News

Here you will find a collection of news articles on recent superannuation issues.

New investment options
February 6, 2012 - LGS has launced six new 'single sector' investment options for members of the Accumulation Scheme and Account-Based Pension Plan.

Legislation Update
December 22, 2011 - Over the past couple of weeks the Federal Government has announced some changes to superannuation law which may have an impact on your super investment.

LGS awarded Best Green Super Fund 2012 by Money Magazine
December 8, 2011 - LGS has continued to be recognised for its sustainable investment approach by taking home the Best Green Super Fund 2012 at the Money Magazine Best of the Best awards.

Batemans Bay Village Centre listed as Water Wise Finalist
November 14, 2011 – The Batemans Bay Village Centre, owned by Local Government Super (LGS) has been listed as a finalist for the Prime Minister’s Water Wise Award - part of the 2012 annual savewater! Awards. It is the only commercial shopping building listed in this category.

We're launching a world first
November 7, 2011 – We are launching our Green Building Fund Exemplar Project at 76 Berry Street North Sydney.

Colour of Money competition winners
November 4, 2011 – Congratulations to the two lucky winners of Local Government Super's Colour of Money reactivation competition.

Would you like the security of a guaranteed investment return?
October 18, 2011 – Rollover and Account-Based Pension members can now choose our 12-month fixed-term investment option and earn a guaranteed investment return.

Nine Local Government Super-owned buildings awarded 6-star environmental rating by NABERS
August 31, 2011 – In a recent announcement by the Office of Environment and Heritage, nine Local Government Super (LGS)-owned commercial buildings have had their environmental credentials upgraded.

What does the Government's climate change plan mean for your super?
August 31, 2011 - The Federal Government has released their climate change plan, which includes a price on carbon emissions.
Find out more about the plan and the likely impact on your super.

Market Update
August 15, 2011 - The recent movements on Australian and global markets have understandably caused concern for some members, so we thought we would provide you with some commentary on these events.

Too many fees can really eat into your super
August 15, 2011 - Multiple super accounts can mean extra fees eating away at your super, so why not consolidate your different accounts into Local Government Super and make the most of your investment.

Local Government Super wins 2011 Australian Business Award for Environmental Sustainability
July 22, 2011 - Local Government Super (LGS) has been recognised among Australia’s most progressive organisations, with the superannuation fund’s sustainable practices in its investment portfolio winning the Australian Business Award for Environmental Sustainability in the 2011 Awards.

Do you want 12% super guaranteed?
July 15, 2011 - The superannuation guarantee has helped a lot of Australians save for their retirement but the fact is that many people still retire with not enough super and have to rely on the Age Pension to meet their living costs.

Local Government Super transforms 19 year old commercial property
May 5, 2011 - Local Government Super (LGS) has announced one of its recently upgraded commercial properties is now the leading energy efficient building in Sydney's CBD.

The 10 storey building at 120 Sussex St, which undertook an upgrade in 2010, recently obtained a National Australian Built Environment Rating System (NABERS) Base Building Energy Certificate of 5 stars, the highest available.

LGS appoints Head of Marketing
May 3, 2011 -Local Government Super (LGS) has announced it has appointed Michelle Hopwood as Head of Marketing & Communications.

Local Government Super tops climate change rankings again
April 15, 2011 - Local Government Super (LGS) has been ranked first for its climate change initiatives for the second consecutive year in the annual The Climate Institute/Australian Institute of Superannuation Trustees (AIST) survey.

Now in its third year, the survey was responded to by 18 funds, representing A$200 billion in retirement savings. The project aims to independently assess the readiness of superannuation funds to manage the risks and opportunities of climate change.

Local Government Super wins SuperRatings’ Infinity Award
March 30, 2011 -Local Government Super (LGS) has been named the Infinity Award winner for 2011 by independent super research company SuperRatings, reinforcing its position as the leader in sustainable behaviour in the superannuation industry.

Leading Australian investors join global peers to "Green" real estate investment initiative
March 30, 2011 - Local Government Super (LGS) and Victorian Funds Management Corporation (VFMC) together with some of the world's largest asset managers, representing $1.4 trillion in assets under management, have joined forces with some of the leading real estate industry associations to create the Global Real Estate Sustainability Benchmark ("GRESB") Foundation.

Japanese earthquake and investment markets
The recent natural disasters in Japan have had an impact on investment markets both in Australia and overseas. While the fall in the markets has had an impact on some of our investment returns, our financial year to date returns still remain positive.
 
We continue to actively monitor the situation.

Local Government Super awarded sustainable fund of the year
Local Government Super (LGS) has been hailed as the Sustainable Super Fund of the Year for 2010 by the Australian Sustainability Awards.

LGS wins an Australian Business Award in the Environmental Sustainability category
Local Government Super was presented with an Australian Business Award in the Environmental Sustainability category at the 2010 Awards.

Solar power upgrade on existing building demonstrates environmental leadership to property sector
Local Government Super (LGS) has launched the installation of 1,000sqm of solar photovoltaic panels on one of its commercial office buildings in Macquarie Park, New South Wales.

Local Government Super awarded $2.1 million Green Building Fund Grant
Local Government Super (LGS) has been awarded a $2.1 million Green Building Fund Grant by the Department of Innovation, Industry, Science and Research.

Local Government Super tops climate change rankings
Local Government Super (LGS) has been ranked first for its climate change initiatives in an Asset Owners Disclosure Project on climate change.

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News

Japanese earthquake and investment markets

Devastation of the Japanese earthquake

On 11 March, an 8.9 magnitude earthquake off the coast of Japan caused widespread damage and triggered a devastating tsunami on the north-east coast of the country.

The earthquake caused significant damage to several of Japan's nuclear facilities and after numerous explosions at these plants, two reactors have dangerously overheated and have been leaking radiation into the atmosphere.

Impact on share markets

The Japanese share market is down 14% and this is mainly due to the loss of production caused by factory closures which is expected to result in lower company earnings.

The Australian share market is down almost 6% and may fall further in the short term.

The fall in international shares has been offset a little by the recent 3.5% fall in the Australian dollar this month due to investors selling off riskier assets like the Australian dollar.

Bond yields have fallen since the earthquake so their returns for the month are positive in both Australia and overseas.

Impact on our investment options

The fall in share markets will have some impact on our investment options, but returns for the financial year to date remain positive.

For example, the performance of our High Growth option is down around 3% for March* but the year-to-date return remains strong at 7.2%.

In contrast, the March* return on our Conservative option is slightly negative but is still 4.7% for the financial year to date.

March* and year-to-date returns on our Cash option remain positive.

* March figure is up to 17 March 2011

Containing the nuclear radiation problem

There is a lot of uncertainty about the scale of the radiation leaks and how long it will take to contain and fix the problems at the Japanese nuclear facilities.

There have been reports of very high radiation levels and if the situation escalates it may present long-term growth challenges for the Japanese economy.

Our investment portfolios are not overly exposed to the Japanese economy, or their share market in general, so the direct impact should be minimal.

If the radiation situation is contained, the focus will swing back to rebuilding the country and this is likely to boost the Japanese economy over the medium term.

We will of course continue to monitor the situation and take appropriate actions if the outlook continues to deteriorate.

This commentary has been prepared by LGSS Pty Limited (ABN 68 078 003 497) (AFSL 383558), as Trustee for Local Government Superannuation Scheme - Pool A (ABN 74 925 979 278) and Pool B (ABN 28 901 371 321) - collectively known as Local Government Super.

The information contained in this commentary is of a general nature only and is not intended to be a substitute for advice. It does not take into account any individual's or organisation's investment objectives, financial situation or particular needs.

If you require advice that is based on your own personal situation, we recommend you contact an authorised financial advisor. For more information about Local Government Super, contact Member Services on 1300 369 901 or go to www.lgsuper.com.au to obtain a copy of the relevant Product Disclosure Statement pertaining to your membership.

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News

We want you to really enjoy your retirement.

The superannuation guarantee has helped a lot of Australians save for their retirement but the fact is that many people still retire with not enough super and have to rely on the Age Pension to meet their living costs.

Our aim is to help you maximise your super investment so when you finally finish working you can start enjoying your retirement.

The Government's proposal to increase the super guarantee from 9% to 12% will help many Australians achieve a much better standard of living in retirement, in fact, the average wage earner could increase their retirement savings by more than $100,000 over 30 years*.

But the proposal to increase the super guarantee is yet to be passed by parliament.

So if you want to get behind the proposal just click on the link below to join the Australian Institute of Superannuation Trustees (AIST) petition and make sure we all get the opportunity to be better off in retirement.

Let's support the proposal to increase the super guarantee to 12%.

*Based on Australian Government estimates of a 30 year old earning average full-time wages. for source: visit www.futuretax.gov.au

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December 2011

Legislation Update

There have been some recent changes announced to super

The Federal Government has recently announced some changes which may have an impact on your super investment. Here is a brief summary of the changes and how they may affect your super.

Changes to the new low income superannuation contribution

This proposal was first announced earlier in the year. From 1 July 2012, it allows people earning up to $37,000 to effectively pay no tax on their compulsory super guarantee (SG) contributions, as the Government will refund the 15% contributions tax to those who are eligible.

What does this mean for you?

If you have a taxable income of $37,000 or less, you will pay no tax on your super guarantee contributions as the Government will refund the 15% tax which you normally pay.

Reduction in the Government’s Co-contribution

When the new low income superannuation contribution tax rebate begins from 1 July 2012, the super co-contribution will be reduced.

The maximum amount claimable for the super co-contribution will be halved from the current $1,000 to $500. Only people with an income of up to $31,920 will be eligible to receive the maximum amount.

The matching rate (that is the amount that the government puts in for each $1.00 you put in) will also be reduced. The government currently matches contributions dollar for dollar, but this will be halved to 50 cents for each $1.00 of after-tax contributions. It then progressively reduces for incomes over $31,920 up to a maximum of $46,920 (currently $61,920), after which it phases out completely.

What does this mean for you?

You will still be eligible for the co-contribution if you earn less than $61,920 and make an after-tax super contribution this financial year.

However from 1 July 2012, with the reduced matching rate and the lowering of the upper income threshold, fewer employees will be eligible for the co-contribution, and there will be less incentive for low and middle income earners to make after-tax super contributions.

But if you earn less than $37,000, this reduction will be at least partially offset by the introduction of the new low income superannuation contribution tax rebate.

Changes to the concessional contribution caps

The concessional or before-tax contribution caps are currently $25,000 per annum for people under the age of 50 and $50,000 per annum for people aged 50 years and over. However, the Government is considering reducing this cap to $25,000 for people over age 50 and with $500,000 or more in super.

The Government has announced a pause in the indexation of these caps, which means they will not be indexed to inflation for the 2013/14 financial year. So these caps will effectively remain the same for a much longer period.

What does this mean for you?

The Government has not adjusted the concessional contribution caps since it halved them in 2009. However, you may have received annual salary increases during this time, meaning your SG contributions may also have increased.

If you sacrifice some of your salary into your super, you need to make sure that you are not running the risk of exceeding your contribution cap.

Removal of age limit on super guarantee contributions

Currently employees over the age of 70 are not entitled to super guarantee contributions from their employer, but the government has announced that from 1 July 2013, all eligible employees 70 years of age and over will receive these contributions.

What does this mean for you?

If you are a mature-age employee, this change will provide you with more incentive to stay in the workforce and allows you to keep contributing to your super up until you decide to retire.

Extension of the drawdown relief on account-based pensions

In recent years, the Government reduced the minimum pension payment requirements to help self-funded retirees who suffered a drop in the value of their investment due to the global financial crisis.

Due to the continuing volatility in global financial markets, the Government has now announced that it will extend the 25% reduction in minimum payments for the 2012/2013 financial year.

What does this mean for you?

If you have an account-based pension, this means you take advantage of the reduction for another year to conserve the capital in your pension account and make your retirement savings last longer.

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August 2011

Market Update

Recent movements on Australian and global markets

Over the past three months share markets have pulled back from the gains made in the aftermath of the global financial crisis (GFC) mainly due to mounting concerns over the debt problems in Europe and the United States.

At the start of August, rumours about the worsening debt crisis in Europe sent the markets into a tailspin, losing around 10% in just one week, and then they bounced back just as abruptly.

This sort of volatility is unusual and caused concern among investors, and we’ve received a lot of calls from our members.

So we thought we would provide you with some commentary on these events.

What caused markets to fall during the GFC?

The GFC was in fact a credit crisis. During the 1990s and the first half of the last decade, we saw a massive explosion of debt by both business and consumers.

The easy availability of this debt meant that many financial institutions relaxed their credit standards (i.e. the assessment of the borrower’s capacity to repay) and many people who were not strictly creditworthy were able to obtain credit, particularly large mortgages.

In a world where asset values are rising you can cover your increasing repayments by refinancing and taking on more debt. But when asset values start to fall, the lender may not be keen to lend you more money.

A simple example

So, picture this. You owe $600,000 and as security you have put up your house which is valued at $800,000.

Even if the value of the house falls by 50%, as long as you are meeting your repayments, there is no problem from your perspective. However, if you can’t meet your repayments, your lender will want to reclaim your house and will sell it to cover their loss, even if selling the house further erodes its value.

And that is precisely what happened

Asset prices dropped in 2008/09, particularly in the US, and a number of borrowers in order to make repayments were forced to sell. This in turn forced prices down further so that the lenders themselves were also hurt by only being able to recover a fraction of their loan.

Clearly the main lenders are banks and in order to protect the financial system from collapsing under the weight of these ‘distressed loans’, governments worldwide did two things. They:

1. Bought a lot of the bad debts themselves by buying a stake in these banks, and
2. Injected massive amounts of money into their economies as the banking problems had dried up credit and therefore economic growth.

So why are we going through this again?

There are a couple of reasons.

Firstly, the effect of the governments’ fiscal stimuli has largely worn off and many commentators have argued that these cash injections into the economy would not have a prolonged effect in the first place.

To some extent this is understandable; the world was in a financial crisis and governments wanted to get people spending again. Of course infrastructure projects would have had a more sustainable long-term impact, but these take years, sometimes even decades, before you can see an economic benefit.

But even more importantly, while governments are seen to be more secure borrowers than an individual or a company, they are still required to make repayments. The reality is that for many countries the size of their debt is so large that they have no hope of making repayments without either increasing their revenue (i.e. taxes) or reducing their spending.

Where does that leave us?

It seems clear now that to avert a collapse of the financial system, governments around the world resorted to what we refer to as the ‘sugar hit’.

While it temporarily got us through the mess, it didn’t address the underlying problem. The fact is that most western countries are living beyond their means and they have to start making some decisions to address this problem which will be painful in the short to medium term.

Given that governments are usually voted in every three to four years, it is hardly surprising that this is a spoonful of medicine that most would rather leave for the next government to administer.

Like many others, we hope that this current crisis will see some consensus on how to reduce debt levels across the world. If this happens we are confident that markets will settle down once again.

What this means for your super

The diversified nature of LGS’s investment portfolio means we are in a good position to ride out the bumpy share market and deliver strong, consistent investment returns over the long-term. In fact, our High Growth, Balanced Growth and Balanced investment options have recommended investment time frames of five to nine years.

In times of market volatility, your superannuation balance is affected, and it’s natural to feel anxious. However, it’s important not to lose sight of your long term goals and moving between investments on a regular basis may do more harm than good. If you do think that your investment is no longer best meeting your needs, you should obtain professional advice to review your investment choice.

If you are particularly concerned about the recent volatility, consider speaking with a financial adviser. And remember, as a member of LGS, you have access to financial planning advice at no extra cost.

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November 2011

Colour of Money competition winners

Congratulations to the two lucky winners of Local Government Super's Colour of Money reactivation competition.

Mr Toby Browne and Mr David Atkins have each won a $5,000 contribution toward their Local Government Super account for reactivating their accounts during the promotional period by recommencing contributions or transferring in funds from another account.

Congratulations again!

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News

Why we believe a clear climate change policy is necessary for investment certainty

We consider climate change to be a significant risk to our investment portfolio and the long-term returns for our members.

We believe the scientific case for climate change is very clear but unfortunately the appropriate regulatory and policy response is not so straightforward and this has been reflected in the nature of the carbon tax debate in Australia.

Introducing a price on carbon emissions is a major reform and the policy was always going to involve a degree of compromise and attract a certain level of criticism.

Nevertheless, we welcome the introduction of a climate change policy which aims for long-term economic growth that is not linked to long-term carbon pollution growth, and achieves this aim in an efficient and cost-effective way.

There has been an urgent need for this policy as the investment community has been waiting for clarity on this issue for more than a decade. In fact, many important infrastructure projects, vital for the Australia's long-term economic prospects, have not proceeded due to this uncertainty.

So what's in the Federal Government's climate change plan?

The Federal Government's plan, Securing a Clean Energy Future, is a package which includes incentives, tax reform and compensation for business and households but the two aspects of the plan that will have a direct impact on investment markets are:

• Introduction of a carbon price on heavily polluting industries
• Promotion of investment and innovation in renewable energy

While attracting some criticism, overall we believe this is a comprehensive plan and it is a starting point for the essential transition to a low-carbon economy which will change the way many organisations do business.

The carbon price will be levied on around 500 of the biggest polluters, particularly companies in power-generation, mining and waste industries. The aim is to encourage these businesses to be more energy efficient and reduce their output of pollution so they pay less tax on their emissions.

Businesses which adapt to the new low-carbon economy will cut their costs and be more likely to improve their profit margins and their market share. It may also create opportunities for these businesses to develop new low-carbon products and services.

On the other hand, businesses that fail to reduce their emissions will face increasing costs and may become less competitive.

Most Australian households will receive compensation for any cost of living increases associated with the carbon tax, and most high carbon emission-intensive and trade-exposed industries will also receive financial relief from the full impact of the carbon tax.

The price on carbon emissions and super fund returns

Our view is that the government's policy package will have a neutral short-term effect on our investment portfolio returns as the sectors most exposed to the carbon tax will receive substantial compensation.

Most stockbroker reports currently show that the carbon tax will have about a 5% negative effect on profit for a handful of companies but for all other ASX-listed companies the carbon tax will have a negligible impact on their profits.

We also believe that overall the greater certainty around the price of carbon emissions will have a positive influence on investment markets.

Over the medium to longer term, the introduction of a carbon price and the Government's support for investment in clean energy technologies should have a positive impact on investment returns for super funds who invest in these clean energy projects.

How does LGS we compare against other super funds?

Our long-standing commitment to sustainability has put us in a good position to take advantage of the opportunities and effectively manage the risks of introducing a price on carbon emissions.

A recent survey conducted by the Climate Institute and the Australian Institute of Superannuation Trustees (AIST) found that while over a third of super funds recognise the impact of climate change, only 11% of them have a strategy to measure and manage the risks and opportunities of climate change.

The survey independently assesses the readiness of Australia's super funds and the results confirmed that Local Government Super is the number one super fund when it comes to managing these risks and opportunities.

In fact, we currently have over $3 billion invested in responsible investment strategies and the Government's climate change plan potentially offers a whole new range of investment opportunities.

Just click on sustainability if you would like to know more about how we manage the risks and opportunities of climate change.