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Superannuation Act 1976 - Commonwealth Superannuation Board of Trustees No. 2 - Report - 1993-94


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Annual Report 1993-94

Commonwealth Superannuation Scheme

L

Commonwealth

ERRATUM No. 1

Commonwealth Superannuation Board of Trustees No. 2

Reverse of title page

ISBN 0 644 34868 2

ISSN 1037-4507

Commonwealth Superannuation Board of Trustees No. 1

should read

ISBN 0 644 34869 0

ISSN 1038-2895

Commonwealth Superannuation Board of Trustees No. 2

bcneme

Australian Government Publishing Service Canberra

© Commonwealth of Australia 1994

ISBN 0 644 34868 2

ISSN 1037-4507

This work is copyright. Apart from any use as permitted under the Copyright Act 1968, no part may be reproduced by any process without prior written permission from the Australian Government Publishing Service. Requests and inquiries concerning reproduction rights should be directed to the Manager, Commonwealth Information Services, Australian Government Publishing Service, GPO Box 84, Canberra ACT 2601.

Commonwealth Superannuation Board of Trustees No.1

Street Address: Unit 1, Cameron Offices Chandler Street Belconnen ACT

Postal Address: PO Box 22 Belconnen ACT 2616

Telephone: (06) 252 7911

Facsimile: (06) 253 1116

Annual Report inquires: Ian Sanderson Client Communication Branch ComSuper PO Box 22 Belconnen ACT 2616 Telephone: (06) 252 7645

Not e: All contribution, benefit, membership and exit statistics are based on events related to the annual reporting period as reflected in the records of the Commissioner for

Superannuation at the time these statistics were compiled. As such, the statistics may vary from the records of these events as recorded by departments and authorities. Where historical statistics are quoted, these may vary from

previously published statistics due to the application of retrospective adjustments that are now reflected in this r e por t

Produced by the Australian Government Publishing Service

The Hon. Kim C. Beazley MP Minister for Finance Parliament House Canberra ACT 2600

Dear Minister

In accordance with section 161 of the Superannuation Act 1976 the Commonwealth Superannuation Board of Trustees No. 2 is pleased to present to you the annual report on its operations during 1993-94. The Report details the Board’s activities in respect of the administration of the Commonwealth Superannuation Scheme and the management of the Commonwealth Superannuation Fund No. 2, and includes audited financial statements.

R.L. Brown Chairperson Commonwealth Superannuation Board o f Trustees No. 2 .

4 October 1994

iii

Operational chart

Trustees appointed

Rule

changes

CSS Board of Trustees Productivity

contributions

assisted by

Investment Commissioner for

Superannuation and ComSuper

Member

strategy

Investment

contributions

Information reports

Day-to-day investment decisions

Advice on benefits payable

Benefits Moneys to pay part of benefits payments

Board's Specialist Advisers

Employers

Members

Pensioners and Beneficiaries

ACTU

Department of Finance

Minister

Consolidated Revenue Fund

CSS Board of T r u s te e s - its responsibilities and adm inistrative arrangem ents

iv

Contents

Operational chart iv

Chairperson's report 1

Significant statistics 6

The Board of Trustees 8

Fund investment 14

Scheme administration 21

Interest rates 31

Audit committee 35

Future directions 38

Appendixes A. Legislation matters 45

B. Departments and approved authorities 51 C. Eligible superannuation schemes 55

D. Financial Statements 57

E. List of abbreviations 77

Index 79

V

Tables and charts

Tables

1. Board m eetings and a tte n d e e s 12

2. A s se t se cto r indexes and benchm ark portfolio 16

3. CSS Fund investm ents—allocation and perform ance, 1 9 9 3 - 9 4 17

4. Schem e m em bership, 1 9 8 9 - 9 0 to 1 9 9 3 - 9 422

5. Schem e m em bership, by contribution ra te and age, a t 3 0 Ju n e 1 9 9 4 22

6. Contributor exits (w ith benefit entitlem ent) 1 9 9 2 - 9 3

and 1 9 9 3 - 9 4 23

7. Invalidity exits, 1 9 9 3 - 9 4 25

8. Pensions in force a t 3 0 Ju n e 1 9 9 4 25

9. Reconsideration applications received and outcom es 1 9 9 2 - 9 3 and 1 9 9 3 - 9 4 28

10. Annual crediting r a te s since 1 9 7 6 - 7 7 31

11. Exit ra te s declared in 1 9 9 3 - 9 4 34

12. Audit C om m ittee m eetings 36

Charts

1. Cum ulative y ear-to -d ate re tu rn s (annualised) 17

2. Fund com position, a t 3 0 Ju n e 1 9 9 3 and 3 0 Ju n e 1 9 9 4 18 3. P roperty holdings, a s a proportion of Fund as se ts ,

1 9 8 9 - 9 0 to 1 9 9 3 - 9 4 18

4. Fund perform ance com pared w ith inflation 20

5. Schem e m em bership, by gender and age, 3 0 Ju n e 1 9 9 4 22 6. Exits from th e CSS, 1 9 9 3 - 9 4 , by type 23

7. Fund crediting ra te s (annual) com pared w ith inflation, 1 9 7 9 - 8 0 to 1 9 9 3 - 9 4 32

8. Fund crediting ra te s (periodic rolling returns) com pared w ith inflation 32

vi

Chairperson's report

The year in brief

Fund investment

The activities on which the Trustees’ attention was primarily focused in 1993-94 were:

• preparing for the fund management environment that will ensue when the legislatively tied arrangement with Commonwealth Funds Management Ltd (CFM) as sole fund manager expires on 30 June 1995;

• readying the Fund for the revised superannuation administration arrangements that will prevail under the Government’s Superannuation Industry (Supervision) legislation (SIS); and

• the administration of the Fund and Scheme, including resolving the Auditor-General’s qualifications of the financial statements.

There are still several legislative and administrative changes to the CSS that must be made before it can comply with SIS. As a result, the Board has decided to delay its election to become a regulated fund (under the SIS provisions) until those changes have occurred, later in 1994-95. Until the time that the election is made, the CSS will continue to comply with the Occupational Superannuation Standards Act 1987 (OSSA), as modified by SIS requirements.

The 1993-94 investment year was one of two contrasting halves — a very productive and profitable first half followed by a disappointing second half. The second-half reversal was mainly a result of rises in long-term interest rates, and the

flow-on effect that this had on the Fund’s fixed-interest and share holdings.

Strong returns in the Fund’s Australian equities and property investments (which comprised over 51 per cent of total investment assets at 30 June 1994) helped the Fund to an annual return of 7.1 per cent for the financial year, a result that was 3.2 percentage points better than the benchmark.

1

Interest credited to members' accounts

Scheme administration

The returns in the domestic equities sector were particularly impressive (19.7 per cent against a benchmark of 15.7 per cent), and CFM’s performance was acknowledged as being among the leaders in this sector in 1993-94.

The Fund’s property holdings remained fairly steady during 1993-94, at 21.7 per cent of total assets. In comparison to its benchmark, property provided good returns in 1993-94 (13.7 per cent against the benchmark’s 1.2 per cent). This was primarily due to the upward revaluation of two prime

CBD properties. The outlook for property, particularly in CBDs, is positive, given the economic recovery and projected increases in business investment.

Rises in long-term interest rates had a negative effect on the value of the Fund’s fixed-interest investments, with the Australian fixed-interest sector providing negative returns for the first time since 1973-74. International fixed-interest

returns were 4.7 percentage points below their benchmark.

As a result of CFM’s 1993-94 investment performance, the Board was able to declare an annual crediting rate of 6.6 per cent. On a ten-year-return basis the interest credited to

members’ accounts has averaged 10.9 per cent per year. This is a very creditable result when compared to inflation over that period, which has averaged 5.5 per cent per year.

On 1 March 1994 the scheme administrator changed its corporate identity: the organisation that had until then been known as the Retirement Benefits Office (RBO) changed its name to Commonwealth Superannuation Administration, and adopted the business name of ComSuper. The change coincided with ComSuper’s decision to completely overhaul its computer facilities to keep pace with the changes occurring in the superannuation industry.

The Board welcomes these changes, and the commitment to client service and efficient scheme administration that accompanies them. With the growing complexity of superannuation legislation, it is essential for scheme members to have full confidence in their scheme administrator. These changes, and the commitment that underlies them, provide

CSS members with a firm basis for such confidence.

At 30 June 1994 there were 100 990 members of the CSS, down 9.2 per cent from 111 179 at the end of 1992-93. Of the 10 189 members who left the Scheme, 1604 transferred to other superannuation schemes, and 8585 were entitled to receive a CSS benefit. Fifty-nine per cent of exits (other than

2

transfers) were through involuntary retirement (retrenchment).

The rate of invalidity retirements fell slightly over the year, from 1.94 per thousand members in 1992-93 to 1.85 per thousand in 1993— 94. Invalidity retirements are approved under the test of ‘total and permanent incapacity’. In

1993— 94 206 such cases were processed by ComSuper.

The continuing reduction in the CSS population since the Scheme was closed in July 1990 is a factor that the Board takes into account in its regular reviews of the Fund’s investment policy.

Audit qualifications The 1993-94 financial statements, together with the Australian National Audit Office’s qualified audit opinion in respect of those statements, are at Appendix D (page 54). The Fund’s financial statements have been qualified by the ANAO for the last three years, generally as a result of the

inability of ComSuper’s computer systems to cope with the changing superannuation administration environment.

ComSuper, in consultation with the ANAO, have introduced several strategies to overcome these qualifications. These have included:

■ the introduction of new general ledger accounting software and the monthly maintenance of the general ledger;

■ requesting separate remittances of CSS and PSS contributions from employing agencies, at individual member level; and

■ incorporating in the IT modernisation project the requirement for recording productivity contributions at individual member level.

As a result of these strategies, and of the efforts of ComSuper’s accounting staff in overcoming the deficiencies in the existing computer systems, all but one area of audit qualification has been overcome. Importantly, the

qualification concerning the maintenance of proper accounts and records has been resolved. The only remaining area of audit qualification arises from the fact that some employing agencies continue to provide combined remittances for CSS and PSS members. This means that there has been some mixing of the moneys of the two funds, which is a breach of

the CSS Act.

3

International conference

The future

OSSA compliance

In February 1994 I attended the Australian Pensions and Investments Conference, sponsored by Bell Securities Ltd, which was held in Australia, Singapore and Indonesia. The primary focus of the conference was on international investment issues facing American and Australian pension plan sponsors, and Asia-Pacific investment opportunities in the ’nineties. Senior representatives from Australian superannuation funds, major US pension funds and their consultants, senior government officials and corporate heads from various Asia-Pacific nations were in attendance.

I was honoured to be given the opportunity to chair the Concluding Conference Summary.

Changes to the administration of the CSS will be made by the Superannuation Legislation Amendment Act 1994 to enable the Scheme to comply with SIS. These changes will take effect from 1 July 1994. Among other things, the functions of the Commissioner for Superannuation relating to the general administration of the CSS will be transferred to the Board. Also, the arrangement whereby the CSS Fund forms part of the Commonwealth’s Trust Fund referred to in section 60 of the Audit Act will cease.

The Department of Finance intends to develop a proposal to convert the CSS Act and its regulations into a much shorter Act together with a Trust Deed and Rules. This would put the CSS on the same administrative footing as the PSS scheme. Given the complexity of the CSS, it may be two or three years before a fully developed legislative package can be put to the Minister and the CSS Board for consideration.

For 1993-94, in order for the PSS Fund to receive favourable tax treatment, it had to comply with OSSA provisions. The Board has received notices of OSSA compliance from the Insurance and Superannuation Commission (ISC) for 1991-92 and 1992-93, and neither notice has been revoked. The return for 1993-94 is currently being assessed by the ISC Commissioner, who has

foreshadowed that he will again exercise his discretion to treat the Fund as OSSA-compliant in 1993-94.

Thanks I would like to thank the trustees for their hard work and cooperation throughout the year, for their regular attendance and participation at Board meetings, and for their dedicated commitment to furthering the aims and objectives of the

Board. In particular, I acknowledge with gratitude the efforts of those trustees who contributed to the working of the Board’s sub-committees—the Audit Committee and the Reconsideration Advisory Committee.

Ronald L. Brown Chairperson Commonwealth Superannuation Board of Trustees No. 2

5

Significant statistics

Fund investment

A sset allocation 1992-93 1993-94

Sector $M % $M %

Property 956.5 22.1 944.8 21.7

Australian equities 1 192.9 27.5 1 287.6 29.5

International equities 913 .0 21.1 894.4 20.5

Australian fixed-interest 571.6 13.2 836.8 19.2

International fixed-interest 401.9 9.3 82.1 1.9

CPI-indexed bonds 223.8 5.2 250.5 5.7

Cash 70.8 1.6 66.21.5

Total 4 330.5 100.0 4 362.4 1 100.0

Investment performance2 1992-93 1993-94

Benchmark Fund Benchmark Fund

Sector % % % %

Property -1 1 .8 - 9 .6 1.2 13.7

Australian equities 9.1 9.6 15.7 19.7

International equities 26.8 26.8 0 .0 1.1

Australian fixed-interest 11.8 10.4 - 0 .9 - 2 .5

International fixed-interest 21.1 22.7 - 3 .7 - 8 .4

CPI-indexed bonds 14.1 15.7 - 2 .2 - 1 .7

Cash 5.0 4.7 4.2 3.7

Total 7.9 9.1 3.9 7.1

Crediting rates3 1992-93 1993-94

8.2% 6. 6%

1 This represents the funds held by CFM at 30 June 1994, and will differ from the Investments show n in the financial statem en ts because of necessary accounting adjustm ents.

2 Performance figures are after tax and fees.

3 Crediting rates differ from earning rates because of various adjustm ents, including transfers to and from the Reserve A ccount. (See also 'Im portant note on interest rates', page 14)

6

Scheme administration

Contributors a t 30 June 1992-93 1993-94

increase (decrease)

Males 75 914 69 037 (9.1%)

Females 35 265 31 953 (9.4%)

Total 111 179 100 990 (9.2%)

Contributor exits 1992-93 1993-94

increase (decrease)

Age 1 459 1 376 (5.7%)

Involuntary (retrenchm ent) 4 135 5 047 22.1%

Invalidity 244 206 (15.6%)

Death 95 151 58.9%

Resignation & other 1 9181 805 (5.9%)

Total 7 851 8 585 9.4%

Pensions in force a t 30 June 1992-93 1993-94

increase (decrease)

Age 40 460 40 551 0.2%

Invalidity 30 775 29 934 (2.7%)

Involuntary (retrenchm ent) 5 252 7 036 34.0%

S pouses & orphans 25 296 25 831 2.1%

Total 101 783 103 352 1.5%

Average yearly adult pension $15 906 $15 975 0.4%

Invalidity retirement rate 1992-93 1993-94 decrease

per 1 00 0 members 1.94 1.85 (4.6%)

7

The Board of Trustees

Introduction

Membership

The Commonwealth Superannuation Board of Trustees No. 2 (the CSS Board) is a body corporate, by virtue of Section 27b of the Superannuation Act 1976 (the CSS Act), which is responsible for the management and investment of the Commonwealth Superannuation Fund No. 2 (the CSS Fund).

Commonwealth Funds Management Ltd (CFM) has been appointed under Commonwealth legislation as the sole investment manager for the CSS Fund until 30 June f995.

During 1993-94 the Commissioner for Superannuation was responsible for the general administration of the CSS Act, other than Parts IlA , III and IVa and Section 154a , and certain other provisions inserted by the Superannuation Legislation Amendment Act 1991. The Commissioner was

also responsible for providing administrative support to the Board, through ComSuper.

From 1 July 1994, under changes contained in the Superannuation Legislation Amendment Act 1994, the Board will become responsible for the general administration of the CSS.

The Board consists of seven members appointed by the Minister for Finance under Section 27f of the CSS Act. Membership comprises all of the members of the Commonwealth Superannuation Board of Trustees No. 1 (the PSS Board) and two additional members. One of those additional members is required to be a person with experience in the administration of Commonwealth authorities, and the other is to be a person nominated by the Australian Council of Trade Unions (ACTU).

The Chairperson and the ACTU nominees are appointed for a period not exceeding three years (but are eligible for reappointment), whereas all other members hold office ‘at the Minister’s pleasure’.

Members holding office at 30 June 1994 were:

8

Mr Ronald L. Brown (independent Chairperson) —appointed 25 July 1990, reappointed from 1 July 1993 to 30 June 1996

Mr Brown is a consultant to both State and Federal Governments and is a member of a number of government and semi-government boards and commissions. He was Secretary of the (then) Department of Immigration, Local Government and Ethnic Affairs, and Chief Executive of the Special Broadcasting Service, Sydney. He is also Chairperson of the PSS Board.

Mr Patrick J. Barrett, Μλ-appointed 1 July 1990

Mr Barrett is Deputy Secretary of the Department of Finance, a member of the PSS Board, and a Trustee of the CSS Additional Contributions Trust Fund. He is a member of the combined CSS/PSS Audit Committee. His alternate is

Mr David Lindsay, Assistant Secretary, Social Security Division, Department of Finance.

Mr John A. Flitcroft-appointed 1 July 1990, reappointed from 1 July 1993 to 30 June 1996

Mr Flitcroft is a member of the NSW Branch of the Community & Public Sector Union (CPSU), currently working in the Department of Veterans’ Affairs, Sydney. He is also a member of the PSS Board. He was nominated by the ACTU, and his alternate is Mr John Murphy, Review Officer, Merit Protection and Review Agency, Sydney.

Mr David C. Leaver-appointed 1 July 1990, reappointed from 1 July 1993 to 30 June 1996

Mr Leaver works at the Australian Bureau of Statistics, where he is Manager of their Microsimulation Project. He is chairperson of the joint Audit Committee, and a member of the CSS Reconsideration Advisory Committee. He is also a

member of the PSS Board, and of its RAC. He is a member of the Professional Division of the CPSU, and was nominated by the ACTU. Mr Leaver’s alternate is Mr Paul Smith, Bureau of Meteorology, Melbourne.

9

Mr Angus J. McKenzie—appointed 1 July 1990

Mr McKenzie is Group Manager, Risk and Treasury Management, Australia Post. He is responsible for the operation of the Australia Post Superannuation Scheme and is also a director of the Trustee of that Scheme. He is also a Commissioner of the Safety, Rehabilitation and Compensation Commission.

Mrs Cheryl B. Savage—appointed from 1 July 1993 to 30 June 1996

Mrs Savage is a member of the CPSU, and works in the strategy area of Telecom’s Commercial and Consumer Division as the Manager of Finance for Residential Video. She was nominated by the ACTU, and is a member of the joint Audit Committee and of the CSS Reconsideration

Advisory Committee. Her alternate is Mr David Irons, of the Communication Workers Union, Melbourne.

Mr Kenneth A. Searson—appointed 8 April 1992

Mr Searson is the Commissioner for Superannuation and Chief Executive Officer of ComSuper. He is a member of the PSS Board and of the Military Superannuation and Benefits Board of Trustees No. 1. Mr Searson is also a member of the NSW Divisional Council and Federal Council of the Association of Superannuation Funds of Australia. His alternate is Mr Peter Skinner, Deputy Commissioner for Superannuation.

Charter and objectives The Board assumed responsibility for the management and investment of the Fund with effect from 1 July 1991. From

1 July 1994, the responsibility for the administration of the CSS passed from the Commissioner for Superannuation to the Board, in order to comply with SIS. During 1994-95, the Board will examine and (if necessary) redefine, its charier and objectives in the light of this new responsibility.

10

Charter In 1993-94, the Board operated under the following charter:

• to set the broad directions under which the Fund manager is to operate;

• to undertake strategic planning and policy implementation in relation to the operation of the Scheme’s invalidity process; • to be a sounding board for relevant proposals developed by

the Scheme administrator, the Fund manager and the Department of Finance;

• to be a source of advice to the Minister on proposed changes to the CSS which have an impact on the Board’s area of responsibility; and

• to determine crediting rates for contributors’ accounts (that is, interest on members’ and productivity contributions).

Objectives The Board’s objectives in 1993-94 were:

• to maintain appropriate arrangements for the receipt of contributions and the payment of benefits accruing to CSS members;

• to maintain appropriate arrangements, including delegation of Board powers and functions under the CSS Act, to facilitate the proper administration of the invalidity provisions of that Act;

• to maintain appropriate arrangements for the determination of interest crediting rates to be applied to contributors’ accounts; and

• to review and devise an appropriate ongoing investment policy and strategy for the Fund to pursue after 30 June 1995, when the tied arrangement with CFM as sole investment manager expires.

Performance indicators Indicators of performance against those objectives are:

• the investment performance of the Fund relative to appropriate benchmarks (see Fund Investment, pp. 14-20)·, • the efficiency of the arrangements for the payment of

invalidity benefits (see Invalidity processing, pp. 26-27);

• the continuing effectiveness of the banking arrangements; • the number of appeals against decisions taken under delegation from the Board, and the outcome of those appeals (see Reconsideration and review, pp. 27-28); and

11

• the success of the communications strategies used to inform members of relevant superannuation matters and of the Board’s activities (see Member communications, pp. 29-30).

Board mootings Meetings are convened on a regular basis except where issues of urgency require out-of-session meetings to be held. From time to time, Board members’ alternates are invited to attend meetings as observers. In addition to the scheduled meetings shown in the Table below, four out-of-session meetings were held in 1993-94.

Table 1. Board meetings and attendees

Name 1 July 5 Aug. 2 Sep. 18 Oct. 11 Nov. 2 Dec. 3 Feb. 3 Mar. 7 Apr. 5 May 2 June

R. Brown Z Z Z Z Z ✓ Z Z Z Z Z

P. B arrett Z ✓ Z ✓ ✓ ✓ Z Z Z Z

J. Flitcroft Z ✓ ✓ ✓ ✓ Z Z Z z Z

D. Leaver Z ✓ ✓ Z ✓ ✓ Z Z Z z Z

K. Searson Z ✓ ✓ Z ✓ Z ✓ Z Z z Z

A. McKenzie Z Z ✓ ✓ ✓ ✓ ✓ z Z z Z

C. Savage Z ✓ ✓ ✓ / Z Z z Z z Z

J. Murphy 1 D. Lindsay 2

✓

✓

1 Mr Murphy is the alternate for Mr Flitcroft 2 Mr Lindsay is the alternate for Mr Barrett

S e c r e t a r i a t The Secretary to the Board has specific responsibilities in relation to the maintenance of the formal transcript of Board proceedings, the safe custody and control of the Common Seal, and the dissemination of Board decisions. The Secretary also acts as the conduit between the Board, its policy advisers (Department of Finance), the Scheme administrator (ComSuper), the Fund Manager (CFM), Scheme members, members of Parliament and the media.

Secretariat services to the Board are provided by ComSuper staff. More detailed commentary in relation to the operations of ComSuper’s Secretariat and Invalidity Assessment Section can be found in the Commissioner for Superannuation Annual Report 1993-94.

12

Acknowledgments The Board would like to acknowledge the diligence and efficiency of the staff of ComSuper, who support the Board’s activities and assist the Board in the general administration of the Scheme.

The preparation for the cessation of the tied relationship with CFM after 1 July 1995 has required an unparalleled commitment by CFM to the research and development of strategic concepts. The Board acknowledges CFM’s contributions and commitment to the management of

investments in the new era.

In addition, the Board would like to express its appreciation for the assistance given by specialists from both the government sector (particularly officers from the Department of Finance) and the private sector, who provided the Board with a range of professional services and advice throughout

the year.

13

Fund investment

Important note on interest rates

The Fund earning rates quoted in this Report

differ from th e ra te s calculated by ComSuper for crediting ra te purposes.

The ra te s used to report th e investment returns are time-weighted, th a t is, they give equal

w eight to th e retu rns earned over each quarter,

th u s minimising th e effect of variations in cash

flow. This allows th e returns to be com pared on a like-for-like b asis w ith other funds w ith differing p atte rn s of cash flows.

Time-weighted ra te s of return are used in m ost

investm ent perform ance surveys.

The returns calculated for crediting rate purposes are money-weighted ra te s of return, which w eight th e retu rns earned over each time period, allowing for th e am ount and timing of cash flow s. This is considered an effective m easure of a

fund's ra te of grow th, and is therefore th e appro­

p riate m ethod for calculating crediting ra te s and for financial accounting.

I n t r o d u c t i o n 1993-94 was the second year in which the assets of the Commonwealth Superannuation Fund No. 2 (the CSS Fund), were managed separately from those of the Superannuation Fund No. 1 (the PSS Fund). Between 1 July 1990 and

30 June 1992, the assets of CSS members and PSS members were managed in a combined investment fund.

That combined Fund was split on 30 June 1992, and since then the CSS Fund has been free to pursue its own investment strategy, based on the perceived needs of its members and the nature of the assets under management. In fact, since the combined Fund was split, both Funds have operated under the same investment strategy, but have recorded differences in their respective annual earnings, caused by cash-flow variations over the last two years.

14

Investment strategy The primary objective of the investment policy followed by the Board in 1993-94 was to obtain the maximum return on

investments commensurate with:

• a requirement that interest crediting rates must not be negative;

• an acceptable probability of achieving after-tax returns of at least three percentage points per annum in excess of the inflation rate over the longer term; and

• an acceptable probability of maintaining a positive balance in the Reserve Account.

Under Commonwealth legislation, CFM has been appointed as the sole investment manager until June 1995. It has the day-to-day responsibility for investing Fund assets within the strategic direction determined by the Board.

Over the past four years, the Board and CFM have developed a close working relationship. Recently, the trustees and CFM staff, with the assistance of expert consultants,

have been working towards the development of an optimal investment strategy for the fund in the post-June 1995 environment. The Board is confident that CFM has the capacity to adapt quickly to change, and is pleased that CFM will continue to play a key role in the Fund’s strategy for the future.

The principal guidelines of the investment strategy pursued in 1993-94 were as follows:

• asset allocation and the income allocation method will be directed towards meeting the Board’s primary investment objective;

• investment risk will be minimised through appropriate diversification of portfolio exposures both within and between asset classes;

• the longer-term advantages offered by the higher returns typically secured on share and property assets will be sought, by orienting investment policy towards those asset classes (subject to risk considerations);

• investments will be actively managed within the agreed benchmark ranges; and

• futures and options may be used for appropriate invest­ ment functions, but not for gearing of portfolios or speculation.

Further information on this investment strategy, including detailed sectoral investment guidelines, can be found in the

15

Board’s Investment Policy Statement, which was issued to all members in June 1992.

The Board, working closely with CFM, has recently taken several decisions on amendments to its investment policy, and these will be implemented progressively from July 1994. Once the Board has finalised the new policy, a revised Investment Policy Statement will be issued to all members.

The Board’s investment policy nominates a strategic benchmark investment portfolio against which the Fund’s performance can be measured. The benchmark portfolio assumes that fixed proportions of the fund are invested in the major asset classes, with the investment performance of each

asset class being taken from a Board-determined index. The benchmark portfolio and the sectoral indexes are shown in Table 2.

Table 2. Asset sector indexes and benchmark portfolio

Asset sector Index

Permitted range

%

Benchmark portfolio

%

Property Unweighted average of AMP and National M utual Property T ru sts 1 5 -2 5 20

Australian equities Australian S tock Exchange All-Ordinaries Accumulation Index 1 5 -3 0 25

International equities Morgan S tanley Capital International World Index (with n et dividends reinvested) 1 0 -2 5 20

Australian fixed-interest SBC Dominguez Barry (DBSM) Com posite Bond Index 0 - 4 0 20

International fixed-interest Salomon B rothers World Government Bonds Index 0 - 1 0 5

CPI-indexed bonds SBC Dominguez Barry (DBSM) Inflation-linked Bond Index 0 - 1 0 5

Cash SBC Dominguez Barry (DBSM) Bank Bill Index 1 -4 0 5

The benchmark portfolio

16

Fund performance The first half of 1993-94 produced strong gains in most asset sectors, particularly equities, but in the last six months of the year much of that good performance was eroded. This was mainly due to rises in long-term interest rales in the second half, which caused a drop in the market value of fixed-

interest securities. The progressive decline in returns over the course of the year is shown in Chart 1.

Chart 1. Cumulative year-to-date returns (annualised)

0-20 -

Ο N D

At 1 July 1993, the investments held by CFM for the CSS Fund were valued at $4330.5 m . At the end of 30 June 1994, this had increased to $4362.4 m . The Fund achieved a return of 7.1 per cent for 1993-94, compared to the benchmark portfolio’s return of 3.9 per cent (see Table 3).

Table 3. CSS Fund investments-allocation and performance, 1993-94

Asset sector

Value of investments1

at 1 July 1 9 9 3 at 3 0 June 1 9 9 4

Benchmark portfolio performance

Fund

performance2

Property $ 9 5 6 . 5 m $ 9 4 4 .8m 1 .2 % 1 3 .7 %

Australian equities $1 1 9 2 .9 m $1 2 8 7 .6 m 1 5 .7 % 1 9 .7 %

International equities $ 9 1 3 .0 m $ 8 9 4 . 4 m 0 .0 % 1.1%

Australian fixed-interest $ 5 7 1 .6m $ 8 3 6 .8m - 0 . 9 % - 2 .5 %

International fixed-interest $ 4 0 1 ,9 m $ 8 2 .1m - 3 . 7 % - 8 .4 %

CPI-indexed bonds $ 2 Z 3 .8 m $ 2 5 0 . 5 m - 2 . 2 % - 1 .7 %

Cash $ 7 0 . 8 m $66.2m 4 .2 % 3.7 %

Total Fund $ 4 3 3 0 . 5 m $ 4 3 6 2 . 4 m 3 .9 % 7 .1 %

1 The Value of investments figures represent funds under m anagem ent by CFM, and differ from th e Investm ents show n in th e financial s ta te m e n ts because of necessary accounting adjustm ents.

2 Fund performance figures a re after tax and m anagem ent fees, and reflect income a s w ell a s realised and unrealised gains and/or losses.

17

Chart 2. Fund composition, at 30 June 1993 and 30 June 1994

1.6 %

22.1 %

13.2%

30 June 1993 30 June 1994

□ Property Q Australian equities Q International equities

dU Australian fixed-interest g International fixed-interest □ CPI-indexed bonds ■ Cash

The pie-charts above illustrate the changes in asset allocation that have occurred over the year.

At 30 June 1990, property comprised over 38 per cent of the Fund’s total assets. This has reduced, through valuation reductions and the prudent sale of selected assets, combined with the Board’s policy of directing incoming contributions towards other asset sectors, to 21.7 per cent at 30 June 1994.

Chart 3. Property holdings, as a proportion of Fund assets, 1989-90 to 1993-94

% 20

1990 1991 1992 1993 1994

year ending 30 June

18

Comparison of Fund performance

Inflation Rate

The inflation ra te used throughout this Report is th e percentage change in th e June-to-June Consumer

Price Index. In last y ear's Annual Report, a different inflation ra te definition w a s u s e d - th e average of the

four quarterly CPI rates declared for a financial y ear com pared with the average of th e four rates

for th e previous year.

The latte r m ethod is the one used by th e Govern­ m ent in its Budget papers. The m ethod employed here

is the one used by m ost

financial institutions and com m entators when dis­ cussing inflation.

During 1993-94 the value of the Fund’s property holdings (as at 30 June) fell from $956.5 m (22.1 per cent of Fund assets) to $944.8 m (21.7 per cent of assets). Despite the reduction in the balance date value, the sector performed well in comparison to its benchmark, primarily because of the upward revaluation of two prime CBD properties —

Grosvenor Place in Sydney and 101 Collins St in Melbourne.

The Board now considers property to be one of the better­ performing sectors, and further property purchases may be made as opportunities arise. As a result, holdings will probably remain at the higher end of the permitted range.

Australian shares provided the best returns for the Fund in 1993-94. Comprising almost 30 per cent of total assets, these investments outperformed their benchmark by four percentage points (19.7 per cent against 15.7 per cent), and offset the below-benchmark returns in the fixed-interest and cash sectors.

When comparing the performance of superannuation funds it is important to remember that superannuation is, for the majority of scheme members, a long-term investment. Therefore, the primary objective of a superannuation fund is to maximise the expected rate of return over the long term while investing prudently. However, trustees must also be aware of the need to achieve acceptable returns in the short term (to be fair to exiting members) while pursuing their longer-term strategy.

A fund’s investment strategy must be consistent with the nature of its liabilities. In addition, its strategy will be affected by its risk profile, the existence (or not) of a Reserve Account, the cash flows into and out of the fund, the scheme’s benefit design, and a host of other considerations.

Consequently, comparisons between CSS Fund returns and the returns of other funds may be misleading without a full understanding of how all these factors influence the respective investment strategies.

The Board believes that its investment objective of out­ performing the rate of inflation by three percentage points per annum over the longer term (see p. 15) represents a reasonable basis on which to judge the Fund’s performance.

The overall Fund return (after tax and fees) for 1993-94 of 7.1 per cent was 5.4 percentage points ahead of inflation, which (taken with the returns for the last few years) more than satisfies that objective.

19

Attendance at international conference

Investment inquiries

The chart below illustrates that the Fund’s returns over the years have consistently exceeded the rate of inflation.

Chart 4. Fund performance compared with inflation

□ Earning rate □ Inflation rate

15 years 10 years Byears 3 years 1 year period

In February 1994, the Board Chairperson attended the Australian Pensions and Investment Conference in Australia, Singapore and Indonesia, on behalf of the CSS and PSS Boards of Trustees. The total cost of his attendance was $3798, which was shared evenly between both Funds.

Further information on the investment activities of the CSS Fund can be obtained from:

The Secretary CSS Board of Trustees P0 Box 22 Belconnen ACT 2616

Phone: (06) 252 7965 Fax: (06) 253 3044

20

Scheme administration

The Scheme administrator

Members' contributions

The CSS is administered by ComSupcr, which (among other things) maintains records on contributors and pensioners, receives and accounts for contributions from employing agencies in respect of their employees, and

pays benefits as they become due.

A program-level description of the activities of ComSuper is contained in the Department of Finance Annual Report 1993-94 (Program Element 4.1). A detailed component-level description of all ComSuper

programs is contained in the Commissioner for Superannuation Annual Report 1993—94.

Members must pay basic contributions of 5 per cent of their superannuation salary into the Fund each fortnight. They may also elect to make supplementary contributions (up to a further 5 per cent of salary) in order to increase their member benefit upon retirement. Contributions are deducted from their salary and paid on their behalf by employing agencies to ComSuper, who in turn pay them into the Fund. ComSuper is responsible for receiving and recording members’ basic and supplementary contributions, as well as their productivity contributions, and for calculating benefits when they become payable.

In 1993-94 ComSuper received contributions totalling $3 18m, which comprised $234m in member contributions and $84m in productivity contributions. Benefits paid from the Fund during the year totalled $31 1m, giving a

net contributions flow for 1993-94 of $7m .

21

Membership With the introduction of the PSS in July 1990, the CSS was closed to new members. As a consequence, the Scheme population will continue to decline, and the average age of CSS members will increase, over the coming years. At 30 June 1994 there were 100 990 CSS contributors, a decrease of 10 189 (9.2 per cent) since 30 June 1993.

Table 4. Scheme membership, 1989-90 to 1993-94

Year ending Men Women Total

3 0 Ju n e 1990 198 597 109 109 307 706

30 Jun e 1991 99 087 46 0 03 145 0 90

30 Ju n e 1992 87 384 39 535 126 919

30 Jun e 1993 75 914 35 265 111 179

30 Ju n e 1994 69 037 31 953 100 990

Chart 5. Scheme membership, by gender and age, 30 June 1994

□ Women

H Men

<24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60+

age group (years)

Table 5. Scheme membership, by contribution rate and age, at 30 June 1994

Age 5% 6%

Contribution rate 7% 8% 9% 10% > 10%,' Total

2 0 -2 4 1 222 3 7 2 0 22 1 256

2 5 -2 9 5 981 28 4823 4 134 - 6 218

3 0 -3 4 11 381 79 90 66 7 381 - 12 004

3 5 -3 9 15 229 190 206 97 22 763 - 16 507

4 0 -4 4 17 730 285 369 254 29 1 598 1 20 266

4 5 -4 9 16 542 279 439 326 45 2 987 1 20 619

5 0 -5 4 9 808 183 294 213 28 3 391 38 13 955

5 5 -5 9 4 672 70 138 124 21 2 212 142 7 379

6 0 + 1 712 26 39 34 7 895 73 2 786

Total 84 277 1 143 1 630 1 139 163 12 383 255 100 990

1 Some CSS members, w ho had been contributing more than 10% under th e Superannuation Act 1922, w ere perm itted to continue contributing at th e higher ra te under th e 1976 CSS Act.

22

Contributor exits During 1993-94, 10 189 CSS members left the Scheme. This comprised 1604 who transferred to other eligible schemes, and 8585 who were entitled to receive a CSS benefit. In summary, CSS exits (other than transfers to

other schemes) are shown in Table 6.

Table 6. Contributor exits (with benefit entitlement) 1992-93 and 1993-94

Reason for exit 1992-93 1993-94

Age retirem ent 1 4 59 1 376

Involuntary retirem ent (retrenchm ent) 4 135 5 047 Resignation (including preservation) 1 9 18 1 805

Invalidity retirem ent 244 206

Death 95 151

Total 7 851 8 585

Chart 6. Exits from the CSS, 1993-94, by type

16.0%

1.8%

■ Age

I f Retrenchment □ Invalidity □ Resignation ■ Death

Scheme exit statistics The following p ag es sum m arise th e b en efits processed in

1 9 9 3 - 9 4 . T he graphs accom panying each benefit sum m ary show th e tre n d s th a t have em erged over th e last five years.

They show exits of each particular ty p e, as a proportion of all exits, since 1 9 8 9 - 9 0 , w hich w a s th e year before

th e PSS w a s established.

23

Age retirement In 1993-94, 1376 members exited under the age retirement provisions of the CSS. Of those retirees, 74 (5.4 per cent) elected to take maximum pension, and 1289 (93.7 per cent) chose to take a standard (indexed) pension and to commute the additional (non-indexed) pension amount into a lump-sum payment. Thirteen retiring members (0.9 per cent) were former Provident Account members who elected to take a lump sum.

For members who took the maximum pension option, the average yearly pension was $14 469. For those who commuted the additional non-indexed pension entitlement to a lump sum, the average pension was $14 088 and the average lump-sum amount was $43 451.

Resignation

(including preservation) Resignations, as a proportion of all exits, have decreased considerably since the introduction of the PSS in 1990-91.

In 1993-94 1805 members resigned, of whom 1160 were eligible to preserve their benefits in the Scheme (that is, they had more than five years’ continuous government employment). Of these, 527 elected to preserve their benefits. Another 599 eligible members chose to take a refund of their contributions and interest rather than take up their entitlement to an employer-funded preserved benefit. Thirty-four members transferred their entitlements to other eligible superannuation schemes.

Involuntary retirement Retrenchments increased by 22.1 per cent, from 4135 in (retrenchment) 1992-93 to 5047 in 1993-94.

The majority (3217, or 63.7 per cent) of members who retired involuntarily in 1993— 94 chose to take a lump­ sum-only refund. Their average lump-sum amount was $95 635. The remainder (1830, or 36.3 per cent) took the pension-plus-lump-sum option. Their average pension amount was $15 149 per annum, and the average lump­ sum amount was $48 010.

24

Invalidity retirement

° 89-90 90-91 91-92 92-93 93-94

Invalidity retirements decreased from 244 in 1992-93 to 206 in 1993-94 (1.85 per thousand members).

Table 7. Invalidity exits, 1993-94

Invalidity classification Number Total

With BCC applying :

Maximum pension 1

S tandard pension & lump sum 9

Lump sum only 10

Total with BCC applying 20

Without BCC applying:

Maximum pension 68

S tandard pension & lump sum 115

Total without BCC applying 183

Former Provident Account members (lump sum) 3

Total 206

Of the 206 invalidity retirees, 124 elected to take a standard (indexed) pension plus lump sum, 69 took the maximum pension, and 13 took a 100 per cent lump-sum benefit.

P e n s i o n s At 30 June 1994 there were 103 352 pensions in force, incurring an annual pension liability of $1628.8m . Table 8 gives a breakdown of those pensions, by type, and their annual liability.

Table 8. Pensions in force at 30 June 1994

Type of pension Number

Annual liability f$M)

Age 40 551 627.3

Invalidity 29 934 575.3

Involuntary (retrenchm ent) 7 036 110.5

Spouses & orphans 25 831 315.7

Total 103 352 1 628.8

25

Invalidity processing

Requests to approve invalidity retirement

Assessm ent pane!

Board decisions

The invalidity retirement process is designed to ensure a thorough assessment of a person’s condition and to fully consider prospects of rehabilitation and/or retraining before the Board issues an invalidity retirement certificate. This certificate is only issued when the Board considers an employee to be totally and permanently incapacitated, that is, unlikely to work again in a position for which the person is reasonably qualified by education, training and experience, or could become so qualified after retraining.

The legislation provides for payment of pre-assessment payments which ensure that a person who is (or is likely to become) totally and permanently incapacitated is not left without income while his or her case is assessed.

Applications for pre-assessment payments and/or the issue of an invalidity retirement certificate are normally made to ComSuper through the applicant’s employer. If the applicant wishes to be paid pre-assessment payments, the employer must include a medical report completed by a Commonwealth Medical Officer (or other Board- approved medical practitioner) who has examined the person and considers that the person is, or is likely to become, totally and permanently incapacitated.

During 1993-94, pre-assessment payments were approved in respect of 219 applicants. Five applicants were refused pre-assessment payments on the ground that there was little likelihood that they would be unable to work again.

The decision-making process requires the Board to engage an assessment panel, with experience in assessing invalidity claims for superannuation purposes, to assist it to reach a decision on whether a person is totally and permanently incapacitated. During 1993-94 panel services were provided by Disability Claims Management & Counselling Service (DCMC).

When all the necessary information is available, ComSuper is in a position to place the matter before the Board for decision (or in certain circumstances to approve invalidity retirement under delegation from the Board), at which time the Board is required to decide whether to approve the retirement and, if so, to issue a certificate having regard to:

26

Reconsideration and review

Internal reconsideration

(a) the advice of the panel; and

(b) the ‘practicality’ of the person being able to find a job for which he or she is qualified or could become qualified after retraining.

During 1993-94, 171 applications for invalidity retirement certificates were approved and a further 35 applications were refused.

The approved retirement certificates included four using the ‘fast track’ process which enables the Board to approve invalidity retirement certificates without recourse to the invalidity assessment panel where it is satisfied that the individual is totally and permanently incapacitated.

Decisions of the Board and its delegates are subject to internal reconsideration and external review. These processes are managed by the Review and Legal Services Branch of ComSuper.

A person affected by a decision of the Board or a delegate may apply in writing to have it reconsidered. If the Board took the decision, the application must be supported by evidence not previously known to the

Board, and accompanied by a fee of $150.

A request for reconsideration of a Board decision is usually referred to the Reconsideration Advisory Committee (RAC), whose recommendation is taken into account by the Board in deciding whether to affirm or vary the decision or set it aside and substitute another

decision for it. The Board can also refer a decision to the RAC on its own motion.

Decisions are reconsidered on the basis of new evidence provided by the applicant or obtained by the Review and Legal Services Branch. Applicants are invited to make further submissions, in the interests of natural justice, it the Committee’s recommendation is likely to be adverse.

Each applicant receives a comprehensive written statement of reasons for the Board’s decision on reconsideration.

The number of reconsideration applications received in 1 9 9 3 - 9 4 fell by 16 per cent, to 21 cases. Nine

applications were received where the Board had confirmed that it would not direct, under subsection 7(2) of the CSS Act, that the applicant should be deemed to

27

External review

have been retired on invalidity grounds; eight were received where the Board had decided that the evidence presented was not sufficient to grant an invalidity retirement certificate; and four were received seeking to overturn the decision not to approve pre-assessment payments to applicants for invalidity retirement certificates.

Table 9. Reconsideration applications received and outcomes 1992-93 and 1993-94

1992-93 1993-94

Delegate's decision Board's decision

Delegate's decision

Board's decision

Brought forw ard 2 52 1 43

Received 3 22 4 17

W ithdrawn or lapsed 2 100 9

Decisions affirmed 0 2 2 7

Decisions varied 0 0 3 4

Decisions set aside 2 190 10

Resolved 4 31 4 30

Carried forw ard 1 1 43 0 30

1 The c a se s carried forw ard are under investigation by ComSuper or are w ith th e RAC.

Under the Administrative Decisions (Judicial Review) Act 1977 (the AD (JR) Act) a person aggrieved by an administrative decision taken under Commonwealth legislation may seek an order for review of the decision by the Federal Court. A person may also seek an order for review under section 7 of that Act if they consider that there has been unreasonable delay in making a decision. Thus, decisions taken by the Board or its delegates are subject to review by the Federal Court. The provisions of the AD(JR) Act apply to both primary decisions and decisions taken on reconsideration.

In 1993-94 no applications for review of Board or delegates’ decisions were lodged with the Federal Court under the AD(JR) Act.

28

Member

communications

Improved service

ComSuper began distribution of the B oard's 1 9 9 3 -9 4 superannuation information packages to m em bers on

29 August 1 994. The packages, consisting of the 1 9 9 3 -9 4 Annual Report to Members, th e 1 9 9 3 -9 4 Information S ta te m e n t, and an explanatory leaflet, w ere

individually add ressed to m em bers at their place of w ork.

This exercise w a s completed six w eek s earlier than the equivalent exercise in 1 9 9 3 -9 4 .

Superannuation is an important element of the overall package of conditions of employment for Commonwealth employees. With that in mind, and in accordance with Regulation 18c-18s of the Occupational Superannuation Standards Act 1987 (OSSA), the Board continued to keep

CSS members informed of relevant superannuation issues and decisions throughout the year.

ComSuper’s Client Communications Branch prepares and distributes regular newsletters to Scheme members. The costs of producing and distributing these newsletters are charged

against the Fund. They also keep Personnel Sections in employing agencies informed of administrative changes through monthly Super News newsletters, which are charged against ComSuper’s budget appropriation.

In 1993-94 the following publications were issued to members:

• ACCESS Annual Report to Members, September 1993 • ACCESS half-yearly newsletter, March 1994

Total distribution of the two editions of ACCESS in 1993-94 exceeded 215 000 copies, and the cost to the Fund of printing and distributing them came to just over $21 600, or about 19 cents per member.

On behalf of the Board, ComSuper issues individual Information Statements to all current and preserved-benefits members every year. They also supply employing agencies with a Ready Reckoner computer diskette, which members can use to prepare estimates of their future benefit entitlements, by entering data from their Information Statement. Costs of preparation and distribution are borne by

ComSuper.

The response to the Board’s communications program has been positive. Senator Watson, Chairman of the Senate Committee on Superannuation, in his speech on the Superannuation Legislation Amendment Bill 1994, said:

The SIS legislation places a great onus on tru ste e s to provide members with quality information on the operation of th e fund. My observation of th e CSS and PSS schem es is th a t they are doing just th a t. I would

like to tak e this opportunity of commending them on their w ork and enterprise in this direction.

29

Inquiries about Board publications should be directed to

Schemes Promotion Group ComSuper PO Box 22

Belconnen ACT 2616

Phone: (06) 252 7645 Fax: (06)253 1116

30

Interest rates

Crediting rates

Table 10. Annual crediting rates since 1976-77

Financial year Fund

Crediting rate (%)

1 9 7 6 -7 7 CSS Fund 8.1

1 9 7 7 -7 8 II II 8.4

1 9 7 8 -7 9II 11 9.3

1 9 7 9 -8 0 " " 9.6

1 98 0 -8 1II II

12.1

1 9 8 1 -8 2II II 11.7

1 9 8 2 -8 3 ,1 II 10.8

1 9 8 3 -8 4II II 13.5

1 9 8 4 -8 5 II II 15.0

1 9 8 5 -8 6 II II 16.7

1 9 8 6 -8 7 " " 111

1 9 8 7 -8 81, ,1 12.0

1 9 8 8 -8 9II II 8 .8 1

1 9 8 9 -9 0• 1 II 9 .8 1

1 99 0-91 Combined CSS/PSS Fund 2 .8 1

1 9 9 1 -9 2 11 11 " 7 .9 ’

1 9 9 2 -9 3 CSS Fund 8.2

1 9 9 3 -9 4II II 6.6

1 From 1 July 1988 to 30 Jun e 1992, crediting ra te s w ere declared

quarterly. These ra te s are th e annual ra te s derived from th e four quarterly ra te s for each year.

Over the years the annual crediting rate has fluctuated considerably, but has generally outperformed the rate of inflation (see box on page 19). The charts on the next page illustrate the relationship between Fund crediting rates and the rate of inflation over the last fifteen years.

Every year, interest is credited to members’ accumulated contributions at rates determined by the Board. Table 10 lists the crediting rates that have applied since 1976— 77, when the CSS was introduced. (The rates have all been rounded to one decimal place —between 1978-79 and 1990-91, the crediting

rates were taken to three decimal places.)

31

The Reserve Account

Chart 7. Fund crediting rates (annual) compared with inflation, 1979-80 to 1993-94

Crediting rate Inflation rate

84-85 86-87 88-89 90-91 92-93 82-83 79-80 81-82 83-84 85-86 87-88 89-90 91-92 93-94

Chart 8. Fund crediting rates (periodic returns) compared with inflation

% 6

4

11 ΐ ϊ

pji

j "

' l>|1 1 (ml- Τ ''- I - ' ' i J W ;.5.5 |pI

□ Crediting rate Π Inflation rate

7 0 F T f 6.6

|. -1 3.2

jJ: m 1.6 | 1.7 f )

15 years 10 years 5 years 3 years

period

1 year

The Board is prevented by legislation from declaring negative crediting rates, which means that members are effectively guaranteed a return of their contributions plus interest. One way for the Board to ensure the maintenance of this guarantee would be to pursue a conservative investment policy with no risk of capital losses. However, the Board would prefer to be able to credit members’ accounts over the long term with higher rates than are available under such a policy.

32

The Deferred Losses Account

Crediting rate method

Accordingly, the Board has adopted a more aggressive investment strategy, with a higher probability of short-term fluctuations in asset values (including the possibility of negative earnings) linked with a Reserve Account. Such a policy enables crediting rates to be smoothed by transfers to and from the Reserve Account. Independent investment

advice indicated that this approach could generally be expected to produce long-term crediting rates around 2 per cent per annum higher than if a more conservative investment policy was pursued.

The crediting rate method also entails small quarterly transfers from earnings to the Deferred Losses Account (DLA) to continue the process of reducing the balance of that account to zero by 1 July 1999. The DLA was created on

1 July 1984 as a means of spreading over 15 years the effect of a one-off loss in CSS Fund assets arising from a change to market-value accounting for determining the value of the

Fund’s assets.

The crediting rate method currently operates as follows:

(a) At the start of the year a target rate is determined, being the market yield on 10-year Commonwealth bonds less an adjustment for tax.

(b) After the end of the year an adjusted earnings rate for the year is determined, allowing for transfers to the DLA, and also, if the Reserve Account balance is negative, for any transfers required to eliminate that negative balance.

(c) The final step depends on whether the adjusted earnings rate is higher or lower than the target rate.

(i) If it is higher, it will be reduced by transferring 50 per cent of the excess earnings to the Reserve Account - subject to a limit on the amount that can be

transferred to ensure that the balance of the Reserve Account cannot exceed 15 per cent of the Fund at the end of the year.

(ii) If it is lower, it will be increased to the target rate by transfers from the Reserve Account

- subject to a limit on the amount that can be transferred to ensure that the balance of the Reserve Account as a proportion of the Fund at the end of the year is not below the lesser of

33

Exit rates

2.5 per cent and hall' of what it was at the start of the year;

- this limit does not apply if a larger transfer is needed to ensure that the crediting rate is not negative.

(d) The percentage rate so obtained is then rounded to one decimal place and becomes the crediting rate for that year.

For 1993-94:

• The target rate was 6.2 per cent and the adjusted earnings rate was 6.12 per cent. Therefore, the situation at (c)(ii) above prevailed and, accordingly, $1.5m was transferred from the Reserve Account.

• After this transfer, and further adjustment for an understatement of the 1992-93 crediting rate, the crediting rate for 1993-94 was determined to be 6.6 per cent.

• The balance in the Reserve Account at 30 June 1994 was $69.2m, which represented 1.6 per cent of Fund value.

When a member leaves the Scheme, an exit rate of interest is applied to his or her accumulated contributions to cover the period between the date of the last crediting rate and the date of exit. The exit rates declared during 1993-94 were:

Table 11. Exit rates declared in 1993-94

Effective date

Applicable from 1 July 1993 to:

Exit rate (annualised)

4 S eptem ber 1993 1 December 1993 6.2% p.a.

2 December 1993 3 March 1994 9.7% p.a.

4 March 1994 5 May 1994 11.1% p.a.

6 May 1994 30 Jun e 1994 7.9% p.a.

Each new exit rale replaces the previous one. For example, members who exited on or after 6 May 1994 had the interest rate of 7.9 per cent per annum applied to their accumulated contributions for the period from 1 July 1993 until their date of exit.

34

Audit committee

Function

Responsibilities and role

Terms of reference

The combined CSS/PSS Audit Committee advises both Boards of Trustees on accountability and audit-related matters. It operates as a check on the management practices of the Scheme administrator (ComSuper) and the Fund

Manager (CFM).

The Committee’s responsibility is to assure the Boards that their financial statements are based on appropriate accounting concepts, systems and techniques. Its role is to assure the Boards that the audit arrangements within service-providing

agencies (ComSuper, CFM and the Department of Finance) are operating effectively, and that appropriate fraud control strategies are in place.

• The Audit Committee is appointed by the Boards and comprises three members, at least two of whom arc members of both the PSS and CSS Boards.

• The term of appointment of individual members of the Audit Committee is at the discretion of the Boards. •

• The Audit Committee is the point of communication between the Boards and the Internal Audit Committees of ComSuper and CFM and with the Australian National Audit Office (ANAO).

• The Audit Committee reviews: — financial statements with both internal and external auditors prior to their approval by the Boards; — accounting policies adopted, or any changes made or

contemplated by ComSuper or CFM, which affect the Boards’ areas of responsibility; — the annual audit plans of ComSuper and CFM where they relate to areas of Board responsibility; — the audit reports of major audits undertaken; — the extent to which internal audit recommendations

are implemented; and — interim financial information.

35

Audit reviews

Audit

qualifications

• The Committee provides a regular report to the Boards as to whether the internal controls employed by ComSuper and CFM provide reasonable assurance that the Boards’ objectives and goals are being met efficiently and economically.

• With the agreement of the Boards the Committee may initiate specific audit investigations.

• The Committee meets when its members think it necessary (but in any event not less than twice per year). In 1993-94 it met four times, as shown in Table 12.

Table 12. Audit Committee meetings

Name 19 July

1993

29 Nov. 1993

23 Mar. 1994

2 May 1994

D. Leaver ✓ ✓ ✓ ✓

C. Savage / ✓ ✓ ✓

P. B arrett ✓ ✓ ✓ ✓

The Audit Committee considered the following audit reports in 1993-94:

• information dissemination —compliance with OSSA;

• ANAO audit of ComSuper’s contribution systems;

• Financial Statements —General Ledger data; and

• review of systems dealing with late payment of employee contributions and productivity contributions.

The most pressing audit-related issue faced by the Boards is to overcome the level of qualification placed on their annual financial statements by the Auditor-General.

Although the ANAO has expressed concerns in the past about technical accounting matters, it should be noted that those concerns did not extend to individual members’ accumulations in the Fund, nor to their future benefit

entitlements. The factors that gave rise to the audit criticism arose primarily from the age of ComSuper’s computer systems, which have been unable to keep pace with the changes in superannuation legislation over recent years.

ComSuper’s proposal to upgrade its computer facilities was endorsed by the Government and funding was approved in the 1993-94 Budget. Work on the project began in February

1994, with the signing of contracts with the selected systems

36

integrator (BHP IT). ComSuper has estimated that the new system will be complete by the end of 1996, and the components that will allow for the separate maintenance of CSS and PSS members’ records will come into operation

during 1995-96.

The Board is pleased to note that as a result of the efforts of ComSuper’s accounting staff in overcoming the deficiencies in the existing computer systems, all but one area of audit qualification has been removed from the ANAO’s Report on

the 1993-94 financial statements. Importantly, the Auditor- General’s previously expressed concerns regarding the maintenance of proper accounts and records has been resolved for 1993-94.

Of perhaps equal importance, the process of preparing and finalising the auditing of the financial statements was completed ten weeks earlier than in previous years.

The one remaining area of audit qualification relates to the fact that some agencies continue to provide combined remittances for both the CSS and PSS and, as a result, there has been some unavoidable mixing of the moneys of the two

Funds. Although the amounts involved are not material, it is the ANAO’s opinion that any mixing of PSS moneys with CSS moneys constitutes a breach of the CSS Act.

More detailed coverage of ComSuper’s Information Technology Modernisation project, and of the methods used by ComSuper’s accounting staff to overcome the deficiencies in the computer systems, can be found in the Commissioner for Superannuation Annual Report 1993—94.

37

Future directions

Legislative changes

Implications for trustees

In June 1992, the Treasurer made a policy statement entitled Security in Retirement which outlined a system of tighter prudential controls designed to safeguard superannuation investments and to further encourage the superannuation

industry to operate in a fair, honest and open manner.

On 30 November 1993, a package of seven bills, known collectively as the Superannuation Industry (Supervision) legislation (SIS), was passed into law with an effective start date for most superannuation funds of 1 July 1994. Trustees of public sector funds (which includes the CSS) have until 30 June 1995 to elect to become regulated superannuation funds under SIS.

An election to become a regulated fund under the SIS legislation is irrevocable — once it is made, a scheme must comply with all of the standards set out in the Superann­ uation Industry (Supervision) Act 1993 (the SIS Act) and

Regulations. From 1 July 1994 until the Board elects to come under SIS, the CSS must continue to comply with OSSA (as modified by SIS).

There are some aspects of scheme design and administration that must be modified in order for the scheme to fully comply with SIS. That process will continue in 1994-95, and the Board will elect to become SIS-regulated when all the necessary changes have been made.

SIS places primary responsibility for matters concerning a superannuation scheme upon scheme trustees. Non­ compliance with SIS standards can subject trustees to civil and/or criminal penalties. Trustees may be prosecuted by the Insurance and Superannuation Commission (ISC), and members may be able to seek compensation for loss or damage.

38

Unclaimed money

Reasonable Benefit Limits (RBLs)

Compliance with SIS means that the Boards must:

• ensure that the Fund complies with SIS in order lor it to receive favourable taxation treatment; • continue to supply members with information on the performance of the Fund each year; and • continue to supply members with information on their

superannuation entitlements each year.

SIS protects the interests of members in a number of ways which include:

• rules to ensure equal representation for employers and employees on the Boards of Trustees; • standards for the appointment and conduct of the trustees, actuaries, auditors, custodians and investment

managers; • standards lor the preservation and payment of benefits; • obligations on the Boards to do all things necessary to

ensure compliance; and • establishment of an independent Superannuation Complaints Tribunal to which members can apply if they have a grievance about their superannuation.

SIS sets out rules for the treatment of unpaid superannuation benefits. Where more than 90 days pass after a superannuation lump-sum benefit becomes payable, SIS permits—and in certain circumstances requires—the benefit to be paid to an eligible rollover fund. However, if a member

has reached the eligibility age for a social security age pension, SIS requires that an unclaimed superannuation lump-sum benefit must be transferred to the Consolidated Revenue Fund.

From 1 July 1994, new limits will apply for the concessional taxation treatment of superannuation benefits. For 1994-95 the limits will be $400 000 for lump sums and $800 000 for pensions. Transitional RBL provisions apply if a member has a higher entitlement under the rules that applied at 30 June

1994. If that occurs, a member has two years to register a transitional RBL with the Australian Tax Office. ComSuper is currently negotiating with the ATO to determine the best way to administer the transitional provisions.

39

Fund management after 30 June 1995

The legislative requirement that the Boards use CFM as its sole investment manager expires on 30 June 1995. In anticipation of this, the Boards and CFM have commenced

planning for Fund management arrangements in the post-Jum 1995 environment. Investment consultants have been appointed to advise the Board on specific issues, and to generally facilitate the process. A number of planning sessions have been held between the Board, CFM, and the consultants, to investigate appropriate investment structures, policies and strategies.

40

Appendixes

A. Legislation matters 45

B. Departments and approved authorities 51

C. Eligible superannuation schemes 55

D. Financial statements 57

E. List of abbreviations 77

43

Appendix A

Legislation matters

Statutory Rules Superannuation (CSS) Fees Regulations prescribes the rate of, and conditions applying to, fees paid on application under section 153am to the Board for reconsideration of a decision made by the Board (Statutory Rules 1993 No. 201).

Superannuation (CSS) Productivity Employee Inclusion Declaration No. 1 declares certain classes of persons to be productivity employees for the purposes of Part VIA of the CSS Act (Statutory Rules 1993 No. 223).

Superannuation (Former Eligible Employees) Regulations (Amendment) provides for certain employees affected by the sale or transfer of an organisation, business, service or asset to preserve their rights as delayed updated pensions. (Statutory Rules 1993 No. 262).

Superannuation (Existing Invalidity Pensioners) Regulations (Amendment) modifies the CSS Act in its application in relation to certain existing pensioners {Statutory Rules 1993 No. 347).

Superannuation (Continuing Contributions for Benefits) Regulations (Amendment) substitutes a revised section 124d which would ensure that amounts preserved in respect of recipients, as well as amounts paid to recipients, are taken

not to be, or to have been, payable, and must be repaid in order to permit the recognition of a reinstated employee’s prior service {Statutory Rules 1993 No 348).

Superannuation (Former Contributors for Units of Pension) Regulations (Amendment) modifies the CSS Act in its application in relation to certain persons to whom section 183 of the Act applies (Statutory Rules 1993 No. 349).

Superannuation (Former HLIC Employees) Regulations (Amendment) modifies the CSS Act in its application to certain persons employed by, or holding office with, the Housing Loans Insurance Corporation by renumbering the

45

added subsection (5) of the Regulations as subsection (6) (Statutory Rules 1993 No. 350).

Superannuation (Approved Part-time Employees) Regulations (Amendment) makes certain amendments to the Superannuation (Approved Part-time Employees) Regulations (Statutory Rules 1993 No. 351).

Superannuation (Former Provident Account Contributors) Regulations (Amendment) modifies the CSS Act in its application in relation to certain persons to whom section 183 of the Act applies (Statutory Rules 1993 No. 353).

Superannuation (Leave of Absence Without Pay) Regulations (Amendment) enables an eligible employee, with a transfer value from employment engaged in during a period of leave without pay in relation to which section 51 applies, to elect to pay the transfer value to the Commissioner for Superannuation (Statutory Rules 1993 No. 345).

Superannuation (Transfer Arrangements) Regulations (Amendment) provides various modifications to the Superannuation (Transfer Arrangements) Regulations (Statutoiy Rules 1993 No. 346).

Superannuation (Continuing Contributions for Benefits) Regulations (Amendment) provides that certain former employees of Commonwealth Serum Laboratories Limited may remain members of the CSS (Statutoiy Rules 1994 No. 8).

Superannuation (CSS) Approved Authority Declaration No. 15 declares the Special Broadcasting Service to be an approved authority for the purposes of paragraph 3(1 )(a) of the CSS Act (Statutoiy Rules 1994 No. 31).

Superannuation (CSS) Productivity Employee Inclusion Declaration No. 2 declares that an eligible employee who is an employee of the Legal Aid Commission of New South Wales is a productivity employee (Statutoiy Rules 1994 No. 29).

Superannuation (Former Eligible Employees) Regulations (Amendment) makes provision for application of the CSS Act to eligible employees affected by the privatisation of the Repatriation General Hospital, Hollywood (Statutoiy Rules 1994 No: 19).

46

Superannuation (Salary) Regulations (Amendment) makes provision lor the treatment of Senior Officer Allowance and amounts paid or payable as performance pay, bonuses or commissions (Statutory Rules 1994 No. 18).

Superannuation (Continuing Contributions for Benefits) Regulations (Amendment) provides that certain former employees of Australian Meat Technology Pty Ltd may remain members of the CSS (Statutory Rules 1994 No. 115).

Superannuation (Continuing Contributions for Benefits) Regulations (Amendment) modifies the CSS Act in its application to certain fixed-term office holders and employees (Statutoiy Rules 1994 No. 116).

Superannuation (CSS) Productivity Contribution Declaration No. 4 declares the amount of fortnightly productivity contributions in relation to the amount of salary earned from 1 July 1994 for the purposes of the Table in subsection

110C(1) of the Act (Statutoiy Rules 1994 No. 212).

Superannuation (Eligible Employees) Regulations (Amendment) amends the Regulations to exclude certain officers of the ACT Government Service and the ACT Totalizator Administration Board from the definition of ‘eligible employee’ (Statutory Rules 1994 No. 232).

Superannuation (Former Eligible Employees) Regulations (Amendment) makes a technical amendment of the Regulations in relation to certain repatriation institution staff who join State superannuation schemes (Statutory Rules 1994 No. 247).

Superannuation (Continuing Contributions for Benefits) Regulations (Amendment) makes a technical amendment of the Regulations in relation to certain repatriation institution staff (Statutory Rules 1994 No. 248).

Superannuation (Salary) Regulations (Amendment) makes a technical amendment of the Salary Regulations (Statutoiy Rules 1994 No 249).

47

Board Four determinations were made by the CSS Board which set Determinations the crediting rate for the 1992-93 financial year, and the exit rates to apply to eligible employees and deferred benefit members whose benefits become payable prior to the next

declared crediting rate.

Changes to the CSS Changes to the CSS resulting from legislation which became effective during 1993-94:

Prime M inister and

Cabinet (Miscellaneous

Provisions) A c t 1994

This Act amends the CSS Act to include provisions relating to persons who are fixed-term employees and holders of certain statutory offices.

Superannuation Industry

(Supervision)

Consequential

Am endm ents A c t 1993

This Act makes certain amendments to the CSS Act as a consequence of the Superannuation Industry (Supervision) Act 1993 (the SIS Act), with effect from 1 July 1994.

Superannuation

Legislation Amendment

A c t 1994 (SLAA94)

Directions and declarations by the Board

Section 58 of the SIS Act provides that the rules of a superannuation scheme must not provide for the direction of the trustees of the scheme by any other person except in certain circumstances. A number of CSS Act provisions that provided for the Minister to issue principles to be applied by the Board or that required the Minister’s approval for the Board to act, were amended to include certain principles in the legislation and to provide for agreement between the Minister and the Board on other matters.

Exercise of powers by the Commissioner, Minister and Governor-General

Section 59 of the SIS Act provides that the rules of a superannuation scheme must not provide for any person other than the trustees of the scheme to exercise a discretion under the rules except in certain circumstances. Section 60 of the SIS Act provides that the rules of a superannuation scheme must not allow those rules to be amended without the approval of the Board except in certain circumstances. The CSS Act has been amended (with effect from 1 July 1994) to transfer discretionary powers and administrative responsibilities from the Minister and the Commissioner to the Board, and to provide that the rules of the scheme cannot be amended without the approval of the Board.

48

Remuneration of Chairperson of the CSS Board of Trustees

The CSS Act was amended to provide that the Chairperson of the Board meets the SIS Act definition of ‘independent director’ by providing that the remuneration and allowances of the Chairperson are to be met from the CSS Fund —thus meeting the equal employer and member representation provisions of the SIS Act which require, among other things, that there be an additional independent director.

Termination of appointment of certain members of the CSS Board

To comply with section 107 of the SIS Act, the amendments provide that the Minister may not terminate the appointment of a member nominated by the ACTU without the consent of the ACTU, and the ACTU must not give that consent without first consulting the organisations with which it consulted in respect of the nomination.

Payment of certain moneys to Eligible Rollover Funds

To comply with section 244 of the SIS Act the CSS Act was amended to enable the Board to pay any lump-sum benefits payable under the Act to an Eligible Rollover Fund if 90 days have passed since the benefit became payable and the

person has not notified the Board how the benefit is to be paid.

Fund to cease to be part of the Trust Fund

To ensure that the CSS is consistent with paragraph 52(2)(d) of the SIS Act in that the CSS Fund is kept separate from the assets of the employer sponsor of the scheme, section 40 of the CSS Act was amended by omitting subsection 40(2),

which provided that the CSS Fund formed part of the Trust Fund referred to in section 60 of the Audit Act 1901.

Refund of productivity contributions

Subsection 117(3) of the SIS Act provides that, in general, amounts must not be paid out of a superannuation fund to a standard employer-sponsor.

SLAA94 repeals section 110E A of the CSS Act and substitutes a new section in its place. The repealed section provided for interest to be added to amounts refunded from the CSS Fund to employers where those employers had paid productivity contributions to the CSS Fund on behalf of staff who are CSS members, but subsequently applied separate productivity arrangements to those staff with retrospective

49

effect. In such circumstances, if the Minister is satisfied that an equivalent productivity benefit has been provided outside the CSS, he or she can exclude those employees from the

CSS productivity arrangements with effect from the date of commencement of those arrangements, including a retrospective date.

The new section 110E A will provide for contributions p a id by the employer in these circumstances (and interest on those contributions) to be paid to the superannuation fund from which those equivalent productivity benefits are to be provided.

Other amendments

SLAA94 made a number of amendments of a technical nature to the CSS Act.

Departments and approved authorities

A p p e n d ix B

Departments, 30 June 1994

Administrative Services Attorney-General Communication and the Arts Defence

Employment, Education and Training Environment, Sport and Territories Finance Foreign Affairs and Trade Housing and Regional Development Human Services and Health

Immigration and Ethnic Affairs Industrial Relations Industry, Science and Technology Parliamentary:

• House of Representatives • Joint House • Parliamentary Library • Parliamentary Reporting Staff • Senate Primary Industries and Energy Prime Minister and Cabinet Social Security Tourism Transport Treasurer

Veterans’ Affairs

Approved authorities (CSS)

Aboriginal Areas Protection Authority* Aboriginal and Torres Strait Islander Commercial Development Corporation ACT Institute of Technical and Further

Education Aerospace Technologies of Australia Pty Ltd* Alice Springs College of Technical and

Further Education Anglo-Australian Telescope Board ANL Limited* Australian Broadcasting Corporation

Australian Capital Territory ACT Electricity and Water Authority Australian Defence Industries Pty Ltd Australian Film Commission

Australian Fisheries Management Authority Australian Industry Development Corporation Australian Maritime College Australian Marine Science and

Technology Ltd Australian Meat and Livestock Corporation Australian National Gallery

Australian National Training Authority Australian National University Australian Nuclear Science and Technology Organisation Australian Pork Corporation Australian Securities Commission Australian Sports Commission

51

Approved authorities (continued)

Australian Sports Drug Agency Australian Trade Commission Australian Wine and Brandy Corporation Australian Wool Corporation Australian Wool Realisation Commission* Batchelor College Board ol' Health (formerly ACT

Community and Health Service) Calvary Hospital ACT Incorporated Canberra Institute ol' the Arts Civil Aviation Authority Commonwealth Funds Management Ltd Conservation Commission of the Northern

Territory Construction Industry Development Agency Coselco Mimotopes Pty Ltd Cotton Research and Development

Corporation Dairy Research and Development Corporation Energy Research and Development

Corporation Export Finance and Insurance Corporation Film Australia Pty Limited Fire Service of the Northern Territory*1 Fisheries Research and Development

Corporation Grains Research and Development Corporation High Court of Australia Horticultural Research and Development

Corporation Housing Commission (constituted under the Housing Act 1959 of the Northern Territory) Institute of Family Studies Katherine Rural College

Land and Water Resources Research and Development Corporation Law Courts Limited Legal Aid Commission (ACT) Meat Research Corporation Menzies School of Health Research Museums and Art Galleries Board

(established by the Museums and Art Galleries Act 1965 of the Northern Territory) Milk Authority of the ACT National Exhibition Centre Trust National Registration Authority of

Agricultural and Veterinary Chemicals National Training Board Northern Territory of Australia Northern Territory Open College of

Technical and Further Education Northern Territory Tourist Commission Northern Territory University Pig Research and Development

Corporation Power and Water Authority Private Health Insurance Administration Council Rural Industries Research and

Development Corporation Snowy Mountains Engineering Corporation Limited Totalcare Industries Limited Trade Development Zone Authority

University of Canberra University College* (being the college established by the University of New South Wales within the Australian

Defence Force Academy) Wool International (formerly the Wool Research and Development Corporation)

* Excluded from participating in the RSS Scheme. Personnel of these authorities, w ho were members of the CSS at 30 Ju n e 1990, could elect to remain in the CSS.

52

The following GBEs and statutory marketing authorities have established their own superannuation schemes:

Aerospace Technologies Australia Australian National Line Ltd Army and Air Force Canteen Service

Australia Post Australian Defence Industries Australian Industry Development Corporation

Australian Maritime College Australian Meat and Livestock Corporation Australian National Railways Commission Australian National University

Australian Wool Corporation Bureau of the Northern Land Council

Civil Aviation Authority Commonwealth Serum Laboratories Coselco Mimotopes Pty Ltd Federal Airports Corporation Film Australia Joint Coal Board

Qanlas Reserve Bank of Australia Sirolech Ltd Snowy Mountains Engineering

Corporation Telecom University of Canberra

Note: Som e agencies, which have not established their ow n su perannuation sc h e m e s, participate in oth er private s c h e m e s . Personnel of th e above agencies w h o w ere m em bers of the CSS as at 3 0 J u n e 1 9 9 0 could have elected to remain in th e CSS.

53

A p p e n d i x C

Eligible superannuation schemes

A Transfer Value is a lump-sum benefit comprising accumulated employee and employer contributions which is payable to an eligible superannuation scheme in exchange for additional benefits in that scheme. It may be paid on behalf of a CSS member transferring to a scheme which has been declared by the Board to be an eligible superannuation scheme for the purposes of the CSS (section 134).

The following schemes have been declared eligible:

• superannuation schemes established under the following Acts:

Defence Force Retirement and Death Benefits Act 1973 Parliamentary Contributory Superannuation Act 1948 Retirement Benefits Act 1982 (Tasmania)

• the superannuation schemes known as:

Army and Air Force Canteen Service Superannuation Scheme Australian Wool Corporation Provident Fund AUSSAT Superannuation Fund Gladstone Area Water Board Staff Superannuation Scheme

Gladstone Port Authority Staff Superannuation Scheme Gold Coast Waterways Staff Superannuation Scheme Government Officers’ Superannuation Scheme (GO Super) (Queensland) Livestock and Meat Authority of Queensland Superannuation Scheme

Northern Territory Government and Public Authorities Superannuation Scheme Queensland Ambulance Transport Brigade Staff Superannuation Scheme Queensland Electricity Supply Industry Superannuation Scheme Queensland Industry Development Corporation Superannuation Scheme Queensland Local Government Employees Superannuation Scheme Queensland Parliamentary Contributory Superannuation Scheme Queensland Police Superannuation Scheme Queensland State Public Sector Superannuation Scheme Queensland State Service Superannuation Scheme Suncorp Insurance and Finance Superannuation Plan

Superannuation Scheme for Australian Universities (SSAU) Townsville Port Authority Staff Superannuation Scheme University of Newcastle Staff Superannuation Scheme

55

A p p e n d i x D

Financial statements

Auditor-General's report 58

CSS Fund financial statements 60

Actuarial report 73

57

AUSTRALIAN NATIONAL AUDIT OFFICE

C entenary H ouse

19 N ational Crt

Barton ACT 2600

our ref;

INDEPENDENT AUDIT REPORT COMMONWEALTH SUPERANNUATION BOARD OF TRUSTEES NO. 2

To the Minister for Finance

Scope

I have audited the financial statements of the Commonwealth Superannuation Scheme (CSS) which includes the Commonwealth Superannuation Fund No. 2 (CSS Fund), for the year ended 30 June 1994. The statements comprise:

. Statement of Changes in Net Assets

. Statement of Net Assets

. Notes to and forming part of the Financial Statements, and

, Statements by the Trustees.

The Commonwealth Superannuation Board of Trustees No. 2 is responsible for the preparation and presentation of the financial statements and the information contained therein. I have conducted an independent audit of the financial statements in order to

express an opinion on them to the Minister for Finance.

The audit has been conducted in accordance with Australian National Audit Office Auditing Standards, which incorporate the Australian Auditing Standards, to provide reasonable assurance as to whether the financial statements are free of material misstatement. Audit procedures included examination, on a test basis, of evidence

supporting the amounts and other disclosures in the financial statements, and the evaluation of accounting policies and significant accounting estimates. These procedures have been undertaken to form an opinion whether, in all material respects, the financial

statements are presented fairly in accordance with Australian accounting concepts and standards and statutory requirements so as to present a view of the Fund and the Scheme which is consistent with my understanding of its net assets and changes in net assets.

The audit opinion expressed in this report has been formed on the above basis.

GPO Box 707 Canberra A u stralian Capital T erritory 2601 Telephone (06) 203 7300 Facsimile (06) 203 7777

58

Qualification

As indicated at Note 1(b), during 1993-94 arrangements were made progressively to separate the remittances of contributions for the two Schemes. As a result some contributions for the CSS Fund and PSS Fund continued to be mixed during 1993-94. The mixing of CSS Fund moneys and PSS Fund moneys constitutes a breach of the

Superannuation Act 1976. The audit report on the financial statements for 1992-93 was qualified on the same basis.

Proper accounts and records

The audit report on the financial statements for 1992-93 was qualified on the basis that the Board did not maintain a general ledger which complied with the provisions of the Act. The Board maintained such a ledger for 1993-94.

Qualified Audit Opinion

In accordance with sub-section 161(2) of the Superannuation Act 1976, I report that the statements are in agreement with the accounts and records of the Board and, in my opinion, except for the matters mentioned in the Qualification section above:

i) the statements are based on proper accounts and records

ii) the statements present fairly, in accordance with statements of Accounting Concepts and applicable Accounting Standards and the form approved by the Minister for Finance in accordance with sub-section 161( 1 A) of the Superannuation Act 1976, the changes in net assets of the CSS for the year ended

30 June 1994 and the net assets of the CSS at that date, and

iii) the receipt of moneys into the Fund, and the payment of moneys out of the Fund and investment of moneys standing to the credit of the Fund, during the year have been in accordance with the Superannuation Act 1976.

C o m b in e d A c co u n tin g f o r C SS a n d P u b lic S ecto r Su peran n u ation (PSS)

Acting Executive Director Australian National Audit Office

Canberra

30 September 1994

59

Commonwealth Superannuation Scheme

Statement by the Trustees of the Commonwealth Superannuation Func No. 2

The Trustees hereby state that in their opinion:

(a) the attached financial statements of the .Commonwealth Superannuation Scheme show a true and fair view of the net assets of the Scheme at 30 June 1994 and the changes in net assets of the Scheme for the year endec 30 June 1994;

(b) at the date of this statement there are reasonable grounds to believe that the Scheme will be able to pay its debts as and when they fall due; and

(c) the financial statements are in a form approved by the Minister for Finance in accordance with sub-section 161(1A) of the Superannuation Act 1976 and have been prepared in accordance with applicable Australian Statements of Accounting Concepts and applicable Australian Accounting

Standards.

27 *

D.C. Leaver Trustee

K.A. Searson Trustee

Commonwealth Superannuation Board of Trustees No. 2

60

Commonwealth Superannuation Scheme

Statement of Changes in Net Assets for the Year Ended 30 June 1994

Note 1994 1993

S'000 $ '0 0 0

Net Assets Available to Pay Benefits at 1 July 4 2 4 2 7 5 6 3 9 9 6 231

CSS FUND

Investment Revenue

Interest 3 4 147 33 0 9 3

Dividends 37 956 3 4 3 1 5

Other In vestm ent Income 689 1 152

Changes in Net Market Values 2 2 2 7 413 3 4 8 122

Direct In vestm ent Expenses 19 033) (17 733)

281 172 3 9 8 9 4 9

General Administration Expenses 3 (2 742) (3 130)

Net Investment Revenue Before Tax 2 7 8 4 3 0 3 9 5 819

Contributions Revenue

Employee Contributions 4 2 3 4 352 2 3 0 0 3 9

Employer Contributions 4 8 4 229 8 0 537

3 1 8 581 3 1 0 5 7 6

Benefits Paid 5 (31 1 217) (327 784)

Net Contributions Revenue Before Tax 7 3 6 4 (17 208)

Net Investment Revenue and Net Contributions Revenue Before Tax 2 8 5 7 9 4 3 7 8 61 1

Income Tax Expense — Changes in Tax Assets (Liabilities)

Income Tax Payable 6 (25 693) (17 329)

Net Investment Revenue and Net Contributions Revenue After Tax 2 6 0 101 361 2 8 2

Less:

Transfer of Net A s s e t s to th e Public Sector Superannuation Schem e - (25 823)

Withdrawals from the Commonwealth Superannuatio n Schem e 8(f) (212 951) (88 934)

Net Investment Revenue and Net Contributions Revenue After Tax and Withdrawals from Scheme 4 7 150 2 4 6 525

CONSOLIDATED REVENUE FUND

Moneys Appropriated by Parliament 7 2 21 1 3 3 6 2 128 842

Less: Benefits Paid 5(2 198 529)(2 113 175) C osts of Administering th e CSS Act and Rules 7 (12 807) (15 667)

0 0

Net Assets Available to Pay Benefits at 30 June 4 2 8 9 906 4 2 4 2 7 5 6

The attached notes form part of th e s e financial sta te m e n ts.

61

Commonwealth Superannuation Scheme

S tatem en t of Net A ssets As at 3 0 Ju n e 1 9 9 4

Note 1994 1 993

S '0 0 0 $ '0 0 0

CSS FUND

Investments

Short-term Money Market 218 793 96 0 9 6

Australian Fixed-interest 24 5 258 2 1 7 0 8 6

Overseas Fixed-interest 35 3 7 2 993

Australian Equities 1 109 567 1 081 52 7

Units in CFM Australian Equities Fund 97 247 85 4 6 0

Units in Commonwealth Funds M anagement Ltd Fooled Superannuation Trust 9 16 8 46 17 085

Units in CFM Pooled Superannuation Trust 10 2 667 232 2 4 5 5 178

Total Investments 4 3 5 4 978 4 32 5 42 5

Other Assets

Cash at Bank and on Hand 12 4 07 10 068

Contributions Receivable 3 199 2 355

Sundry Debtors 11 1 104 1 6 36

Outstanding Settlements 7 998 20 052

Accrued Income 7 6 2 4 13 678

Total Other Assets 32 33 2 47 789

Total CSS Fund A ssets 4 3 8 7 3 1 0 4 373 21 4

Less: Liabilities

A m ounts Due to the Public Sector Superannuation Scheme 1 661 22 198

Outstanding Settlements 8 177 25 01 3

Sundry Creditors 12 8 146 9 687

Benefits Payable 3 0 738 33 0 0 4

Provision for Income Tax 6 26 9 97 17 2 56

Provision for Deferred Income Tax 6 21 685 23 3 0 0

Total CSS Fund Liabilities 97 4 0 4 130 458

CONSOLIDATED REVENUE FUND

Other Assets

Sundry Debtors 87 243 93 613

Total Consolidated Revenue Fund Assets 87 243 93 613

Less: Liabilities

Benefits Payable 87 243 93 613

Total Consolidated Revenue Fund Liabilities 87 243 93 613

Net A ssets Available to Pay Benefits at 3 0 Ju n e 4 28 9 906 4 242 756

The attached notes form part of these financial statem ents.

62

Notes to and forming part of the Financial Statements 30 June 1994

Commonwealth Superannuation Scheme

1. Summary of Principal Accounting Policies

(a) Basis of Preparation

The form of th e s e financial s t a te m e n ts h as been approved by th e Minister for Finance in

accordance with sub-section 161(1 A) of th e Superannuation A c t 1976.

These financial s ta te m e n ts have been prepared in accordance with applicable Australian

Statements of A ccounting Concepts, applicable Accounting S tan dards and th e Defined Benefit Plan provisions of Australian Accounting Standard (AAS) 25 'Financial Reporting by

Superannuation Rians'. A Defined Benefit Plan refers to a superannuation plan w h ere the

amounts to be paid to m em bers on retirement are determined at least in part by a formula based on their years of membership and salary levels.

The Schem e h as adopted th e provisions of paragraph 22(a) of AAS 25 w hereby the financial statem ents include a S ta te m e n t of Net A sse ts, a S tatem en t of C hanges in Net A s s e ts and

Notes thereto.

Unless otherwise stated , th e s e accounting policies w ere also adopted in the corresponding preceding reporting period.

(b) Mixing of CSS and PSS Contributions

During 1 9 9 3 - 9 4 th e Commissioner of Superannuation had responsibility under the

Superannuation A c t 1 9 7 6 and the Superannuation A c t 1990 for th e administration of the

Commonwealth Superannuation Scheme (CSS) and for the provision of administrative services to the Comm onwealth Superannuation Board of Trustees No. 1 in resp ect of Public Sector

Superannuation S ch em e (PSS). Prior to 1 July 1 9 92 the CSS and PSS w ere managed as a

combined fund with employing agencies remitting one am ou nt per fortnight covering

contributions for both sch em es.

The CSS and PSS Funds co m m en ced to operate as separate entities from 1 July 1992. In line with the CSS and PSS commencing operations as separate entities th e Commissioner for

Superannuation w rote to all employers outlining th e separate remittance procedures required for CSS and PSS employee and employer (productivity) contributions. The D epartment of Finance, which p ro ces ses over 4 5 per cent of th e contributions received by th e CSS and PSS

implemented sep arate rem ittances from th e beginning of 1 9 9 2 - 9 3 . Other employers have

progressively im plemented changed arrangem ents over the last tw o financial years. However, som e employers have continued to provide combined CSS and PSS rem ittances resulting in som e PSS employee and employer (productivity) contributions being paid into the CSS Fund

during 1 9 9 3 - 9 4 .

This represents a breach of section 4 4 of th e Superannuation A c t 1976 which requires proper accounts and records to be maintained in respect of the CSS Fund. A reconciliation of CSS and PSS employee and employer (productivity) contributions for 1 9 9 3 - 9 4 w a s prepared, after the close of the financial year, from information maintained on th e contributor records for th e tw o sch em es. The reconciliation disclosed th a t PSS contributions of $1 51 1 0 6 9 , plus interest of

$ 1 4 9 4 6 3 , w e re due from the CSS Fund to the PSS Fund at 3 0 Ju n e 1 9 9 4 and th es e am ounts

have been recognised as a liability at year end.

(c) Foreign Currency Translation

Foreign currency transactions are converted to Australian currency using th e currency exchange rate in effect at th e point of recognition of each transaction. Foreign currency balances are

converted to Australian currency using th e exchange rate as at balance date.

63

Notes to and forming part of the Financial Statements 30 June 1994

Commonwealth Superannuation Scheme

1. Summary of Principal Accounting Policies (continued)

(d) Income Tax

Income ta x has been bro ught to acco u n t using th e liability m ethod of ta x effect accounting. A provision for deferred income tax has been b ro u g h t to a cco u n t in order to recognise th e timing effect of income earned during th e period t h a t is not ass e ssa b le for taxation purposes in the

current period but is expected to reverse in future periods.

(e) Valuation of Investments

A s s e t s of the CSS are recorded at net market value as at the reporting date and changes in the

n et market value of a s s e ts are recognised in th e S ta te m e n t of Changes in Net A sse ts in th e

periods in which th ey occur. Net market values of investm ents are reduced by an a m o u n t for

selling c o s ts which w ould be expected to be incurred if th e investm ents w ere sold. The b ases

of market valuations are sum m arised below.

(i) Short-term Money M arket—th e s e securities are valued by marking to market using

yields supplied by independent valuers.

(ii) Fixed-interest —th e s e securities are valued by marking to m arket using yields supplied by independent valuers.

(iii) Futures Contracts —open futures c o n tr a c ts are revalued to closing price quoted at close of business on 3 0 J u n e by th e Sydney Futures Exchange.

(iv) Equities —listed securities, including listed property tru sts, are valued based on the last sale price quoted at close of business on 3 0 J u n e by th e Australian Stock Exchange, or last bid w here a sale price is unavailable.

(v) Exchange Traded O p tio n s—options are valued as the premium payable or receivable to close out the c o n tracts at the last buy price quoted at close of business on 3 0 J u n e by

the Australian Stock Exchange.

(vi) O verseas Investm ents —overseas securities are valued on the basis of last sale price

quoted at close of business on 3 0 J u n e by th e relevant securities exchange. In the case

of UK securities, th e basis of valuation is the average of the bid and offer prices.

(vii) CFM Pooled Superannuation Trust (PST) —units in th e PST are valued at their net

realisable value, which is determined by reference to th e net realisable values of units held by th e PST in a number of underlying unit trusts. Units in th e s e underlying unit

tr u sts are valued on a basis c o nsistent with th e m ethods listed above th a t are relevant

to th e a s s e ts held by th e underlying unit trusts.

(f) Contributions

Employee and employer (productivity) contributions are due and payable on each fortnightly contribution day. The contributions do not accrue on a daily basis. Therefore, employee and employer (productivity) contributions in res p ect of th e fortnightly contribution days th a t fell within th e reporting period have been included in th e financial sta te m e n ts.

64

Notes to and forming part of the financial Statements 30 June 1994

Commonwealth Superannuation Scheme

2. Changes in Net Market Values 1994 1993

$ '0 0 0 $ '0 0 0

Changes in Net Market Value of Investments: (i) Investments Field at 3 0 June

Short-term Money Market 3 2 7 2 3 9 7

Australian Fixed-interest (22 938) 14 183

O verseas Fixed-interest 35 3 2 7 5

Australian Equities 123 0 1 9 1 17 7 2 9

CFM Pooled Superannuatio n Trust: — CFM International Equities Fund class 10 9 1 8 192 3 8 6

— CFM Fixed-interest Trust class (39 394) 4 5 0 6 5

— CFM Rural Investm ent Fund class (2 884) (10 027)

- CFM Property Fund class 83 6 1 8 (58 050)

CFM Australian Equities Fund 17 7 4 7 2 3 4 4

C om m onw ealth Funds M anagem ent Ltd Pooled Superannuatio n T rust 8 7 3 1 608

171 321 3 1 0 9 1 0

(ii) Investments Realised During the Period:

Short-term Money Market 1 5 3 0 2 9 977

Australian Fixed-interest 4 0 7 5 1 4 3 4

O verseas Fixed-interest (29 017) 4 4 529

Australian Equities 7 3 5 7 7 (8 465)

CFM Pooled Superannuation Trust: - CFM International Equities Fund class (125) 4 5 0 6

— CFM Fixed-interest Trust class 3 5 0 1 6 7 3

— CFM Rural Investm ent Fund class (155) (61)

— CFM Property Fund class 4 5 1 4 (1 828)

CFM Australian Equities Fund 1 2 1 0 (34 596)

Com m onwealth Funds M anagem ent Ltd Pooled Superannuatio n T rust 133 43

5 6 0 9 2 37 212

2 2 7 4 1 3 3 4 8 122

3. Expenses of the CSS Fund

C osts of th e Com m onw ealth Superannuation Board of T ru stees No. 2 which are related to its responsibilities for th e m an ag e m en t of th e Fund No. 2 and th e in vestm ent of its m oneys are a charge against th e Fund. All other c o s t s incurred by th e Board of Trustees are paid from

moneys appropriated by Parliament.

4. Funding Arrangements

Members contribute to th e S chem e at optional rates ranging from a minimum of 5 per cent to a maximum of 10 per c e n t of salary paid to th e m em ber and employers w h o do not o p erate their own productivity s c h e m e s contribute employer (productivity) contributions to the S c h e m e on a sliding scale approximating 3 per cent of salary paid to the m em ber.

Where a benefit th at b e c o m e s payable under the S chem e can be fully m et from m oneys held in the Fund, th e benefit is paid to the beneficiary from th e Fund. Where a benefit th a t becom e s

payable under th e S c h e m e cannot be fully m et from m oneys held in the Fund, all m oneys held in th e Fund in re s p e c t of th e mem ber are paid into th e Consolidated Revenue Fund and th e

Commonwealth is responsible for th e paym ent of th e benefit to th e beneficiary from the

Consolidated Revenue Fund.

65

Commonwealth Superannuation Scheme

Notes to and forming part of the Financial Statements 30 June 1994

5. Benefits Paid

The benefits paid from th e Schem e during 1 9 9 3 - 9 4 were:

1994 1993

$ ' 0 0 0 S '0 0 0

CSS FUND

Paym ents to Com m onw ealth 2 9 8 6 5 6 3 1 0 4 5 9

Lump-sum Benefits 12 561 _____17 3 2 5

31 1 2 1 7 3 2 7 7 8 4

CONSOLIDATED REVENUE FUND

Lump-sum Benefits 531 0 5 0 5 1 7 2 8 2

Transfer Values 2 6 7 2 3 2 0 4

Pensions 1 6 6 4 7 6 0 1 5 9 2 5 0 3

Other _________ 47_ ________ 186

2 198 5 2 9 2 113 175

An explanation of the funding arrangem ents for th e paym ent of benefits is provided at Note 4.

6. Income Tax

The taxation liability at 3 0 J u n e 1 9 9 4 has been calculated on th e basis th a t the S chem e

complies with th e s ta n d a rd s contained in th e O ccupational Superannuation Standards

R egulations and th at tax will be payable on th e income received by the CSS Fund at a rate of

15 per cent.

The aggregate am o u nt of income tax attributable to the period is less than 15 per cent of the

'Net Investm ent Revenue and Net Contributions Revenue Before Tax' as show n in the

S ta te m e n t of Changes in Net A ssets. The difference is reconciled as follows:

Prima facie income tax exp en se on Net Investm ent Revenue and Net Contributions Revenue Before Tax 42 86 9 56 791

Add/(Less) Perm anent Differences Employee contributions (35 153) (34 506)

Benefits paid 4 6 68 3 49 168

Income from Pooled Superannuation Trusts Imputation credits from

(11 521) (21 477)

franked dividends received 2 72 5 2 22 2

Other (2 896) (277)

42 70 7 51 921

Less: Imputation and foreign tax credits (18 414) (14 979)

Less: Under-/(over-)provision in prior years 1 4 0 0 (19 613)

25 69 3 17 3 2 9

66

Notes to and forming part of the Financial Statements 30 June 1994

Commonwealth Superannuation Scheme

7. Transactions of the Consolidated Revenue Fund

The Superannuation A c t 1 9 7 6 requires the Commissioner for Superannuation to provide

administrative services to th e Comm onwealth Superannuation Board of Trustees No. 2 to

enable the Board to perform its functions under th e Act. Under th e provisions of the Act, only those exp en ses of the Board in respect of its responsibilities for the m anage m ent of the CSS

Fund and investm ent of its m oneys are paid from the CSS Fund. Accordingly, all other exp enses of the Board, the Commissioner for Superannuation and the staff of C om super w ho a ss ist the Commissioner for S uperannuation in the administration of the Superannuation A c t 1 9 7 6 , are met from moneys appropriated by the Parliament.

In addition to this, the A ct requires the C omm onwealth to make certain benefit paym ents (refer Note 4).

8. Income Allocation and Reconciliation of the Superannuation Fund

The income allocation policy provides for th e determination of an annual allocation rate. The method for determining th e allocation rate involves th e transfer of a m ounts into and o u t of the Reserve A ccount. Calculation of the am o u n ts for transfer to and from the Reserve A cco u n t for allocation is both a function of the level of income and th e level of th e Reserve A ccount as a

percentage of th e Fund. In general, a higher level of income will te nd to result in tran sfers to

the Reserve A cco u n t and a relatively high level in th e Reserve A cco u n t will result in transfers from th e Reserve A ccount. It is important to note th a t whilst th e current policy does have a

smoothing effect on income allocation, its principal purpose is to accum ulate adequate reserves which enable s th e Fund to pursue a more active investm ent strategy. This has actuarially been shown to provide higher level returns to m em bers over th e longer term.

The s te p s in determining th e a m ount available for allocation each year under th e current policy are as follows:

(i) At th e start of the financial year, a 'ta rg e t rate' is determined, based on th e market yield

on 10-year Com m onw ealth Bonds less an adjustm ent for tax.

(ii) After th e end of th e year, an 'a djusted earnings rate' is determined based on th e actual

net income of th e Fund and allowing for transfers to th e Deferred Losses A cco u n t and also, if th e Reserve A ccount is negative, for any transfers to eliminate th a t negative

balance. (Note th a t th e Deferred Losses A cco u n t w a s created in re s p e c t of th e CSS on 1 July 1 9 8 4 as a m eans of spreading over fifteen y ears the effect of a c h an g e to

market value accountin g for determining th e CSS Fund's a s s e ts t h a t resulted in a one- off reduction in th e CSS Fund value at th a t time. A proportion of th e CSS Deferred

Losses A ccount th a t relates to th o s e former CSS m em bers w ho elected to transfer to

the PSS, w a s transferred to th e PSS Fund.)

(iii) The final s te p d ep en d s on w h e th e r th e 'adjusted earnings rate' is higher or lower than

th e 'ta r g e t rate'. If th e 'adjusted earnings rate' is higher, it will be reduced by

transferring 5 0 per cen t of the e x c e s s earnings to th e Reserve A cco u n t (subject to a

limit on th e a m ount t h a t can be transferred to ensure th a t th e balance of th e Reserve

A ccount can n o t exceed 15 per cen t of the Fund at th e end of the year.

If th e 'adju ste d earnings rate' is lower, it will be increased to th e 'ta rg e t rate' by

transfers from th e Reserve A ccount, subject to a limit on the am ount th a t can be

transferred to ensure th a t the balance of th e Reserve A ccount a s a proportion of the

Fund at th e end of th e year is not below th e lesser of 2 .5 per c e n t or half of w h a t it

w a s at the start of th e year. This limit d o es not apply, how ever, if a larger transfer is

needed to ensure th a t th e allocation rate is not negative.

67

Notes to and forming part of the Financial Statements 30 June 1994

Commonwealth Superannuation Scheme

8. Income Allocation and Reconciliation of the Superannuation Fund (continued)

It should be note d th a t th e allocation p ro c e s s described above has no effect on th e financial

s t a te m e n ts of th e CSS. The allocation p ro c e s s describes th e w ay in which income earned by

the CSS is reflected in c h a n g e s to co n trib u to rs' entitlements.

(a) Allocation of Income

The net m o v em en ts for th e period arising from th e determination of th e a m o u n t available for allocation to contrib utors are as follows:

1 9 9 4 1 9 9 3

$ '0 0 0 S '0 0 0

Net Revenue and Net Contributions after tax 2 6 0 101 361 2 8 2

Less: Net Contributions (7 364) 17 2 0 8

Net Revenue After Tax 2 5 2 7 3 7 3 7 8 4 9 0

Less: Transfer to Deferred Losses A cco u n t (8 189) (8 581)

2 4 4 5 4 8 3 6 9 9 0 9

Add: Transfers from Reserve 1 5 6 7 (41 123)

A m o u n t Available for Allocation to Contributors 2 4 6 1 15 3 2 8 7 8 6

(b) Reserve Account

Balance at beginning of year 7 4 185 3 3 9 4 2

Less: Transfer to A m o u n t Available for Allocation to Contributors (1 567) 41 123

72 6 1 8 75 0 6 5

Less: Transfer to th e PSS — (1 10)

W i t h d r a w a l s f r o m t h e C S S (3 3 8 6 ) ( 7 7 0 )

B a l a n c e a t e n d o f y e a r 6 9 2 3 2 7 4 1 8 5

(c) Deferred Losses Account

This acco u n t exists to provide a m echanism for allocating the loss on revaluation of the a s s e ts of th e CSS Fund on 1 July 1 9 8 4 ($215 109 9 5 3 ) to contrib utors' entitlem ents. A proportion of th e CSS a cco u n t w a s transferred to th e PSS a t 3 0 J u n e 1992 to recognise th a t part of th e

a c c o u n t which related to former m em bers of th e CSS w h o elected to transfer to th e PSS:

Balance at beginning of year (51 485) (61 666)

Add: Transfer from A m o u n t Available for Allocation to Contributors 8 189 8 581

(43 296) (53 085)

Add: A m ount transferred to th e PSS — 2 0 1

W i t h d r a w a l s f r o m t h e C S S 2 3 5 0 1 3 9 9

B a l a n c e a t e n d of y e a r ( 4 0 9 4 6 ) (51 4 8 5 )

68

Notes to and forming part of the Financial Statements 30 June 1994

Commonwealth Superannuation Scheme

8. Income Allocation and Reconciliation of the Superannuation Fund (continued)

(d) Contributors' Entitlements Account

19 94 1993

$ '0 0 0 $ '0 0 0

Balance of Contributors' Entitlements at beginning of year 4 2 2 0 0 5 6 4 0 2 3 955

Add: Contributions Less: Benefits paid from Fund

3 1 8 581

1311 217)

3 1 0 57 6

(3 27 784)

Net Contributions for the Year 7 3 6 4 (17 208)

Add: Amount Available for Allocation to Contributors 24 6 115 3 2 8 78 6

Less: Am ount transferred to th e PSS Withdrawals from th e CSS

4 4 7 3 53 5

(211 915)

4 3 3 5 533

(25 914) (89 563)

Balance at end of year 4 261 6 2 0 4 2 2 0 0 5 6

(e) Reconciliation of the Superannuation Fund

Contributors' Entitlements A ccount Reserve A ccount Deferred Losses A ccount

4 261 6 2 0

69 2 3 2

(40 946)

4 2 2 0 0 5 6

7 4 185

(51 485)

Balance of Superannuatio n Fund 4 2 8 9 9 0 6 4 2 4 2 7 5 6

(f) Withdrawals from the CSS

As a result of determinations made by th e Minister for Finance during th e year tran sfers of

a s s e ts to th e value of $ 2 1 2 951 0 0 0 w ere made in respect of m em bers w h o elected to join

superannuation s c h e m e s established by their employers. These transfers comprised th e

following com ponents:

Contributors' Entitlements A ccount Reserve A ccount Deferred Losses A ccount

211 9 1 5

3 3 8 6

(2 350) 212 951

8 9 5 6 3

7 7 0

(1 399)

88 9 3 4

9. Units in Commonwealth Funds Management Ltd Pooled Superannuation Trust

Class of Unit

Capital Stable 7 8 3 4 8 1 13

Managed Growth ______ 9 0 1 2 ______ 8 972

16 8 4 6 17 0 8 5

69

Notes to and forming part of the Financial Statements 30 June 1994

Commonwealth Superannuation Scheme

15. Auditor's Remuneration

The am ount paid and payable in res p ect of external audit services is $ 4 7 5 0 0 ( 1 9 9 2 - 9 3 :

$47 500).

16. Foreign Currency Gains

The foreign currency loss on overseas inv es tm en ts for th e year w a s $ 1 0 8 3 5 0 0 0 0 ( 1 9 9 2 - 9 3 : gain of $ 2 0 8 8 3 000). This a m ount is included in the 'C h an g es in Net Market Values of

Investments' disclosed in Note 2.

17. Related Parties

The Trustee of th e CSS, th e Com m onw ealth Superannuation Board of T ru stees No. 2, had the following m em bers during th e year:

Mr R.L. Brown (Chairman) Mr P.J. Barrett A.M. Mr J.A. Flitcroft Mr D.C. Leaver Mr A.J. McKenzie Mr K.A. Searson Mrs C.B. Savage Mr J.P. Murphy (Alternate for Mr J.A . Flitcroft) Mr P.G. Skinner (Alternate for Mr K.A. Sears on) Mr D. Lindsay (Alternate for Mr P.J. Barrett) Mr P.R. Smith (Alternate for Mr D.C. Leaver) Mr D.J. Irons (Alternate for Mrs C.B. Savage)

Fees and associate d superannuation contributions paid to, or in res p ect of, th o s e m em bers

entitled to receive fees during th e year totalled $ 6 7 0 0 0 ( 1 9 9 2 - 9 3 : fees $ 6 4 000).

18. Segment Reporting

(a) Industry Segments

The CSS operates in th e su perannuation fund investm ent industry with exposure to several

sectors both directly and through its investm ents in unit tr u s ts through th e CFM Pooled

Superannuation Trust. These secto rs comprise th e short term and fixed interest money markets, the equities m arkets and th e rural and commercial property markets.

(b) Geographic Segments

The CSS operates predominantly within Australia. However, significant investm ents are held offshore both directly in th e form of fixed interest in vestm ents and, via th e CFM Pooled

Superannuation Trust, in th e CFM International Equities Fund which in turn invests in offshore marketable securities. At 3 0 J u n e 1 9 9 4 th e market value of th e S c h e m e 's overseas

investm ents in relevant investm ent cate gorie s in Australian dollars, w a s a s follows:

71

Notes to and forming part of the Financial Statements 30 June 1994

Commonwealth Superannuation Scheme

18. Segment Reporting (continued)

Australian Dollar United S ta te s Dollar J a p a n e s e Yen United Kingdom Pound Germ an Mark

French Franc O ther Currencies

All o v ers eas in v estm ents are sufficiently liquid

1994 1 9 9 3

S '000 S '000

3 7 2 4

4 4 0 164 4 3 3 2 1 0

2 4 8 0 3 5 3 1 0 965

85 5 7 5 112 6 6 0

1 5 8 7 4 5 3 4 2

3 3 7 7 9 68 6 1 0

185 071 3 3 6 7 9 9

9 9 4 5 8 3 1 3 0 7 5 9 0

to be realisable within a period of one year.

19. Contingent Liabilities

In th e normal course of b usiness, re q u e s ts are m ade by m em bers and former m em bers for th e

review of decisions relating to benefit entitlem ents of th e S c h e m e which could result in

additional benefits becoming payable in th e future. Each request is co nsidered on its merits prior to any benefit becoming payable. In th e opinion of th e T ru stees, th e s e requests do not

r e p r e s e n t a material liability on the S c h e m e . The T rustees are n o t aw are of any other potential c o n tin g e n t liabilities.

2 0 . OSSA Compliance

During th e year th e S c h e m e did not comply with certain requirem ents of th e O ccupational

Superannuation Standards A c t 1987. The areas of non-compliance related to:

• m em ber reporting —b reach es of regulations 1 8e(4), 1 8f and 1 8h(3); • a c cep tan ce of non-compulsory contributions from persons over 7 0 orpersons employed less th an 10 hours per w eek —breach of regulation 18B; • th e present structure of th e S chem e b reach es th e following regulations:

— non-inclusion of O SSA requirem ents in governing rules —breach of regulation 18; and — th e Commissioner may pay out a benefit under section 119 of th e Superannuation A c t 1976 if a ju d g em ent is served upon him —breach of regulation 5.

T h ese m atters have been considered by th e Insurance and Superannuation Commission and advice has been received th a t an exercise of discretion to treat the S chem e as if it had satisfied th e above requirements in relation to th e year ended 3 0 Ju n e 1 9 9 4 can be anticipated. The

financial s ta te m e n ts for the y ear ended 3 0 J u n e 1 9 9 4 have been prepared on the basis th a t the

S c h e m e w a s a complying fund for the financial year.

72

A u s t r a l ia n G o v e r n m e n t A c t u a r y PO Box 9836 CANBERRA ACT 2601

212 Northboume Ave CANBERRA ACT 2600

Telephone: (06) 247 2299 Facsimile: (06) 267 6862 DX: 5766 Canberra

COMMONWEALTH SUPERANNUATION SCHEME

Accrued Benefits as at 30 June 1993

1. The Australian Government Actuary has been requested by ComSuper to calculate the value of Accrued Benefits for accounting purposes under Australian Accounting Standard 25 (AAS25) as at 30 June 1993 for the Commonwealth Superannuation Scheme.

2. The assumptions used to calculate the value of Accrued Benefits were the same as those used by the Australian Government Actuary, Mr D.B. Duval, FIA, FIAA in his report on the long term cost of the Public Sector Superannuation Scheme and the Commonwealth Superannuation Scheme as at 30 June 1993. A summary of the assumptions and methods

adopted in calculating the value of Accrued Benefits is set out in the attached Notes.

3. The value of Accrued Benefits as at 30 June 1993 was $38,755 million for active members, former members with deferred benefits and current pensioners. In additional to this amount, there is an accrued amount relating to benefits of former members who have transferred to Government Business Enterprise schemes. This amount was $3,099 million

as at 30 June 1993 and is to be paid to those schemes in a manner approximating the transfer benefit due on exit of transferred members from those schemes.

4. Figures have been calculated in a manner consistent with the Institute of Actuaries of Australia Guidance Note 455.

K.E. Deeves Fellow of the Institute of Actuaries of Australia Acting Australian Government Actuary ^ l August 1994

73

INSURANCE AND SUPERANNUATION COMMISSION

Note 1: Summary of Method of Attributing Benefits to Past Membership

For benefits payable on retirement, death, and disability, and for the deferred pension option available on resignation, total benefits are projected forward allowing for future salary increases and then discounted back to the valuation date at the valuation rate of interest.

The past membership component for each of these types of benefit (ie, on retirement, death, disablement or resignation) is taken to be the proportion of the discounted projected benefit payable on exit that -• membership completed at the valuation date; bears to

• membership to the projected date of exit

The past membership component of lump sum resignation benefits and of productivity superannuation benefits is taken to be the accumulated amount of contributions and interest at the valuation date.

The method used for calculating the past membership component was considered the most appropriate given the nature of the benefit structure of the Scheme.

Note 2: Summary of the Actuarial Assumptions

Financial Assumptions

Investment returns: Inflationary salary increases: Promotional salary increases: Pension increases (CPI):

7% pa net of investment tax and investment expenses 5.5% pa an age and service related scale was used 4% pa

Other Assumptions

Assumptions have been made regarding rates at which in service members will leave the Scheme on account of retirement, death, disablement and resignation. Assumptions were also made about pensioner mortality. These rates have been based on the experience of the Scheme. Full details are set out in the report on the long term cost of the public Sector

Superannuation Scheme and the Commonwealth Superannuation Scheme using data to 30 June 1993.

Reasonableness of Assumptions

Taking into account the circumstances of the Scheme, its membership, assets and benefit structure, I believe the assumptions used are appropriate in relation to the determination of the present value of Accrued Benefits for the purposes of AAS25.

K E Deeves 3/ August 1994

74 INSURANCE AND SUPERANNUATION COMMISSION

A u s t r a l ia n G o v e r n m e n t A c t u a r y PO Box 9836 CANBERRA ACT 2601

212 Northboume Ave CANBERRA A CT 2600

Telephone: (06) 247 2299 Facsimile·. (06) 267 6862 DX: 5766 Canberra

COMMONWEALTH SUPERANNUATION SCHEME SUMMARY OF THE 1993 LONG TERM COST REPORT

1. A Long Term Cost Report on the Public Sector Superannuation scheme (PSS) and Commonwealth Superannuation Scheme (CSS) was carried out using data as at 30 June 1993 by the Australian Government Actuary, Mr Donald Duval, FIA, FIAA. This report was presented to Parliament in June 1994.

2. These schemes are partially funded and both schemes have an underlying Government guarantee. The CSS has been closed to new entrants since July 1990. Projections of the actual annual employer costs of the two schemes combined as a percentage of Gross Domestic Product (GDP) were made over a period of 45 years. These projections showed a progressive fall in costs as the more expensive CSS scheme phased out. The actuary was thus of the opinion that the financial position of the schemes as at 30 June 1993 was

satisfactory.

3. The realisable value of assets of the CSS as at 30 June 1993 was $4,243 million.

4. Vested benefits of the CSS were not calculated as part of the Long Term Cost Report as at 30 June 1993 but were calculated separately. They amounted to $41,569 million.

It should be noted that the actuary commented that -

'The value of vested benefits represents the liability that would have fallen on the scheme if all members had ceased service on 30 June 1993 and elected the option which is most costly to the scheme. The likelihood of such an occurrence is remote in the extreme. The value quoted does not in any way represent the scheme's liability under circumstances which have any reasonable possibility of arising.'

INSURANCE AND SU PERANN UATION CO M M ISSIO N 75

5. The value of Accrued Benefits for active employees who are members of the CSS, former members with deferred benefit entitlements in the CSS and persons receiving pensions from the CSS as at 30 June 1993 was $38,755 million, being the sum of:

(i) the present value of the proportion of projected future pension benefit payments that has accrued in respect of membership of the CSS to 30 June 1993; (ii) the value of accumulated member contributions with interest at 30 June 1993; and (iii) the value of productivity superannuation contributions (both funded and unfunded)

with interest at 30 June 1993.

In addition to these amounts, there is an accrued amount relating to benefits of former members who have transferred to Government Business Enterprise schemes. This amount was $3,099 million as at 30 June 1993 and is to be paid to those schemes in a manner approximating the transfer benefit due on exit of transferred members from those schemes.

6. As would be expected in a substantially unfunded arrangement, the value of accrued benefits is more than the realisable value of scheme assets at the same date.

K.E. Deeves Fellow of the Institute of Actuaries of Australia Acting Australian Government Actuary 11 August 1994

76 INSURAN CE AND SU PERA N N U A TIO N C O M M ISSIO N

Appendix E

List of abbreviations

MS A ustralian A ccounting S tandard ACTU

AD(JR) ANAO ATO BCC

CBD CFM CPI CPSU

CSS

CSS Act

CSS Board (of Trustees)

CSS Fund DCMC OLA GBE

ISC

OSSA PSS

PSS Act

PSS Board (of Trustees) PSS Fund

RAC RBL RBO SIS

A ustralian Council of T rade Unions Administrative Decisions (Judicial Review) A ct 1977

A ustralian N ational Audit Office A ustralian Taxation Office B enefit Classification C ertificate Central B usiness D istrict

Com m onwealth Funds M anagem ent Ltd Consum er Price Index Community and Public S ector Union Com m onwealth S uperannuation Schem e Superannuation A ct 1976

Com m onwealth S uperannuation Board of T ru stees No. 2 Com m onwealth S uperannuation Fund No. 2 Disability Claims M anagem ent & Counselling Service Deferred Losses A ccount Governm ent Business Enterprise Insurance & Superannuation Commission Occupational Superannuation Standards A ct 1987

Public S ecto r S uperannuation (Schem e) Superannuation A ct 1990

Com m onwealth Superannuation Board of T ru ste e s No. 1 S uperannuation Fund No. 1 Reconsideration Advisory Com m ittee R easonable Benefit Limit R etirem ent B enefits Office (now ComSuper) Superannuation Industry (Supervision) (legislation)

77

Index

A C C E S S (report to m em b ers), 2 9 Actuarial report, Financial s t a t e m e n t s , 7 5 - 8 0

a d d res s, C o m m o n w e a l th S u p e ra n n u a tio n Board of T r u s t e e s No. 2, ii

adju sted earnings rate, crediting rate m eth o d , 3 3 — 4 administration, C S S , 2 1 —3 0 A d m in istra tive D ecisio n s (Ju dicial R eview )

A c t 1 9 7 7 , 2 8

age retirem ent, s ta tistic s, 2 4

Annual crediting rates sin ce 1 9 7 6 - 7 7 , table, 31 A p pendix es, 4 3 — 79 D e p a rtm e n ts and app ro v ed authorities,

5 1 - 3

Eligible su p e r a n n u a tio n s c h e m e s , 5 4 Financial s t a t e m e n t s , 5 5 — 8 0 legislation m a tte r s , 4 5 — 9 a s s e s s m e n t panel, invalidity p ro ces sin g , 2 6 a s s e t s e c t o r indexes and b e n c h m a rk portfolio, tab le, 1 6 Audit c o m m itte e , 3 5 — 7 audit qualifications, 3 6 —7 audit review s, 3 6

function, 3 5 m eeting s, table, 3 6 responsibilities an d role, 3 5

te r m s of reference, 3 5 — 6 audit qualifications Audit c o m m itte e , 3 6 — 7 C h a irp e rso n 's report, 3 audit reviews, A udit c o m m it te e , 3 6 A uditor-G eneral's report, financial

s t a t e m e n t s , 5 6 — 7 Australian Council of Trade Unions (ACTU), 8 Australian National Audit Office (ANAO),

3, 3 6 - 7 , 5 6 - 7

Australian Pension s and In v es tm en t C o n ference, 4, 20

b en ch m ark portfolio, 16 Board decisions invalidity p rocessing , 2 6 — 7 review and reconsideration, 2 7 — 8

Board determ ination s, 4 7 Board m eetings, Board of T ru s te e s , 12 Board m e e tin g s an d a t t e n d e e s , table, 12 Board of T ru s te e s , 8 — 13

Board m eetin g s , 12 charter, 11 m em bership, 8 — 10 objectives, 11

p erform ance indicators, 1 1 —12 Secretariat, 1 2

Central B usiness District property in v e s tm e n ts, 2, 1 9

C h a irp e rso n 's report, 1 —5 Audit qualifications, 3 c o n fe re n c e , international, 4 Fund in v e s tm e n t, 1 —2

interest credited to m e m b e r s ' a c c o u n ts , 2 OSSA com pliance, 4 planning, 4 S c h e m e administration, 2 — 3 chart, operational, iv charter, Board of T ru s te e s , 11 C o m m iss io n e r for S u p e ra n n u a tio n Annual

Report 1 9 9 3 - 9 4 , 12, 2 1 , 37

co m m itte e , Audit c o m m itte e , 3 5 — 7 C o m m o n w e a lth Medical Officer, 2 6 C o m m o n w e a lth Sup eran n u atio n Administration (Com Super), 2

C o m m o n w e a lth S u p eran n u atio n Board of T ru ste e s No. 1 (PSS Board), 8, 14

c o m m u n ic a tio n s with m e m b e rs, 29 com puting facilities, m odernisation, 3, 37

79

C o m S u p e r, b u s in e s s n a m e of C o m m o n w e a l th S u p e ra n n u a tio n A dministration, 2 c o n fe r e n c e , international, 4 , 2 0 con tribu tion s, m e m b e r s ', 21 c o n trib u to r exits, 2 3 — 5

co n trib u to r exits 1 9 9 2 — 9 3 and 1 9 9 3 - 9 4 , tab le, 2 3

crediting rates, 3 1 —2 m e th o d , 3 3 — 4 C S S Fund financial s t a t e m e n t s , 5 8 — 7 4 C S S Fund in v e s tm e n ts - a llo c a tio n and

perfo rm ance, 1 9 9 3 - 9 4 , table, 17 cum ulative y e a r-to -d a te returns (annualised), chart, 1 7

D eferred L osses A c c o u n t, 3 3 D e p a rtm e n t of Finance, 4, 12, 3 5

D e p a rtm e n t of Finance Annual Report 1 9 9 3 - 9 4 , 21 D e p a rtm e n ts an d a p p ro v e d authorities, A p p en d ix es, 5 1 —3 Disability Claims M a n a g e m e n t &

Counselling Service (DCMC), 2 6

Eligible su p e r a n n u a tio n s c h e m e s , A pp en dix es, 5 4 equities in v es tm en t, 1 —2, 19 exit rates, 3 4

Exit rates declared in 1 9 9 3 - 9 4 , table, 3 4 exits, contributor, 2 3 — 5 by typ e, chart, 2 3

ex ternal review, Board d ecisio n s, 28

Financial s t a t e m e n t s , 5 5 — 8 0 Actuarial report, 7 5 — 8 0 A uditor-G eneral's report, 5 6 — 7 C S S Fund financial s t a t e m e n t s , 5 8 — 7 4 form ation of fu nd, 1 4

function, Audit c o m m itte e , 3 5 fu nd com p osition , ch art, 18 fu n d crediting rates annual, co m p a r e d w ith inflation, ch art,

32

periodic rolling return s, co m p a r e d w ith inflation, chart, 32 fu n d , form ation, 14 fund in v es tm en t, 1 4 — 2 0

b e n c h m a rk portfolio, 16 C h a irp e r so n 's report, 1 —2 form ation of Fund, 14 fu nd p erfo rm ance, 17 — 2 0 in v e s tm e n t s tra te g y , 1 5 —16 perfo rm an ce, fu n d , 1 7 —2 0 significant s ta tistic s, table, 6 Fund p erfo rm ance, 17 — 2 0

co m p a r e d w ith inflation, ch art, 2 0 Future directions, 3 8 — 4 0 futu re m a n a g e m e n t of Fund, 4 0

information te c h n o lo g y , m odernisatio n, 3, 37 inquiries, publications, 3 0 Insurance an d S u p e ra n n u a tio n

C om m issio n (ISC), 38 in terest credited to m e m b e r s ' a c c o u n t s , 2

interest rates, 3 1 —4 crediting rate m e th o d , 3 3 — 4 crediting rates, 3 1 —2 Deferred L osses A c c o u n t, 33 R eserve A c c o u n t, 32 — 3 rises in long-term , 2 internal reco nsid eratio n. Board decisions,

2 7 - 8

invalidity exits, table, 25 invalidity pro ces sin g , 2 6 — 7 invalidity retirem ent re q u e s ts to a p p ro v e , 2 6

s ta tistic s, 25 in v e s tm e n t, fun d, 14 — 2 0 I n v e s tm e n t P olicy S ta te m e n t, 16 in v e s tm e n t s tra te g y , 1 5 —16

involuntary retirem en t (retrenchm ent), statistics, 2 4

legislation m a t te r s , A p p en d ix es, 4 5 — 9 Board d eterm in atio n s, 4 7 C SS, c h a n g e s to, 4 7 — 9

legislative c h a n g e s , 38 — 9 legislative r e a r ra n g e m e n ts, 4 S ta tu to r y Rules, 4 5 — 7

m eetings, Board of T ru s te e s , 12 m em b ers co m m u n ic a tio n s , 29 m e m b e r s ' con trib ution s, 2 1 —2

s u m m a ry sta tistic s, 2 — 3 m em bership, Board of T ru s te e s , 8 —10

objectives, Board of T ru s t e e s , 11 O ccupational S u p era n n u a tio n S ta n d a rd s A c t 1 9 8 7 (OSSA), 1, 4, 2 9 , 38

p en sio n s, 25 p en sio n s in force a t 3 0 J u n e 1 9 9 4 , table,

25

p erform an ce, fu n d , 17 — 2 0 p erfo rm an ce indicators, Board of T ru ste e s, 1 1 —12 planning, 38 — 4 0

C h a irp e rso n 's report, 4 property in v e s tm e n t, 1 —2, 1 8 —19 property holdings, 1 9 8 9 - 9 0 to 1 9 9 3 -9 4 , chart, 18

80

rates, interest, 3 1 —4 Reasonable Benefit Limits (RBLs), 39 Reconsideration A dvisory C o m m ittee (RAC), 2 7 reconsideration and review, Board

decisions, 2 7 — 8 reconsideration applications, 1 9 9 2 — 9 3 and 1 9 9 3 - 9 4 , table, 28

report, C h a irp e r so n 's, 1 —5 Reserve A c c o u n t, 15, 3 2 — 3 resignation (including preservation), statistics, 2 4

responsibilities and role, A udit co m m itte e , 35 Retirem ents Benefits Office (RBO), 2 retren ch m en t, sta tistic s, 2 4 review and recon sideratio n , Board

decisions, 2 7 — 8

S c h e m e administration, 2 1 —3 0 C h a irp e rso n 's report, 2 — 3 con tribution s, m e m b e r s ', 21 exits, co ntribu to r, 2 3 — 5

inquiries, publications, 3 0 invalidity p ro cessin g, 2 6 — 7 m e m b e r c o m m u n ic a tio n s , 2 9 m e m b e rs ' con trib ution s, 21 m em bership, 2 2 pensio ns, 2 5 reconsideration and review , 2 7 — 8 S c h e m e adm inistrator, 21 significant s ta tistic s, tab le, 7 S c h e m e adm in istrato r, 21 S c h e m e m em b ersh ip

by contribution rate and a g e, table, 2 2

by g e n d e r and a g e , chart, 2 2

S ecretariat, Board of T ru s t e e s , 12 S e c u rity in R e tire m e n t (policy s ta te m e n t) , 38 s ta tistic s, significant, 6 — 7

S ta tu to r y Rules, 4 5 — 7 s tra te g y , in v e s tm e n t s t r a te g y , 1 5 —16 S u p e r N e w s , 2 9

S u p era n n u a tio n A c t 1 9 7 6 , 8 S u p era n n u a tio n In d u stry (Supervision) A c t 1 9 9 3 (SIS), 1, 3 8 S u p era n n u a tio n Legislation A m e n d m e n t

A c t 1 9 9 4 , 4 , 8

S u p e ra n n u a tio n Legislation A m e n d m e n t Bill 1 9 9 4 , 2 9

ta r g e t rate, crediting rate m e th o d , 3 3 — 4 te r m s of reference. Audit c o m m ittee, 3 5 - 6

T ru ste e s, Board, 8 —13

unclaimed m o n ey , 39

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p a r l i a m e n t a r y

PAPER No. 307 of 1994 ORDERED TO BE PRINTED ISSN 0727-418

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A43517 Cat. No. 94 21779

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