OSF Product Disclosure Statement – OSF Defined Benefit Members

Dated 4 November 2016

Reserve Bank of Australia Officers’ Superannuation Fund – Defined Benefit Members – Product Disclosure Statement dated 4 November 2016

This is the Product Disclosure Statement for OSF Defined Benefit Members (PDS – DB) for individuals who have a defined benefit interest in the OSF. It contains important information about the Defined Benefit Members division of the OSF. The PDS – DB is available from the OSF website https://super.towerswatson.com/rbaosf/publicinformation/PDS. Alternatively, you can obtain a hard copy free of charge, from the OSF Membership team (Phone: 1800 001 474 or Email: [email protected]). The information provided in this PDS – DB is general information only and does not take into account your personal financial situation or needs. The Trustees of the OSF are not licensed to provide financial product advice. You should obtain financial product advice tailored to your own personal circumstances. Information in this PDS – DB is subject 1 to change from time to time by the Trustees of the OSF.

OSF Product Disclosure Statement – OSF Defined Benefit Members

Dated 4 November 2016

1. ABOUT THE OSF The Reserve Bank of Australia Officers’ Superannuation Fund (OSF) is a non-public offer, complying superannuation fund that provides benefits to employees (and some former employees) of the Reserve Bank of Australia (RBA), Note Printing Australia Limited (NPA) and the Australian Prudential Regulation Authority (APRA) (each an ‘employer’). It had almost 2 650 members and $1.29 billion of net assets as at 30 June 2016. The OSF is governed by a trust deed (Trust Deed) (which overrides any statements in this Product Disclosure Statement (PDS – DB)). Unless they are separately defined in this PDS – DB (in which case the definition in this PDS – DB will apply), terms in this PDS – DB which are capitalised have the meaning given to them in the Trust Deed. The OSF Board of Trustees’ (Trustees) objective is to provide low cost, quality superannuation products that provide value to OSF members and beneficiaries, and to deliver a high level of service to members. To support this objective, the Trustees’ goals are to: •

maintain the OSF’s sound financial position;

•

continue to comply with legislative and regulatory requirements;

•

maintain the level and delivery of service to members;

•

provide superannuation benefits to members at low cost;

•

achieve reasonable levels of return for members’ accumulation balances; and

•

achieve a high level of member satisfaction.

You can find important governance information and other information about the OSF (including the Trust Deed, information about the Trustees and their remuneration, significant events, annual reports and outsourced providers) on the OSF website: https://super.towerswatson.com/rbaosf/publicinfor mation/publicdocuments.

Successor fund transfer The Trustees have decided to successor fund transfer all of the benefits provided under the OSF and have identified a suitable successor fund (Sunsuper Superannuation Fund) for that purpose.

A successor fund transfer is a mechanism for transferring members from one superannuation fund to another which is provided for, and regulated by, superannuation law. Such a transfer can only occur if the trustees of the original fund and the successor fund are satisfied that, in the successor fund, members will have rights in respect of benefits which are equivalent to those they have in the original fund. While the Trustees have decided to implement a successor fund transfer, due to the work and time involved the actual transfer is not expected to be completed until 2017. In the meantime it is “business as usual”.

About this document This is a Product Disclosure Statement for Defined Benefit Members in the OSF (ABN 25 303 030 489) and is issued by the OSF Board of Trustees (ABN 82 534 724 258). It covers the Defined Benefit membership of the OSF, including the accumulation component available to Defined Benefit Members. Consent to Statements All persons to whom statements may be attributed in this Product Disclosure Statement have consented to the inclusion and have not withdrawn their consent as at the date of issue.

Investing your superannuation with the OSF The OSF has both Defined Benefit Members and Accumulation Members. •

Defined Benefit Members have benefits comprising a Defined Benefit as well as (in most cases) an accumulation benefit; and

•

Accumulation Members’ OSF benefits only comprise an accumulation benefit.

Defined Benefit The Defined Benefit is funded by your employer. The benefit payable is a function of a number of factors, including your age, length of Defined Benefit membership, service history and your final salary. It does not depend on investment returns or costs.

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OSF Product Disclosure Statement – Defined Benefit Members

Accumulation Account balance An Accumulation Account balance may be held in more than one separate account within the OSF but a reference in this document to an Accumulation Account is to be read as a reference to all such accounts together. An Accumulation Account balance consists of your accumulation contributions and any investment earnings, less any withdrawals (such as tax). Accumulation contributions may consist of: •

your concessional contributions;

•

an employer funded productivity benefit of 3 per cent of your salary; and

•

any benefits that you transfer to the OSF from other superannuation funds.

and

non-concessional

Your Accumulation Account balance can be invested in a range of investment option(s) that best suit your needs and attitude to risk (see section 9 Investments for more information). The value of your Accumulation Account balance in the OSF may rise or fall because of factors including the investment returns earned by your choice of investment option(s). It is possible that your Accumulation Account balance may, at some times, be less than the total amounts contributed and transferred in (less any withdrawals), particularly if you leave the OSF within a few years of joining.

Dated 4 November 2016

understand your benefit entitlements, including the main features of any Defined Benefit you may have. If you would like more detailed information about your benefits in the OSF, please contact the OSF Membership team at: Phone:

1800 001 474

Email:

[email protected]

Fax:

1800 805 135

Mailing address: Reserve Bank of Australia Officers’ Superannuation Fund PO Box 1442 Parramatta NSW 2124 OSF website: https://super.towerswatson.com/rbaosf

Sections of this PDS – DB This PDS – DB is divided into various sections outlining different aspects of how the OSF is managed and how your benefits work: Section

Page number

1. About the OSF

2

2. Board of Trustees

4

3. Membership and Fund Rules

5

4. Your Defined Benefit Membership

6

5. Contributions

21

6. Fees and Costs

26

7. Tax and Levies

34

8. Insurance

38

9. Investments

40

10. Accessing your Benefit

49

Contact details

11. Pensions

51

The OSF will provide you with any additional information that you reasonably require in order to make an informed judgement about the management, financial condition, investments and investment performance of the OSF or to

12. Communicating with the OSF

54

13. Other Information

55

APRA Licensing and compliance APRA granted an RSE licence to the Trustees of the OSF (L0002462) (ABN 82 534 724 258) in May 2006. The OSF is an APRA-registered fund (R1056518) (ABN 25 303 030 489). The Unique Identification Number for the OSF is RBA00100AU. The OSF is a registered superannuation fund for taxation purposes and is eligible for concessional tax treatment. No penalties have been imposed on the Trustees, the OSF or its responsible persons. 1

Should you have any questions about the information contained in this PDS – DB, please contact the OSF Membership team.

1

‘Responsible persons’ includes the Trustees and other key decision makers.

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OSF Product Disclosure Statement – Defined Benefit Members

Dated 4 November 2016

2. BOARD OF TRUSTEES The Trustees are responsible for the management of the OSF. There are eight trustees, with half appointed by the Governor of the RBA and half elected by members of the OSF.

The Trustees act independently from the RBA and are required to exercise their powers and perform their duties in the best interests of OSF members.

The Trustees are:

Registers of relevant interests and duties of the Trustees are available on the OSF website.

RBA representatives

Remuneration of Trustees

Chris Ryan (Chairperson)

The Trustees are not remunerated out of the assets of the OSF or by any of the participating employers for performing their OSF duties. The Trustees volunteer their time, skills and expertise to the management of the OSF.

Michele Bullock (Deputy Chairperson) Gerald Richardson Lynne Cockerell

Member representatives Belinda Cheung David Emery Peter Gallagher David Noble All representatives serve for a fixed term in accordance with the OSF Trust Deed.

Secretary Bernadette Cossettini

Committees The Board of Trustees has two committees: the Investment Committee and the Audit Committee. The Investment Committee supports the Trustees through management of the OSF’s assets consistent with the Investment Committee Charter. The Audit Committee, operating under the Audit Committee Charter, supports the Trustees in overseeing the OSF’s financial reporting and risk management framework.

Conflicts of interest or duty Responsible persons of the OSF may also be employees of the RBA. As the RBA is one of the participating employers of the OSF, and provides administrative and other services to the OSF, there is the potential for conflicts of interest or duty to arise. The OSF has in place a policy and framework for the identification and, if required, management of any potential conflicts of interest or duty.

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OSF Product Disclosure Statement – Defined Benefit Members

Dated 4 November 2016

3. MEMBERSHIP AND FUND RULES Who can join the OSF?

Accumulation membership

You are generally eligible to become a member of the OSF if you are an employee of the RBA or NPA.

Accumulation Members’ OSF benefits comprise an Accumulation Account balance which generally consists of any employer and personal contributions, rollovers in, and any positive investment earnings, less any negative investment earnings, withdrawals, taxes, fees and charges. The member bears the investment risk of the Accumulation Account.

However, the Defined Benefit membership section of the OSF has been closed to new RBA and NPA staff since at least 1 August 2014. All new staff of the RBA and NPA join as OSF Accumulation Members.

OSF Trust Deed The OSF's governing rules are outlined in the Trust Deed. The Trust Deed prevails over any other documentation and is available on the OSF’s website. The Trust Deed may be amended as agreed from time to time by the Trustees and the RBA, and as permitted by law.

Types of OSF membership The OSF generally has two types of membership: Defined Benefit membership and Accumulation membership. Defined Benefit membership Defined Benefit Members receive a Defined Benefit, which is tied to a number of factors, including their salary, age, service history and length of Defined Benefit membership at the time the benefit is paid. In the case of ill-health or death, the length of Defined Benefit membership may be projected forward to a future date. This is discussed further in section 4 Your Defined Benefit Membership of this PDS - DB. In addition, Defined Benefit Members usually have an Accumulation Account balance. Defined Benefit membership has been closed to new staff since 1 August 2014. Defined Benefit Pension Membership Defined Benefit Pension Members receive a chosen portion of their Defined Benefit (or their deceased spouse's or parent's Defined Benefit, as relevant), in the form of a lifetime pension, which is payable following retirement from their employer or their death (and subject to meeting criteria outlined in the Trust Deed).

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OSF Product Disclosure Statement – Defined Benefit Members

Dated 4 November 2016

4. YOUR DEFINED BENEFIT MEMBERSHIP The OSF is hybrid superannuation fund. If you are a Defined Benefit Member of the OSF, your benefit membership generally consists of two parts: •

Defined Benefit. This is calculated by way of a specified formula outlined in the Trust Deed. The investment risks are borne by the employers; and

•

Accumulation Account. Your Accumulation Account balance generally comprises the value of your employer and personal contributions, rollovers in, and any positive investment earnings, less any negative investment earnings, withdrawals, taxes, fees and charges. You bear the investment risk of the Accumulation Account.

Together, these two parts make up your OSF benefits. Further details about your Defined Benefit and your Accumulation Account are below.

Defined Benefits Introduction to your Defined Benefit As a Defined Benefit Member, you receive a Defined Benefit, which is tied to a number of factors, including your salary, age, service history and length of Defined Benefit membership at the time the benefit is paid. In the case of ill-health or death, length of Defined Benefit membership may be projected forward to a future date. The OSF website can provide you with an estimated 2 value of your Defined Benefit, and it also allows most members to project this benefit to a future date (https://super.towerswatson.com/rbaosf). Your Defined Benefit is funded by your employer and does not depend on investment returns. The employers bear the investment risk in relation to Defined Benefits, and are responsible for the funding of any shortfalls. The Trustees invest the Defined Benefit monies in a manner that takes into account the OSF’s defined benefit obligations.

Generally, your Defined Benefit is paid from the OSF as a: •

lump sum if you leave the participating employer and withdraw your superannuation before you permanently retire from the workforce; or

•

lifetime pension or lump sum (or combination of both) if taken on retirement, death or ill health.

Preserved Membership Subject to having been a Defined Benefit Member for at least 5 years, if you cease employment with a participating employer before age 55, you have the option of keeping your Defined Benefit (and where applicable, your Accumulation Account balance) in the OSF until age 60. If you choose this option, you will become a Preserved Member (a sub category of Defined Benefit membership). Further details of Preserved Members’ benefits are provided below. References to a Defined Benefit Member in this PDS – DB include a Preserved Member (but not those who have chosen another superannuation fund), unless otherwise specifically stated. Calculation of your Defined Benefit Note: Your Member Annual Statements show your estimated Defined Benefit at the end of each financial year. You can also view your Defined Benefit and certain benefit projections on the OSF website. The value of your Defined Benefit is calculated initially as a lump sum and then where applicable, converted to an indexed pension. Calculation of your Defined Benefit lump sum The Defined Benefit lump sum is generally calculated as: SxAxR

2

Subject to the assumptions outlined on the OSF website. Your actual benefit is determined by the OSF Trust Deed, not the website calculator.

Where:

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OSF Product Disclosure Statement – Defined Benefit Members

S = Salary. For a Defined Benefit Member, this is your full-time annual salary advised by your employer. For a Preserved Member, this is your full-time annual salary on ceasing employment with a participating employer which has been indexed thereafter to changes to the Consumer Price Index. A = Accrual Factor. This is the nominal accrual of your Defined Benefit from the date you became a Defined Benefit Member until retirement (i.e. depending on your age, your Accrual Factor is generally calculated by projecting your service until age 55). It is calculated by adding Accrual Factors applicable over your period of membership. For most members who joined the OSF after 1990, your Accrual Factor will be 0.17 per year for 20 years, and 0.085 per year thereafter. A full list of Accrual Factors is set out in the Trust Deed. Example – Accrual Factor Alex became a Defined Benefit Member in 1995, at age 31. While Alex is younger than 55, his Accrual Factor for resignation benefit purposes is: = (17% x 20 years of membership) + (8.5% x 4 years of membership) = 3.74. Alex’s Accrual Factor after age 55 will depend on his service. If he retired at age 59, his Accrual Factor would be: = (17% x 20 years of membership) + (8.5% x 8 years of membership) = 4.08. R = Ratio Factor. This is the ratio of your period of actual employment with a participating employer to the service period if you had continued employment until age 55. Once a Defined Benefit Member reaches age 55, the Ratio Factor reverts to 1. Although, if you become a Preserved Member, your Ratio Factor at that date will continue to apply to your Defined Benefit going forward. The Ratio Factor also reverts to 1 for death and ill health retirement benefits of Defined Benefit Members (excluding Preserved Members).

Dated 4 November 2016

Example – Ratio Factor Ben joined the OSF as a Defined Benefit Member at age 24. At age 30, his Ratio Factor is: = (30 – 24) / (55 – 24) = 0.19. At age 35, his Ratio Factor is: = (35 – 24) / (55 – 24) = 0.35. If Ben had ceased employment and elected to become a Preserved Member at age 30, his Ratio Factor of 0.19 would continue to apply to all future Defined Benefit calculations. Calculation of your indexed pension The indexed pension is calculated as: Defined Benefit lump sum x Pension Reduction 10

Factor

The Pension Reduction Factor applicable depends on your age at the commencement of the pension and the circumstances in which you are accessing your Defined Benefit. The Pension Reduction Factor does not vary once your pension commences. If you are accessing the pension due to ill health, the Pension Reduction Factor is subject to a minimum of 90 per cent (or 85 per cent for Preserved Members). The minimum Pension Reduction Factor also applies to death benefits. The Pension Reduction Factor (subject to the minimum rules if the benefits are being accessed due to ill health or death) is detailed below: Age of Member on commencing the Indexed Pension

Pension Reduction Factor

65 or older

1

64

0.98

63

0.96

62

0.94

61

0.92

60

0.90

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OSF Product Disclosure Statement – Defined Benefit Members

Age of Member on commencing the Indexed Pension

Pension Reduction Factor

59

0.89

58

0.88

57

0.87

56

0.86

55

0.85

Example – Pension Reduction Factor Jane is a Defined Benefit Member who retires and ceases employment with a participating employer at age 59. Jane’s Defined Benefit lump sum is $500 000. Jane’s initial gross annual indexed pension is calculated as: = Defined Benefit lump sum / 10 x Pension Reduction Factor = ($500 000 / 10) x 0.89 = $44 500 per annum. Indexation of pensions occurs semi–annually (March and September), based on changes in the Male Total Average Weekly Earnings (MTAWE) series published by the Australian Bureau of Statistics. Factors that affect your Defined Benefit Your Defined Benefit can also be affected by other factors such as a reduction in hours worked, leave without pay, membership category and the situation in which you are accessing your Defined Benefit. These may affect the calculation of your Defined Benefit lump sum and indexed pension and in some cases the options available. These are outlined below. If you have any questions, please contact the OSF Membership team. Accessing your Defined Benefit before age 55 and the Discount Factor (D)

Dated 4 November 2016

employer), the lump sum value of your Defined Benefit will be discounted by 1.5 per cent per annum (compounded) for the period between withdrawal and age 55. This is the Discount Factor (D). The discount is applied because, in effect, you are receiving your Defined Benefit earlier than age 55. Approximate Discount Factors applicable to different withdrawal ages are available in the Trust Deed. Part-Time employment During a period of part-time employment with an employer, the daily accrual of your Defined Benefit is reduced to reflect your part-time service. This proportion is called the “employment ratio”. For example, if you work 3 days each week instead of 5 days, you would have an employment ratio of 0.6 (ie. 3 days divided by 5 days) for that period of parttime service. When you cease employment under age 55 with a participating employer, or in the event of ill health retirement or death, your weighted average employment ratio will be applied to your Defined Benefit to project your Accrual Factor forward to age 55. The weighted average employment ratio is the employment ratio averaged over your entire employment history to reflect the variations in hours worked. Example – Weighted Average Employment Ratio Bill joins the OSF as a Defined Benefit Member in 2001 at age 30. In his first 10 years of service, Bill works full-time, but reduces to 4 days a week for the following 2 years. Bill’s employment ratio over these 2 years will be 0.80. Bill then resigns from the participating employer at age 42 and elects to rollover his OSF benefits to an external superannuation fund. His salary at resignation was $100 000. At resignation, Bill’s weighted average employment ratio is: = [(10 years x 1) + (2 years x 0.80)] / (12 years) = 0.967. The weighted average employment ratio will be applied to accrual of the Defined Benefit as set out below.

With the exception of benefits being paid under ill health retirement or death, if you access your Defined Benefit before you reach age 55 (for example, because you have resigned from an

8

OSF Product Disclosure Statement – Defined Benefit Members

His Accrual Factor would be calculated as: = (17% x 10 years of membership) + (17% x 2 years of membership x employment ratio of 0.80) + (17% x 8 years of membership x weighted average employment ratio of 0.967) + (8.5% x 5 years of membership x weighted average employment ratio of 0.967) = 3.698. As a result, Bill’s resignation benefit at age 42 is calculated as: =SxAxRxD where: • R is 0.48, calculated as (42 – 30) / (55 – 30); and • D is 0.824, calculated based on 13 years until age 55 is reached. Bill’s resignation benefit (before tax) will be approximately: = $100 000 x 3.698 x 0.48 x 0.824 = $146 263. Leave without pay For any period of leave without pay (LWOP) of up to 84 calendar days, your Defined Benefit will continue to accrue at the rate applicable before you commenced LWOP. However, if you take LWOP for a period of more than 84 calendar days, your Defined Benefit will cease to accrue from the first day of your leave. Irrespective of your length of LWOP, employer contributions made to your Accumulation Account will cease from when you commence LWOP. While on LWOP you are free to choose either to continue paying your own contributions to the OSF or cease contributing until you return to work. If you cease contributions while on LWOP, your eligibility for certain benefit options on ill health or death will not be affected (refer Benefits and Options Available later in this section for more information). If you wish to continue contributing, please contact the OSF Membership team for details. Separate arrangements apply for employees on a Post Graduate Study Award (PGSA). RBA staff should contact the Human Resources Department for further information.

Dated 4 November 2016

Choice of fund Employees may elect to have their employer contributions paid to a superannuation fund of their choice. If you elect for your employer to make your superannuation contributions to another superannuation fund, this will affect the accrual of your Defined Benefit and the options available to you. Your Defined Benefit will be less than if you had not elected choice. Unless you make the choice within 12 months of becoming employed by an employer, you will also only be able to roll out your Defined Benefit upon ceasing employment with the employer. Please contact the OSF Membership team for further information. Choice is a complex issue so it is important that you consider all aspects carefully before making any decision. ASIC has issued information regarding items for consideration in choosing a superannuation fund. This information is available https://www.moneysmart.gov.au/superannua at: tion-and-retirement/how-super-works/choosing-asuper-fund. ASIC has also released a factsheet on private selfmanaged superannuation. Members are encouraged to read this if they are considering setting up their own superannuation fund. This is available at: https://www.moneysmart.gov.au/superannuationand-retirement/self-managed-super-fund-smsf. The information contained in the factsheet does not constitute financial product advice. Members should seek advice from a licensed financial adviser in relation to their personal circumstances. Medical standards As per section 8 Insurance of this PDS – DB, you need to satisfy the medical standards determined by the RBA to be eligible for insurance in the event of death or ill health. If you satisfy the medical standards, you are a Category X Member (a sub category of Defined Benefit membership). If you do not satisfy these medical standards and are under age 55, you are a Category M Member (another sub category of Defined Benefit membership). If you are a Category M Member, the Defined Benefit payable in the event of death or ill health retirement will be the amount payable if you had immediately withdrawn your benefit on resignation because you do not receive any insurance benefit. Under these circumstances, Category M Members can only take their benefit as a lump sum.

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OSF Product Disclosure Statement – Defined Benefit Members

Dated 4 November 2016

Preserved membership

Accumulation Account

As a Preserved Member, your Defined Benefit will continue to accrue although, as explained earlier under 'Calculation of your Defined Benefit lump sum', it will be adjusted to reflect your period of active membership. Your salary upon ceasing employment with the participating employer will be indexed thereafter on an annual basis to changes to the Consumer Price Index.

If you have an Accumulation Account, this will contain your 3 per cent productivity benefit contributions, any salary sacrifice contributions as well as post-tax contributions or rollovers. You will be able to invest the balance of your Accumulation Account in one or more of the 10 investment options available in the OSF. This allows you to choose the investment strategy which best suits your risk profile (see table below):

Example – Preserved Member Accrual As a continuation of the Ratio Factor example, assuming Ben ceased employment and elected to become a Preserved Member at age 30, the value of his Defined Benefit at age 55 based on the following: •

joining at age 24;

•

becoming a Preserved Member at age 30; and

•

an OSF recorded Salary of $80 000 at age 55

Description Blended options Each of these options is blended to diversify your investment across a range of asset classes.

= $80 000 x [(17% x 20 years) + (8.5% x 11 years)] x 0.19

Sector specific options

= $65 892 (before tax).

Each of these options invests in a single asset class and may hold a small amount of cash.

If you are still a Preserved Member at age 60, unless you provide instructions otherwise, your Defined Benefit will automatically be paid as an indexed pension and your Accumulation Account balance will need to be withdrawn from the OSF.

• Option B • Option C • Option E

=SxAxR

Subject to the requirements of the superannuation law, you can as a Preserved Member elect at any time to withdraw your benefits from the OSF. You can either withdraw your whole benefit (Defined Benefit and Accumulation Account balance) or only the Accumulation Account balance.

• Option A

• Option D

would be:

As a Preserved Member, your Accumulation Account balance continues to be subject to the investment returns of your chosen investment option(s). Upon becoming a Preserved Member, the OSF does not accept any employer contributions, member contributions or inward transfers on your behalf. However Government co-contributions are accepted.

Name of Investment options

• Cash • Fixed Interest • Listed Property • Australian Equities • International Equities

Note: You bear the risk of your Accumulation Account investment. When choosing your investment options, you should consider the likely investment return, the risk and your investment timeframe. The Trustees may make changes to the OSF’s investment options, including changes to the benchmark asset allocations and the range of options available. Members will be advised of any such changes. This will usually be through the Superannuation Matters newsletter. Please refer to section 9 Investments of this PDS – DB for further details about investment options.

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OSF Product Disclosure Statement – Defined Benefit Members

Dated 4 November 2016

Switching investment options

•

a lump sum;

You can change investment options at the end of each calendar quarter (March, June, September and December) via the OSF website or by lodging an Investment Option Switch Application with the OSF Membership team.

•

a combination of both an indexed pension and lump sum; or

•

unless you are a Preserved Member, a rollover into your Accumulation Account (forming part of your retained benefit as described below).

If you wish to switch to a low risk option prior to ceasing employment with one of the employers, you may notify the OSF of your intention to exit and switch your Accumulation Account balance to the Cash Option outside the regular quarterly switch dates. The Accumulation Account balance of a deceased member will be automatically switched to the Cash Option effective on the day following the member’s date of death. You are not able to switch your Defined Benefit funds, because the amount is set by a formula and the investment risk is borne by the employers.

Portability Members have the option of moving their existing Accumulation Account balance from one fund to another at any time. However, the Trustees may refuse the transfer if you have previously transferred or rolled over your balance in the last 12 months. Warning: Members should be aware that portability provisions only apply to your Accumulation Account balance and any withdrawal of your accumulated post-tax contributions balance (which is a portion of your Accumulation Account balance) will affect your eligibility for certain benefit options in the event of ill health retirement or death (refer Benefits and Options Available below for more information).

Benefits and Options Available

The value of your Defined Benefit is calculated as per the standard Defined Benefit formula described in 'Calculation of your Defined Benefit' above with accrual up until your current age at retirement. If you elect to receive your Defined Benefit as an indexed pension, an indexed pension will be payable to your qualifying spouse and/or dependant children following your death. Additionally, your dependants may be eligible to receive a pension guarantee in respect of the indexed pension. Further information is available in section 11 Pensions of this PDS – DB. Should you elect to receive your Defined Benefit as an indexed pension, a 14 day Cooling Off Period applies during which you can write to the Trustees requesting a lump sum rather than a pension. Refer Cooling Off Period – Indexed Pension later in this section for more information. Accumulation Account If you take the Defined Benefit portion of your retirement benefit, any Accumulation Account balance that is held for you also becomes payable. Unless you elect to retain your Accumulation Account balance in the OSF (see Retained Benefits below), you must elect to either: •

roll your Accumulation Account balance as a lump sum to your nominated superannuation fund;

•

take your Accumulation Account balance as a lump sum (assuming you have retired from the workforce and have reached your preservation age); or

•

do a combination of the above.

Retirement Benefit This is the benefit that is paid to you when you retire from the workforce after you reach your preservation age (refer section 10 Accessing Your Benefit for more information on preservation age). Your retirement benefits consist of your Accumulation Account balance and your defined benefit. Defined benefit portion At retirement, you have the option of taking the Defined Benefit portion of your retirement benefit as: •

an indexed pension for life;

Retained Benefits Upon retirement, if you are a Defined Benefit Member (with the exception of Preserved Members and members who have been ill health retired (see below)), you can elect to retain your Accumulation Account in the OSF. Otherwise, your Accumulation Account balance will need to be withdrawn from the OSF. If you elect to leave some or all of your Accumulation Account in the OSF (including any part

11

OSF Product Disclosure Statement – Defined Benefit Members

of the Defined Benefit lump sum you have rolled in), you will become a Retained Member. Once you become a Retained Member, you will be able to access your benefits at any time subject to there remaining a minimum account balance of $5 000. You will also be able to continue to change your investment options on a quarterly basis. Depending on the number of withdrawals, you may be charged an exit fee (see Fees and Cost table in section 6 Fees and Costs). Ill Health Retirement An ill health retirement benefit becomes payable by the OSF if the Trustees decide that you meet the conditions specified in the Trust Deed. The Trustees must be reasonably satisfied that you are unlikely, because of ill health, to ever again engage in gainful employment for which you are reasonably qualified by education, training or experience. Such ill health may be physical or mental, but not temporary or caused by your own misconduct. Under the Trust Deed, Defined Benefit Members aged 60 and over and Preserved Members aged over 60 are not able to apply for ill health retirement. In these scenarios, members may be able to access their Defined Benefit in the same way they would in the case of retirement for any other reason. Your ill health retirement benefits consist of your Accumulation Account balance and your Defined Benefit (although as discussed later in this 'Ill Health Retirement' section, this is calculated differently than in circumstances where retirement is not due to ill health). The OSF will inform you of your current ill health retirement benefit each year as part of your Member Annual Statement. Updates can be obtained from the OSF Membership team at any time. Category M Members If you are a Category M Member, you are not eligible for insurance (as discussed at section 8 Insurance). As such, your ill health retirement benefit is equal to your resignation benefit (or, if a Preserved Member, your withdrawal benefit). This benefit is only payable as a lump sum. Category X Members (including Preserved Members) For Category X Members, other than Preserved Members, the Accrual Factor applied to calculate your Defined Benefit payable on ill health retirement is based on your retirement benefit at age 60 capped at the higher of 30 years’ service or your actual years of service.

Dated 4 November 2016

For Preserved Members, your Defined Benefit payable under ill health retirement will be the higher of: •

your withdrawal benefit; and

•

your Defined Benefit calculated based on your retirement benefit at age 55, capped at the higher of 30 years’ service or your actual years of service.

Upon retiring due to ill health, you will have the option of taking your defined benefit as: •

an indexed pension for life;

•

a lump sum;

•

a combination of an indexed pension and lump sum; or

•

unless you are a Preserved Member, a rollover into your Accumulation Account.

If you elect to receive your Defined Benefit as an indexed pension, an indexed pension will be payable to your qualifying spouse and/or dependant children following your death. Additionally, your dependants may be eligible to receive a pension guarantee in respect of the indexed pension. Further information is available in section 11 Pensions of this PDS – DB. Should you elect to receive your Defined Benefit as an indexed pension, a Cooling Off Period applies. Refer Cooling Off Period – Indexed Pension later in this section for more information. Example – Defined Benefit Member Ill Health Benefit Pauline joined the OSF in 2003 as a Defined Benefit Member at age 18. The Trustees approved Pauline’s ill health retirement application effective 2010 when she was age 25. Pauline had not worked part-time or had any periods of LWOP during her employment. Her salary at the date of approval was $51 000 and she was ineligible for the additional non-indexed pension (see section below this example for further information on eligibility). Pauline’s Defined Benefit payable as an ill health retirement lump sum is: =SxAxR where:

12

OSF Product Disclosure Statement – Defined Benefit Members

• A is calculated to age 60 capped at the higher of 30 years’ service or actual years of service. For Pauline, she has 7 years of service. If she had worked to age 60, she would have 42 years of service. As a result, her accrual will be capped at 30 years of service; and • R reverts to 1 for ill health retirement and death benefits of Defined Benefit Members (excluding Preserved Members). = $51 000 x [(17% x 20 years of membership) + (8.5% x 10 years of membership)] x 1 = $216 750 (before tax). Pauline has the option of a lump sum of $216 750 or an initial gross annual indexed pension calculated as: = Defined Benefit lump sum / 10 x Pension Reduction Factor = ($216 750 / 10) x 0.90 = $19 508 per annum. Pauline may also elect a combination of both indexed pension and lump sum (including rolling part or all of her Defined Benefit into her Accumulation Account).

Dated 4 November 2016

• A is calculated to age 55: (17% x 20 years of membership) + (8.5% x 15 years of membership) = 4.675; • R is equal to 0.171, calculated as (26 – 20) / (55 – 20); and • D is 0.700, calculated based on 24 years until age 55 is reached. Justin’s resignation approximately:

benefit

at

age 31

is

= $87 000 x 4.675 x 0.171 x 0.700 = $48 685 (before tax). Justin’s Defined Benefit payable as an ill health retirement lump sum is: =SxAxR where: • A is calculated to age 55 capped at the higher of 30 years’ service or actual years of service. For Justin, he has 6 years of service. If he had worked to age 55, he would have 35 years of service. As a result, his accrual will be capped at 30 years’ of service; and • R is equal to 0.171, calculated as (26 – 20) / (55 – 20). = $87 000 x [(17% x 20 years of membership) + (8.5% x 10 years of membership)] x 0.171

Example – Preserved Member Ill Health Benefit Justin joined the OSF in 2005 as a Defined Benefit Member at age 20. He ceased employment with the participating employer and became a Preserved Member in 2011 at age 26. The Trustees approved Justin’s ill health retirement application effective 2016 at age 31. Justin did not work parttime or have any periods of LWOP while he was a Defined Benefit Member. Justin’s indexed salary at the date of ill health retirement approval was $87 000. Justin is ineligible for the additional nonindexed pension. The Defined Benefit payable to Justin will be the higher of his ill health retirement benefit and his withdrawal benefit. Justin’s withdrawal (resignation) benefit in 2016 at age 31 was: =SxAxRxD where:

= $63 227 (before tax). As Justin’s resignation benefit of $48 685 is less than his ill health retirement benefit of $63 227, the Defined Benefit payable will be $63 227. Justin has the option of a lump sum of $63 227 or an initial gross annual indexed pension calculated as: = Defined Benefit lump sum / 10 x Pension Reduction Factor = ($63 227 / 10) x 0.85 = $5 374 per annum. Justin may also elect a combination of both indexed pension and lump sum. If you take the Defined Benefit portion of your ill health retirement benefit, any Accumulation Account balance that is held for you also becomes payable. Unless you elect to retain your

13

OSF Product Disclosure Statement – Defined Benefit Members

Accumulation Account balance in the OSF (see Retained Benefits below), you must elect to either: •

roll your Accumulation Account balance as a lump sum to your nominated superannuation fund;

•

take your Accumulation Account balance as a lump sum; or

•

a combination of the above.

If you elect to receive the Additional non-indexed pension (see below), you will only be able to make these choices in respect of any remaining Accumulation Account balance excluding your accumulated post-tax contributions balance. Retained Benefits Upon ill health retirement, Defined Benefit Members (with the exception of Preserved Members) can elect to retain their Accumulation Account in the OSF, and become a Retained Member. Additional non-indexed pension In the case of ill health retirement, if you elect to receive your Defined Benefit as an indexed pension, you may also have the option of receiving an additional non-indexed pension in lieu of your accumulated post-tax contributions balance (which is part of your Accumulation Account balance). Should you be eligible, and elect to receive the additional non-indexed pension, you will forfeit all of your accumulated post-tax contributions balance. The additional non-indexed pension is calculated as 40 per cent of your initial annual indexed pension and is not indexed to MTAWE. This option of an additional non-indexed pension is only available if: •

you have continuously made post-tax contributions of at least 2 per cent of your salary for the entire length of your Defined Benefit membership while employed by a participating employer; and

•

you have not withdrawn any of your accumulated post-tax contributions balance, unless this was for payment to the ATO.

If you elect to forego your accumulated post-tax contributions balance and receive an additional nonindexed pension, an additional non-indexed pension will also be payable to your qualifying spouse and/or dependant children following your death. However, unlike the indexed pension, the pension guarantee

Dated 4 November 2016

does not apply to the additional non-indexed pension. Further information is available in section 11 Pensions of this PDS – DB. Death Benefit Your death benefits consist of your Accumulation Account balance and your Defined Benefit. If you die while a Defined Benefit Member, your spouse (including de facto spouse) or, if you have no living spouse, dependant children, may be entitled to death benefits. If you do not have a spouse or dependant children at the time of your death, your death benefit may be paid by the OSF as a lump sum to your estate. For these purposes, a child is generally only classified as a dependant: •

up to age 18, or

•

up to age 25, if receiving full-time education at a school, college, university or other recognised tertiary institution.

The OSF will inform you of your current death benefit each year as part of your Member Annual Statement. Updates can be obtained from the OSF Membership team at any time. Category M Members Similar to ill health retirement benefits, if you are a Category M Member, your death benefit (including the Accumulation Account balance) is only payable as a lump sum (i.e. it is not available as a pension). In the event of death, the benefit payable to your spouse or dependant children will be equal to your resignation benefit (or, if a Preserved Member, your withdrawal benefit). Defined Benefit Member with a spouse and/or children In accordance with the Trust Deed, following your death, your Defined Benefit will be distributed to your qualifying spouse, if you have a surviving spouse, or your dependant children (where applicable). The recipient of your Defined Benefit will have a choice of taking your Defined Benefit as a lump sum, an indexed pension or a combination of both. (i) Lump sum The lump sum defined benefit payable to your spouse or dependant children is equal to your ill health retirement benefit at the time of your death.

14

OSF Product Disclosure Statement – Defined Benefit Members

The method for calculating this lump sum is discussed above at 'Ill Health Retirement'. (ii) Indexed pension Your Defined Benefit payable as an indexed pension to your spouse or dependant children is a proportion of your ill health retirement indexed pension benefit plus a lump sum (the Pension Guarantee), as set out in the following table: Maximum indexed pension (% of member’s indexed pension)

Plus Pension Guarantee*

Dated 4 November 2016

when the child reaches age 18 (or up to age 25 if in full-time education). A pension guarantee may be payable associated with the cessation of the indexed pension in relation to your child. Further information is available in section 11 Pensions of this PDS – DB. If your spouse or dependant children elect to receive your Defined Benefit as an indexed pension, a 14 day Cooling Off Period applies during which they can write to the OSF Trustees requesting a lump sum rather than a pension. Refer Cooling Off Period – Indexed Pension later in this section for more information. Example – Defined Benefit Member Death Benefit

Spouse only

67%

Remaining 33% x 10

Spouse and one child

78%

Remaining 22% x 10

Spouse and two children

89%

Remaining 11% x 10

Spouse and three or more children

100%

Nil

One orphan

45%

Remaining 55% x 10

Two orphans

80%

Remaining 20% x 10

Three orphans

90%

Remaining 10% x 10

Four or more orphans

100%

Nil

*Where the multiple 10 reflects the Pension Guarantee Period.

The proportions listed in the table above are the maximum proportion of indexed pension available to your spouse or dependant children. Where your spouse or dependant children elect to receive a combination of lump sum and indexed pension, they can choose an indexed pension up to the maximum proportion applicable. The indexed pension is payable to your spouse for their entire life whereas the indexed pension payable in relation to a dependant child ceases

Jenny joined the OSF in 2002 as a Defined Benefit Member at age 20. Jenny dies at age 34, leaving behind a husband. Jenny has not worked part-time or had any periods of LWOP during her employment. Jenny’s salary at death is $64 000 and she was not eligible for the additional non-indexed pension (see section below this example for further information on eligibility). Jenny’s Defined Benefit payable as a lump sum death benefit is her ill health retirement benefit at the date of death: =SxAxR where: • A is calculated to age 60 capped at the higher of 30 years’ service or actual years of service. For Jenny, she has 14 years of service. If she had worked to age 60, she would have 40 years of service. As a result, her accrual will be capped at 30 years’ of service; and • R reverts to 1 for ill health retirement and death benefits of Defined Benefit Members (excluding Preserved Members). = $64 000 x [(17% x 20 years of membership) + (8.5% x 10 years of membership)] x 1 = $272 000 (before tax). This equates to a gross indexed pension of: = Defined Benefit lump sum / 10 x Pension Reduction Factor = ($272 000 / 10) x 0.90 = $24 480 per annum.

15

OSF Product Disclosure Statement – Defined Benefit Members

This means that in relation to the Defined Benefit, Jenny’s husband has the following death benefit options available: i. a lump sum of $272 000; ii. a gross annual indexed pension commencing at $16 402 ($24 480 x 0.67) plus a Pension Guarantee lump sum amount of $80 780 ([$24 480 - $16 402] x 10); or iii. a combination of lump sum and indexed pension. Additional non-indexed pension If your spouse or dependant children elect to receive any part of your Defined Benefit as an indexed pension, they may also have the option of receiving an additional non-indexed pension in lieu of your total accumulated post-tax contributions balance. As would be the case if you elected to take this additional non-indexed pension upon ill health retirement, should they elect to receive the additional non-indexed pension, they will forfeit all of your accumulated post-tax contributions balance. The additional non-indexed pension is calculated as 40 per cent of your spouse or dependant children’s initial annual indexed pension and is not indexed to MTAWE. This option of an additional non-indexed pension is only available to your spouse or dependant children if you would have been eligible to take it because: •

•

you have continuously made post-tax contributions of at least 2 per cent of your salary for the entire length of your Defined Benefit membership (except for periods of LWOP) while employed by a participating employer sponsor; and you have not withdrawn any of your accumulated post-tax contributions balance, unless for payment to the ATO.

Similar to the indexed pension, the additional nonindexed pension is payable to your spouse for their entire life whereas the pension payable in relation to a dependant child ceases when the child reaches age 18 (or up to age 25 if undertaking full-time education). However, unlike the indexed pension, the pension guarantee does not apply to the additional non-indexed pension.

Dated 4 November 2016

Example – Defined Benefit Member Death Benefit – Additional Pension If in the above example, Jenny had continuously contributed at least 2 per cent post tax throughout her Defined Benefit membership and not withdrawn any of her accumulated post-tax contributions balance, unless for payment to the ATO, her husband would have the option of the additional non-indexed pension instead of Jenny’s accumulated post-tax contributions balance. Assuming Jenny’s husband elected the full indexed pension of $16 402, the gross additional nonindexed pension available to him would be: = 40% x $16 402 =$6 561 per annum. Accumulation Account balance Following your death, your remaining Accumulation Account balance (for example, any portion that has not been forfeited in favour of an additional nonindexed pension) may be payable to your spouse and/or children (including adult children). If you do not have a spouse or any children your Accumulation Account balance may be paid by the OSF to your Legal Personal Representative (LPR). If the Trustees cannot locate your spouse, children or LPR, the Trustees may pay the benefit to any other person(s) permitted under superannuation law. You can nominate dependants to whom you would like your Accumulation Account balance to be paid in the event of your death (via the OSF website at: https://super.towerswatson.com/rbaosf). Your nomination is not binding on the Trustees. The distribution of your Accumulation Account balance will be determined on a case by case basis by the Trustees, taking into consideration any dependant nomination you make and any other information available (including your Will if applicable). The claim will then be assessed in accordance with the Trust Deed and superannuation law. Upon notification of death, the OSF will automatically switch your Accumulation Account balance to the Cash Option (refer to section 9 Investments) effective on the day following the date of death. The Trustees have determined that this is the investment option that will provide the most certainty to your dependants or your estate over the value of your Accumulation Account balance. For

16

OSF Product Disclosure Statement – Defined Benefit Members

Dated 4 November 2016

more information on the potential risk and return associated with the Cash Option, please refer to section 9 Investments.

Example – Defined Benefit Member Resignation Benefit under 55

Where your Accumulation Account balance is paid as a lump sum death benefit to your spouse or dependant child, an additional amount representing the anti-detriment payment may also be paid. 3 The anti-detriment payment represents a refund of the 15 per cent contributions tax that was paid on your taxable contributions. The OSF uses a formula provided by the ATO to calculate the anti-detriment payment.

Joanna joined the OSF in 2010 as a Defined Benefit Member at age 25. Joanna ceases employment with the participating employer in 2016, at age 31. She has not worked part-time or had any periods of LWOP during her employment. Her salary at date of resignation is $77 000.

Defined Benefit Member without spouse or children

where:

Joanna’s Defined Benefit resignation lump sum is: =SxAxRxD • A is calculated to age 55;

The Defined Benefit payable upon your death to your estate is a lump sum equal to your ill health retirement benefit at the time of your death. Your estate will also receive a lump sum representing your Accumulation Account balance.

• R is equal to 0.200, calculated as (31 – 25) / (55 – 25); and • D is 0.700, calculated based on 24 years until age 55 is reached.

Resignation Benefit

= $77 000 x [(17% x 20 years of membership) + (8.5% x 10 years of membership)] x 0.200 x 0.7000

Your resignation benefit consists of your Accumulation Account balance and your Defined Benefit, and may differ depending on your age at resignation. Ceasing employment at under age 55 Upon resignation from a participating employer at an age less than 55, unless: •

you are eligible to elect to remain in the OSF and become a Preserved Member; or

•

your total OSF superannuation benefit (including your Accumulation Account balance) is under $200 or is non-preserved,

your Defined Benefit and Accumulation Account balance must be rolled over to an approved deposit fund or another superannuation fund until you retire from the workforce on or after your minimum preservation age (refer section 10 Accessing Your Benefit for more information on preservation age). The value of your Defined Benefit that is rolled over is calculated by the formula S x A x R x D.

3

The Federal Government proposed in its 2016/2017 Federal Budget the removal of the anti-detriment payment regime. If this proposal passes into law, the OSF would not continue to make these payments available.

= $45 815. Ceasing employment at ages 55 to 59 If you resign from a participating employer at age 55 or over, you will need to provide instructions as to how you would like to access your Defined Benefit. Unless you have reached your preservation age and are retiring from the workforce, your options in relation to your Defined Benefit are restricted to the following: •

taking your Defined Benefit as an indexed pension;

•

rolling your Defined Benefit into your Accumulation Account balance (refer to Retained Benefits below for further information);

•

rolling your Defined Benefit as a lump sum to your nominated superannuation fund; or

•

a combination of the above.

If you have reached your preservation age and are retiring from the workforce, you will have the additional option of taking your Defined Benefit as a lump sum.

17

OSF Product Disclosure Statement – Defined Benefit Members

Dated 4 November 2016

The value of your Defined Benefit is calculated as per the standard Defined Benefit formula with accrual up until your date ceased employment.

•

roll your Accumulation Account balance as a lump sum to your nominated superannuation fund;

If you do not provide instructions within 90 days of ceasing employment, your Defined Benefit will automatically be paid as an indexed pension.

•

take your Accumulation Account balance as a lump sum (assuming you have retired from the workforce and have reached your preservation age); or

•

do a combination of the above.

If you elect to receive your Defined Benefit as an indexed pension, an indexed pension will be payable to your spouse and/or dependant children following your death. Additionally, your dependants may be eligible to receive a pension guarantee in respect of the indexed pension. Further information is available in section 11 Pensions of this PDS – DB. Should you elect to receive your Defined Benefit as an indexed pension, a 14 day Cooling Off Period applies during which you can write to the Trustees requesting a lump sum rather than a pension. Refer Cooling Off Period – Indexed Pension later in this section for more information.

If no election is made, your Accumulation Account balance will be transferred to the OSF’s Eligible Rollover Fund. Preserved Member Withdrawal Benefit

As noted above under 'Benefits and Options Available', upon ceasing employment at age 55 and over, Defined Benefit Members (with the exception of Preserved Members) can elect to retain their Accumulation Account balance in the OSF.

A Preserved Member can elect at any time to withdraw their benefits from the OSF, including the option of withdrawing their Accumulation Account balance while the Defined Benefit remains in the OSF. However, if a Preserved Member withdraws their Defined Benefit, they will also need to withdraw their Accumulation Account balance from the OSF. You should be aware that if you withdraw any of your accumulated post-tax contributions balance, the option of you, your spouse or your dependant children receiving the additional nonindexed pension on ill health retirement or death will not be available.

Ceasing employment at age 60 and over

Withdrawal before reaching age 55

If you leave your participating employer on or after age 60, you will have the same options available to those members who do so at age 55 to 59. In addition, you are able to receive your Defined Benefit as a lump sum in cash, even if you are not retiring from the workforce.

If as a Preserved Member, you elect to withdraw your Defined Benefit from the OSF before age 55, your Defined Benefit and Accumulation Account balance must be rolled over into an approved deposit fund or another superannuation fund until you retire from the workforce on or after your minimum preservation age.

Retained Benefits

Similarly, if you do not provide instructions within 90 days of ceasing employment, your Defined Benefit will automatically be paid as an indexed pension. The value of your Defined Benefit will be calculated as per the standard Defined Benefit formula with accrual up until the date you ceased employment.

The value of your Defined Benefit that is rolled over is calculated as S x A x R x D. The Salary used in the calculation will be your salary at the point of ceasing employment with the participating employer, annually indexed since then to the Consumer Price Index.

Accumulation Account balance If upon ceasing employment with the participating employer at any age from 55 onwards, you take the Defined Benefit portion of your resignation benefit, any Accumulation Account balance that is held for you also becomes payable. Unless you elect to retain your Accumulation Account balance in the OSF (see Retained Benefits above), you must elect to either:

Example – Preserved Member Withdrawal Benefit under 55 Vijay joined the OSF in 2008 as a Defined Benefit Member at age 22. Vijay ceases employment with the participating employer in 2013 at age 27 and elects to become a Preserved Member. Vijay has not worked part-time or had any periods of LWOP during his employment.

18

OSF Product Disclosure Statement – Defined Benefit Members

Vijay decides in 2016 at age 30 to rollover his OSF benefits to an external superannuation fund. Vijay’s indexed salary at that point is $83 000. Vijay’s Defined Benefit withdrawal lump sum is: =SxAxRxD where: • A is calculated to age 55; • R is equal to 0.152, calculated as (27 – 22) / (55 – 22); and • D is 0.689, calculated based on 25 years until age 55 is reached. = $83 000 x [(17% x 20 years of membership) + (8.5% x 13 years of membership)] x 0.152 x 0.689 = $39 159. Withdrawal from age 55 up to age 60 If you are a Preserved Member and you withdraw your Defined Benefit anytime from age 55 onwards, unless you have reached your preservation age and are retiring from the workforce, your options in relation to the Defined Benefit are restricted to the following:

Dated 4 November 2016

The value of your Defined Benefit is calculated as per the standard Defined Benefit formula with accrual up until your withdrawal date. Salary used in the calculation will be your salary at the point of ceasing employment with the participating employer, annually indexed since then to the Consumer Price Index. Example – Preserved Member Withdrawal Benefit over 55 Lily joined the OSF in 2003 as a Defined Benefit Member at age 21. Lily ceases employment with the participating employer in 2010 at age 28 and elects to become a Preserved Member. Lily has not worked part-time or had any periods of LWOP during her employment. Lily decides in 2039 at age 57 to access her Defined Benefit as an indexed pension. Lily’s indexed salary at age 57 is $101 000. Lily can also elect to roll her OSF benefits to an external superannuation fund. Lily is unable to take her OSF benefits as a lump sum as she has not reached her preservation age. Lily’s Defined Benefit withdrawal lump sum is: =SxAxR

•

taking your Defined Benefit as an indexed pension;

•

rolling your Defined Benefit as a lump sum to your nominated superannuation fund; or

• A is calculated to her current age, age 57; and

•

a combination of the above.

• R is equal to 0.206, calculated as (28 – 21) / (55 – 21)

If you have reached your preservation age and are retiring from the workforce, you will have the additional option of taking your Defined Benefit as a lump sum. If you withdraw or access your Defined Benefit, you will also need to withdraw your Accumulation Account balance. You must elect to either: •

•

•

where:

= $101000 x [(17% x 20 years of membership) + (8.5% x 16 years of membership)] x 0.206 = $99 037. Lily’s gross annual commencement is:

indexed

pension

at

roll your Accumulation Account balance as a lump sum to your nominated superannuation fund;

= Defined Benefit lump sum / 10 x Pension Reduction Factor

take your Accumulation Account balance as a lump sum (assuming you have retired from the workforce and have reached your preservation age); or

= $8 616 per annum.

do a combination of the above.

If no election is made, your Accumulation Account balance will be transferred to the OSF’s Eligible Rollover Fund.

=($99 037/ 10) x 0.87

If you elect to receive your Defined Benefit as an indexed pension, an indexed pension will be payable to your spouse and/or dependant children following your death. Additionally, your dependants may be eligible to receive a pension guarantee in respect of

19

OSF Product Disclosure Statement – Defined Benefit Members

Dated 4 November 2016

the indexed pension. Further information is available in section 11 Pensions of this PDS – DB. Should you elect to receive your Defined Benefit as an indexed pension, a 14 day Cooling Off Period applies during which you can write to the Trustees requesting a lump sum rather than a pension. Refer Cooling Off Period – Indexed Pension later in this section for more information. Age 60 If you are still a Preserved Member at age 60, your Defined Benefit will automatically be paid as an indexed pension (except to the extent that you elect, in accordance with the election procedures, to receive it as a lump sum) and your Accumulation Account balance will also need to be withdrawn from the OSF. If no election is made regarding your Accumulation Account balance, it will be transferred to the OSF’s Eligible Rollover Fund. Cooling Off Period – Indexed Pension Even if you elect to receive your Defined Benefit as an indexed pension, a 14 day cooling off period applies from the earlier of: •

the OSF confirmation advice of the commencement of your indexed pension; or

•

5 days after the commencement of the payment of your indexed pension.

During this period you may write to the Trustees revoking your choice to commence an indexed pension and instead elect to receive your Defined Benefit as a lump sum. Contact the OSF Membership team for further information. Special Rules for 2 per cent post-tax contributions balance Under the Trust Deed if you withdraw any amount (with the exception of withdrawals for payment to the ATO) from your Accumulation Account balance you will cease to be eligible for an additional nonindexed pension in the event of ill health retirement or death.

20

OSF Product Disclosure Statement – Defined Benefit Members

Dated 4 November 2016

5. CONTRIBUTIONS Contributions to the OSF are generally made by the employer and the member.

Employer Contributions Employers are generally required to make superannuation contributions for their employees. Those employer contributions are subject to a minimum Superannuation Guarantee (SG) rate and this is the rate at which employers typically make contributions for employees who do not have a Defined Benefit. The SG rate is currently 9.5 per cent of Ordinary Time Earnings (OTE) and, under current legislation, the rate will gradually increase to 12 per cent in accordance with the following timetable: Income year

SG rate (%)

Instead, Defined Benefits are determined by the OSF Trust Deed. For more information, see section 4 Your Defined Benefit Membership of the PDS – DB. In addition to your Defined Benefit, employers contribute an employer funded productivity benefit in respect of Defined Benefit Members of the OSF which is 3 per cent of salary. This productivity benefit is additional to your Defined Benefit and is credited to your Accumulation Account balance. In most cases, the OSF is required to ensure that the amount of your Defined Benefit and employer funded productivity benefit is at least equal to what your balance would be if your employer had contributed to your Accumulation Account at the SG rate. In this way, your Defined Benefit together with productivity contributions made for you should result in a benefit which is at least as large as if you had received the SG rate over your service period.

1 July 2014 – 30 June 2021

9.5

1 July 2021 – 30 June 2022

10.0

1 July 2022 – 30 June 2023

10.5

1 July 2023 – 30 June 2024

11.0

All pre-tax employer contributions (such as your 3 per cent productivity benefit) are classified by the Australian Tax Office (ATO) as concessional contributions and are taxed at 15 per cent (subject to a concessional contribution cap) on payment into the OSF. Refer to section 7 Tax and Levies of this PDS – DB for further information on tax.

1 July 2024 – 30 June 2025

11.5

Member Contributions

From 1 July 2025 onwards

12.0

Defined Benefit Membership While your Defined Benefit is funded by contributions from employers to the OSF, an employer contributing to a defined benefit fund generally does not contribute specifically for an individual member, but rather contributes to the fund in general. The contribution rate for the Defined Benefit section of the OSF will vary from time to time and is agreed by the RBA and the Trustees after taking into consideration the OSF actuary’s funding recommendation as part of its triennial actuarial investigation of the OSF. The contribution rate for all active members is currently 18.3 per cent of base salary. However, while the contributions made by employers may change, changes to the employer contribution rate do not affect your Defined Benefit.

If you are a current employee of a participating employer, you may also make voluntary contributions to the OSF. You may be able to contribute either from pre-tax salary (concessional contributions) through salary sacrifice arrangements or from post-tax salary (non-concessional contributions) through payroll deductions or other arrangements, or a combination of both. Both concessional and non-concessional contributions are subject to caps, above which additional tax will be required to be paid (see Limits on Contributions on page 23 for more information). While you are a current employee of a participating employer, you will (unless you varied the default amount) be making contributions from your post-tax salary equal to 2 per cent of your pre-tax salary. You can increase or reduce these contributions, including opting not to make them at all. However, if you reduce your contributions to less than 2 per cent of pre-tax salary, certain benefit options on ill health or death will not be available (see section 4 Your

21

OSF Product Disclosure Statement – Defined Benefit Members

Dated 4 November 2016

Defined Benefit Membership of this PDS – DB for further information).

Government Co-Contributions Subject to eligibility, you may also receive cocontributions from the government to your Accumulation Account balance. You are eligible if you: • •

make an eligible personal superannuation contribution by 30 June each year; have a total income (defined to include assessable income plus reportable fringe benefits and any reportable employer superannuation contributions for the financial year) of less than the higher income threshold for that year (see table below);

•

receive 10 per cent or more of your total income from eligible employment, running a business or a combination of both;

•

are less than 71 years old at the end of the income year;

•

do not hold an eligible temporary resident visa at any time during the financial year; and

•

lodge your income tax return for the relevant income year.

The table below shows a summary of the cocontribution scheme. Co-contribution income thresholds for 2016/17: Income Level Lower income threshold (i.e. the income level to receive maximum co-contribution)

Rate of co-contribution at this income level

Rate of reduction

co-contribution

$36 021 or less

Income Level Higher income threshold (i.e. the income level at and beyond which the government will not make any co-contribution)

$51 021

Example: Income level $27 000 $37 000 $47 000

Co-contribution of $500 $467 $134

You do not need to take additional action to receive the co-contribution. The ATO will assess your eligibility, based on the information in your tax return and information provided by the OSF. The cocontribution is paid directly by the Government into your Accumulation Account. Co-contributions are treated as non-concessional contributions and no additional taxes are payable when the money is received by the OSF. Further information about claiming co-contributions is available from the ATO: https://www.ato.gov.au.

Government Low Income Superannuation Contribution A Low Income Superannuation Contribution is payable to eligible members in respect of contributions made between 1 July 2012 and 30 June 2017. It is a refund of the 15 per cent contributions tax paid on concessional contributions, subject to a minimum of $10 and a maximum of $500 per financial year. You are eligible if you:

$0.50 per $1.00 posttax personal contributions – subject to a maximum cocontribution of $500 per year 3.333 cents per dollar of income level above $36 021

•

have made concessional contributions during the year;

•

do not have an adjusted taxable income of greater than $37 000;

•

are not a holder of a temporary resident visa; and

•

have 10 per cent or more of your income derived from business or employment.

You do not need to take additional action to receive the Low Income Superannuation Contribution. The ATO will assess your eligibility, based on the information in your tax return and information provided by the OSF. The Low Income

22

OSF Product Disclosure Statement – Defined Benefit Members

Superannuation Contribution is paid directly by the Government into your Accumulation Account. It is treated as a non-concessional contribution and there is no additional tax payable when the money is received by the OSF. Further information about claiming the Low Income Superannuation Contributions is available from the ATO: https://www.ato.gov.au.

Limits on Contributions There is a limit on the total amount of concessional and non-concessional contributions which can be made in any one tax year before contributions attract additional tax. For further information on taxation please see section 7 Tax and Levies of this PDS – DB.

Dated 4 November 2016

Non-concessional (post-tax) contributions The annual limit for non-concessional contributions is $180 000 for members aged between 65 and 75, or $540 000 over a three-year period for members under 65. The caps are indexed annually. If you exceed the non-concessional contributions cap you can choose how your excess contributions are treated. Your election is made to the ATO and is irrevocable once you have made it. The options are below: Option 1 – release amounts from superannuation

Concessional (pre-tax) contributions

If you choose this option all of your excess nonconcessional contributions and 85 per cent of your associated earnings amount will be released from your Accumulation Account balance. The ATO will issue a release authority to the OSF.

Concessional contributions that exceed the cap will be included in your assessable income and taxed at your marginal tax rate plus the Medicare levy. Your tax liability will be reduced by a 15 per cent tax offset to account for the contributions tax that has already been paid by the OSF.

Your associated earnings amount stated in your determination will be included in your assessable income and taxed at your marginal rate of tax. A non-refundable tax offset equal to 15 per cent of your associated earnings will be applied to recognise any tax paid by the OSF.

You will also have to pay the excess concessional contributions (ECC) charge on the increase in your tax liability. This is an interest-based charge which is applied to recognise that the tax on excess concessional contributions is collected later than normal income tax.

Option 2 – pay excess non-concessional contributions tax on the excess amount

The ATO will notify you if your total concessional contributions exceed the applicable concessional contributions cap. To assist with paying the additional tax, you may elect to withdraw up to 85 per cent of your excess concessional contributions from the OSF by providing an ATO release authority to the OSF. Should you elect to do so, you will only be able to release funds from your Accumulation Account balance. Further information on contributions caps is available from the ATO website: https://www.ato.gov.au. The annual limit for concessional contributions depends on your age, as set out in the following table: Concessional contributions cap 2016/17 Aged under 49 years on 30 June 2016

Aged 49 years and over on 30 June 2016

$30 000

$35 000

If you choose not to release your excess nonconcessional contributions from the OSF, you will receive an excess non-concessional contributions tax assessment where the excess amount will be taxed at the highest marginal tax rate. You will receive a compulsory release authority with the assessment which you must give to the OSF to pay the amount of the assessment. Option 3 – advise the Commissioner that you have no money in superannuation (only available if you have, in fact, removed all your money from superannuation) If you choose this option you are declaring to the ATO that you have no money or assets in any superannuation fund. Further information regarding contributions caps is available from the ATO: https://www.ato.gov.au. Any withdrawal from your Accumulation Account balance that is directed to the ATO and relates to excess contributions will not affect your eligibility for certain benefit options in the event of ill health or death (see section 4 Your Defined Benefit Membership of this PDS – DB for further information).

23

OSF Product Disclosure Statement – Defined Benefit Members

Dated 4 November 2016

How do you calculate your concessional and nonconcessional contributions for a financial year?

members who joined the OSF after the start of the financial year will be calculated on a pro-rata basis.

Concessional contributions are generally contributions to superannuation made by or for you (by your employer) from before-tax income. For Defined Benefit Members, these include:

Adjustments will also need to be made to the notional concessional contributions if you commence/change part-time hours, are on LWOP during the financial year, or become a Preserved Member during the financial year.

•

the employer-funded productivity benefit of 3 per cent;

•

employee salary sacrifice contributions; and

•

the notional employer contribution for the Defined Benefit.

Example – Defined Benefit Member John’s superannuation salary at 1 July 2016 was $50 000. He has been a Defined Benefit Member of the OSF for 10 years and has worked on a full-time basis over that period at the RBA.

The OSF is required by the ATO to calculate a notional concessional contribution for Defined Benefit Members in relation to the Defined Benefit, based on a formula and assumptions prescribed by Government regulations. This notional concessional contribution counts towards the concessional contributions cap. For Preserved Members, the notional concessional contribution will be zero. In any case, it differs from the contribution actually made to the Defined Benefit by your employer.

John will also salary sacrifice $5 000 over the 2016/17 financial year to his superannuation. John’s concessional contributions for the year are calculated as follows: Productivity Benefit*: 3% of $50 000 = $1 500 Notional Concessional Contributions: 12% of $50 000 = $6 000

Two notional concessional contribution rates have been determined for Defined Benefit Members (excluding Preserved Members): Defined Benefit Member Category

Notional Concessional Contribution Rate (%)*

Less than 20 years Defined Benefit membership

12.0

20 or more years Defined Benefit membership

7.2

*These rates may change subject to regulations by Treasury or the ATO.

The applicable notional concessional contribution rates above are applied as a percentage of your superannuable salary on the first day of the financial year to determine your notional concessional contribution.

Salary Sacrifice contributions: $5 000 John’s total concessional 2016/17: $12 500.

contributions

for

* Assuming no salary increase during the year

Grandfathering contributions

arrangements

–

Concessional

Grandfathering arrangements may apply if you were a Defined Benefit Member on 12 May 2009 and have notional concessional contributions relating to your Defined Benefit that exceed the concessional contributions cap. In this case: •

your notional concessional contributions for the Defined Benefit are deemed to be at the level of the cap; and

•

you will only be assessed for excess contributions on the value of other concessional contributions made in that year, such as the productivity benefit and any salary sacrifice contributions.

These rates are based on a member being an OSF member for the whole financial year and working full-time. Calculation of the notional concessional contribution for members who exceed 20 years as a Defined Benefit Member within a financial year and

24

OSF Product Disclosure Statement – Defined Benefit Members

Example – Defined Benefit Member Grandfathering Arrangements and Concessional Contributions Cap Mary has been a Defined Benefit Member since before 12 May 2009 and is eligible for the grandfathering arrangement. She has been a Defined Benefit Member of the OSF for 10 years and has worked on a full-time basis over that period at the RBA. Her 1 July 2016 salary was $266 667, which remained unchanged over the financial year. Mary is age 48 as at 30 June 2016, so her concessional contributions cap will be $30 000. Mary’s notional concessional contributions are calculated to be $32 000 in 2016/17 (12% of a salary of $266 667). Mary also salary sacrifices $2 600 in the same financial year and her productivity benefit contribution is $8 000 (3% of a salary of $266 667). Mary’s total concessional contributions for 2016/17 will be reported to the ATO as: $30 000 plus $2 600 plus $8 000 = $40 600. Additional income tax will be payable on the amount over the applicable cap of $30 000 (that is, the amount of $10 600). Non-concessional contributions are calculated by adding all post-tax contributions made in the financial year.

Inward Transfers Under portability provisions you have the option of transferring superannuation benefits you accrued in another regulated fund to the OSF. These benefits will be added to your Accumulation Account balance in the OSF and will be invested in your chosen investment option(s). You can either instruct the external fund to transfer your benefits to the OSF or you can provide the OSF with your membership details for the external fund and authorise the OSF to arrange the transfer of your benefits to the OSF on your behalf. Note: if you transfer any benefits that were non-preserved from another fund to the OSF these will not be accessible in cash until you leave the RBA/APRA/NPA (although they may have been accessible in the fund from which they are transferred).

Dated 4 November 2016

Contributions Splitting As provided under current legislation, the OSF allows members to split their accumulation contributions made each financial year with their spouse (defined to include de facto and same-sex couples). Contributions can only be split with a spouse who is below age 55 or between 55 and 64 and has not permanently retired. What Contributions are Splittable? Only taxed splittable contributions can be split. Taxed splittable contributions are contributions that have been taxed in your superannuation fund and include employer contributions, salary sacrifice contributions and personal contributions for which an income tax deduction is claimed. You can generally transfer contributions up to the lesser of:

taxed

splittable

•

85 per cent of concessional contributions for that financial year; and

•

the concessional contributions cap for that financial year.

Investment earnings accumulated between the time of the contribution and the time the split is made cannot be included in the contribution split. Under legislation, your post-tax contributions cannot be split. Contributions made prior to the current financial year are also not available to be split. Certain other restrictions also apply in some circumstances. Full details on these arrangements are available from the OSF Membership team. You should note that any contributions that are split with your spouse will count towards your concessional contribution limits. If you split your contributions with your spouse, the full amount of the original contributions before the split still counts towards your concessional contributions cap.

Proposed changes for rules superannuation contributions

on

The Federal Government proposed a number of measures in its 2016/2017 Federal Budget that affect the contributions that may be made to superannuation. While these changes have not yet been passed into law, they should be considered in conjunction with the information in this section.

25

OSF Product Disclosure Statement – Defined Benefit Members

Dated 4 November 2016

6. FEES AND COSTS The Trustees aim to keep the OSF operating at a low cost to members. This section shows fees and other costs that you may be charged on your superannuation benefit. Fees and costs can be paid directly from your superannuation account, from the assets of the OSF as a whole or deducted from the underlying investments. Information on taxes are set out in section 7 Tax and Levies of this PDS – DB.

OSF Defined Benefit Members – Accumulation Account TYPE OF FEE OR COST

Exit Fee

Fees and costs – Defined Benefit

AMOUNT

HOW AND WHEN PAID

For other members: nil

If applied, this is deducted from your Accumulation Account balance at the time the partial withdrawal is paid.

Nil

Not applicable

No fees are applicable to your Defined Benefit.

Fees and costs – Accumulation Account

Advice fees

OSF Defined Benefit Members – Accumulation Account

Relating to all members investing in a particular investment option

TYPE OF FEE OR COST

AMOUNT

HOW AND WHEN PAID

Other fees and costs

Nil

Not applicable

Investment fee

Nil

Not applicable

Indirect cost ratio (ICR)

Administration fee

Nil

Not applicable

Buy-sell spread

Nil

Not applicable

A percentage of members’ Accumulation Account balances, depending on the investment option chosen^:

Switching fee

Nil

Not applicable

Exit Fee

For Retained Members making partial withdrawals: nil for the first four withdrawals in any twelve month period, then $50 for each subsequent withdrawal.

Deducted from the net investment returns of each investment option before unit prices are calculated and applied to your Accumulation Account balance.

Fees and costs in relation to your Accumulation Account are not negotiable.

If applied, this is deducted from your Accumulation Account balance at the time the partial withdrawal is paid.

Plus an amount to maintain the Operational Risk Financial Requirement (ORFR)*

^Refer to the respective Investment Costs listed in the table of Indirect Cost Ratios. *Refer to the ORFR section under ‘Additional explanation of fees and costs’ in this section.

For an explanation of the fees and costs set out

26

OSF Product Disclosure Statement – Defined Benefit Members

Dated 4 November 2016

below, please see the Product Disclosure Statement for Accumulation Members of the OSF available at https://super.towerswatson.com/rbaosf/publicinfor mation/PDS.

OSF’s underlying investments, custody fees, some taxes, fees for professional advice sought by the Trustees and other operating expenses and investment costs.

The table below provides the estimated total Indirect Cost Ratio that will be applied to your Accumulation Account balance according to your chosen investment option(s).

Costs are deducted from the underlying assets of the OSF on a recovery basis only. Members are generally advised of any changes to costs annually (this involves an analysis of indirect costs incurred over the financial year, which are then allocated to each investment option to provide an estimated charge).

INVESTMENT OPTION

INDIRECT COST RATIO^

Option A

0.26%

Option B

0.25%

Option C

0.25%

Option D

0.22%

Option E

0.78%

Cash

0.14%

Australian Equities

0.13%

International Equities

0.21%

Fixed Interest

0.24%

Listed Property

0.93%

^The indirect cost ratios listed above are estimates, with the investment costs reflecting the costs for the 2015/16 year. Indirect cost ratios can include performance fees payable where investment managers of underlying investments achieve returns exceeding an agreed benchmark, and include transaction costs associated with purchases and divestment of assets. In 2015/2016, the OSF incurred higher than usual performance fees for Option E and higher than usual transaction costs in Listed Property.

Additional explanation of fees and costs Additional explanation of indirect costs Indirect costs are costs of the ongoing management of the OSF’s investments which are passed onto members through the unit price calculation process and may affect the net investment return applied to your Accumulation Account balance. A non-exhaustive list of these indirect costs are: remuneration to the responsible entities of the

The underlying components that make up the OSF’s indirect costs can fluctuate by their nature, and hence it is not feasible for the Trustees to provide members with advanced warning of changes to these fees. However if there is a substantial change to the costs of operating the OSF, and the Trustees determine that the change is significant and adverse to members, separate notification of the change may be provided to members. The OSF may receive a tax deduction for some of the costs it incurs in conducting its operations. The benefit of this tax deduction is passed onto members via higher unit prices. The net amount that you pay in fees may therefore be less than the figures shown in this PDS – DB. Operational Risk Financial Requirement (ORFR) APRA requires trustees of superannuation funds to set aside adequate financial resources to respond to operational risks. An ‘operational risk’ is the risk of loss resulting from inadequate or failed internal processes, people and systems, or from external events (such as service provider errors). The ORFR is designed to ensure that any costs associated with resolving operational risk events are appropriately spread across different generations of members rather than being borne entirely by members at the time the operational loss is incurred. The Trustees have determined an ORFR target amount of 0.25 per cent of the OSF’s net assets. The ORFR is fully funded and held in the form of an operational risk reserve where the assets in this reserve are segregated from the assets held to meet members’ benefits. The ORFR will only be called upon to cover a loss incurred as a result of an operational risk event and any use of the ORFR must be formally approved by the Trustees. The ORFR balance is monitored to ensure it remains close to its target. Where required, the Trustees may replenish this balance. This would be facilitated by reducing your investment returns slightly.

27

OSF Product Disclosure Statement – Defined Benefit Members

The ORFR is invested in products that focus on capital preservation and liquidity, such as cash deposits, and is overseen by the Investment Committee. This ensures that the ORFR provides an unrestricted commitment to address losses arising from operational risks in a timely manner.

Fee changes The Trustees have the right to change fees charged in the future. The OSF will give you at least 30 days notice of any proposed introduction or increase in fees. However, please note that the underlying investment management fees and expenses in the indirect cost ratio fluctuate as part of the OSF’s regular operations. The Trustees will not provide prior notification for changes relating to the indirect cost ratio.

Worked examples The tables on the following pages give examples of how the fees and costs in your Accumulation Account for each of the investment options in the OSF can affect your superannuation investment over a one year period. Use these tables to compare the OSF with other superannuation products. Please note that these examples are prescribed by legislation, and that OSF fees are not negotiable.

Dated 4 November 2016

Example – Option A

Balance of $50 000

Investment fees

Nil

For every $50 000 you have in Option A you will be charged $0 each year.

PLUS Administration fees

Nil

And, you will be charged $0 in administration fees regardless of your balance.

PLUS Indirect costs for Option A

0.26%^

And, indirect costs of $130 each year will be deducted from your investment.

EQUALS Cost of product

If your balance was $50 000, then for that year you will be charged fees of $130 for Option A*.

^The Indirect cost ratio shown is based on the actual investment costs for the year to 30 June 2016. An additional amount may be added to maintain the ORFR. *Additional fees may apply. Retained Members making partial withdrawals will be charged $50 per transaction after the first four withdrawals in a 12 month period.

28

OSF Product Disclosure Statement – Defined Benefit Members

Dated 4 November 2016

EXAMPLE – Option B

Balance of $50 000

EXAMPLE – Option C

Balance of $50 000

Investment fees

Nil

For every $50 000 you have in Option B you will be charged $0 each year.

Investment fees

Nil

For every $50 000 you have in Option C you will be charged $0 each year.

PLUS Administration fees

Nil

And, you will be charged $0 in administration fees regardless of your balance.

PLUS Administration fees

Nil

And, you will be charged $0 in administration fees regardless of your balance.

PLUS Indirect costs for Option B

0.25%^

And, indirect costs of $125 each year will be deducted from your investment.

PLUS Indirect costs for Option C

0.25%^

And, indirect costs of $125 each year will be deducted from your investment.

If your balance was $50 000, then for that year you will be charged fees of $125 for Option B*.

EQUALS Cost of product

EQUALS Cost of product

If your balance was $50 000, then for that year you will be charged fees of $125 for Option C*.

^The Indirect cost ratio shown is based on the actual investment costs for the year to 30 June 2016. An additional amount may be added to maintain the ORFR.

^The Indirect cost ratio shown is based on the actual investment costs for the year to 30 June 2016. An additional amount may be added to maintain the ORFR.

*Additional fees may apply. Retained Members making partial withdrawals will be charged $50 per transaction after the first four withdrawals in a 12 month period.

*Additional fees may apply. Retained Members making partial withdrawals will be charged $50 per transaction after the first four withdrawals in a 12 month period.

29

OSF Product Disclosure Statement – Defined Benefit Members

Dated 4 November 2016

EXAMPLE – Option D

Balance of $50 000

EXAMPLE – Option E

Balance of $50 000

Investment fees

Nil

For every $50 000 you have in Option D you will be charged $0 each year.

Investment fees

Nil

For every $50 000 you have in Option E you will be charged $0 each year.

PLUS Administration fees

Nil

And, you will be charged $0 in administration fees regardless of your balance.

PLUS Administration fees

Nil

And, you will be charged $0 in administration fees regardless of your balance.

PLUS Indirect costs for Option D

0.22%^

And, indirect costs of $110 each year will be deducted from your investment.

PLUS Indirect costs for Option E

0.78%^

And, indirect costs of $390 each year will be deducted from your investment.

EQUALS Cost of product

If you balance was $50 000, then for that year you will be charged fees of $110 for Option D*.

EQUALS Cost of product

If your balance was $50 000, then for that year you will be charged fees of $390 for Option E*.

^The Indirect cost ratio shown is based on the actual investment costs for the year to 30 June 2016. An additional amount may be added to maintain the ORFR.

^The Indirect cost ratio shown is based on the actual investment costs for the year to 30 June 2016. An additional amount may be added to maintain the ORFR.

*Additional fees may apply. Retained Members making partial withdrawals will be charged $50 per transaction after the first four withdrawals in a 12 month period.

*Additional fees may apply. Retained Members making partial withdrawals will be charged $50 per transaction after the first four withdrawals in a 12 month period.

30

OSF Product Disclosure Statement – Defined Benefit Members

EXAMPLE – Cash Option

Balance of $50 000

Investment fees

Nil

For every $50 000 you have in the Cash Option you will be charged $0 each year.

PLUS Administration fees

Nil

And, you will be charged $0 in administration fees regardless of your balance.

PLUS Indirect costs for Cash Option

0.14%^

EQUALS Cost of product

And, indirect costs of $70 each year will be deducted from your investment. If your balance was $50 000, then for that year you will be charged fees of $70 for the Cash Option*.

^The Indirect cost ratio shown is based on the actual investment costs for the year to 30 June 2016. An additional amount may be added to maintain the ORFR. *Additional fees may apply. Retained Members making partial withdrawals will be charged $50 per transaction after the first four withdrawals in a 12 month period.

Dated 4 November 2016

EXAMPLE – Australian Equities Option

Balance of $50 000

Investment fees

Nil

For every $50 000 you have in the Australian Equities Option you will be charged $0 each year.

PLUS Administration fees

Nil

And, you will be charged $0 in administration fees regardless of your balance.

PLUS Indirect costs for Australian Equities Option

0.13%^

And, indirect costs of $65 each year will be deducted from your investment.

EQUALS Cost of product

If your balance was $50 000, then for that year you will be charged fees of $65 for the Australian Equities Option*.

^The Indirect cost ratio shown is based on the actual investment costs for the year to 30 June 2016. An additional amount may be added to maintain the ORFR. *Additional fees may apply. Retained Members making partial withdrawals will be charged $50 per transaction after the first four withdrawals in a 12 month period.

31

OSF Product Disclosure Statement – Defined Benefit Members

Dated 4 November 2016

EXAMPLE – International Equities Option

Balance of $50 000

EXAMPLE – Fixed Interest Option

Balance of $50 000

Investment fees

Nil

For every $50 000 you have in the International Equities Option you will be charged $0 each year.

Investment fees

Nil

For every $50 000 you have in the Fixed Interest Option you will be charged $0 each year.

PLUS Administration fees

Nil

And, you will be charged $0 in administration fees regardless of your balance.

PLUS Administration fees

Nil

And, you will be charged $0 in administration fees regardless of your balance.

PLUS Indirect costs for International Equities Option

0.21%^

And, indirect costs of $105 each year will be deducted from your investment.

PLUS Indirect costs for Fixed Interest Option

0.24%^

And, indirect costs of $120 each year will be deducted from your investment.

If your balance was $50 000, then for that year you will be charged fees of $105 for the International Equities Option*.

EQUALS Cost of product

EQUALS Cost of product

If your balance was $50 000, then for that year you will be charged fees of $120 for the Fixed Interest Option*.

^The Indirect cost ratio shown is based on the actual investment costs for the year to 30 June 2016. An additional amount may be added to maintain the ORFR.

^The Indirect cost ratio shown is based on the actual investment costs for the year to 30 June 2016. An additional amount may be added to maintain the ORFR.

*Additional fees may apply. Retained Members making partial withdrawals will be charged $50 per transaction after the first four withdrawals in a 12 month period.

*Additional fees may apply. Retained Members making partial withdrawals will be charged $50 per transaction after the first four withdrawals in a 12 month period.

32

OSF Product Disclosure Statement – Defined Benefit Members

EXAMPLE – Listed Property

Balance of $50 000

Investment fees

Nil

For every $50 000 you have in the Listed Property Option you will be charged $0 each year.

PLUS Administration fees

Nil

And, you will be charged $0 in administration fees regardless of your balance.

PLUS Indirect costs for Listed Property Option

0.93%^

And, indirect costs of $465 each year will be deducted from your investment.

EQUALS Cost of product

Dated 4 November 2016

If your balance was $50 000, then for that year you will be charged fees of $465 for the Listed Property Option*.

^The Indirect cost ratio shown is based on the actual investment costs for the year to 30 June 2016. An additional amount may be added to maintain the ORFR. *Additional fees may apply. Retained Members making partial withdrawals will be charged $50 per transaction after the first four withdrawals in a 12 month period.

33

OSF Product Disclosure Statement – Defined Benefit Members

Dated 4 November 2016

7. TAX AND LEVIES Superannuation can be a tax-effective way of saving for retirement, when compared to other types of investments. However, tax may still apply to your superannuation investment. Please note that this is general information only, does not constitute financial or tax advice and does not take into account your specific circumstances. The Trustees are not registered tax (financial) advisers under the Tax Agent Services Act 2009.

Importance of providing your Tax File Number (TFN) When you joined a participating employer, you would have been asked to provide your TFN by completing a TFN declaration form. This information may be passed on to your chosen superannuation fund by your employer. The OSF will keep your TFN secure and will only use your TFN when passing on information as required by taxation and superannuation legislation and for processing your benefits when you leave the OSF. While it is not compulsory to provide your TFN to the OSF, there are significant consequences if you do not, including: •

you may pay extra tax on your contributions or when you access your benefit later;

•

the OSF will not be able to accept your nonconcessional contributions; and

•

it may be difficult to trace different superannuation accounts in your name so that you receive all of your superannuation benefits when you retire.

Taxation of Contributions Concessional and non-concessional contributions, which are within the legislative caps discussed in section 5 Contributions of this PDS – DB, are normally taxed at 15 per cent and 0 per cent respectively. Tax treatment of Excess Concessional Contributions If your concessional contributions exceed the cap, the amount will be included in assessable income and taxed at your marginal tax rate plus the Medicare levy. The tax liability will be reduced by a 15 per cent tax offset to account for the

contributions tax that has already been paid by the OSF on the excess concessional contributions which are included in your assessable income. You are also liable to pay interest on the increase in your tax liability. If required, you may withdraw from your OSF Accumulation Account balance up to 85 per cent of your excess concessional contributions to help pay your tax liability. Tax Treatment of Excess Non-Concessional Contributions If your non-concessional contributions exceed the cap, and you elect the option of releasing the excess non-concessional contributions and 85 per cent of the associated earnings, the full associated earnings amount will be included in your assessable income and taxed at your marginal tax rate plus the Medicare levy. A tax offset of 15 per cent of the associated earnings will be applied to account for any tax paid by the OSF. Unless you advise the Commissioner you have no money in superannuation, if you do not choose to release your excess non-concessional contributions, the excess amount will be taxed at the highest marginal tax rate. You will receive a compulsory release authority which must be provided to the OSF to pay the amount of the assessment. Taxation of government co-contributions and low income superannuation contributions No tax applies to a government superannuation cocontribution or low income contribution paid to your OSF account. High Income Earners – Division 293 Tax The Division 293 tax has been levied on high income earners since the 2012/13 financial year. Division 293 tax applies to particular contributions relating to members with incomes over $300 000. The general effect of Division 293 tax is to reduce the tax concession on superannuation contributions for these individuals. Division 293 tax is charged at a rate of 15 per cent on the lesser of (a) an individual’s 'low tax contributions' and (b) the amount by which the sum of their standard income and their 'low tax contributions' exceeds $300 000. If you are a Defined Benefit Member, your 'low tax contributions' amount is worked out by taking these three steps:

34

OSF Product Disclosure Statement – Defined Benefit Members

•

step 1: start with your concessional contributions that do not relate to your Defined Benefit interest;

•

step 2: subtract your excess concessional contributions; and

•

step 3: add your concessional contributions that relate to your Defined Benefit interest (and in doing so ignore any applicable grandfathering). Example – Division 293 Tax In 2016/17, Cindy had a base salary of $295 000. Cindy has been a Defined Benefit Member of the OSF for 8 years and worked on a full-time basis over that period at the RBA. Cindy does not salary sacrifice. Cindy’s relevant contributions for the 2016/17 financial year are calculated as follows: Productivity Benefit: 3% of $295 000 = $8 850 (see step 1) Notional Concessional Contributions: 12% x $295 000 = $35 400 (see step 3) At 30 June 2016, Cindy is aged 51, so a concessional cap of $35 000 applied. Because of grandfathering, Cindy's Notional Concessional Contributions are deemed (for excess concessional contributions purposes) to be $35 000. This means she has excess concessional contributions of $8 850 (step 2).

Dated 4 November 2016

You have the option of paying the Division 293 tax immediately, or deferring payment until you access your superannuation benefit (for example at retirement). Note, however, that this deferred debt will generally be subject to interest. Further information regarding the Division 293 tax is available at the ATO’s website: www.ato.gov.au.

Taxation of Investment Earnings The OSF pays tax on investment earnings of up to 15 per cent, less allowable tax deductions and relevant tax concessions. These taxes are deducted from the investment earnings of the OSF, and are reflected in unit prices.

Taxation deductions for the OSF The OSF can claim certain tax deductions, including deductions for fund expenses and other operating costs. The benefit of tax deductions is passed onto members through the calculation of unit prices.

Taxation of Benefit Payments Taxation of Lump Sum Benefit Payments – Retirement If you access your superannuation benefit as a lump sum upon retirement, the OSF will apply the following tax to the taxable component of your benefit (according to your age): Age

Tax payable

Aged 60 or over.

No tax payable.

At or above preservation age and under 60.

Tax free up to the low rate cap amount of $195 000* and then a maximum of 15% (plus Medicare levy) on any amount above the cap.

Therefore, Cindy's 'low tax contributions' are: $8 850 - $8 850 + $35 400 = $35 400 Cindy’s only income is her RBA salary. Her income for Division 293 assessment purposes is: $295 000 + $35 400 = $330 400 As this is higher than $300 000, Division 293 tax will apply. The amount on which Division 293 tax will be applied is the lesser of $35 400 (Cindy’s 'low tax contributions') and $30 400 (the amount by which the sum of her standard income and her 'low tax contributions' exceeds $300 000). Division 293 tax will therefore be calculated on $30 400. The tax payable will be $4 560 (15% x $30 400).

*Low rate cap is for the 2016/2017 financial year.

Taxation of Lump Sum Benefit Payments – Death A death benefit paid as a lump sum is taxed differently depending on whether it is paid to a dependant or non-dependant. A dependant is generally: •

a spouse;

•

child under the age of 18; or

•

anyone otherwise financially dependent on, or

35

OSF Product Disclosure Statement – Defined Benefit Members

Dated 4 November 2016

in an interdependent relationship with, the member.

employer sponsored fund, service days may commence when the member's employment commenced, if that was prior to the commencement of their fund membership.

If a lump sum death benefit is paid, the OSF will apply the following tax: Beneficiary

Tax payable

Dependant

• Tax free – all components. • 0% on tax-free component.

Non-dependant

• Your marginal tax rate or 15%, whichever is lower, plus the Medicare levy (on Taxable component). • Your marginal tax rate or 30%, whichever is lower, plus the Medicare levy. (on Un-taxed component).

These arrangements apply to any lump sum withdrawal of your OSF benefits on death (Defined Benefit or your Accumulation Account balance).

Example – Additional Tax-free component of an ill health lump sum Andrew commenced employment at age 24. At age 48 he has now retired due to ill health. He will receive a lump sum payment of $200 000. The tax free component of his benefit will be calculated as follows: = Lump sum x (days to normal retirement/service days plus days to normal retirement) = $200 000 x (6 205/ [8 760 + 6 205]) = $200 000 x 0.415 = $83 000. Andrew’s additional tax free amount will be $83 000. If Andrew’s existing tax free amount is $52 000, this means that his remaining $65 000 will be the taxable component and assessable for tax purposes.

Taxation of Lump Sum Benefit Payments – Ill health If you access your superannuation benefit as a lump sum upon ill heath retirement, the benefit payment will be divided into tax-free and taxable components. An additional tax-free component applies to superannuation benefits paid in relation to ill health retirement. This is in addition to your existing taxfree component. To calculate the additional tax-free component of an ill health lump sum, use the amount worked out under the disability formula below: Lump sum benefit x (days to normal retirement/ [service days plus days to normal retirement])

The OSF will apply the following tax to the remaining taxable component of your benefit (according to your age): Age

Tax payable on taxable component

Aged 60 or over.

No tax payable.

At or above preservation age and under 60.

Tax free up to the low rate cap amount of $195 000* and then a maximum of 15% (plus Medicare levy) on any amount above the cap.

Below preservation age.

Tax payable of no more than 20% (plus Medicare levy).

where: •

•

days to normal retirement is the number of days from the day on which the person stopped being capable of being gainfully employed to his or her last retirement day (generally age 65), and service days is the number of days from the day the member joined the fund or, if a rollover amount was received by the fund with an earlier service period start date, that earlier start date to the date of ill health. For an

*Low rate cap is for the 2016/2017 financial year.

Taxation of Income Stream Benefit Payments If you or your dependants elect to receive your Defined Benefit as an indexed pension and where applicable, an additional non-indexed pension, the

36

OSF Product Disclosure Statement – Defined Benefit Members

Dated 4 November 2016

OSF will apply the following tax (according to the recipient’s age): Age

Tax payable

Aged 60 or over.

No tax payable.

At or above preservation age and under 60.

Tax payable at your marginal tax rate (plus Medicare levy). A 15% tax offset is available.

Below preservation age.

Tax payable at your marginal tax rate (plus Medicare levy). A 15% tax offset will only be available if the payment is a disability superannuation benefit.

Taxation for Temporary Residents Tax may apply if you are or were a temporary resident and apply for a Departing Australian Superannuation Payments (DASP). See ATO website for further details at https://www.ato.gov.au/.

Taxation on KiwiSaver transfers Transfers from the OSF to the New Zealand KiwiSaver scheme are tax free.

37

OSF Product Disclosure Statement – Defined Benefit Members

Dated 4 November 2016

8. INSURANCE Insurance is designed to help you and your family in the event that you are unable to continue to work until normal retirement age due to ill health or death. The benefits available to Defined Benefit Members of the OSF may be higher in the event of death or ill health retirement. We refer to this additional benefit as your 'insurance' even though the additional benefit is self-insured and does not involve any insurance company. The method for calculating these benefits is discussed at section 4 – Your Defined Benefit Membership and the calculation is done in accordance with the Trust Deed. The calculation of the Defined Benefit in the event of death or ill health retirement generally includes a projection of service until retirement age (which is assumed to be 60, or 55 in the case of a Preserved Member), capped at a maximum projection period of 30 years. In cases where you have already passed this service period (30 years of service or retirement age, as applicable), service is not projected forward, and instead the Accrual Factor component of the Defined Benefit formula will reflect your actual service period. An additional calculation is applicable if you are a Preserved Member, such that your death and ill health retirement benefit will be the higher of: •

your withdrawal benefit; and

•

your Defined Benefit calculated based on your retirement benefit at age 55, capped at the higher of 30 years’ service or your actual years of service.

(Refer section 4 Your Defined Benefit Membership for examples of the calculation of death and ill health retirement benefits). The amount of insurance is then the difference between your withdrawal benefit and your death or ill health retirement benefit. Subject to each member’s individual circumstances, there may or may not be an insurance amount. However, the OSF will ensure that relevant members receive the SG Minimum Death cover explained below.

Example – Defined Benefit Member Insurance The Trustees determine that Jill satisfies the OSF’s requirements for ill health retirement. Jill is a Defined Benefit Member aged 53. Her resignation benefit is $510 400 and her ill health retirement benefit is $545 600. Jill’s insurance amount is: = $545 600 – $510 400 = $35 200. Under ill health retirement or death, you or your dependants will be entitled to access the Defined Benefit as a lump sum, an indexed pension or a combination of both (refer section 4 Your Defined Benefit Membership of this PDS – DB for more information). Subject to your circumstances, tax may apply to these benefits – refer to section 7 Tax and Levies of this PDS – DB.

Insurance Risk There are risks associated with your insurance cover. These risks include: •

the risk that the insurance provided through the OSF may not suit your individual needs;

•

the risk that in some cases, you may not be eligible for insurance cover in the OSF.

Before making any decisions about your insurance arrangements including whether additional insurance is required, you may wish to discuss your circumstances with a financial adviser.

Eligibility You need to satisfy the RBA’s medical standards to be eligible for insurance in the event of death or ill health. Unless a medical assessment has been completed determining that you meet the RBA’s medical standards, you will be a Category M Member and you will not be eligible for any insurance prior to age 55. Upon reaching age 55, a Category M Member will automatically become eligible for insurance (but, in the case of ill health, only up until age 60, as explained above under Ill Health Retirement).

38

OSF Product Disclosure Statement – Defined Benefit Members

Members that meet the RBA’s medical standards are classified as Category X Members.

Making a claim Under the Trust Deed, Defined Benefit Members aged 60 and over and Preserved Members aged over 60 are not able to apply for ill health retirement. In these circumstances, members may still be able to access their Defined Benefit for other reasons as explained in section 4 Your Defined Benefit Membership. Category M Members under age 55 are not eligible for insurance but are able to apply for ill health retirement. If this application is approved, the Defined Benefit amount paid will be a lump sum equal to their resignation/withdrawal benefit. Please contact the OSF Membership team as soon as reasonably possible after the date on which your illness or injury occurred if you wish to make a claim. If you are making a claim for ill health retirement you will be required to meet the definition of ill health as set out below. The Trustees will generally ask you for medical information and evidence to enable them to assess your claim. You may also be interviewed, be asked to attend vocational assessments and rehabilitation. It may take some time to obtain all the information required which means it may be some time before your claim is finalised and if accepted, for payment to be arranged. We will keep members informed of the progress of their claims. When insurance benefits may not be paid An insurance benefit will not be payable if you do not satisfy the definition of ill health. Definition of ill health In accordance with the Trust Deed, you will meet the definition of ill health if the Trustees are reasonably satisfied that you are unlikely, because of the illhealth, ever again to engage in gainful employment for which you are reasonably qualified by education, training or experience. Such ill health may be physical or mental, but not temporary or caused by your own misconduct.

Premium rates Defined Benefit Members are not charged insurance premiums.

Dated 4 November 2016

SG Minimum Death cover Legislation requires most superannuation members to have a minimum level of death insurance cover, called SG Minimum Death cover. In the OSF, this includes Defined Benefit Members, but excludes Preserved Members and those who have chosen another superannuation fund. Level of Cover – SG Minimum Death cover The SG Minimum Death cover insured amounts are set out below.

Age range

Death only insured amount

Up to 19 years

Nil

20 to 34 years

$50 000

35 to 39 years

$35 000

40 to 44 years

$20 000

45 to 49 years

$14 000

50 to 55 years

$7 000

56 or more

Nil

Ill Health Retirement

Not applicable.

The insurance provided to Defined Benefit Members in most cases will be at least the SG Minimum Death cover required. If this is not the case, a top up amount will be payable to ensure the SG Minimum Death cover is met. Any top up amount payable will be paid as a lump sum and will not form part of any pension entitlements. Example – Defined Benefit Member insurance on death Tim is a Defined Benefit Member who died at age 55. At death, Tim’s Defined Benefit lump sum retirement benefit is $587 000, which is the same as his Defined Benefit lump sum death benefit. As per the SG Minimum Death cover requirements, the OSF will pay a Death Insurance top up amount of $7 000 as a lump sum. This $7 000 will not form part of the indexed pension available to Tim’s dependants.

39

OSF Product Disclosure Statement – Defined Benefit Members

Dated 4 November 2016

9. INVESTMENTS There are investment risks associated with superannuation. Differences in investment returns can accumulate over time, affecting your retirement savings.

governance (ESG) considerations when making their investment decisions. The OSF does not directly consider ESG when appointing investment managers.

While the Defined Benefit is funded by your employer and its calculation does not depend on investment returns, your Accumulation Account balance will depend, to an extent, on the investment performance of your chosen investment option(s).

Assets and Asset Classes

It is therefore important for you to understand the investment options in the OSF, and to carefully consider the option(s) that best suit your needs.

•

Cash – investment returns derive from interest on cash at call or short-term deposits.

•

Fixed interest – investment returns derive from interest or capital growth/loss on loans to or debt securities issued by governments or corporates.

•

Property (both Listed and Unlisted Property) – investment returns derive from change in value of land or buildings, and rental income from ownership of properties.

•

Australian Equities – investment returns derive from capital growth/loss and dividends from investment in listed companies in Australia.

•

International Equities – investment returns derive from capital growth/loss and dividends from investment in companies listed overseas.

•

Asian Equities – investment returns derive from capital growth/loss and dividends from investment in companies listed in Asia.

•

Alternatives – investment returns derive from income or capital growth/loss from investments that are not part of traditional asset classes, or hybrid instruments. For the OSF this is mainly infrastructure and private equity.

Groups of assets with similar characteristics are known as asset classes. Some of the main asset classes are:

You may also wish to seek professional financial product advice before making any investment decision.

How the OSF invests The OSF combines all monies (the Accumulation Accounts of all OSF members and the contributions received to fund the Defined Benefit and OSF pension entitlements) and invests that money with a number of selected external fund managers. Cash and some fixed interest securities are invested directly by the OSF Investment Committee. How the OSF manages investments The Trustees set the strategic asset allocation for the OSF’s investment options that cover members’ Accumulation Account and the assets supporting the Defined Benefit. The Trustees also select professional investment managers to invest the OSF’s assets. Each investment manager is allocated a portion of the OSF’s assets to manage based on its specialist skills. The list of the OSF’s investment managers is available from the OSF website at: https://super.towerswatson.com/rbaosf /publicinformation/OutsourcedServiceProviders. The Trustees also employ a custodian to hold the OSF’s assets.

Return and risk

Environmental, Social and Governance considerations

Return refers to the potential for an asset to provide capital gain or income for the investor over time. Risk is the likelihood that the value of an asset will change (either positively or negatively) over time. These terms are often used to describe assets and asset classes.

The OSF appoints professional investment managers to manage the assets of the OSF, who may take into account labour standards, environmental, social and

Both return and risk can have impacts on your Accumulation Account balance. You should consider the return and risk characteristics of each asset class

The Trustees regularly monitor each investment manager’s activities and investment performance.

40

OSF Product Disclosure Statement – Defined Benefit Members

and each investment option when choosing where to invest your Accumulation Account.

Dated 4 November 2016

Risk

risks. In the OSF, derivatives are used primarily to achieve transactional efficiency, reduce volatility and reduce transaction costs rather than for speculative purposes.

Risk and return go hand-in-hand A relationship generally exists between investment risk and investment returns over the long term. Assets that are likely to have higher returns in the long term (e.g. shares) will tend to fluctuate in value frequently in the short term. As assets tend to perform differently through different stages of the economic cycle, investing across a range of asset classes (also known as diversification) may reduce the short term fluctuations in the value of your investment portfolio and reduce your overall risk exposure.

Gearing Risk

Gearing is the use of debt, which can magnify gains and losses.

Inflation risk

The risk that inflation (measured by the Consumer Price Index) may exceed investment returns.

Interest rate risk

Interest rate changes can have a positive or negative impact (either directly or indirectly) on investment values or returns of interest bearing asset classes. For example, when interest rates rise, the capital value of fixed interest assets may fall.

Investment Risks Superannuation is subject to varying levels of investment risks, depending on the investment option(s) you select. Some of the key risks are outlined below: Risk

Description

Asset Class Risk

Asset classes perform differently over time. For example, bonds often perform well when equities are doing relatively poorly.

Credit and security specific risk

Individual assets such as shares or bonds are exposed to risks associated with the organisation that issues them, e.g. a change in management, business environment or profitability. These influences can cause the value of the assets and hence returns to increase or decrease.

Currency Risk

If an overseas currency changes in value relative to the Australian dollar, the value of international investments can change, in turn influencing the performance of investment options that use international investments.

Derivative Risk

Derivatives, such as options and futures, are investments that have a value which is derived from other securities or assets. Derivatives can be used to manage certain investment risks but they may also magnify certain risks in the investment or expose the investment to additional

Description

Investment manager risk

Some investment managers have an investment style and philosophy that suits certain market and economic conditions better than others.

Liquidity Risk

Some assets may not be readily converted into cash, and therefore in some cases there is the risk that liabilities (including withdrawals) cannot be paid when they fall due.

Tax and legal

Changes to taxation or other laws impacting superannuation may have an effect on your investment.

Key Risk and Return Metrics The return objective is the annual return that the Trustees aim to achieve from each investment option, measured on a net of fees and tax basis. There is no guarantee that an investment option will achieve its return objective. Return objectives may change over time. Past investment returns are not indicative of future performance. The time horizon represents the suggested minimum timeframe for holding the investment. This suggested minimum is based on the expected risk/return characteristics of a particular investment option.

41

OSF Product Disclosure Statement – Defined Benefit Members

The risk objective is the level of risk the Trustees aim to take in order to achieve the desired return objective. This is measured in terms of the probability of a negative return in a 20 year period. There is no guarantee that an investment option will achieve its risk objective. Risk objectives may change over time. This Standard Risk Measure (SRM) is based on industry guidance to allow members to compare investment options that are expected to deliver a similar number of negative annual returns over any 20-year period. The SRM is not a complete assessment of all forms of investment risk. For example, it does not detail what the size of a negative return could be or the potential for a positive return to be less than a member may require to meet their objectives relating to their Accumulation Account. Further, it does not take into account the impact of administration fees and tax. Although the SRM is a useful measure, you should still ensure you are comfortable with the risks and potential losses associated with your chosen investment option(s). The SRM uses a 7-point scale (very low, low, low-medium, medium, medium-high, high, very high).

Risk Band

Risk Label

Estimated number of negative annual returns over any 20 year period.

1

Very Low

Less than 0.5.

2

Low

0.5 to less than 1.

3

Low to Medium

1 to less than 2.

4

Medium

2 to less than 3.

5

Medium to High

3 to less than 4.

6

High

4 to less than 6.

7

Very High

6 or more.

Dated 4 November 2016

OSF’s investment options For your Accumulation Account, you can choose from a range of 10 investment options within the OSF, giving you the flexibility to select an investment option(s) that best suits your financial goals. Each option has a different level of investment risk and potential growth. Option E is managed within a strategic asset allocation framework. The benchmark asset allocations and drift ranges for Option E are outlined on pages 47 and 48. All other OSF investment options are managed to a benchmark asset allocation and generally have an asset allocation range of plus or minus 2 per cent. Investment of Defined Benefit Contributions The participating employers bear the investment risk in relation to Defined Benefits, and the funding of any shortfalls. Accordingly, the investment strategy of the Defined Benefit contributions received is determined by the Trustees, taking into account the OSF’s Defined Benefit obligations. The Trustees invest the assets underpinning the Defined Benefit in Option E. Changing your investment selection For your Accumulation Account, you should carefully select your investment option(s) based on your own personal financial objectives and goals. It is important for you to understand the investment options in the OSF and choose the one (or a combination of options) that best suits your needs. The OSF is not licensed to provide any investment advice or recommendation. You should consider seeking professional advice from a licensed financial planner before making a decision about how to invest your superannuation. In recognition of the fact that your needs may change over time, you are able to change your investment selection for your Accumulation Account. The OSF processes investment changes at the end of each quarter following receipt of an accurately completed nomination. This is called switching. When you perform an investment switch, you can choose to apply it to your existing account balance and/or to any future contributions or transfers.

42

OSF Product Disclosure Statement – Defined Benefit Members

Dated 4 November 2016

Cash

Fixed Interest

Benchmark Asset Allocation

Benchmark Asset Allocation

Return Objective:

CPI + 0.5%

Return Objective:

CPI + 1%

Time Horizon (years):

1

Time Horizon (years):

3

Risk Objective:

Less than 1 year in 20

Risk Objective:

2 years in 20

Risk Band:

1

Risk Band:

4

Standard Risk Measure:

Very Low

Standard Risk Measure:

Medium

Characteristics:

Characteristics:

Cash investments include short-term money market securities and money deposited with (on loan to) financial institutions. This Option minimises the risk of deterioration in the capital value of a member’s investment. Over the long-term, this Option can be expected to offer relatively low returns.

Fixed interest investments include debt securities issued by governments or corporations, as well as asset-backed securities. A small amount of cash is also held to facilitate transactions. Over the longer term, fixed interest investments usually offer higher returns than cash but they also involve slightly higher levels of risk. Because the capital value of a fixed interest investment can vary, there is a chance of a negative return for a period.

Annual Returns of the Cash Option

Annual Returns of the Fixed Interest Option

%

%

%

%

30

30

30

30

20

20

20

20

10

10

10

10

0

0

0

0

-10

-10

-10

-10

-20

-20

-20

-20

-30

-30

-30

-30

-40

-40

-40

-40

-50 15/ 16

-50

-50

06/ 07

09/ 10

12/ 13

06/ 07

09/ 10

12/ 13

-50 15/ 16

43

OSF Product Disclosure Statement – Defined Benefit Members

Dated 4 November 2016

Australian Equities

International Equities

Benchmark Asset Allocation

Benchmark Asset Allocation

Return Objective:

CPI + 4%

Return Objective:

CPI + 3%

Time Horizon (years):

10

Time Horizon (years):

10

Risk Objective:

6 years in 20

Risk Objective:

7 years in 20

Risk Band:

7

Risk Band:

7

Standard Risk Measure:

Very High

Standard Risk Measure: Very High

Characteristics:

Characteristics:

The value of Australian equities can vary considerably so equities are one of the riskiest asset classes. In the longer term, returns on equities have on average, been higher than returns from other types of investment although equities can exhibit low or even negative returns for extended periods. A small amount of cash is held to facilitate transactions. The current Australian equities managers adopt an index (passive) investment style.

The value of international equities can vary considerably and hence this is one of the riskiest asset classes. This asset class is unhedged, so changes in currency values, relative to the Australian dollar, are reflected in asset returns. International equities are expected to provide long-term capital growth with diversification across global equity markets. A small amount of cash is held to facilitate transactions. The current international equities manager adopts an index (passive) investment style.

Annual Returns of the International Equities Option

Annual Returns of the Australian Equities Option %

%

%

%

30

30

30

30

20

20

20

20

10

10

10

10

0

0

0

0

-10

-10

-10

-10

-20

-20

-20

-20

-30

-30

-30

-30

-40

-40

-40

-40

-50

-50 15/ 16

-50

06/ 07

09/ 10

12/ 13

06/ 07

09/ 10

12/ 13

-50 15/ 16

44

OSF Product Disclosure Statement – Defined Benefit Members

Dated 4 November 2016

Listed Property

Option A

Benchmark Asset Allocation

Benchmark Asset Allocation

Return Objective:

CPI + 3%

Return Objective:

CPI + 4%

Time Horizon (years):

10

Time Horizon (years):

10

Risk Objective:

7 years in 20

Risk Objective:

5 years in 20

Risk Band:

7

Risk Band:

6

Standard Risk Measure:

Very High

Standard Risk Measure: High

Characteristics:

Characteristics:

Listed property trusts are one of the riskiest asset classes. Listed property trust assets are mainly commercial, retail or industrial properties. Changes in property values tend to be cyclical and protracted. Consequently, it is possible for property to generate negative returns for a few years in a row. However, held over the long run, listed property has generally provided long-term capital growth. A small amount of cash is held to facilitate transactions.

Option A is generally expected to produce the highest long-term returns, but carries the highest level of risk amongst the OSF’s pre-blended options. A high proportion of the portfolio is invested in growth assets such as equities and property. A small amount of cash is held to facilitate transactions.

Annual Returns of the Listed Property Option

Annual Returns of Option A

%

%

%

30

30

30

30

20

20

20

20

10

10

10

10

0

0

0

%

0 -10

-10

-10

-10

-20

-20

-20

-20

-30

-30

-30

-30

-40

-40

-40

-50 15/ 16

-50

-40 -50

06/ 07

09/ 10

12/ 13

06/ 07

09/ 10

12/ 13

-50 15/ 16

45

OSF Product Disclosure Statement – Defined Benefit Members

Dated 4 November 2016

Option B

Option C

Benchmark Asset Allocation

Benchmark Asset Allocation

Return Objective:

CPI + 3%

Return Objective:

CPI + 2%

Time Horizon (years):

7

Time Horizon (years):

3

Risk Objective:

5 years in 20

Risk Objective:

2 years in 20

Risk Band:

6

Risk Band:

4

Standard Risk Measure:

High

Standard Risk Measure: Medium

Characteristics:

Characteristics:

Option B has a moderately high risk profile and is expected to produce more moderate returns than Option A over the long-term.

Option C has a moderate risk profile and is expected to produce returns that are more stable but not as high as Options A and B over the long-term. A high proportion of the portfolio is invested in defensive assets such as cash and fixed interest, with some exposure to equities and property.

Annual Returns of Option B

Annual Returns of Option C

%

%

%

%

30

30

30

30

20

20

20

20

10

10

10

10

0

0

0

0

-10

-10

-10

-10

-20

-20

-20

-20

-30

-30

-30

-30

-40

-40

-40

-40

-50

-50 15/ 16

-50

06/ 07

09/ 10

12/ 13

06/ 07

09/ 10

12/ 13

-50 15/ 16

46

OSF Product Disclosure Statement – Defined Benefit Members

Dated 4 November 2016

Option D

Option E

Benchmark Asset Allocation

Actual Asset Allocation as at 30 June 2016

Return Objective:

CPI + 0.5%

Return Objective:

CPI + 4%

Time Horizon (years):

2

Time Horizon (years):

10

Risk Objective:

< 1 year in 20

Risk Objective:

4 years in 20

Risk Band:

1

Risk Band:

6

Standard Risk Measure:

Very Low

Standard Risk Measure: High

Characteristics:

Characteristics:

Option D has a low risk profile and is expected to produce stable returns that are lower than the other pre-blended Options over the medium to long-term.

Option E is managed by the Investment Committee which seeks to earn a high rate of return over the longer term by investing in a mix of diversified assets.

Annual Returns of Option D

Annual Returns of Option E

%

%

%

%

30

30

30

30

20

20

20

20

10

10

10

10

0

0

0

0

-10

-10

-10

-10

-20

-20

-20

-20

-30

-30

-30

-30

-40

-40

-40

-40

-50

-50 15/ 16

-50

06/ 07

09/ 10

12/ 13

06/ 07

09/ 10

12/ 13

-50 15/ 16

47

OSF Product Disclosure Statement – Defined Benefit Members

The Benchmark Asset Allocation and allowable ranges for Option E are below: Asset Category

Benchmark

Allowed Range

Cash

2

+6/–2

Bonds

13

+/–10

Total Defensive

15

+/–10

Equities

50

+/–10

20

+/–10

Unlisted Alternatives

15

+/–10

Total Growth

85

+/–10

Property

*

*

Property is composed of listed and unlisted property investments.

Default Investment option If you have not selected an investment option(s) for your Accumulation Account balance, the Trustees have selected Option B as the default investment option.

Units and unit prices Units and unit prices are the mechanisms by which the OSF values your Accumulation Account balance. The unit price of a given investment option is calculated by taking the total market value of the investment option’s assets on a particular day, adjusting for any liabilities (such as taxes and fees), then dividing the net investment option value by the total number of units held by all investors in that investment option on that day.

Dated 4 November 2016

Although your unit balance in an investment option will stay constant (unless there is a transaction on your account, e.g. contribution, withdrawal, investment switch or inwards transfer), the unit price (and therefore your account balance in dollar terms) will change according to changes in the market value of the assets or the total number of units issued for the investment option. The OSF determines the market value of each investment option on a weekly basis, based on the most recent available information. If you invest or switch into a new investment option, or if contributions or transfers are added to your account, you will be allocated additional units based on the value of the switch or investment divided by the relevant investment option’s unit price. Similarly, your units in an investment option will decrease each time you switch out of an option or money is withdrawn from your account (including fees and charges that may be payable).

Performance Performance of each investment option is measured by the change in the unit price of its underlying investments over a specific timeframe. The investment performance of your Accumulation Account, as indicated on the OSF website or in your Member Annual Statement, may differ from the performance of the underlying investments due to the timing of transactions, such as contributions, tax payments or any withdrawals. It is important to note that past performance is not indicative of future returns.

The value of your account is determined by multiplying the units you hold in each investment option(s) by the unit price for each respective investment option(s). When you contribute to an investment option(s) you are allocated a number of units. Each unit represents an equal part of the net market value of the total underlying portfolio of assets held within the selected investment option(s). For example, if you invest $100 into Option B and the unit price is $3.0469, you will be allocated 32.82024 units in the option.

48

OSF Product Disclosure Statement – Defined Benefit Members

Dated 4 November 2016

10. ACCESSING YOUR BENEFIT Superannuation helps you save money for your retirement, therefore there are legislative restrictions on when it can be paid to you in cash. For most people, superannuation is only payable in cash once you reach your preservation age and permanently retire.

Preservation Rules Superannuation will generally be preserved, which means it must be kept within the superannuation system until you meet a Condition of Release to be able to withdraw your benefits in cash. Your preservation age will depend on your date of birth, as shown in the table below: Preservation age

Date of birth Before 1 July 1960

55

1 July 1960 – 30 June 1961

56

1 July 1961 – 30 June 1962

57

1 July 1962 – 30 June 1963

58

1 July 1963 – 30 June 1964

59

After 1 July 1964

60

Preservation components of superannuation benefits Your superannuation benefits may comprise one or more categories of benefits for preservation purposes, each of which are treated differently and subject to different restrictions on withdrawing. These are outlined in the following table.

Preservation Component

Restrictions on withdrawing

Restricted Non-preserved Benefits are generally member contributions made prior to 1 July 1999.

When restricted non-preserved benefits are transferred into the OSF, these will not be accessible until you leave the participating employer or you meet a Condition of Release.

Unrestricted Nonpreserved Benefits are Preserved Benefits or Restricted Nonpreserved Benefits that can be withdrawn by the member as a Condition of Release has previously been met.

Nil.

Your superannuation generally remains allocated to these components even if you transfer it between superannuation funds or accounts. However, the rules of the OSF mean that any Unrestricted Non-preserved Benefit transferred into the OSF from another superannuation fund will be classified as Restricted Non-preserved Benefits upon receipt into the OSF. The components of your superannuation are listed on your Member Annual Statement.

Conditions of Release Circumstances in which preserved benefits may be withdrawn (Conditions of Release) from the OSF include:

Preservation Component

Restrictions on withdrawing

•

Retirement;

•

Death;

Preserved Benefits are generally employer contributions and contributions for which a tax deduction has been claimed.

These benefits must be retained in the superannuation system until a Condition of Release is satisfied.

•

Ill Health Retirement;

•

Severe Financial Hardship;

•

Compassionate grounds; and

•

Terminal medical conditions.

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OSF Product Disclosure Statement – Defined Benefit Members

For more details on the requirements for each of these circumstances, or for further information on other circumstances in which you may take your benefits, please contact the OSF Membership team. The main Conditions of Release and the benefits applicable are summarised in section 4 Your Defined Benefit Membership of this DB - PDS.

Dated 4 November 2016

Unclaimed Monies and Lost Superannuation The OSF may be required to pay your account balance to the Australian Taxation Office (ATO) if: •

your account is subject to a family law payment split but we are unable to identify the ex-spouse entitled to the superannuation benefit; or

•

we are unable to identify a person entitled to the superannuation benefit 2 years after your death; or

•

you are a lost member and either your account balance is less than $4 000, or we have not received an amount in respect of you in the last 12 months and we do not have enough information to identify you and would not be able to pay an amount to you.

Family Law The Federal family law regime allows separating couples (including de facto couples) to split their superannuation entitlements as part of a property settlement. The Federal family law regime currently applies to de facto relationships that breakdown on or after 1 March 2009 in most Australian States, mainland Territories and Norfolk Island, and de facto relationships that breakdown from 1 July 2010 in South Australia. The laws do not apply to the breakdown of de facto relationships in Western Australia. Please contact the OSF Membership team if you would like further information. The OSF will not be able to provide any personal legal advice and it is recommended that members contact a legal professional.

If your account balance is transferred to the ATO, you will no longer be a member of the OSF and any insurance cover you had will cease. If your benefit is transferred to the ATO, you may claim your benefit by contacting the ATO on 13 10 20 or downloading a form from http://www.ato.gov.au.

Automatic rollover and transfers For Defined Benefit Members under age 55 who cease employment with their participating employer, the OSF may be required to transfer your account balance to SuperTrace if instructions are not provided to the OSF within 90 days of your resignation. If your account balance is transferred to SuperTrace, you will no longer be a member of the OSF and any insurance cover you had will cease. SuperTrace will provide you with its PDS if the OSF is able to provide SuperTrace with your current contact details. Alternatively, you may also contact SuperTrace to obtain a copy of its PDS if one has not already been provided to you. Contact details for SuperTrace are: Mailing address: SuperTrace Locked Bag 5429 Parramatta NSW 2124 Phone:

1300 788 750

Fax:

1300 700 353

Website:

https://www.supertrace.com.au/

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OSF Product Disclosure Statement – Defined Benefit Members

Dated 4 November 2016

11. PENSIONS OSF Pensions The OSF provides an indexed pension and in specific circumstances, an additional non-indexed pension to Defined Benefit Members and their dependants. If you or your dependants elect an indexed pension and, where applicable, the additional non-indexed pension, you or your dependants will be classified as a Pensioner in the OSF. Duration of Pensions Your indexed pension and the additional nonindexed pension (if applicable) are payable to you for your entire life. If payable to your spouse, the indexed pension and the additional non-indexed pension (if applicable) are also payable to your spouse for his or her entire life. Pensions paid to, or in relation to, a dependant child generally cease when the child reaches age 18, unless the child is receiving full-time education in which case the pension is paid up to age 25. Indexation For the indexed pension, annual pension amounts are adjusted semi–annually in March and September, to changes in the Male Total Average Weekly Earnings (MTAWE) series published by the Australian Bureau of Statistics. The additional nonindexed pension remains as a fixed amount, except where the child portion ceases following ineligibility. Death of a Defined Benefit Member who has become a Pensioner Where you are a Defined Benefit Member who has elected to receive your Defined Benefit as an indexed pension, and if applicable, has also elected to receive the additional non-indexed pension, the following applies: •

Upon your death, an indexed pension and additional non-indexed pension (if applicable) will be payable to your spouse and/or dependant children.

•

Unless the Post Retirement relationship provisions apply (see below), your spouse and/or dependant children will receive a proportion of your indexed and if applicable additional non-indexed pension according to the following table:

Proportion of pension Spouse only

67%

Spouse and one child

78%

Spouse and two children

89%

Spouse and three or more children

100%

One orphan

45%

Two orphans

80%

Three orphans

90%

Four or more orphans

100%

•

If your death occurs within 10 years of you commencing the indexed pension, a Pension Guarantee will also be payable to your spouse and/or dependant children in addition to the pension(s). Further information on the Pension Guarantee is available later in this section.

•

Where there is no spouse or dependant children, and a Pension Guarantee applies, this will be paid to your estate. Example – Pensions payable to a Spouse Kim is married and receives from the OSF an annual indexed pension of $41 000 and an annual additional non-indexed pension of $16 000. Assuming that the Pension Guarantee does not apply (i.e. she has been receiving a pension for at least 10 years), upon Kim’s death, her husband will receive from the OSF: • an annual indexed pension of 67% of her indexed pension $41 000 x 67% = $27 470; and • an annual additional non-indexed pension of 67% of her additional non-indexed pension $16 000 x 67% = $ 10 720.

51

OSF Product Disclosure Statement – Defined Benefit Members

Death of a non-member spouse while receiving an OSF Pension Where your spouse receives the indexed pension and if applicable, the additional non-indexed pension upon your death, the following applies: •

If your spouse dies, an indexed pension and where applicable, additional non-indexed pension will be payable to any dependant children until age 18 or if in receipt of full-time education, age 25.

•

Subject to your spouse’s death occurring within 10 years of the initial indexed pension commencing, a Pension Guarantee will also be payable to your dependant children. Further information on the Pension Guarantee is available later in this section.

•

Where there are no eligible dependant children, and a Pension Guarantee applies, this will be paid to your spouse’s estate.

Pension Guarantee A guarantee period of 10 years applies to OSF indexed pensions that commenced from 18 September 1990. It does not apply to the additional non-indexed pension. The 10 year guarantee period is from the start of the initial indexed pension (either paid to a Defined Benefit Member or to their dependant due to the death of a Defined Benefit Member). Should the indexed pension (or part of it) cease within this 10 year period, for reasons of death or ineligibility in respect of dependant children, a Pension Guarantee is payable. The Pension Guarantee reflects the length of time between the indexed pension ceasing and the end of the guarantee period, and is payable as a lump sum. If a Pension Guarantee is payable following: •

•

•

the death of a Defined Benefit Member who has become a Pensioner, it will be paid to their spouse and/or dependant children where applicable. Otherwise, it will be paid to their estate; the death of the spouse of a Defined Benefit Member while that spouse is receiving an OSF Pension, it will be paid to the legal personal representative of their dependant child(ren) or any other financial dependent provided under legislation; and a child pension ceasing due to ineligibility, it will be paid to the parent where applicable.

Dated 4 November 2016

Otherwise, it will be paid to the dependant child. Example – Pension Guarantee Jane dies without dependants 7 years after retiring and commencing an indexed pension. Jane was receiving an annual indexed pension of $30 000 at the date of her death. A Pension Guarantee lump sum equal to the whole indexed pension multiplied by the unexpired portion of the guarantee period (3 years) is paid by the OSF to Jane’s estate: $30 000 x 3 = $90 000.

Example – Pension Guarantee Tim is married with no children and at death he was receiving an annual OSF indexed pension of $20 000. Tim dies 5 years after commencing the indexed pension. Tim’s wife will be paid an annual indexed pension equal to 67 per cent of his indexed pension ($13 400). Additionally, the OSF will pay Tim’s wife a Pension Guarantee lump sum equal to the difference between Tim’s indexed pension and that payable to his wife ($6 600) multiplied by the unexpired portion of the guarantee period (5 years): $6 600 x 5 = $33 000. If, as a continuation of this example, Tim’s wife dies 3 years later (i.e. still within the guarantee period) a Pension Guarantee lump sum will be paid to her estate. The lump sum will be equal to the Tim’s wife’s indexed pension at the date of death multiplied by the unexpired portion (2 years) of the guarantee period.

Example – Pension Guarantee Kate started receiving an indexed pension and an additional non-indexed pension for both her and her son, upon the death of her late husband. Kate has been receiving the indexed pension and additional non-indexed pension for both her and her son for 8 years. She is now receiving an annual indexed pension of $43 000 and additional nonindexed pension of $13 200.

52

OSF Product Disclosure Statement – Defined Benefit Members

Kate’s son has now reached age 18 and is no longer undertaking any further full-time studies. As a result, his portion of the pension as calculated below, will cease: Indexed pension: 0.11/0.78 x $43 000 = $6 064; Additional non-indexed pension: 0.11/0.78 x $13 200 = $1 861. Kate will now receive an annual indexed pension of $36 936 and additional non-indexed pension of $11 339. Kate will also receive a Pension Guarantee lump sum equal to the her son’s proportion of the indexed pension multiplied by the unexpired portion of the guarantee period (2 years): $6 064 x 2 = $12 128. Post retirement relationship

Dated 4 November 2016

indexed pension) on your death will be a lesser proportion of your indexed and where applicable, additional non-indexed pension than the normal 67 per cent, depending on the age difference and the age at which your relationship commenced. The OSF Membership team will be able to advise you the details of your entitlements if you supply the date of your post-retirement relationship and your spouse’s date of birth. Contact the OSF Membership team for further information. Exception to the Post Retirement Marriage rules If you joined the OSF before 18 September 1990, and you entered into a relationship after becoming a pensioner but before reaching age 60, your spouse will receive the full 67 per cent pension entitlement without any qualifying period.

If you commence a qualifying relationship while a Pensioner, your spouse (including a de facto or same sex relationship) will qualify for a pension (indexed and where applicable, additional non-indexed) on your death, provided you do not die within 3 years of your relationship commencing. If your spouse is the same age or older than you, the spouse’s pension (indexed and where applicable, additional non-indexed) that will be paid on your death will be 67 per cent of your pension (indexed and where applicable, additional non-indexed). If your spouse is younger than you, your spouse’s indexed and, where applicable, additional nonindexed pension will be determined as follows: •

you may choose to be paid a reduced indexed and where applicable, additional non-indexed pension for the remainder of your life, effective from the end of the 3 year qualifying period. In which case your spouse’s pension benefit (indexed and where applicable, additional nonindexed pension) on your death will be 67 per cent of your reduced indexed and where applicable, additional non-indexed pension. This decision must be made within 2 years of your relationship commencing. The reduction in your indexed and where applicable, additional nonindexed pension will reflect the age difference between you and your spouse and the age at which your relationship commenced;

•

if you prefer to leave your indexed and where applicable, additional non-indexed pension unchanged, your spouse’s pension benefit (indexed and where applicable, additional non-

53

OSF Product Disclosure Statement – Defined Benefit Members

Dated 4 November 2016

12. COMMUNICATING WITH THE OSF Communication to members

Complaints

The Trustees keep members informed of developments in the OSF through the Annual Report, Member Annual Statements, the issue of the Superannuation Matters newsletter, and the OSF website.

OSF Complaints Handling

Information about the OSF, including Product Disclosure Statements, Member Information Booklets, current unit prices for investment options and the OSF Trust Deed, are available on the OSF website at: https://super.towerswatson.com /rbaosf. Copies of these documents are also available from the OSF by contacting the OSF Membership team.

OSF Website The My OSF section of the OSF website allows registered users to access their superannuation account details, update personal details, and request changes to investment options. Defined Benefit Members can also view certain benefit projections. Registration is open to all current, preserved and pensioner members and can be arranged by completing the registration details on the OSF website at: https://super.towerswatson.com/rbaosf.

Enquiries

If you wish to lodge a complaint about the services provided, please advise us in writing with a ‘notice of complaint’. The OSF Membership team will acknowledge your complaint and investigate the matter. The OSF aims to provide a prompt response. If, however, the matter cannot be resolved promptly, the complaint may be referred to the Trustees for further consideration. In all circumstances, you should expect a response within 90 days. If you are not satisfied with the handling of your complaint, you may have the ability to lodge a complaint with the Superannuation Complaints Tribunal (SCT). Superannuation Complaints Tribunal The SCT is an independent dispute resolution body, designed to hear complaints by superannuation fund members and other beneficiaries. The SCT deals with complaints relating to decisions and conduct of trustees, insurers, and other decision-makers in relation to regulated superannuation funds. The SCT does not have an unlimited jurisdiction to deal with all superannuation-related matters. The SCT will generally consider a complaint within its jurisdiction if you are dissatisfied with the decision of the OSF, or have not received a response from the OSF within 90 days of making a complaint.

If you have any enquiries about the OSF or your membership of the OSF, please contact the OSF Membership team:

Contact details for the SCT are below: Phone:

1300 884 114 or (03) 8635 5580

Toll free number:

1800 001 474

Fax:

(03) 8635 5588

Fax:

1800 805 135

Email:

[email protected]

Email:

[email protected]

Mailing address:

Reserve Bank of Australia Officers’ Superannuation Fund PO Box 1442 PARRAMATTA NSW 2124

Mailing address

Website:

Superannuation Complaints Tribunal Locked Bag 3060 Melbourne VIC 3001 http://www.sct.gov.au/

54

OSF Product Disclosure Statement – Defined Benefit Members

Dated 4 November 2016

13. OTHER INFORMATION Actuarial review The OSF’s consulting actuary carries out a detailed review of the funding position of the defined benefit categories of the OSF at least once every 3 years. The most recent review indicated that the OSF’s financial position as at 30 June 2014 was sound. The annual review for the year ending 30 June 2016 also indicated that the OSF’s financial position was sound.

Administration services The Trustees have a contract with the RBA under which it provides all administrative services for the OSF. The RBA has in turn outsourced selected administration services (membership, accounting, systems and website services) to Link Super Pty Limited and Willis Towers Watson Australia Pty Ltd. The RBA directly provides investment, governance, secretariat and risk and compliance services to the OSF.

Anti-Money Laundering (AML) and Counter-Terrorism Financing (CTF) laws The OSF is required to comply with AML/CTF laws, including the need to establish your identity and, if relevant, the identity of other persons associated with your account (e.g. beneficiaries in the case of a death benefit). If you joined the OSF on or after 12 December 2007, we will need to verify your identity before we pay your super benefits to you in cash. At the time your benefit is payable, we may ask you to provide identification such as a certified copy of your driver’s licence, passport or birth certificate (unless you have already provided this information). Additionally, from time to time, we may require further information to assist with this process. If you do not provide the required documentation, the OSF may be unable to process the payment. All personal information collected for AML/CTF purposes is subject to the privacy legislation, and will be treated carefully. The AML/CTF Act also requires the OSF to report to the Australian Transaction Reports and Analysis Centre (AUSTRAC) transactions that may breach the AML/CTF legislation or cause the OSF to commit an

offence. Members will not be advised of any such report or receive notification that a report has been lodged with AUSTRAC.

Indemnity insurance The Trustees are personally responsible for the management of the OSF. While the OSF Trust Deed provides for the Trustees to be reimbursed by the OSF for expenses or any financial loss, other than in circumstances involving fraud or dishonesty, the Trustees have chosen to take out indemnity insurance to limit the exposure of the OSF.

Investment managers and material outsourced service providers The OSF utilises the services of Investment Managers and other material outsourced service providers to assist with the management of the OSF. The list of current investment managers, fund managers and other material outsourced service provides is available on the OSF website at: https://super.towerswatson.com/rbaosf/publicinfor mation/OutsourcedServiceProviders.

Multiple OSF Accumulation Accounts The OSF is required to identify those members with multiple accumulation interests held in separate accounts within the OSF and assess whether it is in the member’s best interests to have these accounts merged. Where it is assessed to be in a member’s best interests, the OSF is required to consolidate such Accumulation Accounts. It is intended that this consolidation will help members by minimising member fees and overall fund administration costs. Fees are not applied to carry out the consolidation process. Where a member’s multiple Accumulation Accounts are invested in different investment options, the investment strategy of the merged account will be adjusted to reflect the valueweighted average of the investment options of the prior multiple accounts. Prior to consolidating a member’s multiple Accumulation Accounts, the member will be contacted by the OSF and provided the option to opt-out of the consolidation. This consolidation process does not apply to Defined Benefits.

55

OSF Product Disclosure Statement – Defined Benefit Members

Dated 4 November 2016

Privacy The OSF handles your personal information in accordance with the Privacy Act. Only information that is necessary to maintain your membership in the OSF, or required by legislation, is collected. Your personal information will not be used or disclosed to any third party for any other purpose without your consent, except where permitted or required by law. You have the right to access and correct your personal information as held by the OSF. Further information may be found in the OSF’s Privacy Policy, which is available under “Public Information” on the OSF’s website, or on request from the OSF Membership team.

56