Glossary

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.

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

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).

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.

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

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.

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).

The meaning of child within the Family Law Act 1975 includes children:

• born to a woman as the result of an artificial conception procedure while that woman was married to, or was the de facto partner of, another person (whether of the same sex or opposite sex);

and

• who are children of a person because of an order of a state or territory court made under a state or territory law prescribed for the purposes of 60HB of the Family Law Act 1975, giving effect to a surrogacy agreement.

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.

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

You have the flexibility to choose a contribution rate of between 2% and 10% of your salary (as a whole percentage). Or you can choose not to contribute at all. We understand that your financial needs can vary and the PSS allows you to change your contribution rate at any time.  

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

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.

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.

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.

An eligible child in relation to a member who has died, is a child of the deceased member or pensioner or of their spouse (including an adopted child, an ex-nuptial child, a foster child, a step-child, a ward, or a child of the member or spouse within the meaning of the Family Law Act 1975) who:

• has not reached age 16

or

• is age 16 or more but less than age 25 and:
  • is receiving full-time education at a school, college or university;

  and

  • is not ordinarily employed or self-employed

and

• immediately before the death of the member or pensioner:
  • ordinarily lived with the member (except where the child is a child of a spouse of the deceased person but not of the deceased person);
  • was, in the opinion of ARIA, wholly or substantially dependent upon the member or pensioner;

  or

  • where the child is born, after the death of the member or pensioner, and would have, in the opinion of ARIA, been living with the deceased member or pensioner or so dependent on them if the person had been born before the death of the deceased.

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 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

The use of debt to finance assets, usually expressed as the ratio of debt outstanding to gross asset value. For example, the 13% gearing of ARIA's core unlisted property portfolio implies that $130 of debt is held against every $1,000 of property value.

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.

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.

A marital or couple relationship is a relationship between a member or pensioner and a person of the same sex or opposite sex who lived together as husband and wife or partners in a permanent and bona fide domestic relationship for a continuous period of at least three years at the date of death.

If the relationship had existed for less than three continuous years at the member or pensioner’s death, eligibility can still be determined where ARIA is satisfied that the person ordinarily lived with the member or pensioner as husband and wife or partners.

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

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.

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

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

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.

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.

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

A pension payable under the Scheme's rules.

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

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

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

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.

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

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

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.

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.

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.

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.

See Involuntary Retirement.

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).

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 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.

An investment position that benefits from a decline in market price.

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

The Superannuation Industry (Supervision) (SIS) Regulations introduced a number of changes from 1 July 1999. One of these changes relates to the amount of the lump sum that you can access before reaching preservation age.

The SIS upper limit is the amount you could have taken as a lump sum had you received an involuntarily retirement (retrenchment) on 30 June 1999.

Any lump sum benefit we pay you before you reach preservation age cannot exceed your SIS upper limit. If you preserve your benefit in the PSS and claim your benefit before reaching your preservation age, your lump sum cannot exceed your SIS Upper Limit. You will need to pay any balance that exceeds your SIS Upper Limit into a rollover fund.

For the purposes of the Superannuation Act 1976, a spouse is a person who had a marital or couple relationship with a member or pensioner at the time of their death.

Where a person previously had a marital or couple relationship but the relationship finished before the date of death, a spouse benefit may still be payable if:

• at the time of the deceased person’s death, the person was legally married to the deceased person

and

• they were wholly or substantially dependent upon the deceased person at the time of the deceased person’s death.

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

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.

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.

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

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'.

Personal contributions in excess of the compulsory 5%.

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

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’.

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

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.

Terminal illness (ATO definition): A payee will be taken to be terminally ill if it is certified by two medical practitioners (at least one of these a specialist) that they are suffering from an illness which in the normal course would result in death within a period of 12 months.

The highest income tax rate.

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.

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.

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

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.

An investment structure whereby a number of investors commit funds to a pooled trust, which purchases and manages direct interests in property assets.

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