Joshua van Gestel - Good afternoon and welcome to Sunsuper's 2021 employer briefing. Before we get started, I would just like to acknowledge the traditional owners, the Aborigines and Torres Strait Islander peoples of this land as custodians. The Turrbal and Jagera peoples are the traditional custodians of this place, Brisbane, where we're actually presenting to you from today. But we would also like to recognise the custodians from around the entire country where you all are watching this broadcast today. There are three key themes that we'll actually be discussing in today's employer briefing. We'll be looking at how our industry is changing and how we have to ourselves at Sunsuper, continue to be at the forefront of the services that we're providing to you and to your employees, as well as the investment returns that we are delivering. We'll look to at how we at Sunsuper ourselves are changing. We had like many of you would have, a challenging year during 2020 as we went through COVID, but we also want to focus on where we're moving to into the future. But thirdly, we also want to discuss today how your obligations as an employer are changing, the things that you need to consider regarding the superannuation that you pay on behalf of your employees. I'm joined by two wonderful guests this afternoon that I will introduce shortly. My name is Josh van Gestel and I'm the national education manager here at Sunsuper. As we go through today's webinar, I'd ask that if you've got any questions that you please make sure you drop those into the submission question box, which is just located next to the video that you're currently watching. Before we do get started, though, I would like to just acknowledge that the information that we're presenting today is of a general advice nature only. And that includes any answers that we provide to questions that come through in the chat. If you do want to explore more your personal circumstances, if you want to find out more about what we're discussing today, then I encourage you to please do so, by giving us a call on 13 11 84, or by visiting our website at sunsuper.com.au. To start things off though today, what I'd like to do is to first hand over to Teifi Whatley, who is one of our executive. And we're very privileged to have her joining us today. Teifi is the chief strategy and impact officer at Sunsuper and has been with Sunsuper for well over 20 years. She brings incredible experience, including a deep understanding of the services and the benefits that we provide to members. And the way that we communicate to your employees as well as to you. Teifi will provide us with an update as to where Sunsuper has been over the last 12 months, as well as where we're heading. Thank you, Teifi.
Teifi Whatley - Thank you very much, Josh. And welcome to everybody who has joined this webinar this afternoon. I will quickly give you a brief introduction to Sunsuper. Of course, many of you already know Sunsuper and know what it is that we stand for. And that is that we are here every day to work for our members, who are your employees, and to give them a much better retirement outcome. We have no shareholders, so we are totally focused on our members each and every day. And our purpose, as you can see there, to inspire and empower them to fulfil their retirement dreams. So we have a very clear focus of what it is that we stand for. And we are very well-respected in the industry, having last year, during a very difficult year, I might add, have been awarded the Chant West Super Fund Of The Year and also the Member Services Award as well, which is absolutely critically important. And is in fact, my favourite award, given that it is all about members. But we're all about employers as well, because you look after all of our members on a day-to-day basis in your workplaces. And so Chant West also last year, awarded us with The Corporate Solutions Fund of the Year where we look after the critical service that you provide to our industry and to our members. And we also won this year, The My Choice Super Award from Super Ratings as well. And we now all have our fingers crossed for next week, when Chant West will announce their 2021 winners as well. So hopefully we will be in the winners circle again, next year. I'd like to briefly touch on the year that was, because it really was such an incredible year for all of us in 2020. And for me, there's two things that have really stuck out for me in the year of 2020 for our members. The first of those was the Early Release Scheme, which the government introduced, and didn't give the industry a great deal of time to implement that. We very, very quickly put in place processes, systems and some people, in fact, we recruited an extra about 75 people to join our team, because the most important thing for our members was that we actually got money into their hands as quickly as possible when they needed it most. So over the course of the two tranches of early release, we paid about 485 payments to our members, totally about three and a half billion dollars. It was quite an extraordinary effort by all of the Sunsuper team. And we were really proud of the fact through that process, we put money in people's hands within five business days for about 96% of those payments. It was an absolutely extraordinary event, I must say. The other thing that really stood out for me in 2020, was what happened in the markets and the way in which we were able to respond to that as well. And I will not steal the thunder of Brian, who will talk about the economy later, but very much it was about the economy going down and then coming back up again. And what was important for us was that we had money available so that we were able to invest as markets started to recover. And that of course is always good news for our members to be able to do that. So a fabulous year that it was as, as we all worked through that and worked for our members. The other thing that really stood out in the last 12 months was our own people and the way in which our own people responded to be there to help our members, but also the way in which our people responded for each other and the way that they cared for each other throughout the year as we changed our workplace and started working from home. So it was very pleasing for us that we were in fact recognised in the top 10 of the best places to work from the Financial Review. That was really important for us. I think it's also really important for you, our employers, and for our members, because that's what we do, we come to work every day so that we can serve our members in the best possible way. We just happened to spend most of last year doing that from our lounge rooms and our dining room tables, but we still maintained that camaraderie and that care for each other as we work hard every day for you. So a little bit about the future, the industry is of course continuing to consolidate. And we will see in the next 10 years, another halving of the number of funds that are regulated by APRA. This is really being driven by regulation, complexity in the industry, but also really thinking about member outcomes and the member outcomes that we have to deliver, and that we are expected to deliver by our members, by our employers, by our advisors, who we work with, and also by the regulators and the government. So we will see that the industry continues to consolidate and it is important that the industry does that, because we do have to look for scale. We do have to look for how it is that we continue to deliver sustainable investment returns for our members, but also how it is that we drive efficiency within our organisation, which will also ultimately result in better services for our members or reduced fees for our members. And that of course is a good thing, because it will drive better member outcomes and better retirement benefits for all of our members. So in that light, I'm sure that many of you know that a merger has been announced between Sunsuper and QSuper. Two Queensland based funds who will come together later this year to create a $200 billion fund where we will collectively be looking after the retirement benefits of 2 million members. This is an extraordinary coming together. We announced the heads of agreement in the middle of March this year, after a prolonged process of due diligence through 2020. And we are now in the integration planning stage of this in order to bring the fund together around about September of this year. This is a really significant event in the industry. These are two large, very well recognised, industry award winning organisations who are coming together. And the reason that these two organisations are coming together is that this is very much about member outcomes and driving better results for our members. This is about being able to take advantage of the opportunity of scale, and that is about being able to get better investment capability at a better cost, and also to be able to deliver more and better services to our members and to our employers. So you will hear a lot more about this in the coming months as we get closer to that merger, but everybody is continuing to work on that merger each and every day. But we also have about 1.4 member million members who we are looking after each and every day right now. And so in that vein, we continue to look at how do we create those better services? How do we make sure that we keep our costs down? How do we make sure that we are helping our members to make the best possible decisions that they can make? There's two components that will lead them to a better outcome. One of those is the decisions that they will make each and every day of their working lives in order to give them that better outcome. The other of course, is having strong long-term returns. They are the critical ingredients that go into the recipe of all of our members getting a better retirement outcome. And so on that note, I think I will hand over to Brian who will talk to you some more about the economy and the returns that we are delivering to our members. So thanks very much.
Brian Parker - Thanks very much Teifi. And thank you very much everybody for your time today. What I'm going to talk to you about is about investment returns and about the markets, and really how we're seeing things from here. But also I wanted to talk you through some of the assets that we've been involved in and how those assets fared during COVID. And also give you a flavour of the overall investment environment that we've been operating in, because it really was a really unique environment to be investing money in during 2020. Now, let me take you to Finland. This is Caruna, Caruna is the largest electricity distribution network in Finland. And up until recently, it was a very significant holding in Sunsuper's portfolio of global infrastructure assets. Now Caruna as a business, delivered very very strong returns for our members pre-COVID. Then when COVID happened, given the nature of the business, it's in the electricity distribution business, the Fins kept the lights on, which means this asset continued to deliver. So there's a range of assets that we held that were perhaps badly affected by COVID, this wasn't one of them. What we found in the second half of last year was that we received a very, very, very attractive unsolicited offer to buy a portion of our stake in this business. I want to really highlighted to me was the fact that pre COVID, one of the things that was a feature of the financial markets that we operated in, was there was an awful lot of money in the system looking for a home, that financial market returns had been very strong and those returns had been underpinned by the fact that the world was awash with liquidity, awash with money that investors were trying to put to work. Now with COVID, that money never went away. That money was still looking for opportunities. And when the COVID crisis hit, that money pounced and took advantage of those opportunities that we saw in financial markets in March last year. But again, the money never went away. And so around the middle of last year, we received an unsolicited offer to buy a portion of the equity. The offer was so attractive that we actually agreed to sell a portion of our equity. We took the decision because we believed that we could take the cash and reinvest it somewhere else and actually deliver a better return for our members. But what actually then happened was that that buyer got gazumped by another global consortium that wanted to pay the same price or a little higher and take the lot. Once again, we did the math and realised that we could take the cash and reinvest it and deliver better returns for our members. So we no longer own this asset, we sold it towards the end of last year and that's delivered very significant gains to our members. If I also go back about a year or so, I wanted to share with you a comment that actually illustrates just how the COVID crisis took people by surprise. This is a statement that was made by a US company, when they were reporting on their annual earnings early last year, because US companies have to tell the Securities and Exchange Commission, the regulator in the US, has to report on how they've done, but they also need to include a statement which tells investors how they think their future looks, how they expect their business to evolve over the longer term. And this is what this company said when they, and again, this was a document that was filed early last year, that basically told investors that we've actually delivered very, very strong growth but we don't expect that growth to continue. We think that we're facing a lot greater competition, that the market is getting much harder for us, so we don't expect anything like the kind of revenue growth over the coming year or so that we delivered over recent years. Now, that's what they said then, the company's name was Zoom. you may have heard of them. Clearly that's a statement today that had a shelf life of about a week, because since then, we all know what has happened and we all know how we've gone about living out our personal lives and our working lives. And we spent the first half of last year, largely as Teifi mentioned, sitting at our dining room tables and our lounge rooms, working with colleagues but also talking with family and friends all over the place. And quite often we had those conversations on software such as Zoom. And this just shows you what happened to Zoom's share price not long after they issued that statement to the regulator. So what it shows you is that if I compare the performance of Zoom share price from the end of 2019. $100 invested in Zoom at the end of 2019, even after a bit of a pullback is now worth about 450 bucks, which has significantly outstripped the rest of the market. And it does highlight what a surprise that COVID was for financial markets. Now, this is the sort of main outlook as we're seeing it. It's important to bear in mind that last year's recession, what I would describe it as, it's not your parents or grandparents' recession. The recession we had last year was one that happened by design, not by accident. Rotations generally happened by accident, they happen because the economy experiences problems, which build up over time, and those problems end up delivering a recession. This time round, this was governments around the world telling businesses and telling a range of employees, you can't go to work and you can't operate your business because we need to deal with a health emergency. And what that means is that not only do we have a recession, but prior to that recession, there were very few traditional alarm bells ringing. In other words, there are signs that often emerge before you get a recession. Those signs generally did not emerge prior to that one. This was a recession by design and not by accident. Now the good news is that the extraordinary response we've seen from policymakers around the world, and now more recently, the start of vaccine rollout, are truly truly game changes for the economic outlook. We can now be confident that not only is there a light of the end of the tunnel, but that light is a genuine end of the tunnel, not an oncoming train. So the recovery is real, the recovery is happening, however, it's still going to be a gradual drawn out affair, the pace of vaccine rollout is varying across the world. Some countries are rolling out the vaccine much faster than others. Clearly here in Australia, we haven't rolled out the vaccine as fast as we would have liked. But make no mistake, the vaccine roll out, even though it's uneven and even though it's going to take time is real and it can make us a lot more confident about the medium to longer term outlook for the Australian and the world economy. There's not to say that prior to COVID, we didn't have things to worry about. It's not as if the, and if you're in the business of investing money, for other people, there are always things to worry about. And there are still things that we worry about today. We worry about geopolitics, we worry that the kind of massive stimulus that we've seen delivered during COVID, as appropriate is that stimulus was, may deliver higher inflation over the coming years. And we worry that even going into COVID, we had a situation here in Australia where wages weren't growing fast enough, where we didn't have enough people employed full time. Those problems have not gone away. And thankfully, the authorities now seem to be much more willing to address those issues post COVID than they seem to pre COVID. The way I described the financial crisis that we saw in March last year, is think of the GFC compressed into about two to three weeks. Because the speed with which we saw share markets decline, that we saw share prices fall during March last year was truly extraordinary. Now what this chart shows you is what happened to share prices across the world since the end of 2019. So if I think about it, if I buy a basket of shares for a $100 in each of these major share markets or share market indices, what happened over to that $100 over the course of 2020 and indeed into 2021. The speed of the decline was staggering, but so too was the speed of recovery. And as I mentioned before, there was so much liquidity sitting on the sidelines going into COVID, that at the first sign of a crisis, a lot of that money pounced, a lot of investors around the world took advantage of the crisis to acquire cheap assets. That's ultimately what we pay our investment managers to do. And since then, you've seen a very, very strong recovery in investment returns, and that's very, very pleasing. And it means that the returns for our members remain very, very solid. I often say in presentations such as this, that as a superannuation fund, we have very little control, we certainly have no control over the markets, and we have no control over where we may sit in a performance survey over any given month or any given quarter or indeed any given year. Our aim is to build portfolios which meet the return objectives that we communicate to members. When you pick up a product disclosure statement and you look at their investment options, what do we say that we're aiming to achieve? Our prime function is to achieve those objectives, but also to do it in such a way that we're competitive, because we acknowledge that you do have a choice of superannuation provider. So we want to deliver strong long-term real returns. In other words, after inflation, after tax, and after fees. But do so in such a way that way competitive against our peers. And this is what this table shows, in fact, the speed of the turnaround in financial markets is so strong that if I was to show you these, if you didn't know there was a crisis last year, and I just showed you these numbers, you'd be inclined to look at the chart and say, where's the crisis? because the turnaround was that quick. And what it shows you is the performance of Sunsuper's flagship balanced option against the median superannuation fund of our competitors. And what it shows you is that over all the time periods in the Chant West survey, we are ahead of the median fund over all time periods and that's pleasing. But what's more important, however, is that not only other returns competitive, but the absolute returns, the returns that end up in member's pockets, are not just competitive, but they're well in excess, of the return objectives that we communicate to members in our product disclosure statement. And that's very, very pleasing. Let's turn to the world economy right now. The speed of the turnaround in financial markets has been staggering, but also we've seen a very, very sharp turnaround in the performance of the world economy. And what this chart shows you is a series of indices that measure business activity around the world. Now 50 is meant to be neutral. 50 is businesses basically telling the survey provider, we're neither growing or contracting, we're just flat. Above 50 means the world economy is expanding. And what it shows you is that whether you look at the world as a whole, or whether you look at the emerging economies or the developed economies, whether you look at the services sector or whether you look at manufacturing, all of these numbers are solidly above 50. The world is back in a growth phase. And that growth phase is very, very strong right now. And even given the setbacks we've seen with the infection in places like parts of the United States and in Europe, the fact is the major developed economies have coped with infection setbacks remarkably better than you might've thought, given the experience of the first half of last year. That's not to say that the world is out of the woods yet. Clearly what is happening in India right now is utterly catastrophic. But as far as the overall world economy is concerned, we can be confident that there is a light at the end of the tunnel. And that's a very, very pleasing outcome. Not only have we seen a rebound in activity, but we've also seen a very strong rebound in world trade. This chart shows you a measure of the volume of goods trade that's going around the world, and not surprisingly, the volume of world trade collapsed during the depths of COVID. But the speed of the turnaround has been staggering. The volume of world trade right now that has been moved around by ships everywhere, is higher today than it was pre COVID. And that recovery has been very very strong. Let's turn to Australia. The recovery in the labour market here in Australia has been much stronger than we might've thought some months ago, much stronger than virtually anybody forecast. The chart on the left here shows you the number of people employed. The number of people employed fell very very sharply, by design, during the worst of COVID. We have now got those jobs back and more in the last six to 12 months. And that's a very, very pleasing outcome. Not only that, it's translating into better numbers on consumer and on business confidence. The chart on the right shows you the level of consumer and business confidence compared to a longer term average. So zero on this chart means consumers and businesses are about as confident as they normally are. Both these lines are well above average, and that's a very, very good thing. It means that we're very well-placed to absorb the fact that government support measures for the economy, such as Job Keeper have now been turned off. So the recovery in Australia is ongoing and looks increasingly durable. Another reason that gives us a good deal of optimism is that there is a good deal of dry powder out there. There's a good deal of money that people have been sitting on and simply not been able to spend. And again, unlike previous recessions, it's not as if people didn't have money. This was a case where not only did we tell people, you are no longer allowed to do your job, but here's a significant amount of money to tide you over. But there was a range of other people, most other people, in fact, who continued to earn a living, who continued to do their job and continue to get paid, but what do they do with that money? Well, they weren't allowed to go to restaurants and go shopping with it, so what do they do? Well, some of them went online shopping, and some of them went to Bunnings and did renovations, but there's a limit to how much online shopping you can do, no, really there is. And so a large chunk of that money that people earned ended up being saved. And this is what this chart shows you. The yellow column here shows you what percentage of disposable income are households saving in a range of economies, or at least, what were they saving in the five years leading up to COVID? The light blue, sorry, the darker blue column in the middle, shows you what percentage of people's income were they saving and the depths of the COVID crisis, in June last year. And notice, it's sharply higher. Now, since then, we've seen a recovery, and we've seen economies open up. So consumers are out spending money again, but they're still saving a much higher percentage of their income today than they were pre COVID. It's a fair bet, that as time goes on and as vaccines get rolled out, more and more, a greater share of people's income will end up being spent, and that'll help underpin a very solid economic recovery over the coming years. It also means that the removal of government support measures will be able to be absorbed without doing serious damage to the overall economy. Now that's not to say there isn't things to worry about. And let me share with you some of those things. Starting from the far right on this chart, we do worry about geopolitics. We worry about the fact that there are tensions out there between for example, Australia and China. Between China and a range of countries in our region. We worry about tensions between Russia and Ukraine, the world is an inherently unstable place. We worry about the risk of higher inflation. After over a decade where inflation rates around the world fell below where the world's central banks wanted them to be, the opportunity now is that central banks are actively trying to take steps to get inflation up. And they're being aided by governments in that process. There's every chance that we need to be prepared for higher inflation rates over the coming years, perhaps not sharply higher, perhaps not uncomfortably high, but certainly higher than we've seen in the past decade. And we need to make sure that we have investments in the portfolio that are well-positioned for that, investments that actually help protect our members from the risk of higher inflation. We've also got a range of investments which actually have fared very well during COVID, what I've called, COVID resistant investments. And that can be, for example, some big technology stocks that we've seen in our share portfolios, the big US technology companies, such as Microsoft, such as Apple, such as Amazon, that have benefited during the COVID environment, and smaller companies such, as obviously, Zoom. But other assets in our unlisted portfolios that have fared very well out of COVID. We've also very, very conscious that during COVID, the level of interest rates around the world, particularly the level of market interest rates, fell to extraordinarily low levels and that's caused us to rethink the way we build our defensive portfolios. Most notably, causes us to think about which government bond markets around the world are we comfortable investing in and which government bond markets are we not? More on that shortly. Let me share with you some COVID proof investments that have done well for our members. This is a data centre business in Switzerland called Safe Host. We bought this about two and a half, maybe two and a half, three years ago. It's a data centre, its major tenant is Microsoft. Now clearly Microsoft is still paying their rent. This is an asset which has performed very very well for our members. I showed you another asset that's done well during COVID for us, the Caruna business in Finland, which we no longer own. But also one business which has done well more recently, which may surprise you. If you've attended these sessions, either in person or remotely before, you may have heard us talk about the Discovery Park business that Sunsuper owns on your behalf. Sunsuper is Australia's largest owner and operator of holiday parks. The Discovery Pack business actually delivered a positive return in 2020. And if you think about the year the 2020 was, the fact that this business delivered a positive return is truly remarkable. We started the year with the bushfire season on the Eastern Seaboard. A number of our parks on the Eastern Seaboard did not have a Christmas holiday season at all. And then you had COVID. But what we then found was that as soon as lockdowns finished and people were allowed to travel, at least within their own state, they did. A lot of that money that ended up in people's bank accounts, a lot of that excess savings I referred to previously, people went out and spent it and these parks have been pretty much fully booked for the last nine months or so. And as I said, it's delivered actually quite good returns for members of late, it's a beautifully run business. I want to talk quickly about interest rates. This very ugly slide shows you market interest rates around the world. This is the yield or the interest rate I get by buying a 10 year government bond, in a range of markets, including Australia. So at any point on this chart, if I buy a 10 year government bond on that date, what is the return I'm going to get if I hold that bond to its maturity in 10 years time? What we saw during COVID was these yields were already very very low, but they fell even further. Now, even after a slight rise recently, these yields are still very low. If I look at a country like Germany, for example, I'm still paying Angela Merkel for the privilege of having her look after our members' money. Do we want to have an exposure to all these markets? Maybe we need to be more selective about the sovereign or government bond markets we choose to invest in on our members' behalf. But the fact is, sovereign bond rates, government rates rights, market interest rates, are still historically very, very low. Which means the future returns are likely to be very very low as well. Let me just sum up some main messages and then I'll hand you back to Joshua. Firstly, the recession we saw last year was incredibly unique, a recession by design, not by accident, but the recession is over. There is a recovery underway, the vaccine rollout, albeit uneven, and it will take time, there are some emerging economies, for example, that have seen virtually no vaccine rollout, yet. This has got to be an ongoing drawn out process. So we're going to see an uneven recovery, and you're going to see setbacks along the way. You're going to see resurgences of the virus every now and again, but there is a light of the end of the tunnel. Australia is relatively well-placed, being an island clearly helps, but a combination of being lucky and being well-managed has served us very, very well. Pre COVID concerns coming back. Did we worry about politics before COVID? Yes we did. Did we worry about wages growing at too slow a pace? Yes we did. Those concerns have not gone away. As an investor, there is all, and when you are paid to invest money on behalf of other people, there are always things to worry about and it's our job to manage those risks and manage those challenges on your behalf. Thanks very much for your time today, and I'll hand you back to Josh.
Joshua van Gestel - Thank you, Brian, and thank you for sticking to time as well, Brian. I'd like to also just at this point, thank Teifi as well, for her thoughts and reflections when we started. We are getting a number of questions that are coming through for both Teifi and Brian. So I do encourage you, I'll now move into providing reflection on the budget and talking about some legislative change that we've got coming up and we'll then move into Q&A. So please do take this opportunity, if you've got any questions just to send those through and we'll try our best to get to those at the end. Now this year's budget wasn't one that we would say was remarkable, it wasn't a budget that had a lot of announcements to it. But it did have some announcements, that in a broader scheme, were very, very important. And I'll come to those in one moment. The biggest thing though, that we're going to reflect on over the next 10 minutes or so, is that there were a number of announcements that we were expecting that weren't put into to the budget. A number of things are happening on the 1st of July this year, that we were maybe hoping for some headlines on, and they just weren't. The other thing though, for us to reflect on is that we had a budget six months ago and there were a number of announcements regarding superannuation in that budget that we are going to have to deal with in the coming weeks and months. But, if I can probably go to this one first, we did allow you, when you are registering for this event, and we had over a 1000 employees register. We allowed you to ask us questions that were big issues for you. And we had a significant number of questions come through and more than half of them were in relation to this. I think we expected that we get this grand announcement from the government about superannuation guarantee going to 10%. I think some were expecting that we might hear Josh Frydenberg talk about it in the budget. Neither of those occurred. What we know as a result, is that the increase of new superannuation guarantee, from nine and a half to 10% has already been legislated. It was actually legislated many years ago. So the lack of any announcement simply confirms that the increase is going ahead. So from the 1st of July of this year, you have to be prepared to move from nine and a half percent superannuation guarantee to 10%. That government has also been silent on the increase beyond that to 12%. But, we could actually look at that the same way and say, well, in their silence, they are simply confirming legislation. Whether there is some change in the future, we'll see, but we definitely know that we are going to 10%. And as I said, I'll come to some of the things you need to think about in that regard in the moment. The other thing, as a slight aside from this though, is that every year we see the maximum contribution base index, so the amount on which each quarter you have to calculate SG up to, if someone earns more than this amount, then superannuation guarantee above that in the quarter isn't applicable. Just be aware of for your own purpose, that we are seeing that slight indexation, so two things happening here, the increase to 10%, as well as the income indexation. Now, as I've mentioned, we are going to see this increase to 10%, which was actually legislated quite a long time ago. And if we saw the legislation go through as planned, it would have actually reached today's limit more than five years ago. In fact, we would be here today talking about 12% super guarantee, not talking about nine and a half percent. We then saw this actually deferred twice, for a number of different reasons, by successive governments. And that means that now the new legislation that has been in place is the increase to 10% this year, reaching 12% by the 1st of July, 2025. Now there has been a lot of politics, there has been a lot of debate about the increase to 12%, but there's a couple of things that we have to first recognise. When superannuation guarantee was introduced in the 1990s, there even then was a very clear goal that it'll actually increase to 12% or in fact beyond. So there's always been this goal in the system, since its beginning for that 12% to be reached. And the core reason for that 12% figure is really for two main reasons, there's two main purpose to it. The first is that it takes the pressure off the government, and we're see the workforce age, and we're also going to see active workforce participation reduce as older workers move out of the work force, that there would be these increased burden on government, through less tax revenue to pay for the age pension. So the government needed to make sure there was a long-term policy solution in place to actually help replace or support them with retirement payments. And the second thing though, and this is something I'm going to come back to a number of times throughout this presentation is that it's really designed to make sure that people have a comfortable retirement, that they have flexibility in retirement, and that they have sustainability in their retirement as well. What this means for you, and the 1st of July is not that far away, what it does mean is you need to reflect on how you currently pay your employees and pay your employees their superannuation guarantee. Is SG part of their overall remuneration benefit? Or is SG something that you pay on top of that? How are you actually going to fund this? Depending on your circumstances, you may decide to actually take this from employer's pay, so effectively, their overall benefit will remain the same but as superannuation guarantee increases, you might see their salary decreased slightly, or you might see overall package actually increases, that you've got to think about funding. So I do encourage you, think about that, reach out to us if you do need to weigh that up. The other thing though to think about is, is your payroll ready? And although this has been debated for some time, it has been legislated for even longer, which means that most payroll providers are in some way already prepared for this. So again, if this is something that you're concerned about, something that you're worried about being ready for, I encourage you to reach out to your payroll provider, or again, reach out to us to talk about it. But what I'd like to actually suggest is if we take the debate out, if we take the politics out, what this provides is an opportunity to really engage your employees with part of their income that really they have ignored. What you have to understand is that as an employer, a very substantial part of your day to day running, goes towards your employees' financial future. You're not just paying part of your annual expenditure into your employer's superannuation guarantee, into their superannuation account, but you're also dedicating resources, both in terms of human capital, but also in terms of systems and processes to actually make sure that you're meeting your obligations. So what you need to think about is you're doing all this work to meet obligations for your employees. You are paying them effectively a deferred income for the future, but only three out of your 10 employees would actually understand how much they've got in super. I'd hazard a guess and say of those seven out of 10 employees that don't understand their super, some may not know where their super is, and most won't even know what their superannuation balance is. Although you were seeing your obligation increase with the increase to superannuation guarantee, this is also an opportunity for you to make your employees understand that effectively this is an increase in their deferred salary for the future. And we are here at Sunsuper to make sure that we help you with engaging your employees. As Teifi says, there is a whole range of member services and benefits that we provide, that are all designed to help your employees engage with their super, to better understand it, and to better know those obligations that you are meeting. You've got to remember that although one in every $10 that you pay to your employees is effectively being locked away for the future, that one in $10 that's being locked away, is earning investments that Brian has gone through, it is providing them benefits for the future, that they really need to engage with. So it's important that you not just think about your superannuation commitments as an obligation, but also think of it as an opportunity for your employees to engage more with you as an employer. It is a benefit that you are paying. It is an employer benefit that your employees should be happy that they are receiving from you. And this is the reason for it. To put it in context, the age pension is something that many of us will receive from the age pension age, which is currently age 67, or increasing to the age of 67. But the age pension has no flexibility, it is rigid, it is controlled by the government, it is a legislative focus. Superannuation gives your employees, our members, the ability to have freedom of choice, flexibility, about their retirement, and that's why it's important they take an interest. The more engaged they are with their super today, the more engaged they are with your obligations to pay their super, the more flexibility they will have in their future retirement. So thinking about flexibility in the future, the government made a number of key recommendations or announcements in the federal budget. They're all scheduled to start on the 1st of July, 2022. I should make it very clear, these have not been legislated, they are yet to go through parliament and be endorsed by Senate. But what the government has actually said they would like to do is firstly, there is currently a minimum requirement of earnings before you pay superannuation guarantee. Your employees must earn $450 a month before you are obligated to pay SG to them. The government's awareness is that this is largely impacting casual workers, which is largely women. And so by removing this requirement, by now giving access to super guarantee to everyone, regardless of what wage they're earning, it is now going to give 200,000 people access to superannuation contributions that they just haven't had prior to now. A very, very end, and a long awaited important benefit that the government's introducing here. The second, and although this doesn't have a direct impact on you, is that we are seeing the government allowing people to put more into super, which they can later draw down to put towards the purchase of their first home, increasing from $30,000 to $50,000. Please be aware this isn't something that you look after as an employer. It's not something that we look after as a fund. It's actually something that your employees do themselves, making contributions to their super, and then at a later point, they can apply to the Australian Taxation Office to withdraw some of those savings to put towards their first home. The more important one in my view, and this goes back to that flexibility that I was just referring to, is that we are seeing the government making saving for retirement more flexible for older workers. Currently, the older people as they're saving for retirement, do have to make work tests of 40 hours in 30 consecutive days before they can put certain monies into their super. This is a system that is maybe a bit clunky and a bit restrictive when you think about the efforts the government has gone to, to try and encourage older workers in the workforce and as they've also increased age pension age. So how this is actually going to work, if it is passed into legislation. From the 1st of July, 2022, currently those workers that you have that are over the age of 67, need to meet a work test, up until the age of 74, before they can put personal contributions into their super. That will be abolished from the first July, 2022, no work test will be in place. This applies to all personal contributions except personal tax deductible contributions. So this will apply to personal after tax contributions, as well as salary sacrifice contributions that they make through you. This will also apply for spouse contributions. So if I am working and I'm over the age of 67 I no longer have to make that work test in order for my spouse to contribute into my super account. There is also a rule here that I don't want to spend too much time on, but you are allowed to put up to a $100,000 into your super each year, or up to $300,000 within a three-year period, if you're under the age of 65. That's $300,000, which is what we call a bring forward, will actually now be available to people not just under the age of 65, but up to the age of 75. Again, though, there will always be complexity here and regulation and legislation, so we encourage you just to stay tuned for how that may apply from one July next year. Two other things though, that came into place that I quickly one to mention is that we saw legislation announced in last year's federal budget, and this was called Your super, Your future. And what the government was trying to do through this was really make super funds more accountable to members. And they're doing this through two means. Firstly, funds will now be required to meet an annual performance benchmark. And it's very important to note, not just what will happen if they don't meet that, but it's actually going to raise the standard, in the government's view, as to what member outcomes are. If super funds don't meet this performance criteria, they will be required to inform their members, and that is based on that return. So investment performance after fees. But it also means that those funds won't be able to accept new members until their performance improves. So this is the first measure that's being introduced. The second measure is actually a focus on accountability of the funds themselves. So what this means is that funds themselves will have to just provide more disclosure or more information about what they're doing with the money that they are taking in fees. It just means again, the funds will be more accountable to their members and will have to disclose more information which members can actually then test them on and make sure they standing up to. But this one is what applies to you, and again, I should state that we are yet to see final legislation in this regard, it is meant to come into place on the 1st of July this year, one July, 2021, but we still yet have debate to occur in the Senate. And we're still yet to see the final legislation go through for this, but as it currently stands. What the government is going introduce here is stapling for member accounts. And what that means is that you're in a Superfund account, it will be stapled to you for life. What happens at the moment, each time you start a new job, work for a new employer, you actually receive a new super fund, potentially through the employee's default. From the 1st of July, 2021, what will happen is that when you hire a new staff member, you don't put them into a new default. You will have to find out where they currently are a member of. Now, there's still, as I said, legislation to pass in this regard, but the important thing for you to be aware of is employees will still have choice. So although you are required to put employees into a fund they're already a member of, that employee has the opportunity to tell you that they would actually like you to direct their super elsewhere. And this is how it is actually going to work. An employee starts a new job with you, and they would like to choose a super fund, a new super fund. All they need to do is provide you with a choice of fund form as they currently do. And you will then as you currently do, start to direct their superannuation contributions to that fund. But what will happen is if an employee doesn't choose a fund, if they don't provide you with that choice of fund form, you are going to need to go to the ATO. You'll go to the ATO through a portal that is not yet active, and we're yet to see the detail around, but you'll be able to go to that portal and basically request information as to where that new employee's super should be directed. If that employee has an existing fund, the ATO will inform you, and that's where you can then pay. If though the employee does not have an existing fund, perhaps they've just left school and started work for you, you are their first job. Then you can actually start to direct their contributions to your chosen default fund. So what I would state here is that there is a lot to still fall into place before the 1st of July. And we will keep you informed on that. But employees do have choice. In the absence of them making a choice, you'll inquire with the ATO, and if they don't have an existing fund, you'll then be able to direct them to your current chosen fund. Now, again, this presents in our view, an opportunity to engage your employees with your chosen fund, but to also engage the them on making sure they choose to put their super somewhere that will look after them, with a super fund that has strong member benefits, and is focused on providing them with long-term returns. We at Sunsuper, are not just going to leave you high and dry. As we see legislation pass, as we see information become available, we will be in contact with you. We'll provide you updates to minimise the impact for you as well as provide you with resources that you can use to actually engage your employees and help them in the decisions that they'd like to make. Before we hand to Q&A though, just a couple of things for housekeeping. Just be aware on the 1st of July this year, so in a few weeks time, we are going to say pre-tax contribution cap go from 25,000 to 27,500. So that is where superannuation guarantee contributions you make go, as well as salary sacrifice contributions that your employees may make. We'll also include tax deductible contributions employees make outside of their relationship with you. We also have a post-tax contribution cap called a non-concessional cap, which is currently a $100,000, that will increase to $110,000 from the 1st of July this year. Just giving members, your employees, more capacity to put more into their super in after tax contributions. And lastly, we're going to see the government increase the amount that employees can earn in order to actually receive benefits from them. So when employees put money into super post-tax, depending on their income, the government will also make a co-contribution of up to $500. So that change is also coming in or that indexation is also coming in on the 1st of July. The last thing in terms of housekeeping, is just to remember that the 30th of June isn't that far away. So if you are wanting to engage with your employees on decisions, contributions, they need to make before the end of financial year, now is the time that you have to be doing that. Now is also the time for you to be talking to your Superfund, if you need to, about making final contributions for the year, to make sure that they are in place before the 30th of June. If you're on the 30th of June, thinking about how you make a contribution to your Superfunds, it is already too late. You should really be engaging with us now or towards the end of May on any questions that you have. Again, I would like to just re-instate that although we are seeing changes come up, although we're still seeing legislation come in, we will continue to engage with you to make sure that we're providing you the information that you need to make sure you can actually be in great shape and be ready for the first July. What I would like to do though is hand over to both Teifi and to Brian in Q&A. And Teifi, you've been sitting there very quietly for about the last 45 minutes. So I might let your mouth work a little. So we've actually had a question that has come through from Ruth and she's asked, both QSuper and Sunsuper are largely Queensland based funds, which you did actually know. We will have a significant member base between us as the new fund, which is very largely going be here in Queensland. With the new fund's larger scale, and as well as with that focus of the business here in Queensland, will we still have the same focus nationally, and will we still provide employers with the same level of personalised service that they're getting? And I'd say also to their employees.
Teifi Whatley - Thanks, thanks very much, Josh. And thank you Ruth for that question. Yes, I have been sitting here very quietly, but very much enjoying listening to both Brian and Josh to give both of those updates. It's interesting, Sunsuper right now has almost 40% of our members who live outside of Queensland. So we already have quite a significant national footprint, and we have a commitment to our offices that are in Sydney and Melbourne, and to continue to support those offices, and to support our members who live all around the country. Certainly as part of the discussions, and the due diligence process with QSuper, that was very much a point of discussion. And absolutely, the benefits that both organisations can see from merging these two organisations, are to expand on that national footprint. Because what that does, the more members that we have, the more scale that we can create. And as I said earlier, that will lead to us having more scale, to be able to take advantage of more investment opportunities that will lead to better outcomes for our members, but it will also enable the two organisations to come together. Right at this very moment, very well recognised across the industry services for both members and for employers and in fact, for advisers as well. But we will be able to bring those organisations together and really have the best of both of those organisations and to build on the capability that exists within both of those organisations now. So the efficiencies that we will create through that scale will really enable us to be able to improve the services that we provide right now to our members and our employers, and to be able to build on those by taking the best of both of those organisations and continuing to build on them. So yes, and yes, Ruth, very much committed to that national footprint and very much committed to continuing to invest in the services that we provide to each of our customer groups that we have.
Joshua van Gestel - Thank you. And I thought it was wonderful actually in your presentation, you reflected, if we just think about the awards as an indication perhaps, or a measure, that QSuper's awards cabinet's actually quite full as well. So when you put those together as a reflection of what each of us do, but what our potential is together is quite powerful.
Teifi Whatley - Absolutely, absolutely. We both, I think pride ourselves, particularly on our member services. And really we compete against each other. So it will actually be really nice to be able to collectively do that in the future, because there's some great ideas in both organisations, and really to continue to be at the forefront of providing those services to members, that's what we're here for.
Joshua van Gestel - That's great, thank you. And I think maybe your reflection on your comments about our national footprint, both Brian and I've flown up very early this morning into Brisbane. Brian, you are still awake, well done. Daniel asked, saying, you saved me time in your presentation, feel free to go to town on this one a little. Daniel asks at what age, based on economic cycle risk, is a person likely to start lowering their portfolio risk, or at least moving some portion in low risk equities or cash? And I thought when I read this, that it was a really great segue into just thinking about what we do with people as they transition towards traditional retirement age. Do you want to make a comment?
Brian Parker - Yeah, well, again, I suppose the important thing to say at the outset is that the ideal answer to your question is one, that each individual member works out to suit their particular circumstances, their particular appetite for risk, in their particular phase of life And preferably a solution they have worked out after getting a quality financial advice, which Sunsuper can help you with. So again, the perfect solution will vary from person to person, but I think probably the best way I can answer it, in a more general sense is to think about what we do with our Sunsuper for life, life cycle default offering for members. So, and full disclosure, a big chunk of my superannuation, my personal money is in the default, and the reason I decided to do that was that our lifecycle basically does with my superannuation, what I would do myself, if I was managing it daily, instead of actually managing money for other people. So up until the age of 55, the lifecycle is invested fully in Sunsuper's balanced pool. So we have 70% of the portfolio in growth assets, such as shares, for example. Now at the age of 55, we had decided that 55 is not a bad age that the typical member, or if you like our default member, to at least consider starting to gradually reduce their exposure to risk, in particularly reduce their exposure to growth assets. So the way the lifecycle strategy whirs into action, is that when you turn 55, the birthday present you get from Sunsuper, is that our administration platform will start to gradually de-risk you from that point. So in 120 monthly steps, over the next decade, you will go from having 70% of your portfolio in growth assets, because you'll be in our balanced pool, so that by the time you're 65, you'll still have growth assets, because you still need to generate long-term wealth, we all hope to live a long time, but you'll have 10% of your portfolio in cash, you'll have the other 90% invested in our retirement option. And what that means is that by the age of 65, you'll have about 45% of your portfolio in growth assets, such as shares. Now, again, that to me and to Sunsuper, that is a very sensible, common sense solution, which suits the vast majority of My Super default members. Call it, those members who are disengaged with their super, for whatever reason. We have a duty to act in their best interests. And we think that sort of common sense solution makes sense for a large number of members, but again, everybody is different. And so the ideal solution for you is not necessarily the ideal solution for the next member. So if in doubt, please also get in contact with us and seek some advice.
Joshua van Gestel - Absolutely, and I think it's very important to again, think that many of our members are just on that path, that we are looking at that transition for them between 55 and 65. How far into that transition are you Brian?
Brian Parker - Further than you I would say.
Joshua van Gestel - But I do think, again, as you mentioned, there are a large number of our members who are quite actively involved in their own investment decisions. And it is important to this question that's come through from Daniel, that certainly Daniel, if it is something that you're engaged with or that your colleagues are engaged with, do reach out to us to explore your own requirements, what you're wanting to achieve with your investments. And we can make sure that we're on the right path for you. Phyllis has come through and asked, is the removing of the $450 monthly threshold that the government's announced in the budget, also applicable to a minor who works less than 30 hours per week? Minors will still be required, and I mean, younger workers, not people who work down the shaft, they will still be required to make that 30 hour requirement. So we are seeing that removal of the $450 threshold each month really be something the government's recognised as I said, that there are 200,000 people in casual employment, and a significant number of those are recognised to be women that really just don't get any superannuation guarantee coverage that this is going to benefit. Teifi, I might throw one to you that I'm just going to off the cuff, but I did want to get your own reflection, we talked a little about the budget in October, made a number of announcements around stapling, it made announcements around this focus of accountability on funds. We've maybe seen in successive budgets over the last few years that the government's also maybe allowing a bit more flexibility for members in terms of choice, in terms of flexibility with making contributions to their super, do you yourself, where do you say that the industry's going to have to itself raise to almost these new standards? Or do you think that in some sense, the industry was already working towards that?
Teifi Whatley - That's a good question, Josh. And it's probably a combination of both, I think. Certainly, the government has been working towards, looking to the industry to deliver better outcomes for members. Their language is about member outcomes and putting the responsibility back on the industry in order to drive those outcomes for members. So certainly their language has been about that. The obligations that they are seeking to put on the industry. If you just take one of those announcements out of the October budget, funds already have an obligation to act in members' best interests. The announcement that was made in the October budget was to act in members' best financial interests. So they've added a word. Now, the industry would argue, we're already doing that, we already have that obligation, I guess it's another statement by the government to say, we're looking at you, you are here in order to truly act in member's best financial interests, to give them the best possible outcome. Certainly, as they think about consolidation in the industry, stapling is another one of those things to contribute towards that. We are going to continue to see the industry evolve and consolidate. Most of the conversation that has been coming from the government really is driven by that. There are more obligations being put on in terms of reporting, that funds are required to report to the regulator. So there is more information going backwards and forwards. All of these things will put demands on funds, which ultimately will mean, that they will want to be able to increase scale in order to drive those efficiencies. So it is going in that direction, I think. And that was certainly one of the decision points for Sunsuper and QSuper to say, where are the real benefits here? First and foremost, these two organisations coming together, we have to be able to tangibly see what the benefit is for members. It has to be of benefit to Sunsuper members, of benefit to QSuper members and of benefit to the members of a combined entity, being the merged fund. So more and more, I think we will continue to see that. And ultimately, that is why we are here. We come to work every day for our one and only important stakeholder, being our member, and to drive those outcomes for them.
Joshua van Gestel - And I think I'll give you the last word on a question in a moment, Brian, but I think that's where it's important that that's in our heart and soul, that focus of member, they are our only stakeholder. And that is also the case for Q, it's a meeting of minds and a meeting of common belief, which I think is incredibly important in this time of change. Brian, I'm going to hand a question to you that, and we are going to finish on this, that's really, I think, topical at the moment. And Maria asks does Sunsuper invest in cryptocurrencies? And I know the direct answer to that, but probably the second part of her question is the important one, why not?
Brian Parker - Well, the answer is no, no we don't invest in cryptocurrencies. I suppose the best way I can answer it is that our job is to generate the best net returns we can for members. And we are a long-term investor. And our preference overwhelmingly is to invest in assets the generate an income, that we can generate an income, especially a long-term income stream for members. So things such as shares in the form of dividends, bonds in the form of interest, property and infrastructure in the form of rental returns, et cetera. Private equity in the form of dividends and capital gains. So we really are about generating long-term income streams for members. And overwhelmingly, those assets are assets that are transparent, that we can look at the income they're likely to generate, and we can actually assign a value to those assets that we would be prepared to buy those assets at on behalf of our members. So that kind of transparency, that kind of transparent income, and the ability to work out what we think is a fair price to pay for assets, we think that's important. Cryptocurrencies have none of those features. There is no income, you basically buying these assets on exchanges that are, shall we say, somewhat opaque. I don't know who runs them, they're unregulated. These are highly speculative assets that are virtually impossible to value in any transparent way. If I can go one step further and be so bold as to say, that the people who use these so-called currencies to pay for things, are in many cases, people involved in the illegal arms trade or in drug dealing. Do you really want your Superfund investing in these things at this point? We think the answer to that is no. Now, do we monitor what's going on in these markets? Yes, we do, as do our managers. If these currencies were to become more transparent, perhaps more open, perhaps regulated, perhaps if they were able to be used to buy things or to pay tax with, for example, that would give them a credibility, which today none of them have. Whether they gain their credibility over time, I think is still an open question. But for the time being, no, we don't invest in cryptocurrencies and at least in the near term, nor are we likely to. But again, we will watch these currencies and see how they evolve. But at this stage, no, we prefer assets that generate income, that are appropriate, that we can actually assign a value to. And that are not highly, highly speculative.
Joshua van Gestel - Thank you, Brian. And I think it's fair to say any investment that can move by a great deal overnight just based on one man's tweet is probably not the safest place. On that note, I would like to thank you all for taking the time to be with us today. I know it is a large amount of information we've gone through. Especially, in the lead up to the 1st of July, you will hear more from us, both in terms of your obligations that we know, but also those obligations that we are expecting may come into place in some form, or will come into place in some form regarding stapling. In the meantime, though, we wish you a very safe and happy end of financial year. And we do look forward to seeing you again in the future, hopefully face-to-face. Thank you, Teifi, thank you, Brian.
Brian Parker - Thank you Josh.
Joshua van Gestel - Have a great afternoon.
Teifi Whatley - Thank you Josh.