SUPERANNUATION PROVISION ACCOUNT
Objectives
Treasury assists the Government to effectively manage the defined benefit employer superannuation liabilities of the Territory.  This includes the responsibility for the management of the investment funds set aside to meet the defined benefit employer superannuation liabilities of the Territory.
The Superannuation Provision Account (SPA) is a banking account established to recognise the investment assets and defined benefit employer superannuation liabilities of the Territory.
The SPA also recognises the unfunded superannuation liabilities for the superannuation benefits for the Members of the Legislative Assembly.
The SPA operates within the broader Treasury portfolio.
2008‑09 Priorities
Strategic and operational issues to be pursued in 2008‑09 include:
•	managing an investment portfolio of approximately $2.3 billion in assets;
•	implementing changes to the investment portfolio, as required, as a result of the strategic investment review completed in 2007‑08;
•	continuing with the implementation of the outcomes of the Review of the Application of Environmental, Social and Governance Issues to Territory Investment Practices; and
•	completing of the triennial actuarial review of the defined benefit employer superannuation liabilities of the Territory.
Estimated Employment Level
2007-08 Budget			2007‑08
Est. Outcome	2008‑09
Budget	
6		Staffing (FTE)	6	8	

Strategic Indicators
Strategic Indicator 1
Achievement of investment returns greater than benchmark
To maintain a selection of investment managers and a mix of financial investment assets to deliver returns in excess of established performance benchmarks.

Strategic Indicator 2
Achievement of an average long‑term investment return of five per cent ‘real’
To achieve an annualised ‘real’ rate of return of five per cent (net of inflation and fees) over the life of the investment portfolio.

Strategic Indicator 3
Superannuation liability funding percentage
The Government is committed to the effective management, and eventual extinguishment, of unfunded CSS/PSS defined benefit employer superannuation liabilities.  A target of 100% funding of defined benefit employer superannuation liabilities by 30 June 2030 has been established.  This is to be achieved by improving the coverage of superannuation liabilities with investment assets, over time, through the annual review and monitoring of the long-term funding plan.

Output Classes
	Total Cost	Expenses on Behalf of the Territory	
	2007‑08
Est. outcome
$’000	2008‑09
Budget
$’000	2007‑08
Est. outcome
$’000	2008‑09
Budget
$’000	
EBT Class 1: Superannuation Provision Account	523,235	356,923	1,637	7,736	
EBT 1: Superannuation Provision Account	523,235	356,923	1,637	7,736	
Description
This output involves the management of the Territory’s defined benefit employer superannuation liabilities and investment assets.
The key outputs to be delivered in 2008‑09 include:
•	managing the investment assets set aside to meet the CSS/PSS defined benefit employer superannuation liabilities of the Territory by monitoring the investment strategy;
•	delivering an average investment return of five per cent real (net of inflation and fees), within acceptable risk tolerances, over the projected life of the investment portfolio;
•	monitoring and reviewing the performance of the Territory’s investment managers and investment service providers to achieve an investment return greater than benchmark; 
•	undertaking the major triennial actuarial review of the Territory’s CSS/PSS defined benefit employer superannuation liabilities;
•	implementing the Government’s decisions in response to the report on the Review of the Application of Environmental, Social and Governance Issues to Territory Investment Practices;
•	determination of benefit entitlements for Members of the Legislative Assembly Superannuation Scheme; and
•	preparation of annual Member Information Statements for the Members of the Legislative Assembly Superannuation Scheme.

Accountability Indicators
	2007‑08
Targets	2007‑08
Est. Outcome	2008‑09
Targets	
1.1 Superannuation Provision Account	
				
a.	Ratio of the investment earnings return divided by the established benchmark	> 1.0	>1.0	> 1.0	
The ratio of the actual annual portfolio investment earnings rate divided by the established benchmark is a measure of the relative performance of the Territory’s fund managers.	
b.	Annualised long-term return of 5% real	> 5%	> 5%	> 5%	
The annualised real return of the portfolio (net of inflation and fees) is a measure of the average annual compounded return achieved over time.  This measure is updated annually.	
c.	Liability funding percentage1	n/a	65%	63%	
The percentage of superannuation liabilities that are covered by the investment assets is a measure of the level of liability funding.	
				
Note:
1.	New measure.

Changes to Appropriation
Changes to Appropriation - Territorial						
 	2007-08	2008-09	2009-10	2010-11	2011-12	
Payment for Expenses on Behalf of Territory	Est. Out.	Budget	Estimate	Estimate	Estimate	
 	$'000	$'000	$'000	$'000	$'000	
						
2007-08 Budget	15,780	 - 	 - 	 - 	 - 	
						
FMA Section 16B Rollover from 2006-07						
Totalcare Superannuation Liability	1,500	 - 	 - 	 - 	 - 	
						
2008-09 Budget Technical Adjustments						
Rollover - Totalcare Superannuation Liability	(11,985)	7,736	4,249			
Reduced - Totalcare Superannuation Liability	(3,658)	 - 	 - 	 - 	 - 	
						
2008-09 Budget	1,637	7,736	4,249	 - 	 - 	

						
Changes to Appropriation - Territorial						
 	2007-08	2008-09	2009-10	2010-11	2011-12	
Capital Injections	Est. Out.	Budget	Estimate	Estimate	Estimate	
 	$'000	$'000	$'000	$'000	$'000	
						
2007-08 Budget	130,500	133,763	137,107	140,534	140,534	
						
2008-09 Budget Technical Adjustments						
Revised Indexation Parameters	 - 	 - 	 - 	 - 	3,513	
						
2008-09 Budget	130,500	133,763	137,107	140,534	144,047	

Superannuation Provision Account	
Statement of Income and Expenses on Behalf of the Territory	
  2007-08			  2007-08	   2008-09		  2009-10	  2010-11	  2011-12		
    Budget			Est.Outcome	   Budget	   Var	  Estimate	   Estimate	  Estimate		
    $'000			   $'000	   $'000	    %	   $'000	    $'000	   $'000		
		Income								
		Revenue								
15,780		Payment for Expenses on behalf of Territory	1,637	7,736	373	4,249	0	0		
25,437		Interest	30,150	26,787	-11	19,023	20,861	22,674		
143,013		Other Revenue	83,088	148,180	78	169,293	180,599	195,760		
184,230		Total Revenue	114,875	182,703	59	192,565	201,460	218,434		
		Gains								
0		Total Gains	0	0	-	0	0	0		
184,230		Total Income	114,875	182,703	59	192,565	201,460	218,434		
		Expenses								
447		Employee Expenses	657	683	4	710	738	768		
343,215		Superannuation Expenses	337,661	344,856	2	356,615	368,389	405,428		
4,516		Supplies and Services	5,624	6,184	10	6,339	6,497	6,659		
9,900		Other Expenses	179,293	5,200	-97	5,500	5,800	6,100		
358,078		Total Ordinary Expenses	523,235	356,923	-32	369,164	381,424	418,955		
-173,848		Operating Result	-408,360	-174,220	57	-176,599	-179,964	-200,521		

Superannuation Provision Account	
Statement of Assets and Liabilities on Behalf of the Territory	
    Budget			Est.Outcome	   Planned		   Planned	   Planned	   Planned		
as at 30/6/08			as at 30/6/08	as at 30/6/09	   Var	as at 30/6/10	as at 30/6/11	as at 30/6/12		
   $'000			   $'000	    $'000	    %	    $'000	    $'000	    $'000		
		Current Assets								
23,112		Cash and Cash Equivalents	500	500	-	500	500	500		
23,112		Total Current Assets	500	500	-	500	500	500		
		Non Current Assets								
2,288,044		Investments	2,117,836	2,344,129	11	2,578,243	2,819,668	3,047,779		
2,288,044		Total Non Current Assets	2,117,836	2,344,129	11	2,578,243	2,819,668	3,047,779		
2,311,156		TOTAL ASSETS	2,118,336	2,344,629	11	2,578,743	2,820,168	3,048,279		
		Current Liabilities								
71,628		Employee Benefits	70,959	78,703	11	87,473	120,779	133,428		
71,628		Total Current Liabilities	70,959	78,703	11	87,473	120,779	133,428		
		Non Current Liabilities								
3,402,708		Employee Benefits	3,177,012	3,643,525	15	3,908,361	4,155,910	4,427,846		
3,402,708		Total Non Current Liabilities	3,177,012	3,643,525	15	3,908,361	4,155,910	4,427,846		
3,474,336		TOTAL LIABILITIES	3,247,971	3,722,228	15	3,995,834	4,276,689	4,561,274		
-1,163,180		NET ASSETS	-1,129,635	-1,377,599	-22	-1,417,091	-1,456,521	-1,512,995		
		REPRESENTED BY FUNDS EMPLOYED								
-1,163,180		Accumulated Funds	-1,129,635	-1,377,599	-22	-1,417,091	-1,456,521	-1,512,995		
-1,163,180		TOTAL FUNDS EMPLOYED	-1,129,635	-1,377,599	-22	-1,417,091	-1,456,521	-1,512,995		

Superannuation Provision Account	
Budgeted Statement of Cashflows on Behalf of the Territory	
  2007-08			  2007-08	   2008-09		  2009-10	  2010-11	  2011-12		
    Budget			Est.Outcome	   Budget	   Var	  Estimate	   Estimate	  Estimate		
    $'000			   $'000	   $'000	    %	   $'000	    $'000	   $'000		
		CASH FLOWS FROM OPERATING ACTIVITIES								
		Receipts								
15,780		Cash from Government for EBT	1,637	7,736	373	4,249	0	0		
25,437		Interest Received	30,150	26,787	-11	19,023	20,861	22,674		
53,740		Other Revenue	79,710	57,996	-27	63,754	65,224	70,870		
94,957		Operating Receipts	111,497	92,519	-17	87,026	86,085	93,544		
		Payments								
64,546		Related to Employees	75,357	71,698	-5	79,470	88,272	121,611		
4,516		Related to Supplies and Services	5,624	6,184	10	6,339	6,497	6,659		
9,900		Other	6,537	12,936	98	9,749	5,800	6,100		
78,962		Operating Payments	87,518	90,818	4	95,558	100,569	134,370		
15,995		NET CASH INFLOW/(OUTFLOW) FROM OPERATING ACTIVITIES	23,979	1,701	-93	-8,532	-14,484	-40,826		
		CASH FLOWS FROM INVESTING ACTIVITIES								
		Payments								
378,657		Purchase of Investments	154,306	135,464	-12	128,575	126,050	103,221		
378,657		Investing Payments	154,306	135,464	-12	128,575	126,050	103,221		
-378,657		NET CASH INFLOW/(OUTFLOW) FROM INVESTING ACTIVITIES	-154,306	-135,464	12	-128,575	-126,050	-103,221		
		CASH FLOWS FROM FINANCING ACTIVITIES								
		Receipts								
130,500		Capital Injection from Government	130,500	133,763	3	137,107	140,534	144,047		
130,500		Financing Receipts	130,500	133,763	3	137,107	140,534	144,047		
130,500		NET CASH INFLOW/(OUTFLOW) FROM FINANCING ACTIVITIES	130,500	133,763	3	137,107	140,534	144,047		
-232,162		NET INCREASE/(DECREASE) IN CASH HELD	173	0	-100	0	0	0		
255,274		CASH AT BEGINNING OF REPORTING PERIOD	327	500	53	500	500	500		
23,112		CASH AT THE END OF THE REPORTING PERIOD	500	500	-	500	500	500		

Superannuation Provision Account	
Statement of Changes in Equity on Behalf of the Territory	
    Budget			Est.Outcome	   Planned		   Planned	   Planned	   Planned		
as at 30/6/08			as at 30/6/08	as at 30/6/09	   Var	as at 30/6/10	as at 30/6/11	as at 30/6/12		
   $'000			   $'000	    $'000	    %	    $'000	    $'000	    $'000		
-1,119,832		Opening Balance	-851,776	-1,129,635	-33	-1,377,599	-1,417,091	-1,456,521		
		Accumulated Funds								
										
0		Superannuation Actuarial Movement	0	-207,507	#	0	0	0		
-173,848		Operating Result for the Period	-408,360	-174,220	57	-176,599	-179,964	-200,521		
		Reserves								
-173,848		Total Income And Expense For The Period	-408,359	-381,727	7	-176,599	-179,964	-200,521		
		Transactions Involving Equity Holders Affecting Accumulated Funds								
130,500		Capital Injections	130,500	133,763	3	137,107	140,534	144,047		
-1,163,180		Closing Balance	-1,129,635	-1,377,599	-22	-1,417,091	-1,456,521	-1,512,995		

Notes to the Budget Statements
Significant variations are as follows:
Statement of Income and Expenses on Behalf of the Territory
•	payment for expenses on behalf of Territory:  
–	the decrease of $14.143 million in the 2007‑08 estimated outcome from the original budget is due to the majority of payments associated with the entitlements of former Totalcare employees being projected to be paid in future years; and
–	the increase of $6.099 million in the 2008‑09 Budget from the 2007‑08 estimated outcome reflects the estimated amount of payments of entitlements to former Totalcare employees in the 2008‑09 financial year.
•	interest:
–	the increase of $4.713 million in the 2007‑08 estimated outcome from the original budget is due to maintaining a higher exposure to cash investments, combined with the increases in the official cash rate during the year; and
–	the decrease of $3.363 million in the 2008‑09 Budget from the 2007‑08 estimated outcome is due to the projected reallocation of cash assets to other investment asset classes.
•	other revenue:  
–	the decrease of $59.925 million in the 2007‑08 estimated outcome from the original budget is mainly due to a decrease in capital gain earnings as a result of the reduced domestic and international equity market returns; and
–	the increase of $65.092 million in the 2008‑09 Budget from the 2007‑08 estimated outcome reflects the investment earnings assumption that the long term average portfolio return estimate will be 7.5 per cent (5 per cent plus CPI, net of fees) compared with the estimated lower actual return in 2007‑08.
•	employee expenses:
–	the increase of $0.210 million in the 2007‑08 estimated outcome from the original budget mainly reflects increased staffing requirements in relation to the Totalcare superannuation liability investigation.
•	superannuation expenses:  
–	the decrease of $5.554 million in the 2007‑08 estimated outcome from the original budget has been determined from the latest actuarial review of superannuation liabilities and reflects the impact of the discount rate of 6.35 per cent as at 30 June 2007, partially offset by emerging cost payments to the Commonwealth Government; and
–	the increase of $7.195 million in the 2008‑09 Budget from the 2007‑08 estimated outcome is due to the estimated growth in superannuation liabilities and an increased emerging cost payment to the Commonwealth Government. 
•	supplies and services:
–	the increase of $1.108 million in the 2007‑08 estimated outcome from the original budget is due mainly to a significant increase in the cost of administration by the Commonwealth Government in relation to the defined benefit superannuation schemes; and
–	the increase of $0.560 million in the 2008‑09 Budget from the 2007‑08 estimated outcome is due to indexation and an estimated increase in the administration costs associated with the Totalcare superannuation liability investigation.
•	other expenses:  
–	the increase of $169.393 million in the 2007‑08 estimated outcome from the original budget is mainly due to a decrease in capital gain earnings as a result of the reduced domestic and international equity market returns; and
–	the decrease of $174.093 million in the 2008‑09 Budget from the 2007‑08 estimated outcome reflects the investment earnings assumption that the long term average portfolio return estimate will be 7.5 per cent (5 per cent plus CPI, net of fees) compared with the estimated lower actual return in 2007‑08.
Statement of Assets and Liabilities on Behalf of the Territory
•	cash and cash equivalents:  the decrease of $22.612 million in the 2007‑08 estimated outcome from the original budget is due to the reclassification of a portion of investment assets from cash and cash equivalents to investments.
•	non current investments:  
–	the decrease of $170.208 million in the 2007‑08 estimated outcome from the original budget is due to a decrease in capital gain earnings as a result of the reduced domestic and international equity market returns; and
–	the increase of $226.293 million in the 2008‑09 Budget from the 2007‑08 estimated outcome is due to the reinvestment of projected investment earnings and the net cash inflows to the portfolio.
•	current employee benefits:  the increase of $7.744 million in the 2008‑09 Budget from the 2007‑08 estimated outcome is due to the estimated growth in annual employee benefits.
•	non current employee benefits:  
–	the decrease of $225.696 million in the 2007‑08 estimated outcome from the original budget is due to the update to the estimated superannuation liabilities utilising the discount rate as at 30 June 2007; and 
–	the increase of $466.513 million in the 2008‑09 Budget from the 2007‑08 estimated outcome is due to the result of the latest actuarial review conducted by the Government’s consulting actuary that incorporates a discount rate assumption for the budget of 6 per cent, which for 2008‑09 is lower than the actual discount rate that applied at 30 June 2007.
Statement of Changes in Equity
Variances in the statement are explained in the notes above.