Glossary

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Active

An active manager has a benchmark to operate against; but the manager sets out to beat the benchmark. This is done by buying shares in different proportions from their benchmark weight. For example, again if Newscorp is 10% of the index by value, an active manager might hold 13% Newscorp in the portfolio if the manager expects Newscorp to outperform. If Newscorp is expected to under perform, then the manager might hold only 7%. So the manager actively moves away from benchmark weight in companies where the manager has conviction that the shares will either outperform or under perform.

Active management

An investment management style that aims for returns above a set benchmark, identifying mis-priced securities, which the investor trades to make a profit.

ARIA

The Trustee of the CSS. We provide superannuation services and products to Australian Government employees and employers through three Schemes – the Commonwealth Superannuation Scheme (CSS), the Public Sector Superannuation Scheme (PSS) and the PSS Accumulation Plan (PSSap).

Alternative investments

Non-traditional assets, that is, assets outside the traditional asset classes of shares, fixed interest and property. They include infrastructure assets, buy-out funds and venture capital.

Asset classes

An asset class is a group of financial assets that have similar investment characteristics (such as Australian shares or Australian property).

Benchmark

Scheme managers and investors use various indexes or other market measurements as 'benchmarks' to judge the performance and risk of a portfolio in comparison with other investments.

Cash Investment Option

An investment option which provides members the opportunity to have more surety of earnings for their taxed accumulation components, in exchange for the likely higher but more volatile earnings delivered by a balanced fund (the current CSS Default Fund)

Concessional contributions

Previously known as deductible contributions. These are contributions made from before-tax income, whilst you were a contributing member. Generally these are employer contributions in the CSS

Concurrent membership

If you have joined the CSS with one Commonwealth employer, and then join again with another Commonwealth employer.

CPI-indexed pension

A pension which is indexed half yearly in line with the consumer price index.

CSS Default Fund

The current CSS Fund which we are now referring to as the 'default' Fund to differentiate it from the Cash Option introduced in December 2004.

Debt

Investing in 'debt' includes buying government bonds, fixed interest or cash investments. Debt generally offers less risk but also lower returns than shares or property.

Earnings Rate

This is what the CSS Fund earns on its investments, less fees and taxes. Fund earnings are applied to member’s accounts on a regular basis. Fund earnings may be positive or negative.

Eligible child

In relation to a person who has died, means a child (including an adopted child, an ex-nuptial child a stepchild or a ward of either the member or his/her spouse, or any other person whom the Board determines is to be treated as a child of the deceased) of the person or of a spouse of the deceased person.

Eligible spouse

He or she is a person of the opposite sex who had been living as husband or wife (including de facto) for a continuous period of at least three years.

Employer-financed component

In most cases the first part of the employer component is paid as an indexed pension. Depending on your reason for exit, this defined benefit has regard to your final salary, length of contributory membership, prospective (i.e. potential) membership and age at exit. For the majority of members this is the main benefit available from the CSS.

Financial planning

Financial planning is the process of meeting your life goals through the proper management of your finances. Your life goals could include buying a home, saving for your children's education, managing debt or planning for retirement.
Financial planners use a six-step process that helps you take a 'big picture' look at where you are and where you want to be financially. Using this process they help you work out what you need to do now and in the future to reach your goals.
The six steps of the financial planning process are:

1. Gathering your financial data - such as details on your income, debt level, commitments, etc.
2. Identifying your goals.
3. Identifying any financial issues - or deficiencies between where you are now financially and where you want to be.
4. Preparing your financial plan - which will identify recommended investments and will address your attitude to risk.
5. Implementing your financial plan.
6. Reviewing and revising your plan - to ensure it stays up-to-date and relevant to the economic climate and your changing lifestyle.

Copyright: FPA 2002

Invalidity benefits

An invalidity retirement pension is payable if the Trustees agree to your retirement because you suffer a permanent medical condition which is likely to stop you from working again. If you are totally and permanently incapacitated to the extent that you are unlikely to work again in any occupation for which you are reasonably qualified by education, training or experience (or could become so after retraining), you may be retired on invalidity grounds and become entitled to payment of invalidity benefits.
Partial invalidity benefits: A partial invalidity benefit is a form of income maintenance, paid as a pension when your salary is reduced because a permanent medical condition causes you to be downgraded or to work reduced hours. It is also payable if you retired on medical grounds and then returned to work in a position lower than the one you held when you were first retired on medical grounds.

Involuntary retirement

Retrenchment or redundancy, when your employment is compulsorily terminated by your employer, or when you accept an offer of retrenchment or a redundancy package, or when your employment is terminated on inefficiency grounds, as a result of having lost essential qualifications or, in restricted cases, on the termination of contracts.

Marital relationship

Broadly speaking, a marital relationship,at a particular time, means a permanent and bona fide domestic relationship, as husband or wife (whether or not legally married), between a scheme member or pensioner and another person of the opposite sex, where:

• the couple had been living as husband or wife for a continuous period of at least three years immediately before that time; or
• the couple had been living as husband or wife for a continuous period of less than three years immediately before that time and they ordinarily lived as husband or wife on a permanent and bona fide domestic basis (in the opinion of the Trustees), having regard to any relevant evidence, including evidence that:

  (a) the person was wholly or substantially dependent upon that other person;

  (b) they were legally married to each other;

  (c) they had a child who was:

  (i) born of their relationship, or

  (ii) adopted by them during the period of the relationship; and

  (d) they jointly owned a home which was their usual residence.

Where a marital relationship commenced after the pensioner's 60th birthday and had lasted less than 5 years at the time of death of the pensioner, a spouse's application form should still be completed and forwarded to ComSuper as it is possible that a benefit may still become payable as an act of grace.

Member component

Your basic and supplementary contributions (if any), plus Fund earnings.

Member statement

To help you keep a record of your contributions, as at 30 June each year we calculate your accrued contributions, fund earnings and potential benefits. You can also access your Member Statement from this website.

Minimum retiring age

The minimum retirement age applicable to a person with respect to terms and conditions of employment.

 Non-concessional contributions

Previously known as undeducted contributions. These are personal contributions made after June 1983 from after-tax salary, whilst you were a contributing member.

Non-indexed pension

Pension that can be purchased with your member and/or productivity components. This pension is not indexed to the consumer price index (see CPI-indexed pension). From age 60 this will be tax-free.

Passive

A passive manager is required to track the performance of the relevant index as closely as possible. For example, our passive Australian equities manager, CFS, tracks the performance of the S&P/ASX300 ex Listed Property Trusts (that is the Funds benchmark for Australian equities). CFS does this by buying shares for our portfolio in the same proportion as they occur in the index. For example, if Newscorp is 10% of the index by value then our CFS portfolio will contain 10% Newscorp by value.

Passive management

Aims to equal the overall annual change in an index e.g. the Dow Jones Index.

Pension

A pension payable under the Scheme's rules.

Period of membership

The period starting on a person's first day of membership and ending on his or her last day of membership.

Post-June 1990 Productivity

Fortnightly contributions paid by a member’s employer after June 1990. This is payable from a taxed source.

Post-June 1994 Invalidity Component

Paid as a result of total and permanent incapacity and in consequence of termination of employment.

Pre-assessment payments

Partial income maintenance from the time any sick leave expires until an assessment is made of whether you are, to be retired on invalidity grounds.

Pre-July 1983 component

The amount of a member’s super which relates to eligible service before 1 July 1983.

Pre-July 1990 productivity

Productivity contributions paid by a member’s employer for the period of prior to July 1990. This is payable from an untaxed source.

Preservation age

The age up to which certain components of your superannuation benefit must remain 'preserved' within the Fund. That is, you cannot access these funds until you reach preservation age, except in special circumstances.

Productivity component

An employer-contributed amount, which is dependent on a member's salary, paid fortnightly, to which Fund earnings are applied and forms part of any benefit payable from the CSS. The productivity component is paid from a taxed source.

Property

Investors may buy property, such as office buildings, directly or through a property trust. Returns come from rent, property development and market increase in property values. Over the long-term, property investments have a lower risk and return than shares.

Reasonable Benefit Limits (RBL)

Under the Better Superannuation legislation, Reasonable Benefit Limits (RBL) were abolished on 1 July 2007. Even though RBLs no longer apply to contributions made after 1 July 2007, the CSS is still required to maintain RBL information.

Regular employee

A person who is a permanent full-time employee, a permanent part-time employee or a temporary full-time employee for at least three months. A temporary part-time employee who is employed for at least three months and has access to sick and recreation leave is also a regular member.

Retrenchment or redundancy

See Involuntary Retirement.

Rollover or transfer of funds

In superannuation terms, this is the transfer of superannuation lump sum payments, into a superannuation fund, approved deposit fund or deferred annuity in order to avoid the requirement to pay lump sum tax (if the rollover is not accessed until the minimum retirement age).

Rules

ARIA administers the CSS in accordance with the provisions of the CSS Act and is responsible for the management and investment of the CSS Fund.

Shares (or Equities)

Shares represent part-ownership of a company. They can deliver a profit through share price increases and dividends. Shares may provide greater long-term returns than other investments, though they do have greater short-term fluctuations.

SIS

Superannuation Industries (Supervision) Regulations. The governing federal legislation covering superannuation and the superannuation industry. SIS provides the legislative basis of the Superannuation Guarantee.

SIS upper limit

The Superannuation Industry (Supervision) Regulations (SIS) placed certain restrictions on the amount of cash lump sum that can be paid to members who are not permanently leaving the workforce, or have not reached their preservation age.

If you are not permanently retiring from the workforce or have not reached your preservation age, any cash lump sum paid to you cannot exceed your SIS Upper Limit. This is the cash amount you would have received if you had been involuntarily retired (retrenched) on 1 July 1999.

Any CSS lump sum amount that exceeds the SIS Upper Limit must be rolled over into a rollover fund.

Super Co-contributions

An additional super contribution paid by the Australian Government to low income earners who make after-tax contributions.

Superannuation Guarantee (SG)

A policy introduced in July 1992 which provided that all employers are required to contribute a prescribed level of contributions on behalf of their employees to a complying superannuation fund.
The CSS Scheme exceeds the SG prescribed minimum.

Superannuation Contributions Surcharge

A tax on certain superannuation contributions, specifically regarding higher income earners, which was introduced from 20 August 1996 and abolished from July 2005. Surcharge debts for the period are recorded on member accounts and, if not paid during membership, must be paid when a benefit is claimed.

Superannuation Lump Sum

Previously known as an Eligible Termination Payment. A Superannuation Lump Sum Payment consists of two components, tax-free and taxable components. 

Superannuation salary

Contributions are based on a percentage rate of your 'superannuation salary', which is your basic salary plus any recognised allowances. Additional payments such as overtime, accommodation or travel are not counted as 'superannuation salary'.

Supplementary contributions

Personal contributions in excess of the compulsory 5%.

Taxable component

This includes concessional contributions made since 1 July 1983. It can contain taxed and untaxed elements

Taxed element

Consists of post-June 1990 productivity member contributions, Super Co-contributions and transfers from other super funds. These component were previously referred to as ‘funded’.

Tax-free component

This may include contributions made before 1 July 1983, non –concessional contributions made since 1 July 1983 and post-June 1994 invalidity amounts.

Tax offset

A reduction in tax liability. Often a tax offset is described as a percentage, for example, an offset of 10% to a pension. It is different from a tax deduction, which reduces your taxable income.

Top Marginal Tax Rate (MTR)

The highest income tax rate. For 2007/08 the top MTR is 45%.

Totally and permanently incapacitated

If a member suffers from a physical or mental condition that will result in them being unlikely ever to work permanently again in a job for which he or she is reasonably qualified by education, training or experience or could be so qualified after retraining.

Transfer value

If you choose to preserve your benefit in the CSS, and, within three months join another eligible superannuation scheme, a transfer value can be paid into that Scheme in return for benefits in that Scheme.

Trustee

A person who holds office as a Trustee of ARIA and includes the Chairperson

Unallocated Earnings

Previously unallocated earnings related to the notional fund earnings applied to a member’s account from 30 June 2003 to 30 June 2007. From 1 July 2007, ARIA will allocate fund earnings in a way that reflects actual investment performance. Allocated earnings may be positive or negative

Untaxed element

Consists of your employer component and any pre-July 1990 productivity contributions. This component was previously referred to as ‘unfunded’.