SUPERANNUATION UNIT 
Objectives
The objective of the Superannuation Unit is to assist the Government to effectively manage the superannuation liabilities of the Territory.  This objective is supported by a stated funding plan and an investment earnings target.
The Superannuation Unit is responsible for the management of the funds set aside to meet the liabilities of the Territory and its agencies relating to employer superannuation.
The Superannuation Provision Account (SPA) was established in 1991 to assist the Government in managing its superannuation liabilities.  The SPA is not a superannuation scheme, but a Government account that receives appropriations and makes payments in connection with the Government’s superannuation liabilities.
The SPA receives appropriations and contributions from the ACT Budget and ‘off‑budget’ government agencies and complies with the Territory Superannuation Provision Protection Act 2000.
The funds held in the SPA are invested through external fund managers according to an asset allocation strategy that takes into account the long-term nature of the liabilities and projected cash flow requirements.
The Superannuation Unit utilises the services of a Finance and Investment Advisory Board established to provide advice in respect of the assets and liabilities of the Territory Superannuation Account.
2005‑06 Highlights
Strategic and operational issues to be pursued in 2005‑06 include:
•	implementing arrangements pursuant to the closure of the Public Sector Superannuation (PSS) defined benefits scheme and the commencement of the PSS accumulation scheme; 
•	reviewing the long-term funding strategy for the SPA in the light of the closure of the Commonwealth Superannuation Scheme and PSS defined benefit schemes;
•	undertaking a strategic asset allocation review and implementing any changes to the investment portfolio structure as required;
•	undertaking policy research and development for the implementation of continuous value‑add investment strategies for the Territory; and
•	supporting the Government in the consideration of appropriate superannuation arrangements for Members of the Legislative Assembly (MLAs).

Output Classes
	Total Cost	Expenses on Behalf of the Territory	
	2004-05
Est. outcome
$’000	2005-06
Budget
$’000	2004-05
Est. outcome
$’000	2005-06
Budget
$’000	
EBT Class 1
Superannuation Unit	266  777	293  581	1  351	0	
EBT 1 Superannuation Unit	266  777	293  581	1  351	0	
Description
Management of Territory Employer Superannuation Liabilities.
The Superannuation Unit will undertake:
•	a review of the long-term funding strategy, reflecting the closure of the PSS defined benefit scheme to new employees from 1 July 2005;
•	superannuation liability funding by developing and implementing an investment strategy consistent with the outcome of the review of the long-term funding strategy; and
•	investment management by developing and implementing a strategic asset allocation sufficient to deliver an average long-term investment return of 5% real within acceptable risk tolerances.

Strategic Indicators
Review of long term funding plan
The Government has a target to achieve a 90% funding level for its superannuation liabilities by June 2040.  This long term funding plan will be reviewed in 2005‑06 to take account of changes in projected superannuation liabilities following the closure of the defined benefit PSS scheme from 1 July 2005.  The review will follow provision of the actuary’s report in January 2006, which will update liability estimates based on the data as at 30 June 2005.  For further information see Budget Paper No. 3, Part 7.
Achieve average long‑term investment return of 5% ‘real’
Managing superannuation investments in respect of allocation to investment classes and monitoring of investment manager performance to achieve an average rate of return of 5% ‘real’ (5%+CPI) over the long‑term.

Accountability Indicators

	2004‑05
Targets	2004-05
Est. Outcome	2005-06 Targets	
1.1 Superannuation Unit	
a.	Liability funding percentage	60%	58%	60%	
b.	Ratio of the investment earnings return divided by the established benchmark	> 1	> 1	> 1	
Liability funding percentage outlines, the percentage of superannuation liabilities that are funded by investment assets.  The objective of the Government is to improve this funding percentage over time.
Ratio of average investment earnings rate divided by the established benchmark is, a measure of whether investments have outperformed established benchmarks.

Budgeted Financial Results
Section 31 of the Financial Management Act 1996 (FMA) advises that Chief Executives are responsible for achievement of financial results.  For the purpose of Section 31 of the FMA, key budgeted results are specified in the Budget Papers to improve accountability.  An outcome of the increased accountability will be the requirement for Chief Executives to explain material variances from specified budgeted results.
In accordance with Section 31 of the FMA, following are the key budgeted results for the Superannuation Unit in 2005‑06:
•	developing and implementing an investment strategy that will result in the total assets of the SPA being equal to 60% of the total liabilities of the SPA by 30 June 2006, with the long term funding plan to be reviewed during 2005-06; and
•	an operating result of better than or equal to $172.432m deficit.

Changes to Appropriation
Changes to Appropriation - Territorial	 	 	 	 	 	
	2004-05	2005-06	2006-07	2007-08	2008-09	
Payment for Expenses on Behalf of Territory	Est. Outc.	Budget	Estimate	Estimate	Estimate	
 	$'000	$'000	$'000	$'000	$'000	
						
2004-05 Budget	  1  832	    0	    0	    0	    0	
						
2005-06 Budget Technical Adjustments						
MLA Superannuation Benefit Payments	-481	    0	    0	    0	    0	
						
2005-06 Budget	  1  351	    0	    0	    0	    0	

Changes to Appropriation - Territorial	 	 	 	 	 	
	2004-05	2005-06	2006-07	2007-08	2008-09	
Capital Injections	Est. Outc.	Budget	Estimate	Estimate	Estimate	
 	$'000	$'000	$'000	$'000	$'000	
						
2004-05 Budget	  122  182	  125  236	  128  367	  131  576	  131  576	
						
2005-06 Budget Technical Adjustments						
Superannuation Liability Review	    0	    0	    0	    0	  3  290	
						
2005-06 Budget	  122  182	  125  236	  128  367	  131  576	  134  866	

Superannuation Unit	
Statement of Income and Expenses on Behalf of the Territory	
  2004-05			  2004-05	   2005-06		  2006-07	  2007-08	  2008-09		
    Budget			Est.Outcome	   Budget	   Var	  Estimate	   Estimate	  Estimate		
    $'000			   $'000	   $'000	    %	   $'000	    $'000	   $'000		
		Income								
		Revenue								
1  832		Payment for Expenses on behalf of Territory	1  351	0	-100	0	0	0		
350		Interest	500	500	-	500	500	500		
93  687		Other Revenue	153  777	120  649	-22	145  867	161  314	177  614		
95  869		Total Revenue	155  628	121  149	-22	146  367	161  814	178  114		
		Gains								
0		Total Gains	0	0	-	0	0	0		
95  869		Total Income	155  628	121  149	-22	146  367	161  814	178  114		
		Expenses								
225		Employee Expenses	329	382	16	248	254	260		
246  568		Superannuation Expenses	260  036	286  569	10	286  737	291  991	300  655		
3  309		Supplies and Services	3  412	3  630	6	3  546	3  675	3  675		
3  000		Other Expenses	3  000	3  000	-	3  000	3  000	3  000		
253  102		Total Ordinary Expenses	266  777	293  581	10	293  531	298  920	307  590		
-157  233		Operating Result	-111  149	-172  432	-55	-147  164	-137  106	-129  476		

Superannuation Unit	
Statement of Assets and Liabilities on Behalf of the Territory	
    Budget			Est.Outcome	   Planned		   Planned	   Planned	   Planned		
as at 30/6/05			as at 30/6/05	as at 30/6/06	   Var	as at 30/6/07	as at 30/6/08	as at 30/6/09		
   $'000			   $'000	    $'000	    %	    $'000	    $'000	    $'000		
		Current Assets								
1  000		Cash	1  513	1  533	1	1  537	1  542	1  548		
463		Receivables	154	154	-	154	154	154		
1  463		Total Current Assets	1  667	1  687	1	1  691	1  696	1  702		
		Non Current Assets								
1  359  606		Investments	1  447  094	1  626  868	12	1  829  509	2  042  190	2  266  537		
1  359  606		Total Non Current Assets	1  447  094	1  626  868	12	1  829  509	2  042  190	2  266  537		
1  361  069		TOTAL ASSETS	1  448  761	1  628  555	12	1  831  200	2  043  886	2  268  239		
		Current Liabilities								
60		Payables	17  391	17  384	..	17  375	17  361	17  339		
45  974		Employee Benefits	59  536	66  005	11	73  746	81  654	90  548		
46  034		Total Current Liabilities	76  927	83  389	8	91  121	99  015	107  887		
		Non Current Liabilities								
2  121  036		Employee Benefits	2  424  486	2  645  014	9	2  858  724	3  069  046	3  279  137		
2  121  036		Total Non Current Liabilities	2  424  486	2  645  014	9	2  858  724	3  069  046	3  279  137		
2  167  070		TOTAL LIABILITIES	2  501  413	2  728  403	9	2  949  845	3  168  061	3  387  024		
-806  001		NET ASSETS	-1  052  652	-1  099  848	-4	-1  118  645	-1  124  175	-1  118  785		
		REPRESENTED BY FUNDS EMPLOYED								
-806  001		Accumulated Funds	-1  052  652	-1  099  848	-4	-1  118  645	-1  124  175	-1  118  785		
-806  001		TOTAL FUNDS EMPLOYED	-1  052  652	-1  099  848	-4	-1  118  645	-1  124  175	-1  118  785		

Superannuation Unit	
Budgeted Statement of Cashflows on Behalf of the Territory	
  2004-05			  2004-05	   2005-06		  2006-07	  2007-08	  2008-09		
    Budget			Est.Outcome	   Budget	   Var	  Estimate	   Estimate	  Estimate		
    $'000			   $'000	   $'000	    %	   $'000	    $'000	   $'000		
		CASH FLOWS FROM OPERATING ACTIVITIES								
		Receipts								
1  832		Cash from Government for EBT	1  351	0	-100	0	0	0		
15  583		Other Revenue	15  331	15  882	4	16  049	16  205	16  385		
17  415		Operating Receipts	16  682	15  882	-5	16  049	16  205	16  385		
		Payments								
45  467		Related to Employees	61  386	59  954	-2	66  250	74  017	81  932		
3  309		Related to Supplies and Services	3  412	3  630	6	3  546	3  675	3  675		
48  776		Operating Payments	64  798	63  584	-2	69  796	77  692	85  607		
-31  361		NET CASH INFLOW/(OUTFLOW) FROM OPERATING ACTIVITIES	-48  116	-47  702	1	-53  747	-61  487	-69  222		
		CASH FLOWS FROM INVESTING ACTIVITIES								
		Payments								
90  821		Purchase of Investments	73  623	77  514	5	74  616	70  084	65  638		
90  821		Investing Payments	73  623	77  514	5	74  616	70  084	65  638		
-90  821		NET CASH INFLOW/(OUTFLOW) FROM INVESTING ACTIVITIES	-73  623	-77  514	-5	-74  616	-70  084	-65  638		
		CASH FLOWS FROM FINANCING ACTIVITIES								
		Receipts								
122  182		Capital Injection from Government	122  182	125  236	2	128  367	131  576	134  866		
122  182		Financing Receipts	122  182	125  236	2	128  367	131  576	134  866		
122  182		NET CASH INFLOW/(OUTFLOW) FROM FINANCING ACTIVITIES	122  182	125  236	2	128  367	131  576	134  866		
0		NET INCREASE/(DECREASE) IN CASH HELD	443	20	-95	4	5	6		
1  000		CASH AT BEGINNING OF REPORTING PERIOD	1  070	1  513	41	1  533	1  537	1  542		
1  000		CASH AT THE END OF THE REPORTING PERIOD	1  513	1  533	1	1  537	1  542	1  548		

Superannuation Unit	
Statement of Changes in Equity on Behalf of the Territory	
    Budget			Est.Outcome	   Planned		   Planned	   Planned	   Planned		
as at 30/6/05			as at 30/6/05	as at 30/6/06	   Var	as at 30/6/07	as at 30/6/08	as at 30/6/09		
   $'000			   $'000	    $'000	    %	    $'000	    $'000	    $'000		
-770  950		Opening Balance	-849  585	-1  052  652	-24	-1  099  848	-1  118  645	-1  124  175		
		Accumulated Funds								
0		Net Effect of Change in Accounting Policy	-214  100	0	100	0	0	0		
-157  233		Operating Result for the Period	-111  149	-172  432	-55	-147  164	-137  106	-129  476		
		Reserves								
-157  233		Total Income And Expense For The Period	-325  249	-172  432	47	-147  164	-137  106	-129  476		
		Transactions Involving Equity Holders Affecting Accumulated Funds								
122  182		Capital Injections	122  182	125  236	2	128  367	131  576	134  866		
-806  001		Closing Balance	-1  052  652	-1  099  848	-4	-1  118  645	-1  124  175	-1  118  785		
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 $0.481m in the 2004-05 estimated outcome from the original budget is due to the cost of MLA superannuation benefit payments being less than expected following the ACT elections; and
-	the decrease of $1.351m in the 2005‑06 Budget from the 2004‑05 estimated outcome is due to the Superannuation Unit expecting no MLA superannuation benefit payments during the 2005‑06 financial year.
•	other revenue:  
-	the increase of $60.090m in the 2004‑05 estimated outcome from the original budget is due to an increase in the investment earnings estimate for the financial year following the strong returns achieved on Australian equity investments; and
-	the decrease of $33.128m in the 2005‑06 Budget from the 2004‑05 estimated outcome is due to budgeting for investment earnings at the long term average portfolio return estimate.
•	superannuation expenses:  
-	the increase of $13.468m in the 2004‑05 estimated outcome from original budget is the result of the latest triennial actuarial review conducted by the Government’s consulting actuary recommending an increase of $15.8m in the emerging cost payment to the Commonwealth, offset by the reduction of $2.347m in superannuation amortisation expense; and
-	the increase of $26.533m in the 2005-06 Budget from the 2004-05 estimated outcome is due to the estimated growth in superannuation liabilities and the increased emerging cost payment to the Commonwealth. 
Statement of Assets and Liabilities on Behalf of the Territory
•	non-current investments:  
-	the increase of $87.488m in the 2004‑05 estimated outcome from original budget is  due to a higher asset base following the 2003-04 audited outcome and the increase to the current year’s investment earnings estimate, offset by the increased emerging cost payment made during 2004-05; and
-	the increase of $179.774m in the 2005‑06 Budget from the 2004‑05 estimated outcome is due to the reinvestment of projected investment earnings, and the net cash inflows to the portfolio.
•	current liabilities:  the increase in $30.893m in the 2004-05 estimated outcome from the original budget is mainly due to an increase in the emerging cost payment ($11.220m), the cessation of amortisation of actuarial gains/losses ($2.347m) and the outcome of the 2003-04 audited outcome which resulted in the recognition of $17.280m in liabilities associated with Totalcare’s employee superannuation entitlements.
•	non current employee benefits:  
-	the increase of $303.450m in the 2004‑05 estimated outcome from the original budget is due to the increased recognition of superannuation liabilities following the latest actuarial review and the increase in superannuation liabilities following the cessation of amortisation of actuarial gains/losses in the 2003-04 audited outcome; 
-	the increase of $220.528m in the 2005‑06 Budget from the 2004‑05 estimated outcome is due to the projected increase in the superannuation liabilities of the Territory; and
•	accumulated funds:  the decrease in the 2004-05 estimated outcome from the original budget is mainly due to the early adoption of international accounting standards in relation to superannuation liabilities ($214m) and the net effect of the 2003-04 audited outcome. 
Statement of Cash Flows on Behalf of the Territory
•	payments related to employees:
-	the increase of $15.919m in the 2004-05 estimated outcome from the original budget is due mainly to the increased emerging cost payment to the Commonwealth of $15.8m.  This comprised an emerging cost payment increase of $10.483m and an emerging cost deficit of $5.317m; and
-	the decrease of $1.432m in the 2005-06 Budget from the 2004-05 estimated outcome is due to the projected increase in the emerging cost payment being offset by no emerging cost deficit estimate.
•	
purchase of investments:  
•	the decrease of $17.198m in the 2004‑05 estimated outcome from the original budget  is due mainly to the increased emerging cost payment to the Commonwealth directing funds away from being invested.