Many AvSuper members have been watching stock markets fall since 30 June 2011 and given related events around the world, including the downgrade of the US triple-A credit rating and ongoing worries about European debt, there is quite reasonable concern about their  super investments.

It is important to remember that superannuation is a long term investment and short term falls are to be expected. Good advice perhaps but we acknowledge it can be very hard for some members to sit and watch their super nest egg decrease, especially as financial markets in Australia fall close to levels last seen at the height of the GFC in 2008.

While there may be things you can do, we caution against panicking or making hasty decisions without thought for the long term consequences of your actions.

In addition to the information below, you may find our last member bulletin a useful guide to recent investment performance, while our monthly investment update and the other investment information and fact sheets you’ll find on our website may be helpful for understanding what has been happening in the financial world, especially as it relates to your AvSuper investments. Of course, you can also contact us to discuss your concerns.

Thinking of taking action

We understand the often emotional urge to flee volatile markets and transfer your investment assets to cold, hard cash – but we strongly recommend you think about your options and their consequences before you take any action. You could end up realising your losses by ‘selling at the bottom’ and then miss out on any market increase that eventuates.

Particularly if you are retried or approaching retirement, now may be the time to talk to our Member Advice Manager to get some advice about choosing AvSuper investment options to best suit your investment needs and risk tolerance (free appointments with our Member Advice Manager are available to all members).

AvSuper’s returns for the 2010-11 financial year were amongst the top 10 funds in Australia so we are well positioned for the future, notwithstanding the current downturn.

Most importantly, remember that trying to time investment markets’ peaks and falls is very hard and very risky, especially in such turbulent markets as we are now seeing. Also, while cash investments do offer lower risk than most other investments, they are unlikely to give your super sufficient growth over the long term, so carefully consider your investment timeframe and long term needs before switching to cash when markets are falling, or have fallen dramatically.

Superannuation and financial markets

Remember: superannuation has performed extremely well over the long term. Super has considerable tax advantages and it can be hard to get back into if you leave the system.

Given that most Australians will spend 15 years or more in retirement, super is still a long term investment even if you are retired or nearing retirement. Over time, you will likely require some growth, and therefore some exposure to growth assets in your super, even while in retirement.

In the short term, the AvSuper Trustee considers that the current situation is not likely to be a repeat of the 2008-09 GFC and notes the corporate world is now in an even better position to deal with downturns than it was three years ago. In the past, we’ve seen that “scared” markets have provided the best opportunities for those who remain focussed on their medium to long term investment objectives.

What AvSuper is doing

The AvSuper Investment Committee is watching investment markets very closely, taking sound investment advice on the key issues and carefully considering the long term growth of your super as they monitor AvSuper’s investment portfolio. We will make any adjustments that may be prudent or appropriate to the circumstances to ensure your super savings are invested soundly with an eye to the long term, and try to take best advantage of the current economic climate.

As the financial situation develops over coming weeks, we will keep you informed. Meanwhile, you can look at the investment section of our website for updated returns, investment managers and related information at any time, or you can call us on 1800 805 088.

Michelle

Michelle Griffiths
CEO, AvSuper

The Trustee is delighted to be able to report consistently outstanding investment returns for the year ending 30 June 2011, resulting in AvSuper joining the ranks of Australia’s ‘Top 10′ super funds for investment performance this year.

In fact, Selecting Super (part of the Rainmaker group) rated AvSuper’s investment performance 7th (out of 78) super funds this year based on returns for our default investment option.

Members in the Growth investment option (the default for members who do not make a choice) of AvSuper’s accumulation division can look forward to seeing double digit returns  on their member statements this year, with a net investment return for the full financial year of 11.1% (after investment fees and taxes).  This return compares very favourably to the benchmark and median investment returns of between 8% and 9% for many other super funds, including many of the largest industry and retail super funds in the country.

AvSuper’s size and agility gives us access to proven investment expertise in our Directors, Management team and our external advisers without any of the anonymity of larger funds.  When you deal with AvSuper, you can count on dealing with people that know super and know you and your account – not an anonymous  call centre.

AvSuper’s boutique, highly personalised and profit-for-members approach mean all investment decisions are made to increase your super assets for the lowest possible cost. 

The Trustee’s Investment Committee – chaired by George Fishlock, an employee representative Director (and Air Traffic Controller) – has a rigorous approach to investment governance and a highly disciplined review and monitoring framework which drives investment performance and portfolio positioning.

To find out more about our investment returns for AvSuper’s other investment options, including returns for our retirement income streams, visit the investment centre on our website.

Michelle

Michelle Griffiths
CEO, AvSuper

Note that past performance is not always indicative of future performance.

Following a comprehensive review and due diligence process, AvSuper’s Investment Committee is pleased to announce a new manager in our  Growth Alternatives portfolio, Bentham Asset Management.

Importantly, investing in Bentham’s syndicated loan fund provides for a well diversified exposure to a global syndicated loan market which typically proves equity like returns with a lower risk profile than investing directly in equities.

Syndicated loans (or bank loans or leveraged loans as they are also called) are made by banks to high rating companies and rank high in the capital structure of those companies which means greater security and lower risk while being supported by attractive yields across different industries, locations and issuers with an overall focus of generating stable income.

Bentham Asset Management has offices in Australia, New York and London. The Australian team has a strong track record of managing global diversified fixed interest portfolios and are well resourced with market leading risk portfolio systems.

Did you know that you can tell us how you want to have your super distributed when you die?

From 1 July 2011, AvSuper members can choose to make binding beneficiary nominations instead of non-binding nominations (which just guide the Trustee). Either way, it is your choice and it doesn’t cost anything to make a nomination.

A binding nomination must be followed by the Trustee as long as it meets the following rules:

• witnessed by two adults not listed as beneficiaries
• signed within the last 3 years
• the beneficiaries are your dependants under super law

You can read more about binding and non-binding beneficiary nominations on our website or complete a beneficiary nominations form to make your choice. Or contact us directly with any questions about making your nomination.

On 10 July 2011, the Federal Government announced the long-awaited carbon tax to mixed reaction from industry. It is important to note that these are only proposals only until the legislation is passed. They have suggested we will have a transition period until 1 July 2015 when a market-based pricing mechanism is expected to begin.

While it may be good news to have the proposal available for review, it is too soon to predict with any certainty the impact of the carbon tax on AvSuper and superannuation in general.

The AvSuper Trustee will be reviewing the carbon tax in detail over the coming months to get a full understanding of the costs, opportunities and any relevant compensation promises for the Fund and for all our investments. In particular, we will look at Australian shares as individual company’s market valuations settle down, infrastructure investments and possible clean technology investments.

Actual costs for companies are yet to be seen but we hope there will negligible impact on super funds at least for the short to medium term.

As we learn more about the carbon tax and analyse the included risks and rewards for your retirement savings, we will keep you informed about these developments.

Michelle

Michelle Griffiths,
CEO

Following the floods across Australia and cyclone Yasi in Queensland, the Government introduced a temporary Flood Levy to raise money to help rebuild devastated areas and assist affected communities. The Flood Levy will only apply from 1 July 2011 to 30 June 2012.

The levy will also apply to super withdrawals (where paid in cash) made during 2011-12. Generally speaking, you may have the Flood Levy deducted from any cash payments made to you by AvSuper if you:

• are under 60 and receive an income stream
• are under 60 and take a cash amount from your super account
• receive a super payment on compassionate release or hardship grounds
• receive a disablement benefit (including any insurance component) from AvSuper

Note that payment of a death benefit to a non-dependant beneficiary or your estate may also incur the Flood Levy.

The levy will generally not apply if

• you are taking a cash amount less than $200
• you are over 60
• you are taking a terminally ill payment
• you are rolling over money between super funds

The Flood Levy will generally affect people earning more than $50,000 pa - however those in flood affected areas can apply for an exemption at the time of receiving their payment.

*Note that the levy will apply to your total income for the year, including these super withdrawals, so a shortfall may be part of your tax return as AvSuper will only make deductions based on each super withdrawal made during the year.

The Federal Government announced today that income stream members can continue to chose a minimum drawdown amount lower than their legislated minimum pension withdrawal for 2011-12.

Generally, income stream members must withdraw a minimum amount of their account balance each year. Since the GFC, the Government has provided some relief by reducing the minimum annual withdrawal amount. This has allowed income stream members to avoid capitalising investment losses generated during the GFC .  This has been useful to many AvSuper members with other sources of income in retirement. 

For 2011-12, income stream members can now choose to drawdown 75% of their mandated annual minimum.

We will be contacting income stream members in July 2011 with details of their annual minimum withdrawals. AvSuper members who have taken advantage of the drawdown relief during 2010-11 will automatically have it applied to their 2011-12 income stream minimum. These letters will include details on how to adjust your drawdown payments if you wish to do so.

The Government has said that drawdown relief will not be available for the 2012-13 year.

Superannuation was not a key focus of this year’s Federal Budget, but some proposed changes were announced which may impact some AvSuper members. Of course at this stage the changes are proposals only and not yet law and as always we will keep you informed as the legislation progresses. 

A full break down of the relevant changes in is our 2011 budget fact sheet, but some of the highlights are:

• Income stream members can still access drawdown relief, although the level of relief is halved for the 2011-12 year and removed altogther from 1 July 2012
• A refund of contributions mechanism to allow members who inadvertently break their concessional contributions limits to make adjustments to avoid excess tax
• from 1 July 2012, if you are over 50 and have less than $500,000 in super, your concessional contributions limit will be $25,000 above the main concessional limit
•  Co-contribution thresholds are not changing for the 2011/12 year

I am pleased to welcome Leyman Leyes as the newest member of the AvSuper Team in his capacity as our Member Services Consultant.

Leyman has a strong superannuation background, including experience with both accumulation and defined benefit arrangements.  He also has practical experience with financial planning and member advice requirements, which means he can very competently support AvSuper members with all queries you might direct to us.

As you know, we are very proud of our long history of providing you with personalised support from an experienced Trustee team – not an anonymous call centre. I am confident that Leyman will be a valued addition to our Member Services team, and I look forward to members meeting him over the phone and in our offices over the coming weeks and months.

Michelle

Michelle Griffiths
CEO, AvSuper

AvSuper uses external service providers to assist the Trustee with many Fund functions, such as administration services which include processing contributions to your account, making benefit payments and issuing member statements.

We are pleased to advise members that following a comprehensive administration benchmarking review in late 2010, we have successfully transferred  AvSuper’s administration to a new provider, Russell Employee Benefits. The Trustee is confident that Russell has the capacity and capabilities to provide a high standard of administration services, now and in the future.

What impact does this have on you as a member?

During the transition, which took place at the end of March 2011, we are pleased to say that members experienced no disruption to services. Even now, you can continue to make contributions, visit member online for account information or switch options, call us for help or personal advice, and so on.

Looking forward, we anticipate  being able to introduce a number of enhancements and improvements, particularly to our online services, over the coming months and will keep you informed as these are progressed.

Michelle

Michelle Griffiths
CEO