SUPERANNUATION UNIT 
Objectives
The objective of the Superannuation Unit is to assist the Government to effectively manage the defined benefit employer 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 investment funds set aside to meet the liabilities of the Territory relating to employee 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 for ACT Government employees, but a Government account that receives appropriations and makes payments in connection with the Government’s superannuation liabilities.
The SPA receives appropriations from the Budget and complies with the Territory Superannuation Provision Protection Act 2000.
The funds held in the SPA are invested with external institutional investment 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 an asset consultant, an actuary and the Finance and Investment Advisory Board to provide advice in respect of the superannuation assets and liabilities of the Territory.
2006‑07 Priorities
Strategic and operational issues to be pursued in 2006‑07 include:
•	managing an investment portfolio of approximately $1.8 billion in assets;
•	undertaking a strategic asset allocation review and implementing changes to the investment portfolio as required;
•	undertaking policy research and development for the implementation of continuous value‑adding investment strategies for the Territory; and
•	undertaking an annual actuarial review of the Territory’s defined benefit Commonwealth Superannuation Scheme / Public Superannuation Scheme (CSS/PSS) superannuation liabilities.

Output Classes
	Total Cost	Expenses on Behalf of the Territory	
	2005-06
Est. outcome
$’000	2006-07
Budget
$’000	2005-06
Est. outcome
$’000	2006-07
Budget
$’000	
EBT Class 1: Superannuation Unit	324,869	337,101	0	17,280	
EBT 1 Superannuation Unit	324,869	337,101	0	17,280	
Description
This output involves the management of the Territory’s net employer superannuation liabilities.
The key outputs to be delivered in 2006‑07 include:
•	assisting the Government to effectively manage the net superannuation liabilities of the Territory through the operations of the SPA;
•	managing the investment assets set aside to meet the superannuation liabilities of the Territory by developing, implementing and monitoring a strategic asset allocation, sufficient to deliver an average investment return of 5 per cent real (net of inflation and fees), within acceptable risk tolerances, over the projected life of the investment portfolio;
•	monitoring and managing the performance of the Territory’s investment managers and investment service providers; and
•	undertaking an annual actuarial review of the Territory’s defined benefit CSS/PSS superannuation liabilities.

Strategic Indicators
Strategic Indicator 1
Superannuation liability funding percentage
The Superannuation Unit aims to assist the Government with the efficient and effective management, and eventual extinguishment, of employee defined benefit superannuation liabilities.  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.

Strategic Indicator 2
Achievement of investment returns greater than benchmark
The Superannuation Unit aims to maintain a selection of investment managers and a mix of superannuation assets to deliver returns of greater than established performance benchmarks.

Strategic Indicator 3
Achievement of an average long‑term investment return of 5per cent ‘real’
The Superannuation unit aims to achieve an average rate of ‘real’ return of 5 per cent 
(5 per cent + CPI, net of fees) over the projected life of the investment portfolio.

Accountability Indicators
	2005‑06
Targets	2005-06
Est. Outcome	2006-07
Targets	
1.1 Superannuation Unit	
a.	Ratio of the investment earnings return divided by the established benchmark	> 1.0	> 1.0	> 1.0	
b.	Average long-term return of 5% real¹	n/a	> 6%	> 5%	
c.	Liability funding percentage²	60%	62%	n/a	
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.
The average real return of the portfolio (net of inflation and fees) achieved over time is updated annually.
				
Notes
1.	New measure.
2.	Discontinued measure.

Changes to Appropriation
Changes to Appropriation - Territorial						
 	2005-06	2006-07	2007-08	2008-09	2009-10	
Payment for Expenses on Behalf of Territory	Est. Outc.	Budget	Estimate	Estimate	Estimate	
 	$'000	$'000	$'000	$'000	$'000	
						
2005-06 Budget	 - 	 - 	 - 	 - 	 - 	
						
2006-07 Budget Policy Adjustments						
Totalcare Superannuation Liabilities	 - 	17,280	 - 	 - 	 - 	
						
2006-07 Budget	 - 	17,280	 - 	 - 	 - 	

						
						
Changes to Appropriation - Territorial						
 	2005-06	2006-07	2007-08	2008-09	2009-10	
Capital Injections	Est. Outc.	Budget	Estimate	Estimate	Estimate	
 	$'000	$'000	$'000	$'000	$'000	
						
2005-06 Budget	125,236	128,367	131,576	134,866	134,866	
						
2006-07 Budget Technical Adjustments						
Revised Indexation Parameters 	-	-	-	-	3,372	
Funding Plan 90% by 2040	-	(46,467)	(47,628)	(48,820)	(50,041)	
Funding Plan 100% by 2030	 - 	25,100	25,727	26,371	27,030	

2006-07 Budget	125,236	107,000	109,675	112,417	115,227	

Superannuation Unit	
Statement of Income and Expenses on Behalf of the Territory	
  2005-06			  2005-06	   2006-07		  2007-08	  2008-09	  2009-10		
    Budget			Est.Outcome	   Budget	   Var	  Estimate	   Estimate	  Estimate		
    $'000			   $'000	   $'000	    %	   $'000	    $'000	   $'000		
		Income								
		Revenue								
0		Payment for Expenses on behalf of Territory	0	17,280	#	0	0	0		
500		Interest	23,863	27,810	17	23,660	18,897	20,575		
120,649		Other Revenue	246,412	119,112	-52	137,386	158,641	164,638		
121,149		Total Revenue	270,275	164,202	-39	161,046	177,538	185,213		
		Gains								
0		Total Gains	0	0	-	0	0	0		
121,149		Total Income	270,275	164,202	-39	161,046	177,538	185,213		
		Expenses								
382		Employee Expenses	400	412	3	422	271	278		
286,569		Superannuation Expenses	316,150	322,944	2	324,934	336,172	345,821		
3,630		Supplies and Services	4,019	4,145	3	4,125	4,227	4,332		
3,000		Other Expenses	4,300	9,600	123	9,900	12,480	5,500		
293,581		Total Ordinary Expenses	324,869	337,101	4	339,381	353,150	355,931		
-172,432		Operating Result	-54,594	-172,899	-217	-178,335	-175,612	-170,718		

Superannuation Unit	
Statement of Assets and Liabilities on Behalf of the Territory	
    Budget			Est.Outcome	   Planned		   Planned	   Planned	   Planned		
as at 30/6/06			as at 30/6/06	as at 30/6/07	   Var	as at 30/6/08	as at 30/6/09	as at 30/6/10		
   $'000			   $'000	    $'000	    %	    $'000	    $'000	    $'000		
		Current Assets								
1,533		Cash	2,500	2,500	-	2,500	2,500	2,500		
154		Receivables	0	0	-	0	0	0		
1,687		Total Current Assets	2,500	2,500	-	2,500	2,500	2,500		
		Non Current Assets								
1,626,868		Investments	1,799,255	1,995,021	11	2,183,360	2,381,595	2,589,037		
1,626,868		Total Non Current Assets	1,799,255	1,995,021	11	2,183,360	2,381,595	2,589,037		
1,628,555		TOTAL ASSETS	1,801,755	1,997,521	11	2,185,860	2,384,095	2,591,537		
		Current Liabilities								
17,384		Payables	0	0	-	0	0	0		
66,005		Employee Benefits	61,271	67,893	11	74,663	82,746	91,883		
83,389		Total Current Liabilities	61,271	67,893	11	74,663	82,746	91,883		
		Non Current Liabilities								
2,645,014		Employee Benefits	2,846,316	3,101,359	9	3,351,588	3,604,935	3,858,731		
2,645,014		Total Non Current Liabilities	2,846,316	3,101,359	9	3,351,588	3,604,935	3,858,731		
2,728,403		TOTAL LIABILITIES	2,907,587	3,169,252	9	3,426,251	3,687,681	3,950,614		
-1,099,848		NET ASSETS	-1,105,832	-1,171,731	-6	-1,240,391	-1,303,586	-1,359,077		
		REPRESENTED BY FUNDS EMPLOYED								
-1,099,848		Accumulated Funds	-1,105,832	-1,171,731	-6	-1,240,391	-1,303,586	-1,359,077		
-1,099,848		TOTAL FUNDS EMPLOYED	-1,105,832	-1,171,731	-6	-1,240,391	-1,303,586	-1,359,077		

Superannuation Unit	
Budgeted Statement of Cashflows on Behalf of the Territory	
  2005-06			  2005-06	   2006-07		  2007-08	  2008-09	  2009-10		
    Budget			Est.Outcome	   Budget	   Var	  Estimate	   Estimate	  Estimate		
    $'000			   $'000	   $'000	    %	   $'000	    $'000	   $'000		
		CASH FLOWS FROM OPERATING ACTIVITIES								
		Receipts								
0		Cash from Government for EBT	0	17,280	#	0	0	0		
0		Interest Received	250	250	-	250	250	250		
15,882		Other Revenue	13,802	5,360	-61	5,360	7,640	360		
15,882		Operating Receipts	14,052	22,890	63	5,610	7,890	610		
		Payments								
59,954		Related to Employees	58,537	61,728	5	68,360	74,958	83,048		
3,630		Related to Supplies and Services	4,019	4,145	3	4,125	4,227	4,332		
0		Other	4,300	9,600	123	9,900	12,480	5,500		
63,584		Operating Payments	66,856	75,473	13	82,385	91,665	92,880		
-47,702		NET CASH INFLOW/(OUTFLOW) FROM OPERATING ACTIVITIES	-52,804	-52,583	..	-76,775	-83,775	-92,270		
		CASH FLOWS FROM INVESTING ACTIVITIES								
		Payments								
77,514		Purchase of Investments	72,459	54,417	-25	32,900	28,642	22,957		
77,514		Investing Payments	72,459	54,417	-25	32,900	28,642	22,957		
-77,514		NET CASH INFLOW/(OUTFLOW) FROM INVESTING ACTIVITIES	-72,459	-54,417	25	-32,900	-28,642	-22,957		
		CASH FLOWS FROM FINANCING ACTIVITIES								
		Receipts								
125,236		Capital Injection from Government	125,236	107,000	-15	109,675	112,417	115,227		
125,236		Financing Receipts	125,236	107,000	-15	109,675	112,417	115,227		
125,236		NET CASH INFLOW/(OUTFLOW) FROM FINANCING ACTIVITIES	125,236	107,000	-15	109,675	112,417	115,227		
20		NET INCREASE/(DECREASE) IN CASH HELD	-27	0	100	0	0	0		
1,513		CASH AT BEGINNING OF REPORTING PERIOD	2,527	2,500	-1	2,500	2,500	2,500		
1,533		CASH AT THE END OF THE REPORTING PERIOD	2,500	2,500	-	2,500	2,500	2,500		

Superannuation Unit	
Statement of Changes in Equity on Behalf of the Territory	
    Budget			Est.Outcome	   Planned		   Planned	   Planned	   Planned		
as at 30/6/06			as at 30/6/06	as at 30/6/07	   Var	as at 30/6/08	as at 30/6/09	as at 30/6/10		
   $'000			   $'000	    $'000	    %	    $'000	    $'000	    $'000		
-1,052,652		Opening Balance	-1,029,279	-1,105,832	-7	-1,171,731	-1,240,391	-1,303,586		
		Accumulated Funds								
0		Superannuation Prior Year Actuarial Movement	-147,195	0	100	0	0	0		
-172,432		Operating Result for the Period	-54,594	-172,899	-217	-178,335	-175,612	-170,718		
		Reserves								
-172,432		Total Income And Expense For The Period	-201,789	-172,899	14	-178,335	-175,612	-170,718		
		Transactions Involving Equity Holders Affecting Accumulated Funds								
125,236		Capital Injections	125,236	107,000	-15	109,675	112,417	115,227		
-1,099,848		Closing Balance	-1,105,832	-1,171,731	-6	-1,240,391	-1,303,586	-1,359,077		
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 increase of $17.280 million in the 2006‑07 Budget from the 2005‑06 estimated outcome is in relation to anticipated superannuation expenses for Totalcare;
•	interest:
–	the increase of $23.363 million in the 2005‑06 estimated outcome from the original budget is due to the reclassification of unit trust investment earnings from capital gains to interest, dividends and capital gains;
–	the increase of $3.947 million in the 2006‑07 Budget from the 2005‑06 estimated outcome is due to the increase in the cash rate and projected growth in funds under 	management;
•	other revenue:  
–	the increase of $125.763 million in the 2005‑06 estimated outcome from the original budget is mainly due to an increase in capital gain earnings as a result of strong domestic and international equity market returns;
–	the decrease of $127.3 million in the 2006‑07 Budget from the 2005‑06 estimated 	outcome is due to budgeting for investment earnings at the long term average 	portfolio return estimate and the receipt of payments from Totalcare relating to its past employee superannuation liability;
•	
superannuation expenses:  
–	the increase of $29.581 million in the 2005‑06 estimated outcome from the original budget is the result of the latest triennial actuarial review conducted by the Government’s consulting actuary; and
–	the increase of $6.794 million in the 2006‑07 Budget from the 2005‑06 estimated outcome is due to the estimated growth in superannuation liabilities and the increased emerging cost payment to the Australian Government. 
•	other expenses: 
–	the increase of $1.3 million in the 2005‑06 estimated outcome from the original budget is due to an increase in fund manager fees flowing from an increase in assets under management; and
–	the increase of $5.3 million in the 2006‑07 Budget from the 2005‑06 estimated outcome is due to superannuation expenses relating to Totalcare past employees.
Statement of Assets and Liabilities on Behalf of the Territory
•	non-current investments:  
–	the increase of $172.387 million in the 2005‑06 estimated outcome from the original budget is due to a higher asset base following the 2004‑05 audited outcome and the increase to the current year’s investment earnings estimate;
–	the increase of $195.766 million in the 2006‑07 Budget from the 2005‑06 estimated outcome is due to the reinvestment of projected investment earnings, and the net cash inflows to the portfolio;
•	current liabilities:  
–	the decrease of $22.118 million in the 2005‑06 estimated outcome from the original budget is mainly due to recognition of the Totalcare estimated superannuation liability as a non-current liability;
–	the increase of $6.622 million in the 2006‑07 Budget from the 2005‑06 estimated 	outcome is due to the estimated growth in annual benefit payments to ComSuper;
•	non current employee benefits:  
–	the increase of $201.302 million in the 2005‑06 estimated outcome from the original budget is due to the recognition of additional superannuation liabilities following the latest actuarial review; and 
–	the increase of $255.043 million in the 2006‑07 Budget from the 2005‑06 estimated outcome is due to the projected increase in the superannuation liabilities of the Territory.
Cashflow Statement
•	capital injection from Government:  the decrease of $18.236 million in the 2006‑07 Budget from the 2005‑06 estimated outcome reflects and adjustment to the funding of superannuation liabilities, under the Government’s plan to fund 100 per cent of accrued superannuation liabilities by 30 June 2030.  The revised long‑term funding plan reflects lower levels of unfunded superannuation liabilities following the closure of the PSS to new entrants from 1 July 2005.