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21/10/2014
1
Pension Member Update – October 2014
Disclaimer
The information contained within this presentation is general in nature. It has been prepared without taking into account your objectives, financial situation or personal needs. Prior to making any acting on any of the information, you should consider whether the information is appropriate for your needs, objectives and circumstances.
You should obtain a copy of the relevant product disclosure statement (PDS) prior to making a decision regarding any investment in any financial product.
UniSuper defined benefits (including defined benefit pensions) are not guaranteed and are subject to the risk that the pool of assets supporting them may not be sufficient to meet all of UniSuper’s defined benefit obligations. In the event of prolonged underfunding, clause 34 of UniSuper’s trust deed provides a mechanism for defined benefits to be reduced on a fair and equitable basis. A clause 34 monitoring period was recently concluded and it was resolved to reduce the defined benefit formula from 1 January 2015 by changing the way Benefit Salary is determined as it applies to service on and after 1 January 2015. This change does not affect defined benefits or pensions that become payable before 1 January 2015. There are three further clause 34 monitoring periods in place, concluding on 30 June 2015, 30 June 2016 and 30 June 2017.
This information is current as at October 2014 and is based on our understanding of legislation at that date. Information relating to the 2014/15 Federal Budget is based on our understanding of the proposals. The information provided in this presentation in relation to these announcements is subject to change and certain proposals may not become effective until they are enacted by Parliament. You should not rely on this information and it should be verified prior to making any decision
The information contained in this presentation is not legal, taxation or accounting advice. Professional advice should be obtained before making any decisions. Whilst care has been taken in the preparation of this information, the accuracy or completeness of the information is not guaranteed.
This presentation was prepared and issued by UniSuper Management Pty Ltd ABN 91 006 961 799, AFSL No: 235907, which is the administrator of UniSuper Superannuation fund (ABN 91 385 943 850). UniSuper Management Pty Ltd is wholly owned by UniSuper Limited (ABN 54 006 027 121) in its capacity as trustee of the UniSuper Superannuation fund . If you would like to contact us please do so on 1800 331 685 or alternatively send us an email to [email protected]
1
Pension Member Update – October 2014
General Update
Centrelink Deeming Changes
Age Pension Changes
Commonwealth Seniors Health Card Changes
Non-concessional contributions
UniSuper Advice
2
21/10/2014
2
Pension Member Update – October 2014
Annual Pension deemed
Annual Pension less deduction amount
Centrelink Deeming Changes
On 1 January 2015, changes will be made to the assessment of
account-based Pensions for Centrelink income test purposes
3
Account-based Pension
Commencement Date
Assessment of pension income
under Centrelink’s Income Test
Before 1 January 2015*
1 January 2015 onwards
* And in continuous receipt of the Age Pension prior to 1 January 2015
Important note: Deeming changes do not apply to Defined Benefit Indexed
Pensions or Commercial Rate Indexed Pensions.
Pension Member Update – October 2014
What is deeming?
A calculation used by Centrelink and Department of Veteran Affairs (DVA)
to assess the assumed income value of financial assets in relation to
pensions and allowances (income support), including:
Newstart Allowance
Widow Allowance
Disability Support Pension
Carer Payment
Sickness Allowance
Age Pension
4
21/10/2014
3
Pension Member Update – October 2014
Centrelink: Income and Assets tests
5
AGE PENSION
Entitlement under
Income test
AGE PENSION
Entitlement under
Income test
AGE PENSION
Entitlement under
Assets test
AGE PENSION
Entitlement under
Assets test
You receive the lower pension amount from the application of both tests.
Pension Member Update – October 2014
What are the current deeming rates?
6
Deemed AssetsDEEMING
RATE
Singles: First $48,000
2%Couples (where at least 1 member is getting a pension): First $79,600 (combined)
Single & Couples: all amounts in excess of the above
3.5%
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Pension Member Update – October 2014
Example
Margaret, age 65 and single, commences an
account based pension with $500,000 drawing an
income stream of $35,000 p.a.
7
Account-based Pension
Commencement Date
Assessment of pension income
under Centrelink’s Income Test
Before 1 January 2015Annual Pension less deduction
amount
1 January 2015 onwards Annual Pension deemed
Additional amount assessed $4,907
Pension Member Update – October 2014
Example
Margaret, age 65 and single, commences an
account based pension with $500,000 drawing an
income stream of $35,000 p.a.
8
Account-based Pension
Commencement Date
Assessment of pension income
under Centrelink’s Income Test
Before 1 January 2015$11,873
($35,000 – ($500,000/21.62))
1 January 2015 onwards$16,780
(48,000 x 2%) + ($452,000 x 3.5%)
Additional amount assessed $4,907
21/10/2014
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Pension Member Update – October 2014
Deeming considerations
Examples of when the deeming rules could apply to existing
account based pensions:
Rollover of an existing account based pension into a new
account-based pension after 1 January 2015
E.g. to add or combine funds into the one account-based
pension account
Ceasing to receive the Age Pension after 1 January 2015
then later falling eligible
9
Pension Member Update – October 2014
Deeming considerations
Examples of when the deeming rules would not apply to
existing account-based pensions (i.e. grandfathering provisions
apply):
Individual is in continuous receipt of the Age Pension prior
to and after 1 January 2015
When the account-based pension reverts to a reversionary
beneficiary:
The reversionary beneficiary is in continuous receipt of
the Age Pension or other Government income support
10
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Pension Member Update – October 2014
Deeming considerations
What about for couples where one member of the couple is not
eligible for an Age Pension until after 1 January 2015?
Still be assessed as a couple; however
The member of the couple receiving the Age Pension prior to
1 January 2015 will not have their account based pension
deemed, whilst the other will have their account based
pension deemed.
11
Pension Member Update – October 2014
Deeming considerations
For those with an account-based pension and in receipt
of an Age Pension:
Consideration to a reversionary nomination
For those eligible for the Age Pension and considering
an account-based pension:
Consider establishing an account based pension and
applying for the Age Pension before 1 January 2015
12
21/10/2014
7
Pension Member Update – October 2014
Other Age Pension Announcements
Proposed Changes:
Increase qualifying age to 70 years
From 1 July 2025, qualifying age will continue to rise by 6 months
every 2 years
- Qualifying age will increase from 67 (in 2025) to 70 (in 2035)
Changes to indexation of payments
Commences September 2017
Eligibility thresholds will be frozen for a period of three years
from 1 July 2017
13
Pension Member Update – October 2014
Commonwealth Seniors Health Card
The Commonwealth Seniors Health card is available to
self-funded retirees.
Eligibility is based on adjusted taxable income (ATI)*
single ATI less than $51,500 p.a.
couples ATI less than $82,400 p.a.
The card provides concessions for:
Pharmaceutical Benefits Scheme (PBS) and other medical
services
14
*ATI = taxable income + foreign income + net investment losses + reportable super contributions + reportable fringe benefits
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Pension Member Update – October 2014
Commonwealth Seniors Health Card
Changes:
From June 2014 card holders will cease to receive the
Seniors Supplement
From September 2014 the annual indexation of income
thresholds will be by the Consumer Price Index (CPI)
From 1 January 2015 untaxed superannuation income to be
included in the eligibility assessment
1 January 2015 deeming rules will apply
Not yet legislated
15
Pension Member Update – October 2014
2014/15 Non-concessional (after-tax) contribution limits
* Work for at least 40 hours during a consecutive 30-day period each
financial year in which the contributions are made. Unpaid work does not
meet the definition of gainfully employed.
Non-Concessional Contribution caps
16* Plus potential interest charge
Age Limit
Under age 65 $180,000 p.a. or $540,000 over 3 years
Age 65 to under 75 $180,000 p.a. subject to a work test*
Age 75+ Not available
Tax on excess contributions 49%
21/10/2014
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Pension Member Update – October 2014
UniSuper Advice
17
UniSuper offers 3 levels of advice:
General Advice (phone-based)
- Not specific to your personal situation
Limited Advice (phone-based)
- Single issue personal advice specific to your situation
Comprehensive Personal Advice (face to face)
- Full personal advice covering multiple issues specific to your
situation
Pension Member Update – October 2014
Areas of Advice
18
Flexi Pension longevity
Portfolio construction
Estate planning considerations
Non-superannuation investments
Legislative changes
Age Pension considerations and more . . .
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10
Pension Member Update – October 2014
Why UniSuper Advice?
19
Fee for service
All advisers are salaried
All commissions are rebated to the client
Advice Fee can be debited directly from a member’s Flexi
Pension or accumulation account, so long as the advice relates to
superannuation and or superannuation related retirement
planning
UniSuper Advice is a Financial Planning Association (FPA)
Professional Practice
Pension Member Update – October 2014
Why UniSuper Advice?
20
95% of UniSuper Comprehensive Advisers are
internationally recognised CERTIFIED FINANCIAL PLANNER
(CFP®) professionals
Call UniSuper Advice today on 1300 331 685 for a
complimentary initial assessment on the level of advice
that might suit you
CFP®, CERTIFIED FINANCIAL PLANNER® and are certification marks owned outside the U.S. by Financial Planning Standards Board Ltd. Financial Planning Association of
Australia Limited is the marks licensing authority for the CFP Marks in Australia, through agreement with FPSB.
21/10/2014
11
Investments Update
John Pearce
Chief Investment Officer
Pension Seminar � October 2014
We will be commenting on market trends and historical returns.
Past events are not an indicator of future events.
This is not advice and does not take into account your circumstances.
Before making decisions about your superannuation, read our PDS (available on our website) and consider your own circumstances and whether to seek financial advice.
22
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12
Agenda
1. Global economy; doing ok but big regional differences
2. Key risks to rising markets
3. Another era of “Financial Repression”
4. To annuitize or not to annuitize?
5. Option Performance
World GDP Growth Real GDP since December 2007
Global growth has been running at around trend since the GFC, with strong emerging economies offsetting weak advanced economies
24
-1
0
1
2
3
4
5
6
1980 1985 1990 1995 2000 2005 2010
World GDP Long Run average
ann % ch
Source: Bloomberg. Past performance is not an indicator of future performance.
90
100
110
120
130
140
150
160
170
180
Dec-07 Dec-09 Dec-11 Dec-13
Global Adv EM
Index (Dec 07 = 100)
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13
Equity markets vs. GDP Equity markets since pre-GFC peak
In general, share markets have recovered in line with GDP although disparities exist; Emerging market equities (and Australia) have lagged despite relatively stronger economies
25
40
50
60
70
80
90
100
110
120
95
100
105
110
115
120
Jan-07 Jan-09 Jan-11 Jan-13
World GDP World Equities
Index (Oct 07 = 100)
Source: Bloomberg. Past performance is not an indicator of future performance.
30
40
50
60
70
80
90
100
110
120
130
Oct-07 Oct-09 Oct-11 Oct-13
World Advanced Emerging Australia
Index (Oct 07 = 100)
China slowing; short term negative but medium term positive
Over-valuation; Equities are about fair value relative to history, but cheap relative to bonds
Fed Tightening?
Geo-Political?
26
Key risks to a rising market
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0
1
2
3
4
5
2001 2002 2003 2004 2005 2006
Federal funds target rate
27
The US Federal Reserve assures us that higher rates are a considerable time off. But ...
Rates can stay low “for a considerable period” Fed Dec ‘03
statement
%
Source: Macquarie Research, FactSet, May 2014. Past performance is not an indicator of future performance.
28
Equity returns have usually been positive in the year after the first hike as it takes time to slow the economy
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15
29
S&P 500 index around military invasions and conflicts (1973-1983)
Source: Bloomberg. April 2014. Equity index represents price returns. Past performance is not an indicator of future performance.
30
S&P 500 index around military invasions and conflicts (1991 - today)
Source: Bloomberg. April 2014. Equity index represents price returns. Past performance is not an indicator of future performance.Note: it is not possible to invest directly in an index.
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16
War zone countries as a percentage of total world:
Population 11.7%
Oil production 9.0%
Foreign direct investment 3.8%
GDP 3.0%
Trade 2.6%
Gross capital formation 2.4%
Corporate profits 0.8%
Equity market capitalisation 0.7%
Interbank claims 0.5%
Portfolio investment inflows 0.4%
31Sources: IMF, United Nations, BP, MSCI, Bloomberg, BIS, World Bank, WTO, JP Morgan
Return in excess of inflation has been achieved despite massive market dislocations created by wars, natural disasters and asset bubbles
32
Australian share market returns over the last century
DECADE ENDING DECADE RETURN % P.A. AFTER INFLATION
1910 11.7
1920 3.1
1930 17.2
1940 9.7
1950 4.0
1960 9.0
1970 10.4
1980 -6.6
1990 9.2
2000 8.2
2010 5.9
Average 7.4
* Calculated from Credit Suisse Investment Returns Source Book, MSCI and ABS data. Past performance is not an indicator of future performance.
21/10/2014
17
Another era of financial repression
34
Another age of debt
Source: “The Liquidation of Government Debt”, Reinhart and Sbrancia, 2011
Ad
va
nce
d e
co
no
mie
s
Gro
ss d
eb
t a
s %
of
GD
P WWI and Depression debts
WWI debtsSecond Great Contraction
21/10/2014
18
Default
Works, but is messy
Austerity
Doesn’t actually work
Inflation (Financial Repression)
Inflating revenues faster than interest costs actually works, but there are winners and losers
35
Dealing with debt
Nominal interest rates are capped below the rate of inflation i.e. negative real interest rates
Encourages investment required for economic growth and capital formation
Facilitates deleveraging as nominal income grows faster than debt
36
Financial repression
21/10/2014
19
G7 plus Switzerland and Spain lowest since 1855
US base rates lowest since 1790
UK base rates lowest since 1694
Netherlands base lowest since 1517
“never before was so little paid to so many…” Adapted by Churchill
37
38
The great repression
Developed countries with negative 2-year bond yields
Ireland
Belgium
Germany
Denmark
Switzerland
Finland
France
Netherlands
Austria
21/10/2014
20
39
The great repression
In 2007, 23 out of 25 developed countries had 10-year yields above 3%. Today …
Portugal
New Zealand
Greece
Iceland
Australia
Consider the experience of a retail investor in a very large ($130 billion) US cash fund
The fund primarily invests in short-dated US government obligations
$10,000 invested on 1 July 2008 would have grown to $10,193by 30 June 2014
The inflation adjusted value of the original $10,000 is $10,881 over the same period
The investor has lost more than 6% of their purchasing power
This is akin to the government borrowing $100 in 2008 and repaying$94.00 in 2014
It is a wealth transfer from saver to borrower
40
Financial Repression in action
21/10/2014
21
-2%
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
-2%
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
De
c-1
98
1
De
c-1
98
2
De
c-1
98
3
De
c-1
98
4
De
c-1
98
5
De
c-1
98
6
De
c-1
98
7
De
c-1
98
8
De
c-1
98
9
De
c-1
99
0
De
c-1
99
1
De
c-1
99
2
De
c-1
99
3
De
c-1
99
4
De
c-1
99
5
De
c-1
99
6
De
c-1
99
7
De
c-1
99
8
De
c-1
99
9
De
c-2
00
0
De
c-2
00
1
De
c-2
00
2
De
c-2
00
3
De
c-2
00
4
De
c-2
00
5
De
c-2
00
6
De
c-2
00
7
De
c-2
00
8
De
c-2
00
9
De
c-2
01
0
De
c-2
01
1
De
c-2
01
2
De
c-2
01
3
Consumer Price Inflation (Year-on-year)
Retail Bank 3mth term deposit rate
41
Australia’s milder version of repression
Source: RBA, Bloomberg
GST Introduced
A long time
Most countries have barely made headway in reducing their debt burdens. Demographics are putting further strain on the fiscal outlooks
If history is any guide, financial repression episodes can persist for many years or decades. In the post war years to 1980 in Australia:
» 81% of the time real interest rates were lower than 2%
» 48% of the time real rates were negative
Post-war 10-year US government yields stayed below 4% until the early 1960s
42
How long can it last?
21/10/2014
22
To annuitize or not to annuitize?
An annuity is a financial product that provides a regular sum of money for a pre-determined length of time
They can starting either immediately or in the future (deferred)
Lifetime annuities are (not surprisingly!) paid until the death of the policyholder(s)
44
Lifetime annuity
21/10/2014
23
Reasons typically given:
We are said to have an “equity” culture (manifesting in the popularity of flexi-pensions)
Annuities are not compulsory/incentivised as in many other countries
Members don’t like the lack of flexibility and access
Some may see the aged pension as effectively providing annuity protection
Or is it simply the case that they are too expensive?
45
Why aren’t lifetime annuities popular in Australia?
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
9.0%
10.0%
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
Div
iden
d Yi
eld
Dividend Yield
Return from Australian shares (ASX 100 Industrials)
46
Instead of buying an annuity one could……invest in a portfolio of shares
Average dividend yield was 4.5% net or 5.7% gross of franking credits
Past performance is not an indicator of future performance.
21/10/2014
24
-
5
10
15
20
25
30
35
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
9.0%
10.0%
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
Perc
enta
ge o
f ini
tial c
apita
l pai
d ea
ch y
ear
Div
iden
d Yi
eld
Dividend Yield Dividend received each year if $100 was invested in 1985
Return from Australian shares (ASX 100 Industrials)
47
Instead of buying an annuity one could……invest in a portfolio of shares
Dividend yield was 5% in 1985
Past performance is not an indicator of future performance.
-
5
10
15
20
25
30
35
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
9.0%
10.0%
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
Perc
enta
ge o
f ini
tial c
apita
l pai
d ea
ch y
ear
Div
iden
d Yi
eld
Dividend Yield Dividend received each year if $100 was invested in 1985
Return from Australian shares (ASX 100 Industrials)
48
Instead of buying an annuity one could……invest in a portfolio of shares
Dividends have grown by around 6% p.a. since 1985
Past performance is not an indicator of future performance.
21/10/2014
25
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
9.0%
10.0%
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
Rent
al Y
ield
Rental Yield
Return from Australian unlisted (ungeared) property
49
Instead of buying an annuity one could……invest in a portfolio of unlisted property
Average rental yield is 7.5%
Past performance is not an indicator of future performance.
Return from Australian unlisted (ungeared) property
50
Instead of buying an annuity one could……invest in a portfolio of unlisted property
Average rental yield is 7.5%
-
2.00
4.00
6.00
8.00
10.00
12.00
14.00
16.00
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
9.0%
10.0%
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
Perc
enta
ge o
f ini
tial c
apita
l pai
d ea
ch y
ear
Rent
al Y
ield
Rental Yield Rents received each year if $100 was invested in 1985
Rental yield was 7.5% in 1985
Past performance is not an indicator of future performance.
21/10/2014
26
Return from Australian unlisted (ungeared) property
51
Instead of buying an annuity one could……invest in a portfolio of unlisted property
Average rental yield is 7.5%
-
2.00
4.00
6.00
8.00
10.00
12.00
14.00
16.00
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
9.0%
10.0%
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
Perc
enta
ge o
f ini
tial c
apita
l pai
d ea
ch y
ear
Rent
al Y
ield
Rental Yield Rents received each year if $100 was invested in 1985
Rental income has grown by around 3% p.a. since 1985
Past performance is not an indicator of future performance.
-
5
10
15
20
25
30
35
1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Pe
rce
nta
ge
of
init
ial
ca
pit
al
pa
id e
ach
ye
ar
Dividend stream from equities Rental stream from property Proceeds from an annuity commencing in 1985
52
What would have happened from 1985?
Purchasing an annuity in 1985 relative to buying a shareor property portfolio
The initial annuity value was calculated using the IM80 life tables, with assumptions relating to mortality improvement. The investment return
assumption was set to 13.2% and an inflation assumption of 6% was used. Past performance is not an indicator of future performance.
21/10/2014
27
The collapse in bond yields significantly increases the cost of annuities
UniSuper’s Commercial Rates Indexed Pension currently provide a65 year old $58,128* p.a. for a $1.27 million investment
53
Lifetime annuity
ASFA June 2014 Retirement Standard for a couple’s comfortable lifestyle http://www.superannuation.asn.au/resources/retirement-standard
Past performance is not an indicator of future performance.
YEAR ANNUITY
ASX 100 INDUSTRIAL EQUITY
PORTFOLIO
UNLISTED DIRECT PROPERTY PORTFOLIO
RATE OF INCREASE
PRICE INFLATION ($M)
DIVIDEND GROWTH RATES
($M)
RENTAL GROWTH RATES ($M)
1985 0.7 0.9 0.8
1994 0.8 1.1 0.7
2004 1.0 1.0 0.8
2014 1.3 0.9 0.8
54
Comparison of capital levels required to finance $58,128 p.a.*
Now more expensive than relying on dividends from an equity portfolioBut note that dividends can (and often do) fall in value
Annuity values were calculated using the IM80 life tables, with assumptions relating to mortality improvement. The investment return assumption was set to the long bond yield and inflation
assumption was based on break even inflation expectations at the time (but approximated in 1985 due to a lack of historical data)
21/10/2014
28
Value of portfolio on death
-
0.5
1.0
1.5
2.0
2.5
3.0
3.5
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
Mil
lio
ns
Years after retirement
share portfolio growing at 6% p.a.
share portfolio growing at 3% p.a.
share portfolio growing at 0% p.a.
Value of annuity with a 10 year guarantee
55
What happens on death of the retiree?
The main benefit of Annuities is that they perfectly match one’s lifespan and hedge the annuitant from the risk of rising price inflation
However, as a consequence of the GFC, in the era of “financial repression”, bond yields have been driven to historically low levels
The consequence of a fall in bond yields (and increasing life expectancy) is that annuities are now very expensive relative to other assets; for example
» A share portfolio of Industrial stocks now delivers an initial dividend yield of 6.5%, which is higher than the total return that a 65 year old can obtain from a life annuity with inflation protection
» The current income yield on the Australian listed property sector 4.6% (which is about the same as total return for annuities)
However, capital values of shares and property can fluctuate, sometimes dramatically; the appropriateness of any investment strategy depends on one’s risk tolerance.
56
Summary
21/10/2014
29
57
Yield oriented investment options
Low risk High risk
Option Objectives
Provide income yield greater than ASX300 (currently 4.5% for 2014)
» note that franking credits can increase income yield by an additional 1.5%
Provide capital growth potential
Suitable for
Investors who want equity exposure with a preference for blue-chip, high yielding equities, as distinct from general equity market exposure which includes higher risk/higher growth companies
Investors able to benefit from franking credits (i.e. superannuation funds)
Risks
Volatility associated with equity markets, which can result in large fluctuations in capital values
Investment time horizon has to be long term (i.e. five years or longer)
58
In search of yieldAustralian Equity Income Option
21/10/2014
30
Australian Equity Income vs. ASX300 (Cumulative Returns)
In search of yieldAustralian Equity Income Option
59
STOCK NAMEPORTFOLIO
WEIGHT (%)
DIV YIELD
(NET %)
DIV YIELD
(GROSS %)
CBA 9.0 5.2 7.5
TELSTRA 8.9 5.5 7.8
WESTPAC 8.8 5.6 8.0
TRANSURBAN 8.4 4.5 4.9
ANZ 8.1 5.5 7.9
WOODSIDE 6.3 6.0 8.6
NAB 6.0 6.0 8.6
WOOLWORTHS 5.2 4.0 5.7
IAG 5.2 6.3 9.0
WESFARMERS 5.1 4.7 6.7
Top 10 Holdings
Source: Net and Gross dividend yields sourced from Goldman Sachs 1year forward yield data
90.0
100.0
110.0
120.0
130.0
140.0
150.0
160.0
170.0
Apr2012
Jul2012
Oct2012
Jan2013
Apr2013
Jul2013
Oct2013
Jan2014
Apr2014
Jul2014
Ind
ex V
alu
e
Aust Equity Income (After Tax and Fees)
ASX 300 (After tax and Fees)
Woolworths Share Price vs. Dividend per Share
60
Example of a key AEI holding: WoolworthsConsistent earnings and dividends – what GFC?
$0.00
$0.20
$0.40
$0.60
$0.80
$1.00
$1.20
$1.40
$1.60
$1.80
$2.00
$0
$5
$10
$15
$20
$25
$30
$35
$40
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Div
ide
nd
Pe
r S
ha
re
Sh
are
Pri
ce
FY EndDPS Price
21/10/2014
31
61
CBA shares
0
0.5
1
1.5
2
2.5
3
25
30
35
40
45
50
55
60
65
70
75
80
85
($)($)
Dividend Per Share (RHS) Share Price (LHS)
Option performance
21/10/2014
32
Option performance as at 30 September 2014
OPTIONFYTD(%)
1 YEAR (%)
3 YEARS (% pa)
5 YEARS (% pa)
7 YEARS (% pa)
High Growth 1.8 12.7 17.7 10.2 4.2
Balanced 1.6 11.2 14.9 9.4 5.0
Cash 0.7 2.9 3.7 4.2 4.4
DBD 1.6 12.3 15.7 10.4 5.8
OPTIONFYTD(%)
1 YEAR (%)
SINCE INCEPTION(21 APRIL 2012)
Australian Equities Income 0.1 11.4 22.0
Global Companies in Asia 4.7 16.5 18.5
Global Environmental Opportunities -2.6 8.7 21.6
Diversified Credit Option 0.1 - Inception 1 September 2014
63Past performance is not an indicator of future performance. Returns relate to our pension (not accumulation) options and are
calculated after fund taxes and investment expenses, but before account based fees.
64
Funding status of the 100 largest US corporate DB plans
Source: Milliman Pension Funding Index, 2014
-5%
15%
35%
55%
75%
95%
70
75
80
85
90
95
100
105
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4
Cum
ula
tive
sto
ck m
ark
et re
turn
So
lve
ncy
of th
e D
efin
ed
Bene
fit pla
ns
100 Largest US Corporate DB Plans US Stock Market
21/10/2014
33
65
Funding status of the 100 largest US corporate DB plans
-5%
15%
35%
55%
75%
95%
70
75
80
85
90
95
100
105
1/1
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00
9
1/0
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4
Cu
mu
lative
sto
ck m
ark
et re
turn
Solv
en
cy o
f th
e D
efin
ed
Ben
efit p
lans
100 Largest US Corporate DB Plans US Stock Market Australian Stock Market
66
Funding status of the 100 largest corporate DB plans
-5%
15%
35%
55%
75%
95%
70
75
80
85
90
95
100
105
1/1
1/2
009
1/0
1/2
010
1/0
3/2
010
1/0
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010
1/0
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010
1/0
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010
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011
1/0
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1/0
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1/0
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1/0
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014
Cum
ula
tive sto
ck m
ark
et re
turn
So
lve
ncy
of th
e D
efine
d B
ene
fit pla
ns
100 Largest US Corporate DB Plans UniSuper's DBD US Stock Market Australian Stock Market
21/10/2014
34
Relative performanceto 30 September 2014
Option 1 Year 3 Years 5 Years 10 Years
High Growth Q1 Q2 Q1 Q1
Growth Q1 Q1 Q1 Q1
Balanced Q1 Q1 Q1 Q1
Conservative Balanced Q1 Q1 Q1 Q1
Capital Stable Q1 Q1 Q1 Q1
Cash Q2 Q2 Q2 Q1
Australian Shares Q1 Q1 Q2 n.a
International Shares Q1 Q1 Q1 n.a
67Past performance is not an indicator of future performance. Rankings relate to our pension (not accumulation) options based on the
Super Ratings survey for the period ended 30 September 2014 as published on 21 October 2014.
