switched on the first day of the month following the receipt and acceptance of your instructions by the Superannuation Office (provided your instructions are received no later than 5 working days prior to the end of the month). Variation in pension payments: Fees and charges: With effect from 1 st July each year. You can change the amount and frequency of your pension payments during the year, subject to the minimum and maximum payment limits. There are no special establishment or entry fees for commencing a Transition to Retirement Pension. The fees payable are the same as those for an Account Based Pension from the Fund (see Account Based Pension fees in the earlier pages of this Product Disclosure Statement). You cannot make any further contributions to your Transition to Retirement Pension account once you have commenced a pension. However, you can commence another pension if you want to use more of your other superannuation monies for this purpose. Taxation of Pensions generally The following is a guide to the main taxes that apply to both Account Based Pensions and Transition to Retirement Pensions. For those aged 60 and over, there is no tax payable on pension payments or on any lump sum withdrawals. On commencement On investment income On pension payments Tax Payable None None If you are under age 60 pension payments are included in your assessable income each year. Part or all of your pension payments may be tax free depending on the: tax-free component included in your pension account balance; tax offset payable if you have attained your preservation age but not yet attained age 60; and tax-free threshold applicable Where applicable PAYG tax on the taxable component of your pension payments will be deducted at the time of payment. 21