Annual Report. Celebrating 80 years. IAG & NRMA Superannuation Plan. for the year ended 30 June 2017

Transcription

1 IAG & NRMA Superannuation Plan Annual Report for the year ended 30 June 2017 Celebrating 80 years Plan website: Plan Helpline: IAG & NRMA Superannuation Pty Limited (ABN , AFSL #439233) is the Trustee of the IAG & NRMA Superannuation Plan (ABN ) and the issuer of this Annual Report. GPO Box 4303, Melbourne VIC 3001.

2 Table of contents A MESSAGE FROM THE TRUSTEE OFFICE page 1 THE PLAN AT A GLANCE page 3 Plan facts and figures Investment returns YOUR PLAN S INVESTMENTS page 4 Investment manager changes How the Plan s assets are invested Large assets of the Plan Use of derivatives Plan Reserves INVESTMENT INFORMATION FOR ACCUMULATION ACCOUNTS AND RETIREMENT INCOME STREAM ACCOUNTS page 7 Your benefit Your investment purchases units Recent investment returns YOUR INVESTMENT OPTIONS IN DETAIL page 8 Australian Shares option Overseas Shares option MySuper and Pension Growth options Balanced and Pension Balanced options Conservative and Pension Conservative options Cash and Pension Cash options MEASURING PERFORMANCE page 15 Investment performance benchmarks INVESTMENT INFORMATION FOR DEFINED BENEFIT MEMBERS page 15 Comparison of annual effective rates of net return and declared rates Defined Benefit members leaving during the year THE PLAN S FINANCIAL DETAILS page 17 The Plan s financial statements Accounts as at 30 June 2017 Sub-plan reporting The Plan s financial position HOW YOUR PLAN IS MANAGED page 19 The Trustee Changes to the Trustee over the year Meeting attendance A chance to have your say Indemnity insurance Trust Deed and Rules Concessional tax treatment Management assistance IF YOU LEAVE EMPLOYMENT page 21 Receiving your benefit as a lump sum Receiving your benefit as an allocated pension Receiving your benefit as a lifetime pension Eligible rollover fund and unclaimed money Contribution surcharge tax Restrictions on when you can access your benefits YOUR 2017 SUPER UPDATE page 23 MORE INFORMATION page 25 Resolving disputes and complaints If you d like more information Questions?

3 A message from the Trustee Office Dear Member We are pleased to bring you the 2017 Annual Report for the IAG & NRMA Superannuation Plan. Here is an overview of what has happened in the Plan over the year: Celebrating 80 years and still going strong We trace our origins back to the original N.R.M.A. Superannuation Fund which was established in Following a number of mergers and transitions this original superannuation fund has evolved into the current IAG & NRMA Superannuation Plan, managing $2billion in members retirement savings. Listening to you change to investment options In our member surveys one theme that came through from your responses was a desire to be able to invest solely in overseas shares or to vary the mix of Australian and overseas shares. We listened to your feedback and implemented a change, to deliver what you wanted. Effective 1 May 2017, the previous Shares option was renamed the Overseas Shares option and the asset allocation of the option changed from 50/50 Australian and overseas shares to 100% overseas shares. Members invested in the Shares option at the time of the change (unless they made an alternate choice) had 50% of their holding in the Shares option moved to the Australian Shares option to ensure they maintained the same exposure to Australian and overseas shares after the conversion. Accessing financial advice for free You can now access financial advice via the Plan Helpline. Free advice is available in relation to: Contributions Investment strategies Levels of insurance cover, and Starting a pension. As part of this expanded service, you may also receive a call from one of our Plan Helpline Consultants following you reaching a milestone or ceasing employment. Changes to super rules The May 2016 Federal Budget saw some substantial changes announced in relation to superannuation. Many of these changes were effective 1 July 2017 and have now been implemented, these include: A reduction in the non-concessional contribution cap to $100,000 per annum or $300,000 over three years using the bring forward rule A reduction in the concessional contribution cap to $25,000 per annum for all ages The introduction of tax on investment earnings for Transition to Retirement Income Streams The application of a limit of $1.6million for transfers to Allocated Pension accounts. Changes to the investment fees We recently wrote to all members to advise you of the changes to the fees for our investment options disclosed in our Product Disclosure Statements. I wanted to take this opportunity to reassure you that these changes do not represent an increase in the fees being paid by you. These changes are a result of a new legislative requirement to include in the fees calculation a substantial amount of operating and transaction costs, incurred by the investment managers, that have previously not been included. These costs have always been incurred and the investment performance the Plan has achieved and reported to you has always been net of these costs. Make sure your death benefit is paid to where you want In most circumstances it is up to the Trustee to determine who, of your dependents, will receive your super if you die, but you can lock in this choice yourself. The Plan offers you the option of making a non-lapsing death benefit nomination. A non-lapsing death benefit nomination is binding on the Trustee to the extent that the nomination is in favour of one or more of your dependants or your legal personal representative. 1 IAG & NRMA Superannuation Plan Annual Report 2017

4 The Trustee is bound to act in accordance with a properly completed and signed non-lapsing death benefit nomination. However, if a portion of your death benefit is unable to be paid in accordance with your instructions (because the nominated person died before you or they cease to be a dependant) then that portion of your death benefit will be paid to your legal personal representative. If you nominate your legal personal representative, you should ensure that you have a valid, up-to-date will. To access the non-lapsing death benefit nomination form, please visit our website Gone digital This year, unless you d elected otherwise or are a Defined Benefit member, you will have received your Annual Benefit Statement electronically. To produce paper statements for every Plan member used over 200,000 sheets of paper each year. To reduce this environmental impact, the default method for your annual super statement is now digital. This has also assisted the Plan to deliver your statements to you earlier without the need to wait for physical printing and mail delivery. You can also view past annual statements back to 2008 via your account on the Plan website. If you still want to receive a printed copy you can request this via your account on the Plan website The Plan s investment performance saw investment markets produce solid investment returns across the portfolio, our largest option, the MySuper option, delivered a substantial 11.1% return. Whilst our four most growth orientated options (Australian Shares, Overseas Shares, MySuper and Balanced) all achieved returns ranked in the first quartile against similar options in the Rainmaker survey. Over the last five financial years, the return on MySuper option has averaged a very healthy 10.0% per annum. Full details about the performance of each of the Plan s investment options starts on page 8 of this report. Remember you can see up to date information on the Plan website on the net investment returns under Benefits & investments, as well as viewing the daily unit prices when logged in to your own account. An online rollover tool The Plan has an online rollover tool to enable you to consolidate any old super quickly and easily using our online function. It s a simple three step process: 1. Sign into your account at 2. Go to Start Online Rollover, under Related links on the far right of the Your Super page 3. Enter the name of your previous fund to search by fund name or search by ABN, then select that super fund. Provide your member number in your previous super fund and specify whether you want to make a full or partial rollover and confirm your request. You ll receive a confirmation and receipt number, so you know your request has been received. That s it, it s done! We ll confirm when your super has been rolled into your IAG & NRMA Superannuation Plan account. Before consolidating your super please check with your previous fund if they charge any exit fees or if a rollover will impact any insurance cover. IAG & NRMA Superannuation Plan your Plan for life As a member of the IAG & NRMA Superannuation Plan, you have a Plan for life. If you change employer, you can stay with the Plan and have your new employer pay your superannuation contributions in to your Plan account. Download the Reserved member brochure, Leaving employment? Stay with the IAG & NRMA Superannuation Plan from the Plan website for more information, or call the Plan Helpline. The Plan offers allocated pensions, so we re here to help when you re ready to retire. You can also start a Transition to Retirement Income Stream, if you re over your preservation age and looking to ease into retirement. Download a copy of the Retirement Income Stream PDS from the Plan website to find out more, or call the Plan Helpline. Access your super on the move To ensure you can access your super details even when you re on the move, you can view your account on your smart phone via our mobile friendly website. You can check your super balance and benefits, your personal details, investments contributions and your transaction history. Scan below, using your QR reader or go to on your phone or tablet. If you have any questions Please take time to read this Annual Report. It contains information about the Plan s investment performance for the year to 30 June 2017, the Plan s financial situation and an overview of what s new in super. If you have any questions about this Annual Report or super in general, please call the Plan Helpline on to have your questions answered. Further information is also available on our Plan website, Sincerely, Troy Maguire Senior Manager, Superannuation IAG & NRMA Superannuation Pty Limited IAG & NRMA Superannuation Plan Annual Report

5 The Plan at a glance This section provides a brief summary of the operations of the Plan during the year. Further details are set out later in the report. Plan facts and figures Plan membership as at 30 June 2017 Accumulation 7,873 Defined Benefit 295 Lifetime Pension 156 Reserved 6,589 Retirement Income Stream 212 Total 15,125 Net Plan assets as at 30 June 2017 were approximately $2.0 billion. About your Plan In this report, a reference to: IAG means a company in the Insurance Australia Group; NRMA means the National Roads and Motorists Association Limited and its related bodies corporate. The Plan has two sub-plans: The IAG sub-plan for current and former employees and officers (and their eligible spouses) of companies in the Insurance Australia Group, and The NRMA sub-plan for current and former employees and officers (and their eligible spouses) of the National Roads and Motorists Association and its related bodies corporate. Generally, if you joined the Plan after 1 January 1999, you belong to the Accumulation section of the Plan. You will also be in the Accumulation section if you chose to transfer to this section. Otherwise, you belong to the Defined Benefits section. Some members who transferred from the SGIC Staff Superannuation Fund, the RACV Superannuation Fund, the CGU Superannuation Fund or the CGU-VACC Pension Fund are also Defined Benefit members. In this Annual Report, unless noted otherwise, references to Accumulation members generally cover Reserved members, Retained members, Spouse members and Retirement Income Stream members. Separate investment performance information is provided for Retirement Income Stream members. It is important to understand that, while past performance is useful as a guide in reviewing the historical investment returns, it should not be relied upon as indicative of future performance and does not guarantee such performance. Investment returns as at 30 June 2017 The following is a summary of the net investment returns for the year as well as the average returns over the last five years and the last ten years. Accumulation members Investment option Annual net investment return* for the year (%) Compound average annual rate of net investment return* over the last five years (% p.a.) Compound average annual rate of net investment return* over the last ten years (% p.a.) Australian Shares Overseas Shares** MySuper Balanced Conservative Cash * The net investment returns above are shown after the investment fee (which covers all investment expenses) and allowing for the effect of tax. ** Prior to 1 May 2017 this was known as the Shares option and was invested in a mix of Australian and overseas shares. The historical investment performance reflects this mix of investments. Retirement Income Stream Investment option Annual net investment return* for the year (%) Compound average annual rate of net investment return* over the last five years (% p.a.) Compound average annual rate of net investment return* over the last ten years (% p.a.) Pension Growth Pension Balanced Pension Conservative Pension Cash * The net investment returns above are shown after the investment fee (which covers all investment expenses) and allowing for the effect of tax. Defined Benefit members Credited to member accounts** Annual net investment return* for the year (%) Compound average annual rate of net investment return* over the last five years (% p.a.) Compound average annual rate of net investment return* over the last ten years (% p.a.) Earned on Plan assets * The net investment returns above are shown after the investment fee (which covers all investment expenses) and allowing for the effect of tax. ** This return is the effective rate of net return for compulsory account balances of Defined Benefit members. Refer page 15 for further information. 3 IAG & NRMA Superannuation Plan Annual Report 2017

6 Your Plan s investments Investment markets were strong throughout the financial year. This was particularly the case from early November 2016, when markets surprisingly rallied following the unexpected election of US President Donald Trump. While improved investor sentiment could be attributed to better economic conditions and the resultant increase in corporate earnings, many have credited the strong market returns to Trump s presidency and the reflation trade, that is, a belief that a Trump leadership would result in increased infrastructure spending, tax cuts and the deregulation of the financial sector to the benefit of the economy as a whole. In Europe, economic recovery continued to be supported by the European Central Bank s Quantitative Easing program which was extended by 9 months until December UK equity returns lagged the broader European market. Growing uncertainty regarding the path toward Brexit was compounded by the results of the snap election in June, which saw British Prime Minister Theresa May s attempt to consolidate parliamentary influence ahead of Brexit negotiations fail spectacularly, instead delivering a hung parliament. The Australian share market (S&P/ASX300 Accumulation Index) returned 13.8% over the financial year. However, there were pronounced differences in industry sector performance. The materials sector rose 24.5% on the back of a sharp recovery in commodity markets. In contrast, Telecommunications Services (-21.2%) performed very poorly, primarily driven by stock specific issues. In international shares, the MSCI World ex-australia Index (hedged to the Australian dollar) returned 21.2% boosted by the reduction in the value of the Australian dollar against major international currencies. The corresponding unhedged return over the year was 14.8%. Emerging market shares outperformed developed markets over the year. The Reserve Bank of Australia reduced the cash rate by 0.25% to 1.50% per annum in August 2016 but has held the rate steady since then. Yields on longer duration bonds rose, causing the prices of those bonds to fall. Over the financial year, Australian fixed interest securities returned 0.7%, significantly underperforming shares. Against this background, the Plan s investment options generally provided solid returns for members over the 2017 financial year. The strong performance of Australian and international share markets delivered double-digit returns (net of fees and tax) on the Australian Shares (14.6%), Overseas Shares (20.0%), MySuper (11.1%) and Pension Growth (12.2%) investment options over the year. The Balanced and Conservative options (8.6% and 5.0%, respectively) benefited to a lesser extent, reflecting their lower allocation to shares and higher allocation to fixed interest and other defensive assets. The Cash option returned 1.5% net of fees and taxes reflecting the low cash rates applying over the year. Even though the last financial year has produced good investment returns, it is important to remember that superannuation is a long term investment and that some down years are to be expected. Details of longer term returns for all the Plan s superannuation and pension options are included on page 7 in this report. The Plan provides members with a range of investment options to suit all levels of risk appetite. You can choose one or more of these investment options for your existing account balance and for your future contributions and you can change these choices online at any time. However, before making any change to your investment choices, you should consider speaking to a licensed or appropriately qualified financial adviser. For further information about investment choices and for general advice, you can call the Plan Helpline on Investment manager changes There were some significant changes to the Plan s investment managers over the year. Implementation of the new strategic assets allocations adopted by the Trustee last year has continued, with new investments being initiated in the Colonial First State Global Infrastructure Fund and the GSA Diversified Alternatives Fund, both funded by selling down part of the international shares holding in the World Equity PST. The World Equity PST, which was wholly owned by the Plan, was subsequently wound-up and the assets managed by the three overseas shares managers, Arrowstreet, MFS and T. Rowe Price, transferred to the direct ownership of the Plan. A new international shares manager, Causeway Capital, was appointed in August 2016 replacing the investment in the Wells Fargo Emerging Markets Equity Fund. IAG & NRMA Superannuation Plan Annual Report

7 How the Plan s assets are invested This table shows the proportion of the Plan s assets invested with each investment manager by asset class. Proportion of total assets as at 30 June Asset Class Investment Manager 30 June 2017 (%) 30 June 2016 (%) Cash IAGAM Cash Management Trust Sub-total Fixed Interest IAGAM Fixed Interest Trust Sub-total Australian Shares Vinva Investment Management DNR Capital Pty Ltd Perpetual Concentrated Equity Fund Colonial First State Wholesale Small Companies Core Fund Sub-total Overseas Shares World Equity PST Arrowstreet Capital LP Causeway Capital Management LLC 2.61 Generation IM Global Equity Fund Investec Global Emerging Markets Equity Fund MFS Global Equity Trust T Rowe Price Global Equity Fund Wells Fargo Emerging Markets Equity Fund 1.48 Sub-total Property & Infrastructure Invesco Global Property APPF Retail Unlisted Property Trust APPF Industrial Unlisted Property Trust Colonial First State Global Diversified Infrastructure Fund 2.57 GPT Wholesale Office Fund Sub-total Growth Alternative Investments Defensive Alternatives Investments IAGAM Sustainable Investments Trust IAGAM Private Equity Trust H2 Special Operations GSA Diversified Alternatives 3.10 Sub-total GMO SGM Major Markets Fund AQR Wholesale Delta Fund Ellerston Capital Limited Sub-total Total Notes: 1. During the year the World Equity PST was wound up and the investments with the underlying managers (Arrowstreet, MFS and T Rowe Price) were transitioned to the direct control of the Plan. 2. The IAGAM Sustainable Investments Trust is invested in the Generation Climate Solutions Fund. 3. Horsley Bridge Partners has been appointed to manage the assets of the IAGAM Private Equity Trust. 5 IAG & NRMA Superannuation Plan Annual Report 2017

8 Large assets of the Plan Part of the Plan s assets are invested under mandates by investment managers appointed by the Trustee. The securities covered by these mandates remain in the Trustee s name. Whilst the value of the portfolios managed under mandate by Arrowstreet Capital, DNR Capital and Vinva each exceed 5% of Plan assets, no individual security under the mandates represented more than 5% of the Plan s total assets. The remaining assets of the Plan primarily consist of units in unit trusts or other pooled funds. The Plan s holdings in the IAGAM Cash Management Trust, the IAGAM Fixed Interest Trust the Perpetual Concentrated Equity Fund and the MFS Global Equity Trust each exceeded 5% of the Plan s total assets. With the Australian and overseas shares asset classes the Plan has the highest exposure to the following companies: Australian shares COMMONWEALTH BANK OF AUSTRALIA WESTPAC BANKING CORP NATIONAL AUSTRALIA BANK BHP BILLITON LTD AUSTRALIA & NEW ZEALAND BANK WOOLWORTHS LTD CSL LTD MACQUARIE GROUP LTD LENDLEASE GROUP AURIZON HOLDINGS LTD Overseas shares MICROSOFT CORP TAIWAN SEMICONDUCTOR MANUFACTURING CO LTD ALPHABET SAMSUNG ELECTRONICS THERMO FISHER SCIENTIFIC INC CERNER CORP MEDTRONIC PLC AMAZON COM INC TENCENT HOLDINGS LTD COLGATE-PALMOLIVE CO Use of derivatives Derivatives are special contracts e.g. futures and forward exchange rate agreements which can be used to manage the risk of changes in the future value of investments. The investment managers are permitted to use derivatives in the management of the Plan assets. These instruments are typically used for the following purposes: hedging; seeking to protect against adverse changes in the market value of assets and movements in currency exchange rates to obtain prices that may not be available if assets are bought directly to reduce the costs of buying and selling assets directly to change the term of a fixed interest security or portfolio to manage cash flows efficiently to manage asset weightings for the different asset classes. Derivatives may not be used for speculative purposes The Plan held derivatives during the year ended 30 June 2017 in respect of its Australian shares, overseas shares and fixed interest investments. The Plan s exposure to derivatives is limited to 20% of the market value of the assets of the Plan. Within each asset class, exposure to derivatives is limited to 20% of the market value of the asset class. The Plan also holds derivatives to hedge part of the currency exposure in relation to its investment in international shares and alternative investments. Derivatives are not used for speculative purposes. Plan reserves The Trustee has established an Operational Risk Reserve for the Plan as required by superannuation legislation and the prudential standards. The purpose of the Operational Risk Reserve is to provide funding to meet the costs associated with rectifying any loss caused by an operational risk event. The Trustee has a policy in relation to the establishment, management, investment, use of and, if required, replenishment of the Operational Risk Reserve. At 30 June 2017, the Operational Risk Reserve was invested in the Plan s MySuper investment option. The reserve levels for 30 June 2017 and preceding years are shown below. As at 30 June Reserve Balance ($,000) % of assets , , , , IAG & NRMA Superannuation Plan Annual Report

9 Investment information for Accumulation accounts and Retirement Income Stream accounts Your benefit For Accumulation members, your super benefit is your member account balance. For Retirement Income Stream members, it is your retirement income stream account balance. Your account is invested (after allowing for tax and expenses) according to your choice of investment option(s). So the amount you ultimately receive is directly linked to the investment performance of your selected option or mix of options. For Defined Benefit members, your additional accumulation accounts are invested according to your choice of investment option(s). Your investment purchases units Your account balance is applied to buy what are known as units in your chosen investment option(s). The number of units bought depends on the unit price at the relevant time. For example, if your account balance is $1,000 and the unit price of your selected investment option is $1.00 at that time, then 1,000 units would be bought on your behalf. Alternatively, if the unit price was $1.25 then 800 units would be bought. Unit prices are generally calculated daily and will go up and down as investment markets shift, affecting the value of your units and consequently the value of your investment. The unit price for each option also takes into account tax, investment related fees and other expenses. (Investment earnings in the pension investment options are not taxed.) The value of your account balance at any time is simply the number of units you have multiplied by their unit price at that time. Net investment returns on your chosen investment options (which may be positive or negative) will be reflected via changes in unit prices. If the net investment returns for the option are positive, the unit price will increase. If the net investment returns are negative (a loss), the unit price will decrease. Daily unit prices are posted on the Plan s website. Further information on unit pricing and the management of unit pricing errors is available on the Plan s website. Recent investment returns Accumulation accounts The following table shows the net investment returns for each investment option for the past five years ended 30 June plus the average over that period. The annual net investment return is earnings after taxes and investment related fees and expenses. Investment option Net investment return (%) Year ended 30 June Compound average rate of net return over the past five years (% p.a.) Australian Shares Overseas Shares* MySuper Balanced Conservative Cash Retirement Income Stream accounts The following table shows the net investment returns for each pension investment option available to retirement income stream members for the past five years ended 30 June plus the average over that period. The annual net investment return is earnings after investment related fees and expenses. No tax is levied on allocated pension accounts. However, these accounts still received the benefit of franking credits attached to dividends on Australian shares. Investment option Net investment return (%) Year ended 30 June Compound average rate of net return over the past five years (% p.a.) Pension Growth Pension Balanced Pension Conservative Pension Cash *Prior to 1 May 2017 this was known as the Shares option and was invested in a mix of Australian and overseas shares. The historical investment performance reflects this mix of investments Investment returns for an investment option may be positive or negative. The value of your investment depends on the performance of your chosen option(s). Each option bears a different level of risk, depending on the mix of asset classes that make up the portfolio. More information about the associated risks and allocation of asset classes for each option are detailed on the following pages of this report. 7 IAG & NRMA Superannuation Plan Annual Report 2017

10 Your investment options in detail Information in this section applies to Accumulation accounts and Retirement Income Stream accounts Each of the Plan s investment options has a specific investment objective and strategy set by the Trustee. The objectives are not a forecast or guarantee of future performance. Each option has a different risk profile and the Trustee s aim is to achieve the best possible returns relative to the level of risk associated with investing in that option. The benchmark asset allocation reflects the strategy for each option. The benchmark asset allocation is the proportion of that option that would ideally be invested in each asset class if the Trustee had no particular view that one asset class was likely to outperform any other asset class. However, within the ranges specified in this Annual Report, the Trustee may decide to invest more than the benchmark allocation in an asset class it expects to outperform and less in one it expects to underperform. The aim is to maintain the asset allocations for each investment option within the ranges stated in this Annual Report. Nevertheless, from time to time, market movements and/or cash flows into or out of an option may cause the actual allocation temporarily to fall outside these ranges. This will normally be addressed at the next available rebalancing opportunity. The investment returns for any option fluctuate depending on the volatility of investment markets and the performance of the underlying asset classes. The performance of each asset type is measured against a benchmark set by the Trustee which reviews this performance regularly. When considering the following information, please note that past performance for each investment option should not be relied upon as indicative of future performance and does not guarantee such performance. Retirement Income Stream accounts Prior to 1 July 2017 all Retirement Income Stream members could select from pension options (Pension Growth, Pension Balanced, Pension Conservative and Pension Cash). From 1 July 2017 Retirement Income Stream members have been segregated into two sections: 1. Allocated Pension members (who have met a condition of release, see page 22) who continue to select from the Pension Options. 2. Transition to Retirement Income Stream (TRIS) members. TRIS members can now select from the TRIS option (TRIS Growth, TRIS Balanced, TRIS Conservative, and TRIS Cash). The only difference between the respective Pension options and TRIS options is the tax applied to the investment earnings. IAG & NRMA Superannuation Plan Annual Report

11 Australian Shares option Strategy Aims to invest 100% of assets in Australian shares (apart from a small cash holding). Investment objective This option aims to achieve a net investment return that matches the return on the S&P/ASX 300 Accumulation Index over rolling three year periods. Level of risk very high Likelihood of a loss in any one year period is approximately six in twenty. Because shares are market driven investments which respond quickly to changes in market conditions, shares are highly volatile and investors can expect performance to show periods of significantly high growth, as well as periods of poor or even negative returns. Over a longer period of time, shares generally can be expected to produce higher returns than any other asset class. The performance of the Australian Shares option is measured against a benchmark portfolio, which consists of the asset allocation as shown below. Asset class Benchmark % Range % Australian shares Cash Where the assets were invested as at 30 June 2017: Australian shares 99.0% Cash 1.0% As at 30 June 2017, the Australian Shares option had investment assets of $121.1M. Recent investment returns The annual net investment returns for the last five years were: Year ending 30 June Net investment return (% p.a.) Five year compound average net investment return IAG & NRMA Superannuation Plan Annual Report 2017

12 Overseas Shares option* Strategy Aims to invest 100% of assets in overseas shares (apart from a small cash holding). * Prior to 1 May 2017 this was known as the Shares option and was invested in a mix of Australian and overseas shares. The historical investment performance reflects this mix of investments. Investment objective This option aims to achieve a net investment return that matches the benchmark return over rolling three year periods. The benchmark return will be calculated using the MSCI World ex Australia (net dividends reinvested) in AUD (50% hedged). Level of risk very high Likelihood of a loss in any one year period is approximately six in twenty. Because shares are market driven investments which respond quickly to changes in market conditions, shares are highly volatile and investors can expect performance to show periods of significantly high growth, as well as periods of poor or even negative returns. Over a longer period of time, shares generally can be expected to produce higher returns than any other asset class. Exposure to overseas shares means that there is also a currency risk although the Trustee has chosen to hedge part of this risk. The performance of the Overseas Shares option is measured against a benchmark portfolio, which consists of the asset allocation as shown below. The Trustee may vary the actual asset allocation at any time either up or down within the below ranges. Where the assets were invested as at 30 June 2017: Overseas shares 97.6% Cash 2.4% As at 30 June 2017, the Overseas Shares option had investment assets of $88.8M. Recent investment returns The annual net investment returns for the last five years were: Year ending 30 June Net investment return (% p.a.) Five year compound average net investment return 14.0 Asset class Benchmark % Range % Overseas shares Cash IAG & NRMA Superannuation Plan Annual Report

13 MySuper and Pension Growth options Strategy Aims to invest the majority of the portfolio (70%) in growth assets, such as Australian and overseas shares and property, and the remaining (30%) in less volatile assets such as fixed interest and cash. Investment objective These options aim to achieve a net investment return of at least 3.0% p.a. above inflation (as measured by the Consumer Price Index) over rolling ten year periods. Whilst both the MySuper and Pension Growth options are invested in the same pool of assets, returns will differ between them because earnings in the Pension Growth option are not taxed. Level of risk high Likelihood of a loss in any one year period is approximately five in twenty. While a large portion of the assets is invested in the more volatile share markets, this is partially offset by the stability of the fixed interest and cash components of the portfolio. For this reason, some fluctuation from year to year can be expected. However this fluctuation is not expected to be as great as for the Australian Shares option and the Overseas Shares option. The performance of the MySuper option and Pension Growth option are measured against a benchmark portfolio, which consists of the asset allocation shown below. The Trustee may vary the actual asset allocation at any time either up or down within the below ranges. Asset class Benchmark % Range % Australian Shares Overseas Shares Property & Infrastructure Growth Alternatives Defensive Alternatives Fixed Interest Cash Where the assets were invested as at 30 June 2017: Australian shares 23.7% Overseas shares 24.2% Property & Infrastructure 12.3% Growth Alternatives 6.6% Defensive Alternatives 9.7% Fixed interest 16.6% Cash 6.9% As at 30 June 2017, these options had investment assets of, in total, $1,361.2M. This includes the assets in respect of Defined Benefit members as explained on page 15. Recent investment returns The annual net investment returns for the last five years were: Year ending 30 June Net investment return (% p.a.) MySuper option Pension Growth option Five year compound average net investment return For Accumulation members, the MySuper option is also the default option. This means that this option will apply to your superannuation investment if you do not choose an investment option. The Trustee has chosen this option as the default option because the Trustee views superannuation as a long-term investment. However, it s important that you individually assess your own situation and retirement planning strategy (for example, if you are near to retirement age), as the default option may not be appropriate for you. You are encouraged to make your own choice between the available options and to seek professional advice. 11 IAG & NRMA Superannuation Plan Annual Report 2017

14 Balanced and Pension Balanced options Strategy Aims to have 50% of the portfolio in growth assets which will participate in the higher returns expected from shares, property and alternative assets but will be cushioned from the associated high volatility by an equal allocation (50%) to defensive assets. Investment objective These options aim to achieve a net investment return of a least 2.0% p.a. above inflation (as measured by the Consumer Price Index) over rolling five year periods. Whilst both the Balanced option and the Pension Balanced option are invested in the same pool of assets, returns will differ between them because earnings in the Pension Balanced option are not taxed. Level of risk medium to high Likelihood of a loss in any one year period is approximately four in twenty. With greater levels of diversification and reduced risk, these options are not expected to experience as high a level of year-on-year volatility in investment returns as the Australian Shares option, Overseas Shares option or MySuper option. The performance of the Balanced option and Pension Balanced option is measured against a benchmark portfolio, which consists of the asset allocation as shown below. The Trustee may vary the actual asset allocation at any time either up or down within the below ranges. Asset class Benchmark % Range % Australian Shares Overseas Shares Property & Infrastructure Growth Alternatives Defensive Alternatives Fixed Interest Cash Where the assets were invested as at 30 June 2017: Australian Shares 16.3% Overseas Shares 16.7% Property & Infrastructure 8.7% Growth Alternatives 4.4% Defensive Alternatives 15.5% Fixed Interest 30.8% Cash 7.7% As at 30 June 2017, these options had investment assets of, in total, $197.3M. Recent investment returns The annual net investment returns for the last five years were: Year ending 30 June Net investment return (% p.a.) Balanced option Pension Balanced option Five year compound average net investment return IAG & NRMA Superannuation Plan Annual Report

15 Conservative and Pension Conservative options Strategy Aims to invest mainly in fixed interest bonds and cash, which are stable investments producing a more predictable return than the Australian Shares, Shares, MySuper and Balanced options in the longer term. The growth component of this portfolio is achieved by a relatively small investment in shares and property. Investment objective These options aim to achieve a net investment return of at least 1.0% p.a. above inflation (as measured by the Consumer Price Index) over rolling three year periods. Whilst both the Conservative option and the Pension Conservative option are invested in the same pool of assets, returns will differ between them because earnings in the Pension Conservative option are not taxed. Level of risk medium to low Likelihood of a loss in any one year period is approximately two in twenty. Investment returns are expected to remain more stable in the short-term than the returns of all the other options except the Cash option. The performance of the Conservative option and Pension Conservative option is measured against a benchmark portfolio, which consists of the asset allocation as shown below. The Trustee may vary the actual asset allocation at any time either up or down within the below ranges. Asset class Benchmark % Range % Australian Shares Overseas Shares Property & Infrastructure Growth Alternatives Defensive Alternatives Fixed Interest Cash Where the assets were invested as at 30 June 2017: Australian Shares 5.3% Overseas Shares 5.6% Property & Infrastructure 8.0% Growth Alternatives 3.4% Defensive Alternatives 27.0% Fixed Interest 46.0% Cash 4.7% As at 30 June 2017, these options had investment assets of, in total, $120.5M. Recent investment returns The annual net investment returns for the last five years were: Year ending 30 June Net investment return (% p.a.) Conservative option Pension Conservative option Five year compound average net investment return IAG & NRMA Superannuation Plan Annual Report 2017

16 Cash and Pension Cash options Strategy Invests solely in deposits in banks, bills of exchange, promissory notes and other short term securities. Cash is the most stable investment with very little risk of negative returns over the short term. However, the long term performance of cash has historically been lower than returns on the other investment options available under the Plan, particularly during periods of high inflation. Investment objective These options aim to provide capital stability and capital preservation by matching the return on the cash benchmark as measured by the S&P/ASX Bank Bill Index after allowance for tax. Whilst both the Cash option and the Pension Cash options are invested in the same pool of assets, returns will differ between them because earnings in the Pension Cash option are not taxed. Level of risk low Likelihood of a loss in any one year period is very small, less than one in twenty. Investment returns are expected to remain more stable than the other options over both the short and long term. As this option is invested only in cash, its performance will be measured by the S&P/ASX Bank Bill Index, which is the index for cash. Asset class Benchmark % Range % Cash Where the assets were invested as at 30 June 2017: Cash 100% As at 30 June 2017, these options had investment assets of, in total, $96.2M. Recent investment returns The annual net investment returns for the last five years were: Year ending 30 June Net investment return (% p.a.) Cash option Pension Cash option Five year compound average net investment return IAG & NRMA Superannuation Plan Annual Report

17 Measuring performance Investment performance benchmarks The investments are reviewed to monitor how they are performing against investment objectives. The following are the benchmarks used by the Trustee to measure the performance of each asset class. Asset class Australian shares Overseas shares Property and infrastructure Growth alternatives Defensive alternatives Fixed interest Cash Performance benchmark S&P/ASX 300 Accumulation Index MSCI World (ex Australia) Accumulation Index with net dividends reinvested (50% hedged) Composite benchmark consisting of 50% of the FTSE EPRA/NAREIT Global REIT Index (100% hedged) and 50% of the Mercer IPD Unlisted Property Index Composite benchmark consisting of 50% of the S&P/ASX Bank Bill Index and 50% of the MSCI World (ex Australia) Accumulation Index with net dividends reinvested (100% hedged) S&P/ASX Bank Bill Indexw S&P/ASX Australia Fixed Interest 0+ Index S&P/ASX Bank Bill Index Investment information for Defined Benefit members Information in this section applies to Defined Benefit members As Defined Benefit members, some of your benefits may be based on your salary and period of service, and some on your account balances in the Plan. The compulsory account balances of Defined Benefit members are credited with a declared earning rate. The Trustee has chosen to invest the assets supporting the entitlements of Defined Benefit members in the MySuper option refer page 11. The Trustee has generally determined the declared earning rate by averaging actual returns over three years. The declared earning rate of 7.3% for the year to 30 June 2017 represents the average of the return for the last three years. This approach is known as smoothing and results in less fluctuation in the rate of interest being applied to members accounts than would apply if the actual earnings were applied each year. However, over longer periods, the difference in overall result is substantially reduced. Any additional voluntary account balances are invested in the Cash option or such other option as chosen by the member. Prior to 1 June 2011, the smoothed rate also applied to these account balances. 15 IAG & NRMA Superannuation Plan Annual Report 2017

18 Comparison of annual effective rates of net return and declared rates The Plan s annual net investment returns and declared earning rates since 1990 for account balances of Defined Benefit members are as follows: Year ended 30 June Net investment return (% p.a.) Declared earning rate (% p.a.) Five year compound average rate of return (% p.a.) Ten year compound average rate of return (% p.a.) Twenty year compound average rate of return (% p.a.) Twenty-eight year compound average rate of return (% p.a.) Note: past performance is not an indicator of future performance Defined Benefit members leaving during the year For Defined Benefit members leaving the Plan during the year, before a final earning rate is available, benefits are calculated using an interim rate. The Trustee sets interim rates each quarter. IAG & NRMA Superannuation Plan Annual Report

19 The Plan s financial details The Plan s financial statements A summary of the Plan s audited accounts for the 2016 and 2017 years is shown below. Copies of the audited accounts and the auditor s report are available by contacting the Plan Helpline on Accounts as at 30 June Statement of Changes in Member Benefits 2017 ($,000) 2016 ($,000) LIABILITY FOR ACCRUED BENEFITS AT BEGINNING OF PERIOD 1,762,458 1,694,601 Employer Contributions 109, ,328 Member Contributions (incl govt contributions) 10,427 6,015 Transfers In 35,928 33,481 Income tax on contributions (15,020) (16,842) NET AFTER TAX CONTRIBUTIONS 140, ,982 Net Benefits Paid (133,884) (98,572) Net Insurance Cost (190) (2,171) Net allocation to members accounts 175,728 27,618 LIABILITY FOR ACCRUED BENEFITS AT END OF PERIOD 1,944,613 1,762,458 Income Statement 2017 ($,000) 2016 ($,000) Investment Income 198,025 43,035 Other Income 3 3 Total Revenue 198,028 43,038 Investment Expenses (4,781) (3,315) Administration Expenses (5,067) (4,801) Total Expenses (9,848) (8,116) NET INCOME FROM SUPERANNUATION ACTIVITIES 188,180 34,922 Total Allocated to Member Benefits 175,728 27,618 Income Tax Expense/(Benefit) 11,785 (2,195) Plan Reserves 667 9,499 TOTAL ALLOCATIONS 188,180 34,922 Statement of Financial Position 2017 ($,000) 2016 ($,000) Investments 1,954,560 1,775,435 Investment Income Receivable 48,037 27,570 Derivatives 2,450 3,447 Other Receivables TOTAL ASSETS 2,005,201 1,806,479 Creditors (11,103) (2,950) Derivatives (264) (1,321) Tax Provision (19,163) (10,359) Total Liabilities (30,530) (14,630) NET ASSETS AVAILABLE FOR MEMBER BENEFITS 1,974,671 1,791,849 Total Member Benefits 1,944,613 1,762,458 Net Assets 30,058 29,391 Operational Risk Reserve 4,672 4,108 DB Surplus 25,386 25,283 TOTAL EQUITY 30,058 29, IAG & NRMA Superannuation Plan Annual Report 2017

20 2017 Sub-plan reporting In accordance with the Plan s Trust Deed, from 1 December 2003, the Plan has been administered as two sub-plans, the IAG sub-plan and the NRMA sub-plan. The following secondary sub-plan report has been prepared for the financial year to 30 June Statement of change in net assets IAG sub-plan 2017 ($,000) NRMA sub-plan 2017 ($,000) NET ASSETS AT START OF YEAR 1,575, ,131 Transfer to ORFR (513) (51) Total investment revenue and expenses 169,357 23,890 Administration expenses (4,555) (512) Income tax expense (10,500) (1,285) Net Income Superannuation Activities (after tax) 154,302 22,093 Contributions and transfers In 135,171 20,350 Inter sub-plan transfer 2,589 (2,589) Income tax on contributions (13,183) (1,837) Net benefits paid (118,962) (14,922) Net insurance proceeds/(cost) 11 (201) Total Member Movements 5, Net Assets at end of year 1,735, ,974 Statement of Financial Position Total assets 1,764, ,652 Less Total liabilities (29,852) (678) NET ASSETS AT END OF YEAR 1,735, ,974 VESTED BENEFITS 1,704, ,636 SURPLUS OF NET ASSETS OVER VESTED BENEFITS 30,861 7,338 The Plan s financial position As noted earlier, the Plan is administered as two sub-plans, the IAG sub-plan and the NRMA sub-plan, each with separate accounts. The Plan s actuary determines how much each employer needs to contribute to ensure that the respective sub-plans have sufficient assets to pay Defined Benefit entitlements in the future. The required level of employer contributions will vary over time depending on how the value of Defined Benefit members entitlements compares with the assets attributed to each sub-plan to support those entitlements. The market value of the assets attributed to the IAG sub-plan as at 30 June 2017 covered 101.8% of the value of benefits that would have been paid to members registered in that sub-plan if they all left their employment with IAG on that day. For the NRMA sub-plan, the corresponding percentage coverage was 103.2%. The Trustee, together with the Plan s actuary, continues to carefully monitor the Plan s financial position on an ongoing basis. The Trustee confirms that employer contributions have been paid into the Plan as recommended by the actuary. IAG & NRMA Superannuation Plan Annual Report

21 How your Plan is managed The Trustee The Trustee, IAG & NRMA Superannuation Pty Limited, manages the Plan. The Trustee Board normally has nine directors. Two directors are appointed by Insurance Australia Group Services Pty Limited. Two directors are appointed by National Roads and Motorists Association Limited. Four directors are elected by members of the Plan for a period of three years. One member representative director is elected by NRMA Road Service Patrols and three directors are elected by other employees who are members of the Plan. As at 30 June 2017, there was also one independent director, Michelle Tredenick, who was appointed by the other Trustee directors. The directors of the Trustee company as at 30 June 2017 were: Chair and Independent director Michelle Tredenick Company-appointed directors Ainsley Lee NRMA Lisbeth Rankin NRMA Dennis Fox IAG David McClatchy IAG Member-representative directors Veronica Atley IAG Christopher Hutchinson IAG Nicholas Mowat NRMA Leslie Lewis NRMA Road Service Patrol Changes to the Trustee over the year There were no changes to the Trustee Board during the year. An election for Member-representative directors was held in early At this election the four incumbent Member - representative directors were all re-elected to their positions for a further three year term, commencing 1 May Meeting attendance During the year, nine Board meetings were held, together with five meetings of the Audit Risk Management and Compliance Committee (ARMCC), four meetings of the Investment Committee, three meetings of the Remuneration Committee and five meetings of the Board Sub-Committee. Attendances were as follows: Board Michelle Tredenick 9 / 9 5 / 5 Christopher Hutchinson ARMCC Investment Committee Remuneration Committee 8 / 9 4 / 4 Dennis Fox 8 / 9 3 / 4 5 / 5 Nick Mowat 9 / 9 5 / 5 3 / 3 3 / 5 David McClatchy 9 / 9 4 / 5 3 / 3 5 / 5 Libby Rankin 8 / 9 5 / 5 3 / 3 3 / 5 Veronica Atley 9 / 9 5 / 5 3 / 3 Leslie Lewis 7 / 9 Ainsley Lee 7 / 9 4 / 4 Board Sub-Committee 19 IAG & NRMA Superannuation Plan Annual Report 2017

22 A chance to have your say As member-representative directors are elected by the members of the Plan, you get the chance to nominate and vote for representatives on the Trustee Board. The Plan has a specific set of rules applying to the appointment and removal of member directors and the filling of casual vacancies. These rules are available on the Plan website. The next election for Member-representative directors will take place in early The successful candidates will be appointed to the Board effective 1 May 2020 for a three year term. Indemnity insurance The Trustee and its directors may be reimbursed and indemnified out of the Plan for all liabilities which they properly incur in administering the Plan including liabilities that arise as a result of an honest mistake. To protect the assets of the Plan against certain losses arising from the conduct of the Trustee and its directors and administrators, the Trustee has taken out trustee indemnity insurance cover. Trust Deed and Rules The Trust Deed and Rules may be amended from time to time. Effective 1 July 2015 the Trust Deed and Rules were amended to reflect the reduction in the Salary Continuance Insurance benefit in relation to Accumulation members and the increase in Funeral Benefit for all members with insurance cover. The Trustee is assisted by a number of professional organisations who provide advice and assistance in the administration of the Plan. These include: Administration, superannuation, actuarial and communication consulting Mercer Outsourcing (Australia) Pty Ltd ABN Mercer Consulting (Australia) Pty Ltd ABN Auditor KPMG ABN Insurer MLC Limited ABN Investment consulting JANA Investment Advisers Pty Ltd ABN Solicitor mackenzie thomas ABN Custodian JPMorgan ABN Concessional tax treatment In order to qualify for concessional tax rates, funds have to be classified as complying superannuation funds under the income tax laws. To be eligible, funds must report regularly to APRA and demonstrate their compliance with superannuation laws and APRA guidelines. The Plan is classified as a complying superannuation fund and the Trustee is not aware of any matter that would cause the Plan to lose its complying status. Management assistance The Plan is administered by Mercer Outsourcing (Australia) Pty Ltd. The administrator performs such functions as determining member benefits, processing and allocating contributions and ensuring all membership data is correct. Contact details for Mercer can be found on page 26 of this report. The Plan s compliance status is monitored by the Plan s Compliance Manager. IAG & NRMA Superannuation Plan Annual Report

23 If you leave employment On ceasing employment with IAG or NRMA, if your account balance is $5,000 or more (or you commit to increasing your account balance to this amount), you have the option of leaving your super in the Plan. By leaving your super in the Plan you can continue death and total and permanent disablement insurance cover (on modified terms) and you can continue to benefit from the other features the Plan provides such as access to Retirement Income Stream products. Your super is an important investment and you are encouraged to consider carefully how you wish to receive it and/or where you want to invest it. Receiving your benefit as a lump sum If you leave employment before you reach your preservation age, part or all of your superannuation benefit will be subject to preservation and cannot be paid directly to you. If your account balance is $5,000 or more, you can remain a member of the IAG & NRMA Superannuation Plan in the Reserved category. If you don t give the Trustee instructions as to where to transfer your super, you will automatically remain a member of the Plan as a Reserved member. If your account balance is less than $5,000, see below under the heading Eligible rollover fund and unclaimed money. If you were an Accumulation member before becoming a Reserved member, you will continue in the same investment option(s). You can elect a new investment choice at any time. If you were a Defined Benefit member before becoming a Reserved member: the amount of your benefit represented by your additional accumulation account will remain invested in the same investment option(s), and the remainder of your benefit (your defined benefit entitlement) will be invested in the Cash option. As a Reserved member you may change your investment options at any time. Additionally, if you are a Reserved member and are now employed with another employer, by exercising your right to choose your super fund, you may be able to have your employer contribute to the IAG & NRMA Superannuation Plan. To do this, you must complete a Standard choice form and return this form to your new employer. Your new employer can contribute to the Plan via BPAY on the Plan website, or by completing the Employer remittance form and sending the Plan a cheque. These forms are available from the IAG & NRMA Superannuation Plan website or by calling the Plan Helpline on You can also make personal contributions (after-tax) to the Plan. These can be made using BPAY using your phone or internet banking facilities or by completing the Application to make lump sum contributions form and sending the Plan a cheque. As a Reserved member you can also continue to make rollovers of other superannuation monies into your account in the Plan. You can transfer your entitlement to another approved superannuation entity, including an eligible rollover fund, superannuation fund, deferred annuity, approved deposit fund, retirement savings account or allocated pension. See page 22 for details on preservation. Receiving your benefit as an allocated pension After you reach your preservation age (see next page) and provided your benefit in the Plan is at least $50,000, you can choose to receive your benefit from the Plan as an allocated pension. Please see the Plan s Retirement Income Stream Product Disclosure Statement (RIS PDS) for more information. You can download the PDS from the Plan website, or request a copy by calling the Plan Helpline on Receiving your benefit as a lifetime pension Certain categories of Defined Benefit members may be entitled to a lifetime pension or to a deferred pension (a lifetime pension that commences at a future date) on ceasing employment. If this is the case, you will be informed about your pension options. Other members can request the Trustee to provide them with a pension in lieu of their lump sum entitlements. In this case, the terms of any pension offered are at the discretion of the Trustee in conjunction with advice from the Plan s actuary. Eligible Rollover Fund and unclaimed money If you do not tell the Trustee within 90 days how you want your benefit paid and your account balance is less than $5,000, it will automatically be transferred to an eligible rollover fund (ERF). An ERF is a fund approved by APRA to receive benefits payable to members who cannot be located, or who do not advise how and where their benefit is to be paid. The ERF currently used by the Trustee is SuperTrace Eligible Rollover Fund (SuperTrace). Its contact details are: The Senior Administrator SuperTrace Eligible Rollover Fund Locked Bag 5429 Parramatta NSW 2124 Tel: If you have reached Government pension age when you leave your employer and you have not given the Trustee instructions regarding the payment of your benefit from the Plan, and you cannot be contacted, your benefit may be treated as unclaimed money according to superannuation law. In this instance, your benefit will be placed with the Australian Tax Office. If your benefit is transferred to an ERF or treated as unclaimed money, you will no longer be a member of the Plan. However, you have rights to claim your benefit from the ERF or the relevant Government body as the case may be. 21 IAG & NRMA Superannuation Plan Annual Report 2017

24 About SuperTrace Set out below is a summary of some of the more significant features of SuperTrace. The assets of SuperTrace are invested in an investment policy (the SuperTrace Policy) issued to Colonial Mutual Superannuation Pty Ltd by The Colonial Mutual Life Assurance Society Limited (CMLA). The SuperTrace Policy is invested solely in the Capital Stable Fund in CMLA s No. 2L Statutory Fund. There is no investment choice available to members. The investment objective of the Capital Stable Fund is to provide a reasonably high level of security and consistent returns. The investment strategy for the assets in the Capital Stable Fund is to invest in a broad range of assets with a majority in defensive investments. Investment returns are credited to members accounts as an annual crediting rate effective 30 June. The crediting rate is derived from the earning rate of the SuperTrace Policy which is net of tax on investment earnings, less any asset charge. The crediting rate is not guaranteed and the rate applied can be negative. The following fees and charges apply in SuperTrace: an asset charge of 2.11% p.a. (actual cost net of tax) is deducted from the earnings of SuperTrace prior to the crediting rate being declared. SuperTrace is unable to accept contributions from members or their employers. However, rollovers from other superannuation funds are permitted. SuperTrace does not provide insurance cover. Should you wish to know more about SuperTrace, contact the SuperTrace Customer Service Representatives on between 8.30am and 6pm Monday to Friday (Eastern Standard Time) or for a copy of their Product Disclosure Statement. Contribution surcharge tax While the contribution surcharge tax was abolished with effect from 1 July 2005, it still has potential application in some cases (possibly where there has been an amended assessment or a transfer of benefits to the Plan with an outstanding surcharge liability). In such a case, the applicable surcharge will be levied against your benefit in the Plan. If you are an Accumulation member, this will usually be by deduction from your accounts. If you are a Defined Benefit member, if the Trustee is required to pay surcharge tax, the amount paid will be accrued, with interest at the Plan s net earning rate, and deducted from your benefit when it is paid. Restrictions on when you can access your benefits Preservation rules Superannuation is a long-term investment and the Federal Government has placed restrictions on when a person can have access to benefits. These restrictions are known as preservation. When you leave the Plan, some or all of your benefit may have to be preserved. This means you may not be able to take all your benefit (less tax) in cash when you leave the Plan. Your benefit statement shows how much of your benefit is preserved. Preserved benefits must generally be kept in the superannuation system until you: retire permanently at or after your preservation age (see below) leave your employer at or after age 60 reach age 65 become permanently incapacitated or suffer a terminal medical condition as defined by Superannuation Industry Supervision (SIS) law (see below), or die. Your preserved amount is shown on your benefit statement. Your preservation age depends on your date of birth according to the table below: Date of birth Your preservation age Before 1 July July 1960 to 30 June July 1961 to 30 June July 1962 to 30 June July 1963 to 30 June After 30 June Preservation of disablement benefits For preservation purposes, permanent incapacity, in relation to a member who has ceased to be gainfully employed, means ill-health (whether physical or mental), where the Trustee is reasonably satisfied that the member is unlikely, because of the ill-health, ever again to engage in gainful employment for which the member is reasonably qualified by education, training or experience. In some cases it is possible that, even though you may have qualified for a total and permanent disablement benefit from the Plan, the benefit may not be paid to you in cash until you have satisfied one of the above payment triggers. This is due to the difference in definitions between the terms total and permanent disablement, as defined in the Trust Deed (or the Plan s insurance policy) and permanent incapacity as explained above. IAG & NRMA Superannuation Plan Annual Report

25 Your 2017 super update Legislative Changes Set out below is a summary of the key changes in super since the last Annual Report. Recent and upcoming changes under current legislation From 1 January 2017, the age pension assets test was varied so that: The level of assets which can be held before they start to impact the age pension was increased, which results in an increase in the age pension for some retirees. The rate at which the age pension is reduced for each $1,000 of additional assets was increased from $1.50 to $3.00 per fortnight. This reduces the age pension for some retirees. Concessional contributions limit for The standard concessional (before tax) contribution limit for is $25,000 for all ages. This is a reduction from when the limits were $35,000 for those aged 50 or over at 30 June 2017 and $30,000 for those younger than 50. Concessional contributions include employer and salary sacrifice contributions. From 1 July 2019 you may be entitled to contribute more than the standard concessional contribution limit if: you have not fully used your annual cap on concessional contributions in the previous five years (but not counting years before 1 July 2018), and the combined balance of all your superannuation accounts is less than $500,000 on 30 June of the previous financial year. Non-concessional contributions limit for The annual non-concessional (post tax) contribution limit for is: Nil if the combined balance of all your superannuation accounts as at 30 June 2017 is $1.6 million or more, or $100,000 if the combined balance of all your superannuation accounts as at 30 June 2017 is less than $1.6 million and you did not trigger the bring forward rule (see below) in 2015/16 or 2016/17, or If you did trigger the bring forward rule (see below) in 2015/16 or 2016/17 and if the combined balance of all your superannuation accounts as at 30 June 2017 is less than $1.6 million, then a special calculation applies (please contact the Plan Helpline for more information). Under the bring forward rule, a member under age 65 at the start of a financial year (1 July) can (unless the combined balance of their superannuation accounts is $1.6 million or more at the prior 30 June) generally bring forward two years of non-concessional contributions and make non-concessional contributions of up to three times the annual limit in that year (unless they have triggered the bring-forward rule in either of the two previous financial years). The bring-forward rule will be triggered if an eligible member makes non-concessional contributions of more than the annual limit (e.g. $100,000 in ), with excess non-concessional contributions then only generally arising if that member s total non-concessional contributions in the trigger year (e.g ) and the next two years exceed three times the annual limit applicable in the trigger year e.g. if the bring-forward rule was triggered by an eligible member making non-concessional contributions of more than the annual limit of $100,000 in , excess non-concessional contributions will then generally only arise if that member s total non-concessional contributions over , and exceed $300,000. However, from 1 July 2017: If the combined balance of all your superannuation accounts is $1.4 million or more at the prior 30 June, special bring forward restrictions apply, and Special transitional rules apply to determining your limit in if you triggered the bring-forward provisions in the 2015/16 or 2016/17 financial year and did not fully utilise your bring forward limit by 30 June For more details, go to ato.gov.au Lost super accounts The account balance threshold for lost super to be transferred to the ATO increased from $4,000 to $6,000 from 31 December These accounts will attract an interest rate equal to increases in the Consumer Price Index (CPI) after being transferred to the ATO. Other 2016 Federal Budget reforms now legislated Tax deduction for personal superannuation contributions: From 1 July 2017, most individuals will be eligible to claim an income tax deduction for any after-tax personal contributions they make to superannuation (subject to the concessional limit). This option was previously largely restricted to the fully self-employed. This option is now available for all accumulation members in the Plan. $1.6 million superannuation pension transfer balance cap: From 1 July 2017, a $1.6 million (indexed) cap applies to the amount that individuals can transfer into a superannuation pension account that has tax-exempt investment earnings. Those with pension accounts above $1.6 million at 1 July 2017 were required to transfer the excess to a taxed superannuation account or withdraw it from super. Special rules apply to defined benefit pensions. Pension account balances can, after establishment and 1 July 2017 grow with investment earnings to exceed the transfer balance cap. This restriction only applies to the amount now transferred into pension phase. Transition-to-retirement pensions: From 1 July 2017, the tax exemption on earnings from assets supporting Transition to Retirement Income Streams only applies where the pensioner has reached age 65 or has satisfied another relevant condition of release. The ability for individuals to treat superannuation income stream payments as lump sums for tax purposes was also removed. 23 IAG & NRMA Superannuation Plan Annual Report 2017

26 High income concessional contributions threshold: From 1 July 2017, the income threshold at which high income earners pay additional contributions tax was reduced from $300,000 to $250,000. Spouse contributions tax offset: From 1 July 2017, the income threshold for a low income spouse to qualify for the maximum spouse contributions tax offset was increased from $10,800 to $37,000 and the cut off income level for a partial offset increased from $13,800 to $40,000. However the offset is not available if the low income spouse s total superannuation balance is $1.6 million (indexed) or more. Low income superannuation tax offset: From 1 July 2017, the Government has replaced the Low Income Superannuation Contribution with the Low Income Superannuation Tax Offset. This provides a government contribution of up to $500 to offset tax on concessional contributions for a members with adjusted taxable incomes up to $37,000. Co-contribution: From 1 July 2017, individuals will not be eligible for the government co-contribution in an income year if their nonconcessional contributions exceed their limit for the year or if their total superannuation balance is $1.6 million (indexed) or more. Removal of anti-detriment provision: For deaths occurring from 1 July 2017, the Government has removed the anti-detriment tax deduction that was available for some superannuation death benefits. For deaths prior to 1 July 2017 anti-detriment is available for payments made up to 30 June The anti-detriment provision allowed eligible death benefits to be augmented to offset the contributions tax introduced in Departing Australia superannuation payment tax: From 1 July 2017, the rate of tax on departing Australia superannuation payments increased to 65 per cent for working holiday makers. Proposed changes yet to be legislated Super measures to assist housing affordability: In the 2017 Federal Budget, the Government announced a package of changes to assist housing affordability, which included the following superannuation measures: A First Home Super Saver Scheme (FHSSS) which is proposed to allow first-home buyers to save for a deposit inside their superannuation account. Savers will be able to contribute $30,000 (up to $15,000 a year within existing caps), and be able to withdraw the contributions along with deemed earnings in order to help fund a deposit on their first home. Concessional tax treatment is proposed to apply. The Government proposes to allow releases from 1 July 2018, with voluntary contributions made from 1 July 2017 to be eligible. Conditions to access super under the FHSSS include that a members must be aged 18 or more, not have used the FHSSS before, and never owned real property in Australia. The FHSSS will be administered by the ATO. Allowing Australians aged over 65 to make an exempt contribution to their superannuation after downsizing their family home. The aim of this measure is to help free up the stock of larger houses for young families, by allowing older Australians to sell their houses and contribute up to $300,000 of the proceeds into superannuation. Existing voluntary contribution rules and restrictions would not apply to Downsizer contributions. This measure is proposed to apply to proceeds from contracts for the sale of a main residence entered into on or after 1 July The home sold must have been held for a minimum of ten years but only needs to have been the main residence for some portion of this. Downsizer contributions must be non-concessional contributions and can be up to $300,000 for an individual or $600,000 (i.e. $300,000 each) for a couple (both parties do not need to be on the home s title). Amending the Superannuation Guarantee to exclude salary sacrifice contributions: The Government has announced it will amend the Superannuation Guarantee (SG) legislation, effective from 1 July 2018, to: prevent contributions made under salary sacrifice arrangements from satisfying an employer s SG obligations; and to specifically include salary or wages sacrificed to superannuation in the earnings base for calculating an employer s SG obligations Superannuation complaints body: The Government has announced it will establish of a new one-stop shop external dispute resolution (EDR) body the Australian Financial Complaints Authority (AFCA) that will deal with all financial disputes, including superannuation disputes from 1 July AFCA is to replace the existing three EDR bodies in the financial system (the Financial Ombudsman Service (FOS), the Credit and Investments Ombudsman (CIO) and the Superannuation Complaints Tribunal (SCT)) and will operate under an ombudsman model. IAG & NRMA Superannuation Plan Annual Report

27 More information Resolving disputes and complaints If you have a question about your benefits in the Plan, please contact the Plan Helpline on Most enquiries can be dealt with over the phone. If not, you may be asked to put your enquiry in writing and provide a contact address for the reply. Enquiries will generally be answered within 28 days. Complex queries should be addressed to: The Enquiries Officer IAG & NRMA Superannuation Pty Limited Level George Street Sydney NSW 2000 If you have a query or a problem which is not resolved to your satisfaction, you should send a written complaint (including all relevant details) to: The Complaints Officer IAG & NRMA Superannuation Pty Limited Level George Street Sydney NSW 2000 The matter will be investigated by the Complaints Officer and, where necessary, the Audit, Risk Management and Compliance Committee on behalf of the Trustee. You will be advised of the Trustee s decision as soon as possible and within 90 days of your complaint being received or within 30 days of the Trustee s decision, whichever is earlier. Please remember to include an address to which the response can be mailed. If the Trustee has not responded to your complaint within 90 days, or you are not satisfied with the Trustee s decision, you may be able to take the matter to a special government body called the Superannuation Complaints Tribunal (see right). While the Trustee has a process in place to deal with complaints from members, the Trustee s objective is to avoid complaints by providing a good level of service to members and, if complaints do occur, to resolve them to the satisfaction of all concerned. A copy of the Trustee s dispute resolution procedure is available on request from the Plan Helpline on Superanuation Complaints Tribunal The Tribunal is an independent body set up by the Federal Government to provide a low-cost, informal forum for resolving most superannuation disputes. Before the Tribunal can consider a complaint, it must be satisfied that the matter has been referred to the Trustee under the procedure set out above. Any complaints must be lodged with the Tribunal within certain time limits. In particular, there is a two year time limit on complaints about total and permanent disablement claims. For more information about requirements and time limits, you can call the Superannuation Complaints Tribunal on If the Tribunal accepts your complaint, it will try to help you and the Trustee reach a mutual agreement through conciliation. If conciliation is unsuccessful, the Tribunal can make a determination, which is binding. 25 IAG & NRMA Superannuation Plan Annual Report 2017

28 If you d like more information For Accumulation members, full details of the benefits provided by the Plan are set out in the Plan s Product Disclosure Statement, which is available on the Plan website or from the Plan Helpline. For Defined Benefit members, full details of the benefits provided by the Plan are set out in a member s booklet. As a member of the Plan, you can inspect other Plan documents by contacting the Helpline, the documents available include: the Plan s Trust Deed and rules the Plan s Product Disclosure Statement the Plan s Retirement Income Streams Product Disclosure Statement the Plan s Lifetime Pensions Product Disclosure Statement the Plan s insurance policies for death and disablement benefits extracts from actuarial reports the latest audited Plan accounts the Plan s Privacy Policy Statement the rules covering the appointment and removal of member representative Trustee directors and the independent Trustee director, and the Plan s enquiries and complaints procedures. There is no charge for this additional information. Be aware that the Trustee cannot provide you with any financial advice. For financial advice regarding superannuation, the selection of an investment option(s) and insurance options, you should speak to a licensed or appropriately authorised financial adviser. Financial advice can be arranged through the Plan s Administrator by calling the Plan Helpline on Questions? If you have questions about your superannuation benefits, please call the Plan Helpline on Mercer Outsourcing (Australia) Pty Ltd (Mercer) administers the Plan on behalf of the Trustee. You can write to the Plan Administrator at: Plan Administrator IAG & NRMA Superannuation Plan GPO Box 4303 Melbourne Vic 3001 IAG & NRMA Superannuation Plan Annual Report

29 Notes 27 IAG & NRMA Superannuation Plan Annual Report 2017

30 This Annual Report has been prepared by the Trustee to meet its legislative obligations under the Corporations Act. The information contained in this Annual Report does not take the specific needs, personal or financial circumstances of any person into account. It is recommended that readers obtain advice from a licensed or appropriately authorised financial adviser before making any changes to their own superannuation arrangements or investments. You should also read carefully the Plan s Product Disclosure Statement. The terms of your membership in the Plan are set out in the Plan s Trust Deed and, should there be any inconsistency between this Annual Report and the Plan s Trust Deed, the terms of the Plan s Trust Deed prevail. While all due care has been taken in the preparation of this report, the Trustee reserves its right to correct any errors and omissions. This document contains general information about investments and investment performance. Please remember that past performance is not necessarily a guide to future performance. Issued by: IAG & NRMA Superannuation Pty Limited ABN AFSL # as Trustee of the IAG & NRMA Superannuation Plan ABN IAG & NRMA Superannuation Plan Annual Report IAG & NRMA - Annual Report 2017_FA