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The CSS Exit Rate Policy

The CSS Board has made a change to the way earnings are allocated to facilitate the introduction of a cash investment option for CSS members in December 2004, and provide a foundation for a fuller range of investment choices in the future.

In order to deliver these options to members, now and in the future, the Board has changed the way it allocates earnings by amending the CSS Exit Rate and Crediting Rate policies, with effect from 13 August 2004, as follows:

“As part of a transition towards the introduction of Member Investment Choice within the CSS, the Board resolves:

1. Not to declare a crediting rate for all CSS members for 2003/2004 and to declare its intention that crediting rates not be declared for future financial years.
2. To amend the exit rate policy for all CSS members as follows:

   i. “The exit rate shall be the net investment earnings of the Fund from 1 July 2003, where net investment earnings are determined as earnings after tax, fees and after replenishment of the negative reserve that existed at 30 June 2003.
   

   ii. This exit rate will fluctuate. Members are guaranteed never to exit the Fund with less than their account balance as at 30 June 2003 plus contributions since that date.

   iii. Exit rates will be determined on a Tuesday, based on the estimated net investment earnings of the Fund as at the end of the previous Friday. They will be published on the next business day to apply to benefit payments from that day.

   iv. A determined weekly rate will be varied where market movements have an estimated 0.5% or greater effect on the Fund's investment performance.”

3. That from 1 December 2004 (or other date as the Board may determine – referred to as the ‘transfer date') members may choose to transfer their funded accumulated balance to a cash investment option which will guarantee that the transferred balance will never be reduced so long as they remain in the cash option.
4. That all members who do not choose to transfer to the cash investment option would remain invested under the investment strategy as determined by the CSS Board. Future exit rates for members in this investment strategy will reflect the net investment return of this strategy from 1 July 2003. Members' balances will not be reduced below that as at 30 June 2003 plus contributions since that date.
5. That the option for members to transfer to cash would be available on the transfer date and thereafter at such times and subject to such conditions as determined by the Board. If at any time the Fund has a negative reserve the option for members to transfer to a cash investment option would be suspended until the negative reserve was replenished. Members can transfer back from cash to the default strategy but restrictions on the frequency of switching will apply, and interest earned since 1 July 2003 again becomes at risk.
6. To retain the right to change the timing of the exit rate determinations and/or the methodology used to calculate the rate as appropriate to the circumstances of the Fund at any particular time.

The Board further resolves to advise the Minister of these decisions and seek support from the Government for amendments to the relevant legislation to remove any impediments to the introduction of member investment choice into the CSS.”

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