Funds SA, a statutory body established under the Superannuation Funds
Management Corporation Act 1995, is responsible for the management
and investment of the fortnightly employee (member contributions)
and employer (SAPOL contributions) superannuation contributions to
the Pension and Lump Sum Scheme Divisions of the Police Superannuation
Fund and the Employer Contribution Account (SAPOL contributions).
Superannuation contributions (both employee and employer) are invested
by Funds SA across a diversified range of asset classes:
| • International shares 38% |
• Inflation linked bonds 12% |
| • Australian shares 34% |
• Fixed interest bonds 6% |
| • Property 8% |
• Cash 2% |
For the 12 months to 30 June 2003, Funds SA achieved investment returns
(net of fees) for the Pension and Lump Sum schemes of 17.9%. Fees
include Funds SA’s investment fees and the Police Superannuation
Board’s administration costs.
History demonstrates that investment markets can experience periods
of extreme volatility from time to time. It is important, therefore,
that a sound investment strategy be pursued, underpinned by a target
return which may realistically be achieved over an appropriate time
horizon with an acknowledged level of risk.
The investment objective set for the Pension and Lump Sum Schemes
(the basis on which the abovementioned investment asset class allocations
have been determined) is to provide an average return of 4.5% per
annum in excess of the rate of inflation over an investment time horizon
of eight years. During this period, however, returns may be volatile.
The probability of a negative return in any one year is estimated
to be 23% meaning that negative returns may be experienced in two
years out of the eight.
The following table shows the investment returns (net of fees) achieved
by Funds SA over the past five years.
Investment returns (net of fees)
| Scheme |
2000 |
2001 |
2002 |
2003 |
2004 |
5 years
annualized |
| Pension |
16.8% |
3.1% |
-5.3% |
-0.8% |
17.9% |
5.9% |
| Lump Sum |
16.8% |
3.0% |
-5.4% |
-0.4% |
17.9% |
5.9% |
Crediting rates
At the end of each financial year, the Police Superannuation Board
is required to declare rates of return to be credited to the various
accounts of members of the Pension and Lump Sum Scheme Divisions of
the Police Superannuation Fund. The investment returns (net of fees)
achieved by Funds SA are used by the Board to calculate end-of-year
crediting rates.
The Board has determined the following policies in respect of end-of-year
crediting rates to be applied to members’ accounts.
Member contribution accounts
The end-of-year crediting rate calculation is based on the average
of the net rates of return (money weighted return net of fees) achieved
for the Police Superannuation Fund (Pension and Lump Sum scheme Divisions),
by Funds SA over the previous three years.
For the financial year 2003-2004, the Board declared crediting rates
for the Pension and Lump Sum scheme divisions of 3.9 per cent and
4 per cent respectively, to be applied to Member Contribution Accounts.
The following table shows crediting rates for member contribution
accounts over the past five years.
Crediting rates to member contribution accounts to June 2004
| Scheme |
2000 |
2001 |
2002 |
2003 |
2004 |
5 years
annualized |
| Pension |
13.0% |
9.8% |
4.9% |
-1.0% |
3.9% |
6.0% |
| Lump Sum |
12.9% |
9.9% |
-4.8% |
-1.0% |
4.0% |
6.0% |
Voluntary contribution and roll-over accounts
The end-of-year crediting rate is the net rates of return (money
weighted return net of fees) achieved for the Police Superannuation
Fund (Pension and Lump Sum scheme Divisions), by Funds SA as at 30
June each year.
For the financial year 2003-2004, the Board declared crediting rates
for the Pension and Lump Sum scheme divisions of 17.9 per cent, to
be applied to voluntary contribution and roll-over accounts. The following
table shows crediting rates for voluntary contribution and roll-over
accounts over the past three years.
Crediting rates to voluntary contribution and roll-over accounts
to June 2004
| Scheme |
2002 |
2003 |
2004 |
| Pension |
-5.3% |
-0.8% |
17.9% |
| Lump Sum |
-5.4% |
-0.4% |
17.9% |
The year in financial markets
The past 12 months have seen a major bounce-back in global equity
markets after the poor returns of the previous three years. As represented
by the Morgan Stanley Capital International All Countries Free Index
(ACWI), global shares in local currency terms returned 20.6% for the
year, after returning -5.9% in the year to June 2003 and -18.1% in
2002. The bounce-back was broadly based across most of the world’s
major stock markets.
The recovery can be attributed to a number of factors, including:
- removal of uncertainty associated with the war in Iraq;
- absence of major terrorist actions;
- strong rebound in the US economy and associated rebound in corporate
profits;
- growing impact of Chinese economic growth in especially the Asian
region;
- associated with the above, good signs of economic growth in Japan;
and
- the above underpinned by stimulatory monetary policy, especially
in the United States.
Full details on Funds SA’s investment strategy can
be obtained by contacting Funds SA by:
