NORTHERN TERRITORY GOVERNMENT AND

PUBLIC AUTHORITIES’ SUPERANNUATION SCHEME

Annual Report

2013-14


Published by the Department of Treasury and Finance

© Northern Territory Government 2014

Apart from any use permitted under the Copyright Act, no part of this document may be reproduced without prior written permission from the Northern Territory Government through the Department of Treasury and Finance.

ISSN: 1032-1241

Northern Territory Superannuation Office

Level 5, Cavenagh House, 38 Cavenagh Street, Darwin NT 0800
GPO Box 4675, Darwin NT 0801

Freecall: 1800 631 630
Telephone: +61 8 8901 4200
Facsimile: +61 8 8901 4222
Email:
Website:

Northern Territory Government and Public Authorities’ Superannuation Scheme (NTGPASS)

Level 5 Cavenagh House, 38 Cavenagh Street DARWIN NT 0800

Postal Address GPO Box 4675 DARWIN NT 0801

Tel 08 8901 4200 Fax 08 8901 4222

The Honourable Adam Giles MLA
Treasurer
GPO Box 3146
Darwin NT 0801

Dear Treasurer

In accordance with the provisions of section 43 of the Superannuation Act, we are pleased to provide to you:

  • the report of the Commissioner of Superannuation and the Superannuation Trustee Board on the operation and management of the Northern Territory Government and Public Authorities’ Superannuation Scheme for the financial year ended 30 June 2014; and
  • the audited financial statements of the Northern Territory Government and Public Authorities Employees’ Superannuation Fund for the financial year ended 30 June 2014.

Yours sincerely

Sarah Rummery
Commissioner of Superannuation
26 September 2014 / Marianne McAdie
Deputy Chairperson, Superannuation Trustee Board
26 September 2014

Table of Contents

About this Annual Report

Report of the Commissioner of Superannuation and the
Superannuation Trustee Board

Highlights

Year in Review

Output Performance

Future Priorities

Fund Performance

Investments

Scheme Performance

Membership Profile

Governance

Summary of the Report of the Actuarial Investigation of the Scheme

Financial Statements

Overview of the Financial Statements

Independent Auditor’s Report to Trustee Board

Statement by the Superannuation Trustee Board

Statement of Net Assets

Statement of Changes in Net Assets

Statement of Cash Flows

Notes to the Financial Statements

About this Annual Report

Welcome to the Northern Territory Government and Public Authorities’ Superannuation Scheme (NTGPASS) Annual Report. NTGPASS was established by the Superannuation Act and provides superannuation benefits for eligible persons employed by the Northern Territory Government. NTGPASS commenced operation on 1 October 1986 and was closed to new members on 9August1999.

Objective

The objective of this Annual Report is to provide information on the operations of NTGPASS to the Treasurer, as the Minister responsible for superannuation matters, and to members and other interested parties. This includes new developments and future directions of NTGPASS as well as the management, financial condition and investment performance of the Northern Territory Government and Public Authorities Employees’ Superannuation Fund (fund).

Quick Guide to the Annual Report

This report of the Commissioner of Superannuation and the Superannuation Trustee Board (STB) provides an overview of the operation and management of NTGPASS and the fund’s investment performance during 201314. This section also includes information about the members of the Superannuation Trustee Board and the Superannuation Review Board and their activities during theyear.

Financial statements provided include the audited Statement of Net Assets, Statement of Changes in Net Assets, Statement of Cash Flows and Notes to the Financial Statements as at 30 June 2014.

Reporting Requirements

The Superannuation Act requires, within six months of the end of each financial year, that:

  • the Commissioner of Superannuation provides a report to the Treasurer on the operation and management of NTGPASS;
  • STB provides a report to the Treasurer on its operations during the year and audited financial statements in respect of the fund; and
  • the Treasurer tables the reports, together with the financial statements and the AuditorGeneral’s report of the audit, in the Legislative Assembly within six sitting days of receiving the reports.

Report of the Commissioner of Superannuation and the
Superannuation Trustee Board

Highlights

Fund Performance

NTGPASS investment options recorded strong investment returns in 201314. The fund’s return for the default superannuation growth option was 14.04percent and the pension growth option was 16.02percent.

NTGPASS Pension Closure

The NTGPASS account-based pension product was closed to new accounts from 1 April 2014.

Superannuation Reform Project

Progress on the Superannuation Reform Project continued during 201314 with drafting of amending legislation for a range of measures.

Superannuation Changes

Several superannuation changes have been introduced by the Commonwealth during the past year. Those that will affect NTGPASS members are changes to concessional contributions, including an increased annual cap and revised treatment for contributions in excess of the annual cap.

Year in Review

Fund Performance

All NTGPASS options ended the financial year with a positive investment return, despite some options experiencing periods of negative returns during the year. The NTGPASS growth option returned 14.04percent for superannuation accounts and 16.02percent for pension accounts. These returns are above the median return for options with a similar asset allocation (as reported by Super Ratings) of 12.66percent this year.

NTGPASS Pension Closure

NTGPASS introduced a standard and pre-retirement pension in 2008. Take up of the pension products has been modest and continued operation would have meant a significant increase in fees to pension members. As a result, the NTPGASS pension products were closed to new members from 1 April 2014. Existing pension members were notified of the closure and plans are in place to transfer their accounts to AustralianSuper early in 2015.

Superannuation Reform Project

Drafting of legislation for a range of amendments progressed during the year. The main changes:

  • allow the transfer of lost and unclaimed superannuation to the Australian Taxation Office;
  • replace the Superannuation Review Board with the Northern Territory Civil and Administrative Tribunal (NTCAT), when it is operational;
  • introduce time limits for review of decisions;
  • allow STB committees to be formed incorporating all relevant schemes;
  • ensure that STBrelated costs can be proportionately levied across the relevant schemes;
  • change the definition of Public Authorities to more readily capture those listed in the PublicSector Employment and Management Act and the Financial Management Act;
  • remove the Northern Territory Government Death and Invalidity Scheme (NTGDIS) AnticipatoryPayments;
  • remove NTGPASS medical entrant provisions;
  • broaden the interpretation of ‘dependant’ to include ‘interdependency of relationship’;
  • increase the payment without grant of probate;
  • update confidentiality provisions and convert penalty offences in the Superannuation Act to be compliant with Part IIAA of the Criminal Code, as well as revise maximum penalties;
  • enable compliance with Commonwealth legislation allowing release of superannuation money for payment of a relevant tax liability; and
  • allow the Commissioner to transfer pension accounts under a successor fund transfer.

Legislation was introduced in August 2014 with anticipated passage in October 2014. Not all changes will commence immediately. The ability to transfer lost and unclaimed members is reliant on becoming prescribed under Commonwealth legislation. Replacement of the review mechanism with NTCAT and the associated time limits for review of decisions are dependent on NTCAT becoming operational.

Work will continue during 2014-15 to implement these changes. Further cost-saving and efficiency measures may be considered.

Legislative Amendments

Most NTGPASS members are also entitled to a benefit under the Northern Territory Supplementary Superannuation Scheme (NTSSS). The standard benefit is 3percent of final salary for each year of service since 1 October 1988. Previously, interest was paid on unclaimed benefits. The NTSSS Instrument was amended to remove the payment of 6percent interest on unclaimed benefits from 31 July 2013.

Superannuation Changes

A number of changes to the superannuation environment introduced in the 2014Commonwealth Budget or otherwise announced apply from 1 July 2014. Changes include:

  • increasing the concessional contribution cap to $30 000 for people aged 49 and under, and $35000 for people aged 50 and over;
  • treatment of non-concessional contributions in excess of the annual cap;
  • an increase in the superannuation guarantee to 9.5percent with a delay in the increase to 12percent, now to take effect from 1 July 2025; and
  • increased tax on superannuation-related payments for the Medicare levy (to 2percent) and Budget Repair levy (2percent) for 2014-15, 2015-16 and 2016-17.

Key changes are outlined in more detail below.

Contribution caps

Concessional contributions are contributions made from before-tax income, such as salary sacrifice contributions and employer contributions made when members exit the scheme, which are concessionally taxed at 15percent. From 1 July 2014, the concessional contribution cap is $30000 for people aged 49 and under, and $35000 for people aged 50 and over.

Since 1 July 2013, contributions that exceed the caps are taxed at an individual’s marginal tax rate plus an interest charge and the excess contributions can be withdrawn. When a person’s annual income plus taxable superannuation contributions exceed $300000, an additional 15percent tax is applied to the contributions over the $300000 threshold.

In addition to salary sacrifice contributions, for members of a defined benefit superannuation scheme such as NTGPASS, a notional amount of employer contributions, known as notional taxed contributions, are treated as concessional contributions and count towards the concessional cap.

It is recommended that members take into account the notional taxed contribution to ensure their salary sacrifice contributions do not exceed the concessional cap. The notional taxed contribution has been determined by the NTGPASS actuary to be a maximum 9.6percent of contribution salary.

Non-concessional contributions are contributions made from after-tax income such as NTGPASS compulsory member contributions, spouse contributions and Commonwealth co-contributions. The annual non-concessional cap increased to $180 000, or $540 000 over three years for those aged under 65, from 1 July 2014.

Treatment of non-concessional contribution in excess of the annual cap

Prior to 1 July 2013, contributions in excess of the non-concessional cap were taxed at 46.5percent (including Medicare levy). With the increase in the Medicare levy and the introduction of the BudgetRepair levy, the tax rate is now increased to 49percent. The 2014 Budget introduced changes for the treatment of non-concessional contributions, backdated to 1 July 2013. This allows a member to withdraw any excess nonconcessional contributions made after 1 July 2013, thereby avoiding excess non-concessional contributions tax on these amounts.

SuperStream

SuperStream is a package of measures designed to enhance the ‘back office’ of superannuation, which primarily involves electronic transmission of information between superannuation funds. A SuperStream compliant information technology solution was implemented during the year. Where required, all superannuation benefit payments are now made via SuperStream.

Anti-Money Laundering and Counter-Terrorism Financing

The Commonwealth Anti-Money Laundering and Counter-Terrorism Financing Act 2006
(AML/CTF) imposes a range of governance and operational obligations designed to combat money laundering and terrorism financing activities.

The main governance and operational obligations require compliance with an AML/CTF program, which includes a detailed risk assessment, member identification requirements, staff training and due diligence programs, as well as the maintenance of a range of records and regular reporting to the Australian Transaction Reports and Analysis Centre (AUSTRAC).

The AML/CTF program implemented in early 2008 is reviewed annually and updated as appropriate. An annual compliance report is submitted to AUSTRAC by the end of March each year.

Member Education

The Superannuation Office aims to provide informative material to assist members in understanding their NTGPASS entitlements, as well as superannuation in general.

Information covering products such as investment options and pensions is available on the website along with a range of publications including forms, fact sheets and information books. Information is kept up to date and new items are developed as required.

Superannuation Office staff are happy to talk to members over the phone or in person through arranged appointments. Members are encouraged to seek the services of a qualified professional as the Superannuation Office cannot provide personal financial advice.

Website

The Superannuation Office website is a good source of information for NTGPASS members. The website is regularly updated for investment returns, ‘What’s New’ information and changes made to forms and fact sheets.

Information sessions

A total of 17 information seminars were held in Darwin and Alice Springs, including two webinars.

Annual Report

The NTGPASS Annual Report is available electronically, via website download or email, to minimise the impact on the environment. Summarised information is produced in the Report to Members, also available on the website.

Memberships

Association of Superannuation Funds of Australia

The Association of Superannuation Funds of Australia (ASFA) is a national not-for-profit and nonpolitical organisation that represents the interests of superannuation funds, trustees and members. ASFA is the peak industry body for Australia’s superannuation funds. It undertakes extensive analysis and research on superannuation and provides education and professional development courses for trustees and fund administrators. ASFA hosts an annual national conference that is attended by board members and senior staff of the Superannuation Office.

ASFA also hosts various superannuation discussion groups throughout Australia. The NorthernTerritory discussion group meets each month and meetings are attended by Superannuation Office staff and representatives from superannuation funds, financial planning organisations, the Australian Securities and Investment Commission and Centrelink. Meetings include presentations on topical issues and ASFA executives provide updates on superannuation policy issues by telephone. The group has facilitated ASFA educational seminars in Darwin and provides an important forum for discussions on topical superannuation issues.

Australian Institute of Superannuation Trustees

The Australian Institute of Superannuation Trustees (AIST) is an independent professional body and registered training organisation offering a range of services for the superannuation industry, including professional development, national and international training, events, compliance services and member support.

The board members and senior staff from the Superannuation Office continued their membership of AIST. Membership offers discounted prices for training and events, a number of which are held in Darwin. In addition, a board member attended the annual Conference of Major Superannuation Funds hosted by AIST.

Administration

Online member information statements

The annual Member Information Statement provides key information to members about their accumulation account and defined benefit. Member Information Statements from previous years can be viewed online by current Territory Government employees. Members must have access to ePASS to view the available information.

In future, it is intended that active members will be able to choose between viewing their current year’s statement online or receiving it via post.

Education and Training

The Superannuation Office employs 23 full-time staff and also provides work and development opportunities for students and graduates through Treasury’s entry-level programs. The complexity and technical aspects of superannuation mean that ongoing professional development and education for board members and staff is a high priority.

Educational seminars and short courses attended during the year include:

  • ASFA 2013 National Conference;
  • Government Superannuation Funds meeting;
  • ASFA Roadshow;
  • ASFA: RG146 Superannuation (Online);
  • Clayton Utz: Statutory Interpretation; and
  • EASA: Appropriate Workplace Behaviour.

The following summary reports on the progress of priorities identified for 201314.

Output Performance

Priorities for 201314 / Results in 201314
Continue the Superannuation Reform Project with consideration of measures that can be readily implemented and result in cost savingsor efficiencies. These include the removalof interest on unclaimed NTSSS benefits and transfer of lost and unclaimed monies to theAustralian Taxation Office. / In progress – the NTSSS Instrument was amended to remove the payment of interest from 31 July 2013. A range of legislative amendments were approved for drafting. Resulting legislation was introduced in August 2014 with anticipated passage in October 2014.
Implementation of revised Heads of GovernmentAgreement. / In progress – the revised agreement was signed by the Northern Territory Treasurer in February2014. To date, the agreement has not been signed by all jurisdictions.
Continue to work with the Commonwealth and other jurisdictions to consider Stronger Super changes and their impact on Territory superannuation schemes. / Achieved – A SuperStream compliant information technology solution was implemented during the year.
Business continuity through internal training and documentation of procedures to ensure knowledge sharing and continuity of essential tasks. / Ongoing – a review of documentation was undertaken to identify current procedures.

Future Priorities

  • Superannuation Reform Project – continuation and implementation of reforms to the Territory’s superannuation schemes to simplify arrangements and reduce costs.
  • Superannuation schemes rules – amend rules to improve efficiency and remove redundant or superseded terms or requirements.
  • Pension closure – finalise successor fund transfer of the NTGPASS pension product.

Fund Performance

201314 Investment Returns

Table 1 details the fund’s superannuation and pension investment returns for 201314, as well as the average annual return (compound average effective rate of net earnings) since each option commenced. Options have been introduced at different times since 2007 and this information is provided in note form. The returns indicated below assume investment in that option for the full year.

As Member Investment Choice was introduced in 2007, five-year average returns are now able to be calculated for all options except the pension assertive option. The growth option remains the only option that has been available for the full 10 years, with a return of 6.67percent per annum over10years and 8.50percent per annum since inception.

Table 1: 201314 Investment Returns

Investment Option / 2014 / 2013 / 5-Year
Average / 10-Year
Average / Since
Inception
% / %
Superannuation
Managed Cash1 / 2.16 / 2.76 / 3.24 / - / 3.24
Conservative2 / 7.57 / 7.83 / 6.92 / - / 4.33
Cautious2 / 10.33 / 10.69 / 8.56 / - / 4.39
Growth (default)3 / 14.04 / 15.40 / 10.24 / 6.67 / 8.50
Assertive2 / 15.57 / 17.16 / 10.88 / - / 3.53
Aggressive2 / 17.82 / 19.66 / 11.61 / - / 3.01
Pension
Managed Cash1 / 2.64 / 3.23 / 3.76 / - / 3.74
Conservative4 / 8.99 / 9.44 / 7.90 / - / 5.88
Cautious5 / 12.15 / 13.14 / 9.72 / - / 6.18
Growth4 / 16.02 / 18.83 / 11.21 / - / 5.66
Assertive6 / 17.57 / 20.22 / - / - / 9.74
Aggressive4 / 19.62 / 23.92 / 13.20 / - / 5.04

Commencement dates: (1) March 2009; (2) July 2007; (3) 1986; (4) April 2008; (5) June 2008; (6) March 2010