2011-12 northern territory police supplementary benefit …€¦ · web viewnorthern territory...

N O R T H E R N T E R R I T O R Y P O L I C E S U P P L E M E N TA R Y B E N E F I T S C H E M E

Annual Report2011-12

Published by the Department of Treasury and Finance

© Northern Territory Government 2012

Apart from any use permitted under the Copyright Act, no part of this document may be reproduced without prior written permission from the Northern Territory Government through the Department of Treasury and Finance.

ISSN: 2201-2060

Northern Territory Superannuation Office Postal address:GPO Box 4675Darwin NT 0801

Location:Level 5, Cavenagh House38 Cavenagh Street, Darwin

Freecall: 1800 631 630Telephone: (08) 8901 4200Facsimile: (08) 8901 4222Website: ww w .nt.g o v .au/ntt/super Email: ntsuperan n u a [email protected] o v .au

NORTHERN TERRITORY POLICE SUPPLEMENTARY BENEFIT SCHEMEFirst Floor Cavenagh House G.P.O. Box 4675, DARWIN, N.T. 0801 38 Cavenagh Street TELEPHONE: (08) 8901 4200DARWIN NT 0800 FACSIMILE: (08) 8901 4222

The Honourable Robyn Lambley MLA TreasurerGPO Box 3146DARWIN NT 0801

Dear Treasurer

In accordance with the provisions of clause 11 of the Northern Territory Police Supplementary Benefit Scheme Trust Deed, I am pleased to provide you:

• the report on the operations of the Northern Territory Police Supplementary Benefit Scheme for the financial year ended 30 June 2012; and

• the audited financial statements of the Northern Territory Police Supplementary Benefit Scheme for the financial year ended 30 June 2012.

Yours sincerely

K Robinson A PollonChairperson, Superannuation Trustee Board Member, Superannuation Trustee Board

28 September 2012

Northern Territory Police Supplementary Benefit Scheme

Annual Report 2011-12 1

Table of Contents

Report on Operations 3Introduction 5

Highlights 5

Significant Events 5

The Scheme 6

Governance 6

Investments 8

Scheme Membership 10

Administration 12

Further Information 12

Financial Statements 13Independent Auditor’s Report to the Trustee Board 15

Trustee Statement 17

Statement of Net Assets 18

Statement of Changes in Net Assets 19

Notes to the Financial Statements 20

Summary of the Report of the Actuarial Investigation of the Scheme 32

Appendix:The Scheme and How it Works 33

Report on Operations



IntroductionWelcome to the 2011-12 Northern Territory Police Supplementary Benefit Scheme Annual Report. The objective of this Annual Report is to provide information to members and other interested parties on the operations of the Northern Territory Police Supplementary Benefit Scheme (PSBS), including the management, financial condition and investment performance of the fund, as well as concurrent superannuation issues.

The scheme was established under the Northern Territory Police Supplementary Benefit Scheme Trust Deed (the Trust Deed) dated 15 June 1984, last amended on 25 May 2012.

The scheme supplements the pension payable from the Commonwealth Superannuation Scheme (CSS) for eligible members of the Northern Territory Police, Fire and Emergency Services.

The Northern Territory Government and Public Authorities’ Superannuation Scheme replacedthe CSS and the PSBS for police recruited after 1 January 1988. The scheme has therefore been closed to new members.

HighlightsNew Pensions Commenced

During the year, two former members commenced a supplementary police pension. At30 June 2012, there were 163 former members and former members’ spouses receiving a pension from the scheme.

Crediting RateThe 2011-12 crediting rate for the fund is -3.9 per cent.

Significant EventsPolice Housing Allowance

During the year the application of housing allowance to relevant PSBS members continued to progress. The first claimant has now received an adjustment to their benefit. An agreement hasbeen reached with ComSuper to review member data and adjust CSS pensions where relevant. It is anticipated that the impact on any PSBS benefit will be resolved in the next year.

Legislative Amendments and Change of TrusteeAs forshadowed in last year’s report, several legislative amendments were undertaken to complete the reform associated with the new trustee arrangements. Effective from 27 April 2012, the Superannuation Legislation Amendment Bill expanded the membership of the Superannuation Trustee Board to include PSBS representatives. Trust Deeds were executed on 25 May 2012 for:

• the retirement of the previous trustees and appointment of the Superannuation Trustee Board (STB) as Trustee of the scheme; and

• a Consolidating and Amending Deed incorporating all previous changes and some modernisation of terminology.

As required under the Superannuation Act, the Treasurer provided approval for the STB to be responsible for administration of the PSBS and investments of the fund. Following this, two of the three former PSBS trustees became members of the STB.


6 Annual Report 2011-12

The Commissioner of Superannuation continues to be responsible for day-to-day administration of the schemes on behalf of the STB. There is no change to member benefits or entitlements.

Transfer of Investments to MLCInvestment of the PSBS fund has previously been with the Bankers Trust (BT) Institutional Diversified Balanced Pooled Superannuation Trust (PST). Following board approval, the investment with BT was redeemed on 30 March 2012 and placed with MLC Implemented Consulting (MLC) on 4 April 2012.

The SchemeThe PSBS is a defined benefit scheme, which pays two types of superannuation benefits:

• a lifetime pension for members who qualify for a supplementary benefit with the option to commute (cash up) the pension to a lump sum; or

• a refund of member contributions and interest for members who do not qualify for a supplementary benefit from the scheme.

Members are required to contribute 1 per cent of their salary to the fund. The scheme is unfunded, which means the Territory finances a supplementary benefit at the time a member ceases employment.

The Appendix provides information on how the scheme works (see page 33).

GovernanceTrustees

There was a change in Trustee arrangements during the year. Up to the date of the lastTrust Deed amendments on 25 May 2012, clause 4 of the Trust Deed provided for three Trustees of the scheme, all of whom were appointed by the Treasurer. The Trustees comprised a police representative on the nomination of the Police Commissioner and a Treasury representative on the nomination of the Under Treasurer, each appointed until they retired or resigned from office, anda member representative on the nomination of the Northern Territory Police Association (NTPA), appointed for a three-year term.

Following legislative amendments outlined earlier, the STB is now the Trustee of the scheme in accordance with clause 6 of the Trust Deed. The STB is a body corporate established under section 8A of the Superannuation Act (the Act). Trustee arrangements are set out in Division 1A of the Act.

The Act provides for a nine-member board consisting of the Under Treasurer, chairperson, deputy chairperson and six nominated members. One member must be nominated by the Commissioner of Police and one member nominated by the NTPA. Apart from the Under Treasurer, all members are appointed by the Treasurer and hold five-year appointments. In the transitionfrom the former Police Trustee Board to the STB, the members previously nominated by the Commissioner of Police and the NTPA became members of the STB.

Functions and powers of the STB are set out in section 8B of the Act. The STB is responsiblefor investing monies, while the Commissioner of Superannuation is responsible for administering the scheme and ensuring payment of the appropriate benefits to former members. Scheme administration is undertaken by the Northern Territory Superannuation Office, a division of



Northern Territory Treasury.



Members at 30 June 2012:

Kathleen Robinson Chairperson

Marianne McAdie Deputy Chairperson

Michael Martin Member

Michelle Kempster Member

Alex Pollon Member

Vicky Coleman Member

Jennifer Prince Member

Mark McAdie Member

Gowan Carter Member

Trustee MeetingsThe former Police Trustee Board met on four occasions during the year to consider general business and investment decisions of the fund. The first meeting of the STB as Trustee of the scheme occurred in August 2012.

Trustee RemunerationPayments to board members are made in accordance with a determination under the Assembly Members and Statutory Officers (Remuneration and Other Entitlements) Act 2006 (AMSO Act), which sets the rates payable to board members for attendance at board meetings, travel and other board related activities. Remuneration is not payable where a board member is also an employee of the Northern Territory Public Sector, the Commonwealth or a state public service.

The current remuneration rate applicable to board members is set in the Statutory Bodies Classification Structure 2012, issued under the AMSO Act. The daily rate is $405 for a Chair and$304 for a member, or an hourly rate 1⁄5 of the daily rate. In 2011-12, two board members were entitled to receive sitting fees for board attendance. Remuneration payments made to board members totalled $2999.

Conflict of InterestAt the commencement of each meeting, STB members are required to sign a conflict of interest register and any disclosures are recorded in the minutes of the meeting.

STB members must disclose if they have a direct or indirect pecuniary interest in any matter being considered, unless:

• the interest stems from being a member of the scheme; or

• they are a member of a large company (but not a director).

Where a disclosure is made in relation to a matter being considered, the STB member cannot take part in deliberations or decisions made on that matter and is disregarded for constituting a quorum on that matter.

There were no conflicts of interest recorded during the year.

Review of DecisionsThe Trust Deed provides that any person who is dissatisfied with a decision of the Trustee or a delegate of the Trustee may, within 30 days of being notified of the decision (or such further period as the Trustee allows), request the Trustee to reconsider the decision. The request should be in writing and set out the reasons for seeking reconsideration. The Trustee is required to reconsider



the decision and to advise in writing its reasons for confirming, revoking or varying the decision.Reconsideration requests can be lodged with the Commissioner of Superannuation.

There were no requests for a review of any decisions made during the year.

Trustee EducationThe Trustee is responsible for the operation of the scheme and STB members attend seminars and information sessions to keep themselves informed on superannuation issues and industry practices.

InvestmentsThe fund returned -3.9 per cent for the 2011-12 financial year.

Crediting Rate PolicyThe crediting rate policy of the Trustee is to fully distribute the earnings of the fund each year among members of the scheme.

Investment ObjectiveThe investment objective of the Trustee is to achieve a positive real rate of return (return after inflation) on fund assets measured over a five-year period. Fund returns over the last five years are presented in Table 1.

Table 1: Fund returns over the last five yearsFund Return

(Crediting Rate) CPI Real Rate of Return1

% % %2007-08 - 10.00 4.50 - 13.882008-09 - 11.20 1.50 - 12.512009-10 10.60 3.10 7.272010-11 9.50 3.60 5.692011-12 - 3.90 1.20 - 5.045-Year Average - 1.442 2.77 - 4.1010-Year Average 4.302

1 Real rate of return = Fund return - CPI1 + CPI

2 Compound average effective rate of net earnings.

Returns since the global financial crisis have not offset negative returns recorded in 2007-08 and 2008-09. The five-year real rate of return on the fund is -4.10 per cent per annum, and therefore the investment objective was not met in 2011-12.

Investment returns can be either positive or negative. The current investment structure of the fund has moderate to low volatility, which means the possibility of a negative annual crediting rate is not expected to exceed, on average, one in every four years.

This investment objective has previously been implemented through an investment with the BT PST. The investment with BT was redeemed on 30 March 2012 and placed with MLC on 4 April 2012.



Composition of the fund’s assets as at 30 June 2012 is presented in Table 2.

Table 2: Portfolio composition

% of PortfolioAustralian shares 32.6International shares 24.7Property 4.3Private markets 9.3Diversified debt 29.1

Long-term ReturnsLong-term returns, calculated as the compound average effective rate of net earnings, are required to be reported in line with Corporations Regulations. On this basis the five-year return for the PSBS fund is -1.44 per cent per annum and the ten-year return is 4.30 per cent per annum.

Investment OverviewInvestment markets were adversely affected by concern regarding the ability of countries such as Greece to service their debt, combined with signs that China’s pace of economic growth was starting to slow. Overall, it was a year when good news was hard to sustain and investors remained very cautious. Australian stocks lost approximately 7 per cent for the financial year to 30 June 2012, while global shares lost approximately 1.8 per cent.

Against this background the PSBS return in 2011-12 was -3.9 per cent.

Fund InvestmentsThe scheme has been closed to new members since January 1988 and has reached a stage where the value of benefits paid from the fund for members exiting the scheme exceeds the value of compulsory contributions received into the fund from active members. This means the fund,in some years, has a negative cash flow. In 2011-12, this resulted in redemption of $200 000from the fund’s investment with the BT PST. At the end of March 2012 the fund’s investment in the BT Balanced Fund was closed and investment funds placed with MLC.

Negative investment returns over the year resulted in a decrease of $67 000 in the fund’s assets. At the end of the financial year, the fund had $2.59 million in assets, of which $2.44 million was invested with MLC, with the residual $150 000 held in cash.

Fees

MLC charges a fee of approximately 0.47 per cent (after rebates) for managing the funds invested.The investment returns are net of these fees.

No administration or account-keeping fees are deducted from member accumulation accounts, as the day-to-day running costs of the scheme are met by the Territory.



Scheme MembershipContributions and Benefit Payments

Members finance a share of the scheme benefits by contributing 1 per cent of their salary to the fund. During 2011-12, member contributions to the fund totalled $98 295.

Members who do not qualify for a benefit receive a refund of their contributions from the fund. Members who qualify for a benefit are paid by the Territory and their contributions are transferred from the fund to the Territory. Total scheme benefits paid in 2011-12 are outlined in Table 3.

Table 3: Benefits paid

2011-12 2010-11

By the fundRefunds of contributionsTransfers to the Territory for members who qualify for a benefit

By the Territory PensionsLump sum payments

$

- 80 510286 916206 406

1 709 293119 772

1 829 065

$

89 315158 744248 059

1 573 317-

1 573 317

MembershipChanges in active membership for the year ended 30 June are provided in Table 4. The changes in active membership since closure of the scheme in 1988 is displayed in Figure 1.

Table 4: Active contributing members

2011-12 2010-11Active members at beginning of period Less exits:

PensionRefunds of accumulation accounts

Active members as at 30 June

83

42

77

90

43

83



Figure 1: Active members of the scheme since closure on 1 January 1988

Number of members 500

400

300

200

100

01988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010

Financial year

The total number and types of pensioners as at 30 June are provided in Table 5.

Table 5: Pension members

2011-12 2010-11PensionersReversionary (spouse) pensioners Postponed pensioners1

Total pensioners as at 30 June

14911

3163

14211

7160

1 Former members who have deferred the payment of their pension.

Membership Profile

Figure 2: Age profile of active members and pensioners as at 30 June 2012

Number of members60

50

40

30

20

10

040-44 45-49 50-54 55-59 60-64 65-69 70-74 75+

Age in yearsActive members Pensioners



AdministrationCompliance and Taxation Status of the Scheme

The PSBS is an exempt public sector superannuation scheme and is therefore not regulated under the Commonwealth Superannuation Industry (Supervision) Act 1993 (SIS).

A Heads of Government Agreement provides that the scheme complies with the Commonwealth retirement income policies and therefore conforms with the principles of SIS and certain other Australian superannuation legislation.

This means that although the scheme is subject to some Australian superannuation legislation, such as the superannuation surcharge and family law, the scheme is specifically exempt from legislation such as choice of fund.

A compliance audit of the scheme is undertaken each year by the Auditor-General, in conjunction with the annual financial statement audit, to ensure that the scheme complies with the principles of SIS. To date, no compliance issues have arisen from these audits.

The scheme is a complying fund for the purposes of part IX of the Income Tax AssessmentAct 1936 as amended. Consequently, income tax is assessable at 15 per cent on net investment earnings and net taxable contributions, and 10 per cent on realised capital gains.

Audit

An audit of the scheme was conducted by the Auditor-General for the Northern Territory as at 30 June 2012. No compliance issues arose from the audit.

Actuarial ServicesActuarial services to the scheme were provided by John Rawsthorne FIAA of Cumpston Sarjeant Pty Ltd, under the panel contract arrangements for actuarial services to the Territory Government. Advice was received during the year in relation to pensions, as well as setting interim and final rates of return.

A triennial actuarial investigation of the scheme was carried out as at 30 June 2012. A summary of the report is provided after the notes to the financial statements. The next triennial actuarial review is due in 2015.

Further InformationMembers requiring any additional information should contact the Northern Territory Superannuation Office.



Financial Statements



Trustee StatementIn the opinion of the Trustee:

• the accompanying financial statements consisting of a Statement of Net Assets, Statement of Changes in Net Assets and Notes to the Financial Statements are drawn up to present fairly the financial position of the Northern Territory Police Supplementary Benefit Scheme as at30 June 2012 and the results of its operations for the year ended, in accordance with Australian Accounting Standards and other mandatory reporting requirements;

• the financial statements have been prepared in accordance with the requirements of the Northern Territory Police Supplementary Benefit Scheme Trust Deed (as amended); and

• the Trust has been operated in accordance with the provisions of the Northern Territory Police Supplementary Benefit Scheme Trust Deed and Rules and in compliance with the requirements of the Superannuation Industry (Supervision) Act 1993 during the year ended 30 June 2012.

Chairperson Date: 28 September 2012

K ROBINSON

Member Date: 28 September 2012

A POLLON



Statement of Net Assetsas at 30 June 2012

Note 2012 2011

ASSETSCash and cash equivalentsUnits in pooled superannuation trust 5Deferred tax assets TOTAL ASSETS LessLIABILITIESBenefits payable 4(b) Sundry liabilitiesProvision for surcharge contributions taxCurrent tax liabilities 7(c)TOTAL LIABILITIES (excluding net assets available to pay benefits)NET ASSETS AVAILABLE TO PAY BENEFITS

$

150 1512 446 582

2632 596 996

213 1371 760

34 611234

249 7422 347 254

$

95 1802 789 323

2392 884 742

330 3331 600

39 91241

371 8862 512 856

The statement of net assets should be read in conjunction with the notes to the financial statements.



Statement of Changes in Net Assetsfor the year ended 30 June 2012

Note 2012 2011

REVENUE Investment income Interest income Miscellaneous revenueMovement in net market value of investments

Contributions revenue Members contribution Surcharge debts paid TOTAL REVENUE

EXPENSESBenefits paid 4(a) Refunds of accumulated contributionsPayment of accumulated contributions to the Territory

Other expensesOther expensesSuperannuation surcharge contributions taxTOTAL EXPENSES

Net change for the year before income taxIncome tax expense 7(b)Net change for the year after income tax

NET ASSETS AVAILABLE TO PAY BENEFITS AT THE BEGINNING OF THE FINANCIAL YEAR

NET ASSETS AVAILABLE TO PAY BENEFITS AT THE END OF THE FINANCIAL YEAR

$

- 60 283 6 687 489

- 67 459

104 61698 2956 321

44 333

206 406- 80 510286 916

2 7921 7711 021

209 198

- 164 865 737

- 165 602

$

211 8665 458

0206 408

104 260100 808

3 452316 126

248 05989 315

158 744

3 7991 8231 976

251 858

64 268545

63 723

2 449 133

2 512 856

The statement of changes in net assets should be read in conjunction with the notes to the financial statements.


Notes to the Financial Statements for the year ended 30 June 2012


1.REPORTING ENTITYThe Northern Territory Police Supplementary Benefit Scheme (ABN 64 563 356 970) is established under the Northern Territory Police Supplementary Benefit Scheme Trust Deed and Rules (as amended). The scheme incorporates a member accumulation and a defined benefit component and operates for the purpose of providing benefits for or in relation to eligible employees underthe Northern Territory Police Administration Act. Administration of the scheme is conducted by the Northern Territory Superannuation Office on behalf of the Trustee.

2.BASIS OF PREPARATION(a)Statement of complianceThe financial report is a general purpose report that is prepared in accordance with Australian Accounting Standards (AAS) including AAS 25, other applicable accounting standards, the requirements of the Superannuation Industry (Supervision) Act 1993 and Regulations and the provisions of the Trust Deed as amended.

International Financial Reporting Standards (IFRS) form the basis of AAS issued by the Australian Accounting Standards Board (AASB). Certain requirements of AAS25 however differ from the equivalent requirements that would be applied under IFRS.

The financial statements were approved by the Trustee on 28 September 2012.

(b)Basis of measurementThe financial statements are prepared on a net market value basis.

(c)Functional and presentation currencyThe financial statements are presented in Australian dollars, which is the functional currency of the scheme.

Amounts have been rounded to the nearest one thousand dollars except where otherwise noted.

(d)Use of estimates and judgmentsThe preparation of financial statements requires the Trustee to make judgments, estimates and assumptions that affect the application of accounting policies and reported amounts of assets and liabilities, income and expenses. Actual results may differ from these estimates.

Estimates and underlying assumptions are viewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and any future periods affected.

There are no critical accounting estimates and judgments contained in these financial statements other than those used to determine the liability for accrued benefits, which are not brought to account but disclosed by way of note. The following significant accounting policies have been adopted in the preparation and presentation of the financial report.




3.SIGNIFICANT ACCOUNTING POLICIESThe accounting policies set out below have been applied consistently in these financial statements.

(a)AssetsAssets are included in the statement of net assets at net market value as at reporting date and movements in net market value of assets are recognised in the statement of changes in net assets in the periods in which they occur.

The fund recognises financial assets on the date it becomes party to the contractual provisions of the asset. Financial assets are recognised using trade date accounting. From this date any gains and losses arising from changes in net market value are recorded.

Estimated costs of disposal are deducted in the determination of net market value. As disposal costs are generally immaterial, unless otherwise stated, net market value approximates fair value.

The fund’s investments with MLC Implemented Consulting (MLC) are unitised and operate as units in untaxed superannuation trusts. The investment is valued at the redemption price at reporting date, as advised by MLC, and is based on the net market value of the underlying investment. Unit values denominated in foreign currency are then translated to Australian dollars at the current exchange rates.

(b)Cash and cash equivalentsCash comprises cash on hand and demand deposits. Cash equivalents are short-term, highly liquid investments that are readily converted to known amounts of cash and are subject to an insignificant risk of changes in value.

(c)Financial liabilitiesThe fund recognises financial liabilities on the date it becomes a party to the contractual provisions of the instrument.

Benefits payable comprises the entitlements of members who ceased employment with the employer sponsor prior to year end, but have not been paid by that date. Other payables are payable on demand or short time frames of less than 60 days.

The fund recognises financial liabilities at net market value as at reporting date with any change in net market values of the fund’s financial liabilities since the beginning of the reporting period included in the statement of changes in net assets for the reporting period. Net market value approximates to the amortised costs of the liability using effective interest rate method less estimated transaction costs.

As disposal costs are generally immaterial, unless otherwise stated, net market value approximates fair value.

(d)Liability for accrued benefitsThe liability for accrued benefits is the fund’s present obligation to pay benefits to membersand beneficiaries and has been calculated on the basis of the present value of expected future payments arising from membership of the scheme up to the reporting date.




3. SIGNIFICANT ACCOUNTING POLICIES (continued)In accordance with clause 17 of the Trust Deed, an actuarial review of the scheme was carried out as at 30 June 2012 and the results were presented in a report dated 31 August 2012. The next triennial review is scheduled for 2015. The Territory’s liability for accrued benefits has been determined by reference to expected future salary levels, a market-based risk-adjusted discount rate and other relevant actuarial assumptions.

(e)RevenueInterest revenueInterest revenue is recognised when the fund has established its right to receive the interest.

Distributions and dividendsTrust distribution and dividend revenue is recognised when the fund has established its right to receive the income.

Contribution revenue and transfersMember and employer contributions and transfers in are recognised when the control of the asset has been attained and are recorded in the period to which they relate. Under Rule 2 of the Northern Territory Police Supplementary Benefit Scheme Trust Deed, members contribute to the fund at the rate of 1 per cent of their salaries.

Movement in net market value of investmentsChanges in net market value of investments are recognised as income and are determined as the difference between the net market value at year end or consideration received (if sold during the year) and the net market value as at the prior year or cost (if the investment was acquired during the period).

(f) Income taxThe contributory superannuation scheme established under the Northern Territory Police Supplementary Benefit Scheme Trust Deed is an exempt public sector superannuation scheme under the Superannuation Industry (Supervision) Act 1993 and is deemed to be a complying superannuation fund for the purposes of Part IX of the Income Tax Assessment Act 1936 as amended. Accordingly, the concessional tax rate of 15 per cent has been applied.

Income tax on benefits accrued as a result of operations for the year comprises current and deferred tax. Income tax is recognised in the statement of changes in net assets except to the extent that it relates to items recognised directly in members’ funds.

Current tax is the expected tax payable on the taxable income for the year using tax rates enacted or substantially enacted at the statement of net assets and any adjustments to tax payable in respect of previous years.

Deferred tax is calculated using the balance sheet method, providing for temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The amount of deferred tax provided is based on the expected manner of realisation of the asset using tax rates enacted or substantially enacted at reporting date.




3.SIGNIFICANT ACCOUNTING POLICIES (continued)A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent it is no longer probable that a related tax benefit will be realised.

The expense (and any corresponding liability) is brought to account in the period in which the assessments are received by the Trustee and are properly payable by the fund.

(g)Superannuation contributions (surcharge) taxThe Trustee recognises amounts paid or payable in respect of the surcharge tax as an expense of the fund. The expense (and any corresponding liability) is brought to account in the period in which the assessments are received by the Trustee and are properly payable by the fund.

No estimate has been made for the balance of any tax payable in respect of surchargeable contributions received by the fund during the current year as the Trustee is unable to determine this amount until receipt of applicable assessments in the following period.

The superannuation contribution surcharge is levied on notional surchargeable contributions in relation to periods from 21 August 1996 to 30 June 2005. The Australian Taxation Office (ATO) assesses the amount of surcharge based on each member’s adjusted taxable income and level of surchargeable contributions and periodically sends grouped assessments to the fund. Theliability to pay the surcharge rests with the holder of the surchargeable contribution at the time the surcharge assessment is received from the ATO.

The superannuation surcharge was abolished with effect from 1 July 2005 by the Superannuation Laws Amendment (Abolition of Surcharge) Act 2005. The last reporting of contributions for surcharge purposes will be in respect of contributions made up to and including 30 June 2005.

(h)Goods and services tax (GST)The fund is not registered for GST. Where GST has been applied, revenues, expenses and assets are recognised inclusive of GST. Receivables and payables in the statement of net assets are also shown inclusive of GST.

(i) Issued standards not early adoptedA number of new standards, amendments to standards and interpretations are effective for annual periods commencing 1 July 2011 and have not been applied in preparing these financial statements. None of these is expected to have a significant effect on the financial statements.The scheme does not plan to adopt this standard early and the extent of the impact has not been determined.

2012 2011$

- 80 510286 916206 406

213 137213 137

$

89 315158 744248 059

330 333330 333

2012 2011$

2 789 323- 200 000

- 2 575 282- 14 041

-

2 500 000- 53 418

2 446 582

$

2 582 915--

206 408-

--

2 789 323




4. PAYABLES

a) BenefitsRefunds of accumulated contributions

Payment of accumulated contributions to the TerritoryTotal benefits

b) Benefits payableRefunds of accumulated contributions payableTotal benefits payable

5.INVESTMENTS

BT Balanced Fund:Opening balance

Less: Partial redemption Full redemption

Change in net market valueClosing balance 31 March 2012MLC KX50 Fund:Opening balanceChange in net market valueClosing balance 30 June

6.AUDITORS’ REMUNERATIONAudit services are provided by the Northern Territory Auditor-General’s Office at no cost to the fund.

2012 2011$

737737

$

545545

- 164 865 737

-24 730

-12 076 43 037 153

32 344545

4 852

29613 39728 600

-30 961-15 121

- 518545

41- 527- 41761234

257- 497

- 257 53

263 239




7.INCOME TAX EXPENSE

a) Recognised in operating statement Current tax expense

Current yearIncome tax expense

b) Numerical reconciliation between tax expense and benefits accrued as result of operations before taxNet change for the year Income tax expenseTax at the complying superannuation fund tax rate of 15% (2011: 15%) Increase in income tax expense due to:

Refunds of accumulated contributions Payments of contributions to the Territory Superannuation contributions (surcharge) tax

Decrease in tax expense due to: Investment incomeMember contributions Surcharge payments received

Income tax expense on benefits accrued as a result of operationsc) Current tax liabilities

Balance at beginning of year Income tax paid – current period Income tax paid – prior period Current year’s income tax provision

d) Deferred tax assetAccrued expenses

2012 2011$000

66 171$000

45 468

2012 2011$000

65 003$000

45 447




8.LIABILITY FOR ACCRUED BENEFITS AND FUNDING ARRANGEMENTS

(a)Benefits payableBenefits payable include benefits in respect of members who ceased to be members prior to year end but had not been paid by that date.

(b)Guaranteed benefitsThe employer-financed component of benefits is paid by the Territory and guaranteed by the Territory under clause 20 of the Northern Territory Police Supplementary Benefit Scheme Trust Deed. The Deed provides for the payment of moneys to the fund from the public moneys of the Territory and establishes or increases the allocation to the extent necessary within the meaning of the Financial Management Act.

(c)Accrued benefitsThe amount of accrued benefits has been determined on the basis of the present value of expected future payments, which arise from membership of the scheme up to the reporting date.

In accordance with clause 17 of the Trust Deed, an actuarial review of the scheme was carriedout as at 30 June 2012 and the results were presented in a report dated 31 August 2012. The next triennial review is scheduled for 2015.

Accrued benefits as at 30 June

9.VESTED BENEFITSVested benefits are benefits that are not conditional upon continued membership of the scheme and include benefits that members are entitled to receive had they terminated their membership of the scheme at the reporting date. Vested benefits at a particular date represent the present valueof benefits payable in respect of former members and the benefits payable to current members onvoluntary withdrawal from scheme membership at that date.

Vested benefits as at 30 June




10.RELATED PARTIES

(a)EmployerThe employer is the Northern Territory Government. The employer provides free of charge to the scheme, staff and administrative services, accommodation and the use of office equipment.

(b) TrusteesThe Trustees of the fund who held office during the year were:

Mr M McAdie Chairman of Trustees

Mr G R Carter Trustee (Member Representative)

Mr A J Stubbin Trustee (Treasury Representative)

Where a Trustee is a member of the scheme, contributions were in accordance with the normal terms and conditions of the Northern Territory Police Supplementary Benefit Scheme Trust Deed and Rules.

Mr Carter and Mr McAdie are each in receipt of a pension under the scheme and were paid sitting fees for services during the 2011-12 financial year (totalling $2999).

In May 2012 the Superannuation Trustee Board (STB) became responsible for scheme governance.

Members at 30 June 2012:

Kathleen Robinson Chairperson

Marianne McAdie Deputy Chairperson

Michael Martin Member

Michelle Kempster Member

Alex Pollon Member

Vicky Coleman Member

Jennifer Prince Member

Mark McAdie Member

Gowan Carter Member

11.FINANCIAL INSTRUMENTSInvestments of the fund (other than cash held for liquidity purposes) comprise units in untaxed superannuation trusts. The Trustee has determined that this type of investment is appropriate for the fund and is in accordance with the fund’s investment strategy.

The Trustee has overall responsibility for the establishment and oversight of the fund’s risk management framework. The Trustee established risk management policies to identify and analyse the risks faced by the fund and they set appropriate risk limits and controls, monitor risks and adhere to risk limits. Monitoring of risks includes those managed by the investment manager. For the first three quarters of the financial year, Bankers Trust (BT) Institutional Diversified Balanced Pooled Superannuation Trust was the investment manager. From April 2012, MLC was the fund’s investment manager.




11.FINANCIAL INSTRUMENTS (continued)The Trustee regularly reviews the risk management policies to ensure changes in market conditions and the fund’s activities are reflected.

The fund’s investments are exposed to a variety of investment risks, such as market risk and liquidity risk. This note presents information about the fund’s exposure to these risks and the fund’s objectives, policies and processes for measuring and managing risk.

Until April 2012, BT reported regularly to the Trustees and provided a formal risk management statement. MLC took over the provision of formal risk management and statements on risk management from April 2012. Other reports from MLC include:

• details of the controls it has in place to monitor compliance with the fund’s investment strategy;

• current asset allocations;

• investment performance against benchmarks; and

• fund manager compliance reporting.

MLC manages these risks on behalf of the fund.

Market riskMarket risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises three types of risk: currency risk, interest rate risk and other price risk. The objective of market risk management is to manageand control market risk exposures within acceptable parameters, while optimising the return on investment.

Currency riskCurrency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates.

The fund is exposed to currency risk on financial instruments that are denominated in a currency other than the functional currency (Australian dollars) of the fund. Consequently, the fund is exposed to risks that the exchange rate of its currency relative to other foreign currenciesmay change in a manner that has an adverse effect on the value of that portion of the fund’s investments denominated in currencies other than the Australian dollar.

Interest rate riskInterest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates.

The majority of the fund’s financial assets are non-interest-bearing with only cash being directly subject to interest rate risk. As a result, the fund has limited exposure to interest rate risk due to fluctuations in market interest rates. All the fund’s cash assets are held with National Australia Bank.




11. FINANCIAL INSTRUMENTS (continued)An increase (or decrease) of 1 per cent in interest rates at the reporting date would have increased (decreased) the benefits accrued as a result of operations and net assets available to pay benefitsby the following amounts:

Benefits accrued asa result of operations

Net assets availableto pay benefits

Balance 1% movement 1% movement Cash and equivalents $000 $000 $00030 June 2012 150 1.50 1.5030 June 2011 95 0.95 0.95

Other market price riskOther market price risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices (other than those arising from interest rate risk or currency risk), whether those changes are caused by factors specific to the individual financial instrument or its issuer, or factors affecting all similar financial instruments traded in the market.

The fund’s financial instruments are carried at net market value and are recognised in the Statement of Net Assets. All changes in market conditions affecting net market value are therefore recognised in the Statement of Changes in Net Assets. The fund’s exposure to other market price risk is limited to the market price movement of the underlying investments. The STB determinedthat these investments are appropriate for the fund and are in accordance with the fund’s published investment strategy in respect of asset class allocation.

The following sensitivity analysis demonstrates the movement in the total value of investments as a result of a 5 per cent variation in value.

5% movement in investments

Balance

Change for the year in net assets available to

pay benefitsNet assets available

to pay benefits$000 $000 $000

30 June 2012 2 447 ± 122 ± 12230 June 2011 2 789 ± 139 ± 139

Credit riskCredit risk is the risk that the counterparty to a financial instrument will cause a financial loss by failing to discharge an obligation.

No collateral is held as security or other credit enhancements exist for all financial assets held. No financial assets are considered past due as all payments are considered recoverable when contractually due.

The maximum exposure to credit risk, excluding the value of any collateral or other security, at balance date to recognised financial assets is the carrying amount of those assets. The fund does not have any significant exposure to any individual counterparty or industry.

The fund does not have any material credit risk exposure to any single debtor or group of debtors under financial instruments entered into by the fund.




11. FINANCIAL INSTRUMENTS (continued)

2012 2011

Cash and cash equivalentsUnits in pooled superannuation trustTotal

$000150

2 4472 597

$00095

2 7892 884

Liquidity riskLiquidity risk is the risk that the fund will not be able to meet its financial obligations as they fall due. The fund’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses. The fund’s liquidity risk is managed on a daily basis in accordance with policies and procedures in place and the fund’s investment strategy. The fund’s overall liquidity risks are regularly monitored by the Trustee.

The following are the contractual maturities of financial liabilities, including interest payments and excluding the impact of netting agreements.

Balance

Contractual cash flows potentially

payable in 2012-13$000 $000

30 June 2012Benefits payable 213 213Vested benefits 65 003 65 003

65 216 65 21630 June 2011Benefits payable 330 330Vested benefits 45 447 45 447

45 777 45 777

Vested benefits (refer to Note 9) have been included as potentially payable in 2012-13 as this is the amount that members could call upon as at year end. This is the earliest date on which the fundcan be required to pay members’ vested benefits, however members may not necessarily call upon amounts vested to them during this time.

Estimation of fair valuesThe fund’s financial assets and liabilities included in the statement of net assets are carried at net market value which the Trustee believes approximates net fair value. The major methods and assumptions used in determining net market value of financial instruments were disclosed in note 3(a) of the significant accounting policies section.




11.FINANCIAL INSTRUMENTS (continued)Fair value measurementsThe table below analyses financial instruments carried at net market value, which approximates fair value, by valuation method. The different levels are defined as:

• Level 1 net market value measurements are those instruments with value based on quoted prices (unadjusted) in active markets for identical assets or liabilities.

• Level 2 net market value measurements are those instruments with value based on inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (as prices) or indirectly (derived from prices).

• Level 3 net market value measurements are those instruments with value based on inputs for the asset or liability that are not based on observable market data.

The Trustee determined that the fair value of the fund’s investments are Level 2.

Level 2 Investments 2012 2011

Units in pooled superannuation trust$0002 447

$0002 789

12.CONTINGENT LIABILITIESThe fund has no contingent liabilities at 30 June 2012 (2011: nil).

13.SEGMENT REPORTINGThe superannuation scheme operates in one business and geographical segment, being the provision of superannuation benefits for members in the Northern Territory of Australia.

14. EVENTS SUBSEQUENT TO REPORTING DATEThere were no significant subsequent events after balance date.



Summary of the Report of the Actuarial Investigation of the Schemeas at 30 June 2012

The triennial actuarial investigation of the scheme was carried out as at 30 June 2012 byJohn Rawsthorne FIAA, of Cumpston Sarjeant Pty Ltd, and the results were presented in his report dated 31 August 2012.

The scheme was closed to new members from 1 January 1988. Members contribute one per cent of salaries to an account which is accumulated with the earnings of the scheme. On leaving without a Territory-financed benefit the member accumulation is paid to the member. If a member is eligible to receive a Territory-financed benefit on exit, the member accumulation is transferred tothe Territory. Apart from refunds on accumulations, all benefit payments from the scheme are made directly by the Territory, rather than via the Fund.

The investigation has focussed on Territory liabilities, examining recent experience, establishing demographic assumptions to apply in future, calculating the present value of future benefit payments and projecting both emerging costs and liabilities for accrued benefits into the future.

The contributory membership stands at 77 members, down from 97 contributors three years ago.This will continue to decline as members reach retirement age and claim benefits. The number of excontributors continues to increase, and now stands at 149 pensioners and 3 deferred pensioners. The rate of increase is expected to slow, with the number of pensioners peaking at around 200 in the 2020s before dropping gradually.

Accrued employer liabilities were $63.8 million as at 30 June 2012, up from $37.2 million as at 30 June 2009. Liabilities are higher than projected from 2009 due primarily to a lower discount rate at this valuation (+$19.7 million). Other causes of increase are low pensioner mortality (+$0.5 million) and low commutation of pensions (+$2.0 million).

Territory emerging costs are expected to be around $1.7 million in 2012-13 and will continue to rise slowly in nominal terms until around 2030 to about $3.5 million per annum. Liabilities are close to their peak in real terms, and will remain stable for six to ten years, after which they will gradually decline as membership declines.

Appendix:The Scheme and How it Works



ContributionsMembers finance a share of the scheme benefits by contributing 1 per cent of their salary to the fund, which is managed by the Superannuation Trustee Board. Each member has an accumulation account in the fund representing their contributions and interest earnings.

Qualifying for a supplementary benefitFor a member of the Northern Territory Police Supplementary Benefit Scheme to qualify for a supplementary benefit they must:

• be at least 50 years of age or have at least 25 years Commonwealth Superannuation Scheme (CSS) contributory service when ceasing to be a member of the supplementary scheme; and

• be entitled to a CSS age retirement pension, early retirement pension, deferred pension or a postponed pension on or after ceasing to be a member of the supplementary scheme.

Where a member qualifies for a supplementary benefit, their accumulation account balance will be transferred to the Territory and the Territory will pay the supplementary benefit.

The supplementary benefit is based on the amount of the member’s CSS employer-financed pension and their age when they cease to be a member of the Northern Territory Police or when they cease to be a CSS contributor, whichever occurs later (for CSS and supplementary scheme purposes, a member attains a particular age on the day before their birthday).

The supplementary benefit is expressed as a percentage of the CSS employer-financed pension, and calculated using the percentage according to the age of the member as outlined in the following table.

Table A1: Supplementary benefit percentage

Member’s age Supplementary benefitYears %55 25.0056 21.6957 18.6958 15.9459 13.4360 or more 11.11

The supplementary benefit is paid as a lifetime indexed pension and commences when the CSS employer-financed pension begins to be paid. If a member defers or postpones their CSS pension, their supplementary pension commences when the deferred or postponed CSS pension commences. Members may elect to commute the supplementary pension to a lump sum equalto 10 times the annual amount of supplementary pension payable at the time the pension commences.

If the member is able to commute their CSS CPI-indexed pension to a lump sum and elects to do so (for example, an involuntary retirement lump sum or a deferred benefit converted to a transfer value), the supplementary benefit will be a lump sum equal to the employer-financed lump sum paid from the CSS multiplied by the percentage in Table 1 applicable to the member’s age when they ceased to be a member of the Northern Territory Police or ceased to be a CSS contributor, whichever occurs later.

ComSuper, the agency that manages Commonwealth superannuation, separately issues members with an information statement about their CSS entitlements as at 30 June 2012.



If members require more information on their CSS benefit, they can contact the CSS by phoning 1300 000 277 or visiting the website at: ww w .cs s .g o v .au .

No entitlement to a supplementary benefitA supplementary benefit will not be payable to a member if:

• the member is under 50 years of age and has less than 25 years CSS contributory service when they cease to be a member of the supplementary scheme; or

• the member’s only CSS benefit is an amount equal to their CSS member contributions with interest (member elects for an immediate CSS cash resignation benefit in lieu of the CSS employer-financed benefit); or

• the member is entitled to a CSS invalidity retirement benefit on ceasing to be a CSS contributor; or

• the member’s estate or dependants are entitled to a CSS benefit as a consequence of the member’s death while still a CSS contributor.

Where any of the above circumstances apply to a member, their accumulation account will be paid to them, to their nominated superannuation or rollover fund, or to their personal representative.

Taxation of Supplementary Pension BenefitsTable A2 illustrates the taxation arrangements for members who qualify for a supplementary benefit from the scheme, which is paid as a lifetime indexed pension.

Table A2: Taxation of pensions

Age Component Tax treatment1 from 1 July 200755-59 years Taxed Marginal tax rates with a 15% pension tax offset

Tax-free Exempt from taxUntaxed Marginal tax rates

60+ years Taxed Exempt from taxTax-free Exempt from taxUntaxed Marginal tax rates with a 10% pension tax offset

1 Prior to 1 July 2007, the tax-free component was called the annual deductible amount.



Taxation of Commuted Lump Sums and Refunds of Member AccountsTable A3 illustrates the taxation arrangements for members who receive a lump sum superannuation benefit from the scheme.

Table A3: Taxation of lump sums

Age Component Tax Treatment1 as at 1 July 2011< 55 years Tax-free component

Non-concessional contributions (member contributions)

Exempt

Pre July 1983 ExemptTaxable componentPost June 1983 taxed

(investment interest)Post June 1983 untaxed

(Territory-financed benefit)

55-59 years Tax-free componentNon-concessional contributions

(member contributions)

20%

30% up to $1.255 million2

Excess over $1.255 million2 taxed at top marginal tax rate3

Exempt


(investment interest)

Post June 1983 untaxed (Territory-financed benefit)

60+ years Tax-free componentNon-concessional contributions

(member contributions)

0% to low rate cap4

15% on excess over low rate cap4

15% to low rate cap4

30% over low rate cap4 up to$1.255 million2


Exempt


(investment interest)Post June 1983 untaxed

(Territory-financed benefit)

Taxed at 0%

15% up to $1.255 million2


1 Plus Medicare levy (1.5%).2 2011-12 limit was $1.205 million.3 2011-12 and 2012-13 top marginal tax rate is 45 per cent.4 2011-12 low rate cap is $165 000; 2012-13 low rate cap is $175 000.



Death BenefitIn the event of a member’s death while still a CSS contributor, their accumulation account balance will be paid to their estate. If the member has deferred or postponed their CSS and supplementary pensions, a supplementary pension will be paid to their dependants. Where a former member receiving a supplementary pension dies, a reversionary (spouse) supplementary pension is payable to dependants.

Preserved BenefitThe Commonwealth’s preservation rules came into effect on 1 July 1999 and apply to lump sum superannuation benefits. A benefit in the form of a lifetime pension, such as the pension payable from this scheme, is not subject to the preservation rules and may commence at any age.

If a member receives a lump sum from the scheme before their preservation age, any preserved benefits must remain in a superannuation fund until the member has reached their relevant preservation age (see Table A4) and has permanently retired from the workforce.

Table A4: Preservation age

Date of birth Preservation age (years)Before 1 July 1960 551 July 1960 to 30 June 1961 561 July 1961 to 30 June 1962 571 July 1962 to 30 June 1963 581 July 1963 to 30 June 1964 59After 30 June 1964 60

Members have a non-preserved benefit calculated at 30 June 1999. Members can cash their non-preserved benefit from the fund if they leave the scheme before reaching their preservation age.

The non-preserved amount remains constant and any superannuation contributions (includes both employer and employee contributions) and interest earned after 1 July 1999 are subject to the preservation rules.

Northern Territory Supplementary Superannuation SchemeIn addition to a member’s CSS and police supplementary benefit, members are entitled to a3 per cent productivity benefit from the Northern Territory Supplementary Superannuation Scheme (NTSSS). The NTSSS benefit is paid as a lump sum at the rate of 3 per cent of final salary for each year of employment since 1 October 1988. The final salary for NTSSS purposes is 130 per cent of the member’s current salary plus Northern Territory Allowance.

Assuming a member has not taken leave without pay, the NTSSS benefit at 30 June 2012 for all types of cessation was around 71.25 per cent of their final salary(71.25 per cent = 23 years 9 months since 1 October 1988 at 3 per cent per year).

Where a member does not qualify for a CSS employer-financed benefit (for example, bytaking a CSS cash resignation benefit), their NTSSS benefit will be increased to approximately146.25 per cent of final salary at 30 June 2012 to satisfy superannuation guarantee requirements.

The NTSSS is an unfunded scheme (that is, the Territory finances the benefit at the time a member ceases Territory public sector employment). The NTSSS benefits are paid through the Northern Territory Superannuation Office and are subject to preservation rules. Member Information



Statements are issued by the Northern Territory Superannuation Office. Statements for both schemes (PSBS and NTSSS) have been combined for the 2011-12 year.

Superannuation SurchargeThe superannuation surcharge was a tax on employer superannuation contributions for high income individuals with an adjusted taxable income above the surcharge income threshold. The superannuation surcharge commenced on 21 August 1996 and was abolished with effect from1 July 2005.

This document was printed on recycled paper.

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