Welcome to the 22nd edition of CEO Online

In this edition, I’ll bring you up-to-date with:

Investment performance and end-of-year results

It's been another great investment year for your fund in 2006/07. Although audited figures are not yet finalised, the Default Fund is estimated to have earned 16.5% after tax and fees, well above the target return of 7% per annum over the long term. This gives the Default Fund a three-year performance rate of 14.5% per annum, which is also well above the 7% per annum target.

The Cash Investment Option is estimated to have earned 5.4% after tax and fees in 2006/07. This is in line with its target rate of return.

The ongoing performance of the Default Fund and Cash Investment Option is below.

Please remember that past performance is no indication of future performance - returns are volatile and it is not possible to predict when they will go up or down, or how quickly this will happen.

CSS Default Fund

For July 2007, the estimated performance after tax and fees is -0.17%.
For the period of 1 August to 22 August 2007 the month to date Earning Rate is -0.54%.

CSS Cash Investment Option

For July 2007, the estimated performance after tax and fees is 0.46%.
For the period on 1 August to 22 August 2007 the month to date Earning Rate is 0.31%.

Current Investment Market

No doubt you will have seen or heard of the correction experienced in the share market both in Australia and in most overseas countries in recent weeks.  These falls had their origin in a rising number of defaults by homeowners within the US sub-prime mortgage market.  Events in this isolated market quickly led to a general re-assessment of risk by global investors, who concluded that the return premium for investing in risky assets was too small.  It has been the re-pricing of risk that has resulted in a significant decline in all major equity markets. It has also led to higher credit spreads on non-government bonds and large moves in currency markets.

Superannuation is no different to any other diversified investment. It is subject to changing market performance across a range of market-linked asset classes, such as shares. Almost all properly diversified superannuation funds suffered a decline in earning rates in July and therefore performance, largely as a result of falling international and Australian share markets. The CSS is no different.

ARIA, the Trustee of the CSS, has adopted a long term investment strategy which is designed to minimise, through diversification, the impact of downturns. However, it cannot eliminate them altogether. You may wish to speak to a financial advisor if you need more information on present market circumstances and the impact of these on your own retirement planning.

t is important to note, that if you leave the CSS as an age retiree, your pension, the most significant part of your benefit, is not affected by investment performance. It is determined by your final salary for superannuation purposes, length of service and age at exit. However, your member and productivity components are affected by investment performance, along with any Super Co-contributions and money you may have transferred into the CSS from other super funds. Additionally, if you intend resigning and preserving your benefit, your pension will be affected by investment returns, as your basic contributions and Fund earnings on the date your benefit is processed forms the basis of determining your commencing pension.

Find out more about your Fund's investment performance, investment strategy and Cash Investment Option.
If you are planning to retire or claim your benefit within the next 12 months, but not in the next three months, you may wish to use the i-Estimator to project your potential future benefit at Member Services Online (remember, you will need an access number to use this service).

Processing delays for benefit quotes and payments

We have previously let members know that due to the implementation of the Government’s Better Super reforms and the consequential need to enhance our systems, there would be delays in processing requests for benefit estimates until mid-August.

We can now report that we have successfully implemented the required system changes and are processing benefit estimates to clear the backlog of estimate requests as quickly as possible.

The current backlog may take several weeks to clear but we anticipate resuming our normal service level standards for processing estimates from early September.

While this backlog is cleared we will continue to give priority to any members who are faced with non discretionary retirement situations, such as invalidity.

We understand the important it is for members to receive timely information and thank you for your patience during this period.

Partnership to improve company performance

As the Trustee for the CSS, ARIA is pleased to have joined with seven other institutional investors to found a specialist governance and research provider, Regnan.

Regan will give us the opportunity to work together to improve the environmental, social and governance performances of the companies in which we invest.

We believe that poor management of environmental, social and corporate governance issues can lead to financial risks as well as a decline in the long term value of shareholder investments.

Find out more about our other commitments and ESG practices

Getting to know the new tax laws

In this edition, I’m pleased to tell you that the Government’s Better Super changes are now in place.

The main changes that may affect you as a CSS member include:

For members aged 60 or over, benefits from a taxed source (such as your CSS lump sum or a non-indexed pension) will now be tax-free and a 10% tax offset will apply for pensions from an untaxed source (such as a CPI-indexed pension).

The new proportioning rules mean that if you take part of your benefit, the payment will include both tax-free and taxable components in the same proportions as exist in your total benefit.

While it is not an offence not to quote your TFN to your super fund, providing your TFN to the CSS will have the following advantages (which may not otherwise apply):

Find out more information about the Better Super changes.

Fund Allocation news

In addition to the implementation of Better Super, changes to the method of allocating CSS Fund earnings are now in place.  Earnings can now be positive or negative, depending on the current investment returns and will be allocated to your account regularly, rather than on exit from the CSS.

Find out more information about the changes to the allocation of Fund earnings

Address details for Member Statements

The 2006/07 annual Member Statement will be distributed from mid-October. If we have your current postal address we will post it direct to you. Otherwise, it will be sent to you through your employer. If you haven't yet provided your current address details and you would like the convenience of important information being sent to you directly, you can provide or update your details by:

ASFA report finds many are under-prepared for retirement

The Association of Superannuation Funds of Australia (ASFA) recently released a sobering report which describes the level and diversity of super account balances in Australia.

The Are retirement savings on track report shows that some areas of the population, particularly women, need encouragement to save if they are to achieve a modest standard of living in retirement. One of the key findings was that 70% of men and 90% of women currently have balances of less than $100,000.

One of the ways you can boost your retirement benefit is by increasing the contributions you make to your super. You can find out more in the Contributions area of our website.

Or, you can use the i-Estimator to project your potential future benefit at Member Services Online (you will need your Access Number to use this service).