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: 2201-2079
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 POLICE SUPPLEMENTARY BENEFIT SCHEME
Level 5, Cavenagh House GPO Box 4675, DARWIN, NT. 0801
38 Cavenagh Street TELEPHONE: (08) 8901 4200
DARWIN NT 0800 FACSIMILE: (08) 8901 4222
The Honourable Adam Giles MLA
Treasurer
GPO Box 3146
DARWIN NT 0801
Dear Treasurer
In accordance with the provisions of clause 11 of the Northern Territory Police Supplementary Benefit Scheme Trust Deed, I am pleased to provide you:
- the report on the operations of the Northern Territory Police Supplementary Benefit Scheme for the financial year ended 30 June 2014; and
- the audited financial statements of the Northern Territory Police Supplementary Benefit Scheme for the financial year ended 30 June 2014.
Yours sincerely
M McAdie / A PollonDeputy Chairperson
Superannuation Trustee Board / Member
Superannuation Trustee Board
26 September 2014
Table of Contents
Report on Operations
Introduction
Highlights
Significant Events
The Scheme
Governance
Investments
Scheme Membership
Administration
Further Information
Summary of the Report of the Actuarial Investigation of the Scheme
Financial Statements
Independent Auditor's Report to the Trustee Board
Trustee Statement
Statement of Net Assets
Statement of Changes in Net Assets
Notes to the Financial Statements for the year ended 30 June 2014
Appendix: The Scheme and How it Works
Report on Operations
Introduction
Welcome to the 2013-14 Northern Territory Police Supplementary Benefit Scheme Annual Report. The objective of this Annual Report is to provide information to members and other interested parties on the operations of the Northern Territory Police Supplementary Benefit Scheme (PSBS), including the management, financial condition and investment performance of the fund, as well as current superannuation issues.
The scheme was established under the Northern Territory Police Supplementary Benefit Scheme Trust Deed (the Trust Deed) dated 15 June 1984, last amended on 25 May 2012.
The scheme supplements the pension payable from the Commonwealth Superannuation Scheme (CSS) for eligible members of the Northern Territory Police, Fire and Emergency Services.
The Northern Territory Government and Public Authorities’ Superannuation Scheme replaced the CSS and the PSBS for police recruited after 1 January 1988. The scheme has therefore been closed to new members.
Highlights
New Pensions Commenced
During the year, four former members commenced a supplementary police pension. At 30June2014, there were 173 former members and former members’ spouses receiving a pension from the scheme.
Crediting Rate
The 2013-14 crediting rate for the fund is 13.2percent.
Significant Events
Police Housing Allowance
The police housing allowance pension adjustment project is ongoing with a further 23 adjustments processed in 2013-14. Pension recalculations will continue to be processed during 2014-15 as the adjusted pension data is received from CSS.
The Scheme
The PSBS is a defined benefit scheme, which pays two types of superannuation benefits:
- a lifetime pension for members who qualify for a supplementary benefit with the option to commute (cash up) the pension to a lump sum; or
- a refund of member contributions and investment earnings for members who do not qualify for a supplementary benefit from the scheme.
Members are required to contribute 1percent of their salary to the fund. The scheme is unfunded, which means the Northern Territory finances a supplementary benefit at the time a member ceases employment.
The Appendix provides information on how the scheme works (see page 35).
Governance
Trustees
The Superannuation Trustee Board (STB) is the Trustee of the scheme in accordance with clause 6 of the Trust Deed. The STB is a body corporate established under section 8A of the SuperannuationAct. Under the Deed and the SuperannuationAct, the STB has overall responsibility for the management and investments of all funds administered by the Northern Territory Superannuation Office, including the PSBS fund.
The SuperannuationAct provides for a nine-member board consisting of the Under Treasurer, chairperson, deputychairperson and six nominated members. One member must be nominated by the Commissioner of Police and one by the Northern Territory Police Association (NTPA). Apart from the Under Treasurer, all members are appointed by the Treasurer and hold fiveyear appointments. In the transition from the former Police Trustee Board to the STB, the members previously nominated by the Commissioner of Police and the NTPA became members of the STB.
Functions and powers of the STB are set out in section 8B of the SuperannuationAct. The STB is responsible for investing monies, while the Commissioner of Superannuation is responsible for administering the scheme and ensuring payment of the appropriate benefits to former members. Scheme administration is undertaken by the Northern Territory Superannuation Office, a division of the Department of Treasury and Finance.
In 2013-14, there were no changes to STB membership.
Current members are:
Kathleen Robinson Chairperson
Marianne McAdieDeputy Chairperson
Jodie RyanMember
Michael MartinMember
Naomi Porrovecchio Member
Alex PollonMember
Vicky ColemanMember
Mark McAdieMember
Gowan CarterMember
Trustee Meetings
The STB met on four occasions during the year to consider general business and investment decisions of the fund.
Trustee Remuneration and other STB expenses
Payments to board members are made in accordance with a determination under the Assembly Members and Statutory Officers (Remuneration and Other Entitlements) Act (AMSO Act), which sets the rates payable to board members for attendance at board meetings, travel and other boardrelated activities. Remuneration is not payable where a board member is also an employee of the Northern Territory Public Sector, the Commonwealth or a state public service.
The current remuneration rate applicable to STB members is set in the Statutory Bodies Classification Structure 2012, issued under the AMSO Act. The daily rate is $405 for a Chairperson and $304 for a member, or an hourly rate 1/5 of the daily rate. In 2013-14, four STB members were entitled to receive sitting fees for board attendance. Remuneration payments made to STB members totalled $5320. A portion was attributed to PSBS.
The board resolved to apply its associated costs to the three funds administered according to the value of funds under management. On this basis, 0.28percent is attributed to PSBS for 2013-14. Board expenses totalled $65702, of which $184 was attributed to PSBS. Total costs are detailed below.
Sitting fees / 5 320Training and conferences / 10 151
AIST Membership / 12 375
Governance expenses / 37 856
Total / $65 702
Conflict of Interest
At the commencement of each meeting, STB members are required to sign a conflict of interest register and any disclosures are recorded in the minutes of the meeting.
STB members must disclose if they have a direct or indirect pecuniary interest in any matter being considered, unless:
- the interest stems from being a member of the scheme; or
- they are a member of a large company (but not a director).
Where a disclosure is made in relation to a matter being considered, the STB member cannot take part in deliberations or decisions made on that matter and is disregarded for constituting a quorum on that matter.
There were no conflicts of interest recorded during the year.
Review of Decisions
The Trust Deed provides that any person who is dissatisfied with a decision of the Trustee or a delegate of the Trustee may, within 30 days of being notified of the decision (or such further period as the Trustee allows), request the Trustee to reconsider the decision. The request should be in writing and set out the reasons for seeking reconsideration. The Trustee is required to reconsider the decision and advise in writing its reasons for confirming, revoking or varying the decision. Reconsideration requests can be lodged with the Commissioner of Superannuation.
There were no requests for a review of any decisions made during the year.
Trustee Education
The Trustee is responsible for the operation of the scheme and STB members attend seminars and information sessions to keep themselves informed on superannuation issues and industry practices.
Investments
The fund returned 13.2percent for the 2013-14 financial year.
Crediting Rate Policy
The crediting rate policy of the Trustee is to fully distribute the earnings of the fund each year amongmembers of the scheme.
Investment Objective
The investment objective of the Trustee is to achieve a positive real rate of return (return after inflation) on fund assets measured over a five-year period. Fund returns over the last five years are presented in Table1.
Table 1: Fund returns over the last five years
Fund Return(Crediting Rate) / CPI / Real Rate of Return1
% / % / %
2009-10 / 10.60 / 3.10 / 7.27
2010-11 / 9.50 / 3.60 / 5.69
2011-12 / - 3.90 / 1.20 / - 5.04
2012-13 / 14.70 / 2.40 / 12.01
2013-14 / 13.20 / 3.00 / 9.90
5-year average / 8.612 / 2.66 / 5.79
10-year average / 5.132
1Real rate of return = Fund return - CPI
1 + CPI
2Compound average effective rate of net earnings.
Strong returns in 2013-14 have assisted to offset the negative return recorded during the five-year period. The five-year real rate of return on the fund is 5.79percent per annum, and therefore the investment objective was met in 2013-14.
Investment returns can be either positive or negative. The current investment structure of the fund has moderate to low volatility, which means the possibility of a negative annual crediting rate is not expected to exceed, on average, one in every four years.
Composition of the fund’s assets as at 30 June 2014 is presented in Table 2.
Table 2: Portfolio composition
% of PortfolioAustralian shares / 30.3
International shares / 26.1
Property / 6.3
Private markets / 8.0
Diversified debt / 24.3
Enhanced cash / 5.0
Long-term Returns
Long-term returns, calculated as the compound average effective rate of net earnings, are required to be reported in line with Corporations Regulations. On this basis, the five-year return for the PSBSfund is 8.61percent per annum and the ten-year return is 5.13percent per annum.
Investment Overview
Favourable investment conditions continued in 2013-14. Growth assets such as equities performed well for most of the year, contributing significantly to overall returns. Australian equities as measured by the ASX 300 Accumulation index rose 17.3 per cent during the year and global equities represented by the MSCIAll-Countries World index (hedged) rose 23.9 per cent. Debt assets such as bonds were notably smaller contributors, with outright interest rates on bonds and cash near historical lows. This is evident in Australia’s official cash rate, which finished the financial year at 2.5per cent.
Fund Investments
The scheme has been closed to new members since January 1988 and has reached a stage where the value of benefits paid from the fund for members exiting the scheme exceeds the value of compulsory contributions received into the fund from active members. This means the fund has a negative cash flow in some years. In 2013-14, this resulted in redemption of $100000 from the fund’s investment.
Fund investments are managed by JANA Investment Advisers (JANA).
Investment returns over the year resulted in an increase of $376000 in the fund’s assets. At the end of the financial year, the fund had $3.1 million in assets, of which $3 million was invested with JANA, with the residual $60000 held in cash.
Fees
JANA charged a fee of approximately 0.49percent (after rebates) for managing the funds invested. The investment returns are net of these fees.
No administration or account-keeping fees are deducted from member accumulation accounts, as the day-to-day running costs of the scheme are met by the Territory.
Scheme Membership
Contributions and Benefit Payments
Members finance a share of the scheme benefits by contributing 1percent of their salary to the fund. During 2013-14, member contributions to the fund totalled $88 184.
Members who do not qualify for a benefit receive a refund of their contributions from the fund. Members who qualify for a benefit are paid by the Territory and their contributions are transferred from the fund to the Territory. Total scheme benefits paid in 2013-14 are outlined in Table 3.
Table 3: Benefits paid
2013-14 / 2012-13$ / $
By the fund
Refunds of contributions / 50 939 / 62 148
Transfers to the Territory for members who qualify for a benefit / 168 040 / 221 480
218 979 / 283 628
By the Territory
Pensions / 1 931 131 / 1 840 160
Lump sum payments / 165 321 / -
2 096 452 / 1 840 160
Membership
Changes in active membership for the year ended 30 June are provided in Table 4. The changes in active membership since closure of the scheme in 1988 are displayed in Figure 1.
Table 4: Active contributing members
2013-14 / 2012-13Active members at beginning of period / 71 / 77
Less exits:
Pension / 4 / 6
Refunds of accumulation accounts / 2 / -
Active members as at 30 June / 65 / 71
Figure 1: Active members of the scheme since closure on 1 January 1988
The total number and types of pensioners as at 30 June are provided in Table 5.
Table 5: Pension members
2013-14 / 2012-13Pensioners / 155 / 153
Reversionary (spouse) pensioners / 13 / 13
Postponed pensioners1 / 5 / 3
Total pensioners as at 30 June / 173 / 169
1Former members who have deferred payment of their pension.
Membership Profile
Figure 2: Age profile of active members and pensioners as at 30 June 2014
Administration
Compliance and Taxation Status of the Scheme
The PSBS is an exempt public sector superannuation scheme and is therefore not regulated under the Commonwealth Superannuation Industry (Supervision) Act 1993 (SIS Act).
A Heads of Government Agreement provides that the scheme complies with the Commonwealth retirement income policies and therefore conforms with the principles of the SIS Act and certain other Australian superannuation legislation.
This means that although the scheme is subject to some Australian superannuation legislation, such as the superannuation surcharge and family law, the scheme is specifically exempt from legislation such as choice of fund.
A compliance audit of the scheme is undertaken each year by the Auditor-General, in conjunction with the annual financial statement audit, to ensure the scheme complies with the principles of the SIS Act. To date, no compliance issues have arisen from these audits.
The scheme is a complying fund for the purposes of part IX of the Income Tax Assessment Act1936 as amended. Consequently, income tax is assessable at 15percent on net investment earnings and net taxable contributions, and 10percent on realised capital gains.
Audit
An audit of the scheme was conducted by the Auditor-General for the Northern Territory as at 30June2014. No compliance issues arose from the audit.
Actuarial Services
Actuarial services to the scheme were provided by John Rawsthorne FIAA of Cumpston Sarjeant Pty Ltd, under the panel contract arrangements for actuarial services to the Territory Government. Advice was received during the year in relation to pensions, as well as setting interim and final rates of return.
A triennial actuarial investigation of the scheme was carried out as at 30 June 2012. A summary of the report is provided on page 13. The next triennial actuarial review is due in 2015.
Further Information
Members requiring additional information should contact the Northern Territory Superannuation Office.
Summary of the Report of the Actuarial Investigation of the Scheme
as at 30 June 2012
The triennial actuarial investigation of the scheme was carried out as at 30 June 2012 by JohnRawsthorne FIAA, of Cumpston Sarjeant Pty Ltd, and the results were presented in his report dated 31August 2012.
The scheme was closed to new members from 1 January 1988. Members contribute 1percent of salaries to an account which is accumulated with the earnings of the scheme. On leaving without a Territory-financed benefit the member accumulation is paid to the member. If a member is eligible to receive a Territory-financed benefit on exit, the member accumulation is transferred to the Territory. Apart from refunds on accumulations, all benefit payments from the scheme are made directly by the Territory, rather than via the Fund.
The investigation has focussed on Territory liabilities, examining recent experience, establishing demographic assumptions to apply in future, calculating the present value of future benefit payments and projecting both emerging costs and liabilities for accrued benefits into the future.
The contributory membership stands at 71 members, down from 90 contributors three years ago. This will continue to decline as members reach retirement age and claim benefits. The number of ex-contributorscontinues to increase, and now stands at 153 pensioners and 3 deferred pensioners. The rate of increase is expected to slow, with the number of pensioners peaking at around 200 in the 2020s before dropping gradually.
Accrued employer liabilities were $68.3 million as at 30 June 2012, up from $37.2 million as at 30June2009. Liabilities are higher than projected from 2009 due primarily to a lower discount rate at this valuation (+$19.7 million). Other causes of increase are low pensioner mortality (+$0.5million) and low commutation of pensions (+$2.0 million).
Territory emerging costs are expected to be around $1.7 million in 2012-13 and will continue to rise slowly in nominal terms until around 2030 to about $3.5 million per annum. Liabilities are close to their peak in real terms, and will remain stable for six to 10 years, after which they will gradually decline as membership declines.
Financial Statements
Independent Auditor's Report to the Trustee Board
Trustee Statement
In the opinion of the Superannuation Trustee Board:
- the accompanying financial statements consisting of a Statement of Net Assets, Statement of Changes in Net Assets and Notes to the Financial Statements are drawn up to present fairly the financial position of the Northern Territory Police Supplementary Benefit Scheme as at 30June2014 and the results of its operations for the year ended, in accordance with AustralianAccounting Standards and other mandatory reporting requirements;
- the financial statements have been prepared in accordance with the requirements of the Northern Territory Police Supplementary Benefit Scheme Trust Deed (as amended); and
- the scheme has been operated in accordance with the provisions of the Northern Territory Police Supplementary Benefit Scheme Trust Deed and Rules and in compliance with the requirements of the Superannuation Industry (Supervision) Act 1993 during the year ended 30June 2014.
Deputy Chairperson / Date: 26 September 2014
M MCADIE
Member / Date: 26 September 2014
A POLLON
Statement of Net Assets