1. Bank of New Zealand Officers’ Provident Association
Staff Superannuation Scheme

2. You now have a choice

3. Member Choice You now have a choice
The aim of this presentation is to introduce you to Member Choice investment options
Member Choice

4. Member Choice You now have a choice
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Member Choice

5. What should you consider?
What you should consider
What should you consider?
Member Choice

6. What are your investment options?
What you should consider
The options - what are they?
What are your investment options?
Member Choice

7. How do you choose the right option for you?
What you should consider
The options - what are they?
How do you choose?
How do you choose the right option for you?
Member Choice

8. First, let’s think about what you should consider during this process.
The options - what are they?
How do you choose?
First, let’s think about what you should consider during this process.
Member Choice

9. Consideration of these factors will in part determine
Every Member is different
- You should consider
- other investment
assets/liabilities
- your age
- level/security of income
Consideration of these factors will in part determine

10. Every Member is different
- You should consider
- your approach to volatility of returns
- other investment
assets/liabilities
- level/security of income
- your age

11. Every Member is different
- You should consider
- your age
- your approach to volatility of returns
- other investment
assets/liabilities
- level/security of income
Do you prefer consistency in your return or will you accept ‘ups and downs’ in the return to achieve a higher return over time

12. Every Member is different
- You should consider
- your age
- your approach to volatility of returns
- other investment
assets/liabilities
- level/security of income
Let’s look at the relationship between an asset class and its volatility of return

13. As you can see there are four main asset classes
Volatility vs Return
High
Shares
Property
Risk
Fixed Income
As you can see there are four main asset classes
Cash
Low
Low
High
Return

14. Volatility vs Return
High
Cash investments offer a lower level of volatility of return than the other asset classes
Shares
Property
Risk
Fixed Income
Cash
Low
Low
High
Return

15. Volatility vs Return
High
Shares
Cash carries less risk than the other asset classes, but the return is expected to be lower.
Property
Risk
Fixed Income
Cash
Low
Low
High
Return

16. Let’s look at some past OPA gross returns from cash.
Volatility vs Return
High
Shares
Let’s look at some past OPA gross returns from cash.
Property
Risk
Fixed Income
Cash
Low
Low
High
Return

17. As you can see the returns were positive within a range of about
CASH
OPA gross returns
As you can see the returns were positive within a range of about
5% – 10%
Expectation is that the return will be in line with a 90 day Bank bill rate
Past performance should not be taken as an indicator of future performance

18. Volatility vs Return
High
Fixed income offers moderate potential return and less volatility in return than shares.
Shares
Property
Risk
Fixed Income
Cash
Low
Low
High
Return

19. suggesting a higher degree of volatility of return than cash
FIXED INTEREST
OPA gross returns
The return is more up and down than cash. The range in which it fell is between
-10% & 20%
suggesting a higher degree of volatility of return than cash
Global returns include a hedge (100%) to 2008
Past performance should not be taken as an indicator of future performance

20. Shares offer a higher potential return but with greater volatility
Volatility vs Return
High
Shares
Property
Shares offer a higher potential return but with greater volatility
Risk
Fixed Income
Cash
Low
Low
High
Return

21. SHARES
OPA gross returns
As you can see shares can offer a high return but also a negative return.
The range these returns fell into were as low as –37.9% and as high as 51.8%
Overseas returns include the hedge at various levels
Past performance should not be taken as an indicator of future performance

22. Volatility vs Return
High
If we show the returns together we can see how each asset class varies in its returns
Shares
Property
Risk
Fixed Income
Cash
Low
Low
High
Return

24. Volatility vs Return In summary High Shares Property Fixed Income Cash
Risk
In summary
Fixed Income
Cash
Low
Low
High
Return

25. Volatility vs Return
High
The higher the expected return, the greater the volatility and the higher the risk
Shares
Property
Risk
Fixed Income
Cash
Low
Low
High
Return

26. Volatility vs Return
High
Shares
So if you’re risk averse, you’ll accept more cash and fixed interest in your investment
Property
Risk
Fixed Income
Cash
Low
Low
High
Return

27. Volatility vs Return
If you’re willing to take a higher level of risk you’ll accept more shares in your investment
High
Shares
Property
Risk
Fixed Income
Cash
Low
Low
High
Return

28. Member Choice gives you an opportunity to select a risk / return profile that fits with your circumstances

29. So what are the options available

30. CONSERVATIVE/CONSERVATIVE 17.5
Your Investment Options:
CASH/CASH 17.5
CONSERVATIVE/CONSERVATIVE 17.5
BALANCED/BALANCED 17.5
GROWTH/GROWTH 17.5
There are eight options – The 17.5 options are income tax related (per PIE/PIR rules; refer Investment Statement)

31. Your Investment Options:
CASH/CASH 17.5
CONSERVATIVE/CONSERVATIVE 17.5
BALANCED/BALANCED 17.5
GROWTH/GROWTH 17.5
We’ll examine CASH/CASH 17.5 first

32. Neutral Asset Allocation
CASH/CASH 17.5
As the name suggests these options invests in cash.
Neutral Asset Allocation

33. With a lower risk of negative returns
Volatility vs Return
With a lower risk of negative returns
High
Shares
Property
Risk
Fixed Income
Cash
CASH/CASH 17.5
Low
Low
High
Return

34. Neutral Asset Allocation
CONSERVATIVE/CONSERVATIVE 17.5
These options invest predominately in Income Assets – i.e., Cash and Fixed Interest.
Neutral Asset Allocation

35. CONSERVATIVE/CONSERVATIVE 17.5
Volatility vs Return
Expect a lower return over the longer term than the Balanced and Growth options
High
Shares
Property
Risk
Fixed Income
Cash
CONSERVATIVE/CONSERVATIVE 17.5
Low
Low
High
Return

36. Volatility vs Return
Expected chance of a negative return in this option is 1 in 75
High
Shares
Property
Risk
Fixed Income
Cash
CONSERVATIVE/CONSERVATIVE 17.5
Low
Low
High
Return

37. Neutral Asset Allocation
BALANCED/BALANCED 17.5
These options includes investments in all asset classes
Neutral Asset Allocation

38. Neutral Asset Allocation
BALANCED/BALANCED 17.5
It will provide both income and capital growth.
These options should provide a higher return than cash over the medium term (5 – 7 years, but expect ups and downs in returns including some years of negativity
Neutral Asset Allocation

39. These options offer medium risk and return
Volatility vs Return
These options offer medium risk and return
High
Shares
Property
Risk
BALANCED/BALANCED 17.5
Fixed Income
Cash
Low
Low
High
Return

40. Volatility vs Return
Expected chance of a negative return in these options are, on average 1 out of every 10 years
High
Shares
Property
Risk
BALANCED/BALANCED 17.5
Fixed Income
Cash
Low
Low
High
Return

41. Neutral Asset Allocation
GROWTH/GROWTH 17.5
Investment predominantly in growth assets – i.e., shares and property
Neutral Asset Allocation

42. Neutral Asset Allocation
GROWTH/GROWTH 17.5
These options suit members who are looking for high returns over the long term and accept that returns will be volatile
Neutral Asset Allocation

43. Volatility vs Return GROWTH/GROWTH 17.5
High
Expected chance of a negative return in these options are, on average 1 out of every 5 years
Shares
Property
Risk
Fixed Income
Cash
Low
Low
High
Return

44. Investment Choice
It’s important that you choose the right option for you
But be aware, a 2% or 3% difference in return can mean a lot
For example:

45. Investment Choice
Assume a current entitlement of $55,000 (an OPA average) with regular contributions of $4,000 p.a. for 10 years (compounded monthly)
Future lump sum at 4% net of tax/fees $129,438
Future lump sum at 6% net of tax/fees $151,220
Future lump sum at 7% net of tax/fees $163,459
Lump sums include contributions only; not employer contribution

46. So what next?
Decide how much risk you’re willing to take. Use the calculator provided to help get an indication of what risk profile suits you.
If you’re still uncertain seek independent financial advice
Once you’ve decided on an option, complete the option form
If you don’t select an option you will be assigned to the Balanced/Balanced 17.5.

47. Remember, we are available to answer any questions you may have.
Thank you for taking time to look at Member Choice