2023 Annual Member Meeting transcript

Start of transcript

Brad Zaknich: Good evening and thank you for attending our Annual Member Meeting. My name is Brad Zaknich. I am a Key Account Manager here at GESB. I am pleased to be your MC and welcome you to our Annual Member Meeting where we will be discussing the 2022/2023 financial year. I would like to begin by acknowledging Aboriginal and Torres Strait Islander peoples as the traditional custodians of this country. We pay respects to the traditional owners and Elders past, present and emerging of all the lands in which we come together and we extend that respect to Aboriginal and Torres Strait Islander peoples including our colleagues and members.

I would also like to acknowledge and thank Esther Conway, our Fund Actuary from Mercer, Patrick Arulsingham from the Office of the Auditor General, Michael Hoang from EY, our external auditors last year and Nicole Oborne from PWC, our internal auditors, for attending this evening along with our Board members and Executive Management Group.

This evening you will hear from three speakers, our Board Chair, our CEO and our Chief Investment Officer. We will then have a question and answer session. We have some questions that have been submitted prior to this evening. If you would like to ask a question and you are watching remotely, please use the ask a question function on your screen. You can find this at the top right-hand side as well as in the footer on the left-hand side.

When you are asking a question, please try to make it a general question where the information could be of benefit to a number of our members. For specific questions relating to your account, we encourage you to get in contact with our Member Services team during business hours either through our online chat facility or our Perth based call centre.

Because of time constraints we may not be able to answer all of your questions during this meeting but we will publish the answers to any questions we can't get to on our website when we upload the recording of this meeting. Please also note that the information in the presentation tonight is of a general nature and is not intended as legal, taxation or personal financial advice. As always, we encourage our members to consult a suitably qualified financial advisor.

I would now like to introduce our first speaker, our Board Chair, Jo Gaines.

Jo Gaines: Good evening. I would like to thank Brad for being our moderator as well as acknowledge my GESB colleagues including our CEO, Ben Palmer, our Chief Investment Officer, Paul Taylor, both of whom you will be hearing from this evening. Your super is your future and providing the stewardship and strategic insight to ensure we can help you achieve a quality retirement is something that as a Board and organisation we take very seriously. Tonight, I am going to touch on some important strategic projects that will help shape GESB over coming years for the benefit of our members.

GESB has a long history of managing the super and retirement savings of current and former public sector employees and their partners. We pride ourselves on providing a positive member experience, an important part of which is listening to your feedback and advocating on your behalf. For some time now we have been working through the requirements to make changes to our governing legislation. Many members have requested the ability to continue to contribute to GESB when making a career move to the private sector or when working concurrently in the private sector.

Under the current legislation, members in this situation need to open a super account with another fund as we are unable to accept contributions from non-public sector employers. This has led to our members paying duplicate fees and charges as well as managing multiple super funds. I am pleased to confirm that changes to the legislation are currently before State Parliament that mean we will soon be able to accept private sector contributions for our members providing you with the option to keep all your super and insurance with GESB, a superannuation fund you know and trust. More information will be provided over coming months so please keep an eye on our website for updates.

In September this year, we achieved yet another strategic milestone on behalf of our members with the introduction of a sustainable balanced plan. At GESB we ensure that we consider environmental, social and governance or ESG factors to improve financial outcomes for our members. Best financial outcomes in ESG considerations are applied across all our funds regardless of what investment option or scheme you are in. However, our research indicated some members would like an even greater focus on ESG matters for their superannuation account.

In response to this, our team has worked to develop a sustainable balanced investment plan for GESB Super, West State Super and Retirement Income allocation pension members. These Readymade plans invest in a diversified range of asset classes that applies stricter ESG criteria and places greater emphasis on exclusions. Our whole of portfolio approach to responsible investing has seen GESB recognised for a second year in a row as a Rainmaker ESG leader making GESB one of the only 16 funds to achieve this accreditation in 2023 out of almost 110 eligible funds.

Rainmaker information is one of Australia's leading financial services research companies and for more than two decades their ratings have been an independent stamp of approval for funds providing excellence in superannuation. Notably, GESB Super and GESB Retirement Income allocated pension have also been awarded the Rainmaker AAA quality rating which recognises these schemes for their quality and outstanding results across benchmarks including organisational strength, communications, investment performance, processes and insurance. These ratings highlight our commitment to helping our members achieve a quality retirement.

Lastly, I would like to mention our Retirement Income Strategy. This important initiative has been developed to provide support, guidance and tools to members who are preparing for and managing their retirement. Our members are our priority and looking after your super with excellence remains our focus. Part of doing this is to ensure that you are supported through your retirement journey and we are committed to providing the high-quality timely information and guidance you need to make informed and confident decisions about your future.

This strategy will help members answer important questions including how much money you may need for a quality retirement, how much you can manage your retirement income sustainably and how to ensure your expected retirement income remains stable. Our Retirement Income Strategy will continue to evolve as the Federal Government implements changes in relation to superannuation funds providing financial advice to members. Details of the strategy and tools to assist you can be found at our website.

In closing, I would like to extend my thanks to you, our members. You are why we do what we do and I know I speak on behalf of the Board, Executive Management Group and employees when I say it's a privilege to look after your superannuation and retirement savings. I would also like to thank the members of our Board, Audit and Risk Committee, Investment Committee and our team of 78 GESB staff for their dedicated work throughout the year. Thank you.

Brad Zaknich: Thank you, Jo. It's always interesting to hear the strategic journey of GESB and the important projects we are working on. We will now hear from our Chief Executive Officer, Ben Palmer.

Ben Palmer: Thanks, Brad. Good evening and thank you for attending our 2023 Annual Members Meeting. My thanks also to Jo for being with us tonight and for your work as our Board Chair. At GESB we understand that our responsibility goes beyond managing your funds and we strive to consistently improve our services, products, processes and communications for the benefit of our near quarter of a million members. This includes developing projects that support the strategic direction of GESB into the future, some of which Jo has just mentioned, as well as operational processes and improvements that benefit our members today. I am happy to be here this evening to share some of the highlights of another successful year at GESB.

As at 30 June 2023, GESB's total funds under management including net member inflows and investment performance increased from last financial year to $36.9 billion. With the core value of sustainable performance, we are committed to providing well regarded value for money products and services backed by competitive performance that meet our objectives. To ensure we are achieving this, we regularly assess our performance across a range of measures as well as against peer funds.

I am pleased to report that our fees continue to be in the lowest quartile when compared with My Super products across the country and our operating expenses relative to the size of our membership base and our assets are also in the lowest quartile and well below industry medians. Significantly, our cost per member has remained relatively stable over the past five years which evidences our efficiency and our ability to provide value for money superannuation products and services for our members. Our size also brings efficiencies in managing our investment portfolio and our management expense ratio, which is the cost to manage our investments, is among the lowest of all My Super products.

As an organisation we put our members first in everything we do to ensure our products and services meet your needs. It was gratifying that in the 2022/2023 financial year our overall member satisfaction with service rating was 90%. We are proactive in assessing what we can improve as well as being responsive to member feedback.

To help with this, during the year, our Executive Management Group was strengthened with the appointment of Natalie Skeggs as Chief Strategy and Member Experience Officer. This role complements the four other Executive Officers and demonstrates our commitment to helping members achieve a quality retirement by delivering excellent service, support, information and assistance to members throughout their journey with us.

We identified over the last financial year that members found the paperwork and process difficult when accessing their super on financial hardship or compassionate grounds. As a result, we made changes to the application form, produced an easy-to-follow fact sheet and simplified our processes to make them more straightforward for our members during challenging times.

We have also made significant updates to our Member Online portal to improve your experience and lay the foundation for Member Online to become a central hub of information, transactions and communications. Our program of work is ongoing but enhancements to date have included making the site easier to navigate, adding a visual summary of account information on the dashboard and depending on the type of account you have, being able to see a money in and money out summary as well as investment performance and insurance information.

Security measures for Member Online have also been strengthened with our members now being asked to complete a simple two-step security check when they request changes to their account. The security of your information remains a priority and we continue to work collaboratively with our suppliers to manage cyber security risks. We have access to industry leading threat intelligence tools that provide real time insights into the cyber security threat landscape. Our networks use multiple intelligence sources including monitoring the dark web to identify and analyse emerging threat patterns and protect our member's data. This is further supported by robust governance and accountability frameworks, audited policies and an ongoing employee training program to reinforce our defences against potential cyber threats.

Acting with integrity is fundamental to who we are, whether it be in terms of our investment practices or in how we conduct ourselves with our members, stakeholders and colleagues. During the year, we prepared and published our inaugural modern slavery statement. GESB opted into this initiative as we believe firmly in the importance of examining our structure, operations and supply chain so we can understand our exposure to modern slavery risks. We are committed to regularly reviewing and updating our modern slavery statement to share our ongoing work in this important area.

Improving the superannuation outcomes for Aboriginal and Torres Strait Islander peoples remains an important focus area and our commitment to reconciliation is an ongoing and collaborative process. In May this year, we were pleased to receive Reconciliation Australia's endorsement of our third Reconciliation Action Plan. The plan develops and expands upon the achievements, strategies and relationships formalised in our previous plans and includes the continued provision of free access to the First Nations Foundation's My Money Dream Financial Literacy Program to help our members learn about budgeting, banking, insurance and superannuation.

As we look to the future, our focus remains firmly on helping our members achieve a quality retirement by improving the member experience, simplifying superannuation, delivering competitive long-term returns and maintaining our low fees so more of our member's money stays invested in their future. I would like to take this opportunity to acknowledge our Board for their support, strategic oversight and direction. I would also like to thank our staff. We're a small and tightknit team and the contribution every person makes is valuable and appreciated.

Finally, thank you to you, our members, for taking the time to attend this meeting. I look forward to answering your questions at the end of the presentations. Thank you.

Brad Zaknich: Thank you, Ben. It's certainly been a year of achievements for GESB and our members. I'd like to now introduce our Chief Investment Officer, Paul Taylor.

Paul Taylor: Thank you, Brad. It's a pleasure to be here. Tonight, I'll summarise investment highlights over the year and what this means for long term returns. I'll also provide an update on our climate change commitments as well as offer an insight into current investment market conditions and what this may mean going forward.

Over the past year and the three years to 30 June 2023, all Readymade plans achieved positive returns. The performance of growth plans was particularly strong over this time and returns from other plans were solid. These returns are gratifying, especially given many plans achieved negative returns in the previous financial year and this year's returns have more than offset these losses. This reinforces that super is a long-term investment. You build your super over a working lifetime and the very nature of investing means there will be ups and downs along the way, but if you can tolerate variable returns from year to year then strong long-term outcomes can be achieved.

Another notable outcome was that GESB's performance was competitive against other superannuation funds. When compared to the performance of the top 50 superannuation funds as defined by independent research provider SuperRatings, the financial year returns of My GESB Super and the GESB Super Conservative plan were in the top half of comparable superannuation fund returns. The conservative plan's return of 5.3% was particularly strong being in the top 25% of comparable products.

Why did plans perform the way they did? The most important factor that drives the performance of plans is underlying market performance of different asset classes. This graph shows the performance of major asset classes over the one and three years to 30 June and illustrates the large variability in asset class returns over these time periods. Share markets achieved very strong returns over both one- and three-year periods which is the main reason growth plans have performed so well over this time.

Bonds, on the other hand, have achieved returns close to 0% over the past year and negative returns over the past three years. This is due to the rapid rise in interest rates in response to high inflation causing the prices of fixed interest securities to fall. The rise in bond yields has also negatively impacted listed property investments.

Cash returns have been significantly higher this year than they have been in the recent past. Although many cash investments are yielding close to 5% at present, the 2.9% shown in the graph represents the return over the full financial year. It is hard to believe that the official cash rate set by the Reserve Bank of Australia was only 0.85% as at 1 July last year and just 0.1% two months prior. This rapid rise in cash rates has improved the returns from cash investments over the 2022/2023 financial year and the 2023/2024 year to date.

This next graph compares how GESB has performed in each asset class against market returns over the past three years. GESB has outperformed the market in Australian shares, international shares, private equity, listed property, listed infrastructure, bonds and cash. This is due to the performance of GESB's selected investment managers across various asset classes and is a primary reason for above benchmark returns of Readymade and Mix Your plan options. Achieving above benchmark returns on a consistent basis is what we aim for and it was pleasing that we have delivered this over the past three years.

Now, let's turn our attention to what this means for long term performance. These graphs show the majority of our Readymade plans against their respective CPI plus return objectives. These are measured over different time periods reflecting the minimum recommended time horizon for each plan's risk profile ranging from rolling 10 year periods for growth plans down to rolling five year periods for conservative plans.

The relatively flat, though increasing, pink line shows the primary return objectives which is CPI plus 4% per annum for the most recent period for growth plans, CPI plus 3% per annum for My GESB Super, My West State Super and RI balanced plans and CPI plus 2% per annum for conservative plans. The other coloured lines on the chart shows the actual rates of return achieved by these investment options over time. The graphs show that performance can fluctuate from year to year but most of the time our plans have achieved their objectives, but this will not occur over every year.

Growth plans have performed particularly consistently above objectives over the past five years but were slightly below over 2016 and 2017. My West State Super, My GESB Super and RI balanced plans have performed close to or above benchmarks over the past eight years, but slightly below over 2013 and 2014. Conservative plans were consistently close to or above objectives over all time periods shown up to 2022, but below more recently. This shows that we have a high level of consistency in meeting objectives but recognises there are expected to be periods from time to time where objectives are not met. It also highlights that in periods where objectives are not met, they have been followed by periods of strong outperformance.

We also consider fees to be an important aspect of investing as they have the potential to erode long term returns. The graph shows our investment fees compared with other superannuation funds based on a $50,000 account balance, which illustrates we have highly competitive fees. Our intention is not to be the cheapest fund as this may limit our ability to invest in a diversified range of high-quality investments and add value over benchmark returns. However, we have consistently been one of the lower cost providers of superannuation and our strategy is for this to continue.

Finally, I would like to discuss our progress towards our climate change commitments. Jo has already spoken about our new sustainable balanced plan, but I'd like to spend a bit of time talking about our journey to net zero carbon emissions at the overall fund level. For context, I will briefly explain our general approach to considering climate change impacts in our investment portfolios.

First and foremost, we make investment decisions based on what is in the best financial interest of members. This approach supports our purpose to help members achieve a quality retirement. Secondly, we believe environmental, social and governance factors, including climate change, present both investment risks and opportunities and it is appropriate to consider such factors to achieve the best financial outcomes for our members.

Consistent with this, the Board has committed to transitioning our investment portfolio to net zero carbon emissions by 2050 and we have interim targets to check our progress. With that in mind, our focus at this stage is within Australian and international listed equities. These asset classes represent around half of our assets and are therefore significant to our commitments. The Board has an interim target for our listed equity portfolio to reduce carbon intensity by 45% by 2030 from a 2020 baseline. We are tracking well against this target with a 31% reduction as at 30 June 2023.

Given the strong performance results outlined earlier, these carbon emission results support our approach of achieving returns in the best financial interest of members and a gradual prudent transition to carbon neutrality. The 45% interim target was reviewed by the Board during the financial year and the target was reaffirmed. While our current target is based on Scope 1 and 2 emissions, we are aware that Scope 3 is also important to our net zero commitment. We continue to monitor the climate-related reporting requirements which include Scope 3 and plan to further improve our climate change reporting over time. If you would like to learn more about ESG approach, I encourage you to look at the responsible investing page of our website.

Now, the question is where to from here? Since 30 June, share market performance has been volatile. Despite this, as of today, returns from the majority of Readymade plans have been positive for the financial year to date with conservative, balanced and growth plans performing quite well.

Going forward, there are several reasons for our optimism over the medium term including that inflation appears to have peaked in the current cycle. Falling inflation reduces the need for large interest rate rises and this is beneficial for many asset classes. Linked to this, cash and bond yields are higher than they have been for many years and offer returns above expected inflation over the medium term. So, while bond returns have been a drag to performance over the past three years, we are more optimistic about that performance on a forward-looking basis.

That said, risks do remain. Geopolitical risks are ever present and we are conscious that conflicts within and between countries can have a negative impact on share market performance.  Additionally, while inflation has been coming down, it remains above Central Bank targets and there is a risk that we haven't seen the end of interest rate increases and this could lead to adverse economic and investment impacts. In weighing up these factors we believe our long-term strategic asset allocations remain appropriate for meeting our return objectives and that holding exposures relatively close to long term targets remain appropriate at this stage. This, however, is continually reviewed and could change at any time.

On that note, it has been a pleasure to provide this update and I am looking forward to addressing your questions shortly. Thank you.

Brad Zaknich: Thanks, Paul. We will now move into the question and answer section of tonight's meeting. I will begin by reading some questions we received from members prior to this evening. If you would like to ask a question that you have not already submitted, please use the ask a question function now. I will be reading the questions and directing them to the most relevant person and we will get through as many as we can. Answers to any outstanding questions will be available on our website over the coming weeks.

Now, we have had some questions come through that are more of a member-based level so for those questions they will be answered in due course, but in the meantime, we will go through the list of questions we have got here. The first question is, do you have a schedule to run regional information and Q&A sessions face to face for members in 2024? GESB has for many years actually been running seminars in the regional areas. I think we have eight scheduled this year and continue to do so in years to come. If, however, you do work for a regional office in the State Government, please feel free to contact your HR person, whoever might be dealing with your wellness program and get them to get in contact with GESB. We have got a Key Account Management team who conduct these seminars. We would be more than happy to try and address your concerns whether it be via webinar or face to face while we're in those areas. Hopefully that answered that question.

Next question. Whilst GESB's introduction of a sustainable investment option is a welcome step, it could be seen as greenwashing as it deflects from the fact that the vast majority of member funds are still exposed by default to unsustainable carbon intensive companies, $3 billion. Does the welcomed focus on ESG not serve to highlight the unsustainable and unethical nature of much of the rest of GESB's investments? Paul, this would be a question for you.

Paul Taylor: Thanks for that, Brad and thank you [Jane] for the question. There are a few points that I would like to I guess respond to that. One is, as I mentioned, that the decisions that we make in investments is for the best financial interest of our members. Having said that, we have made commitments to reduce our carbon intensity of our portfolio and ultimately net zero carbon emissions and as the presentation that was gone through shows that we are tracking extremely well against that with a 31% reduction against our 45% target. That's only over around about three years that we've achieved that so we do continue to reduce that.

The other point I would also like to make is that our approach isn't just based on divestment. The investments that we do make are in listed shares and if we sell the shares someone will buy it and it actually doesn't have any underlying impacts. So, divestment alone, although it can send a message and, in some cases, if it does get to that then divestment is possible, but we engage with investment managers who have, you know, engage with those investee companies like the various fossil fuel companies, with their board and management, to ensure that improvements are being made along the way. We take that approach of not just divestment but actually more engaging with those companies.

As you mentioned, we have launched a sustainable balanced plan. We have had members request such an option, hence we did launch it, which we see as a positive development. Ultimately, if our members all switch to that option, then by extension that will mean that there will be a lot less in fossil fuel companies. From our perspective, the way we do consider those climate change commitments and we have been meeting our targets in that respect so far. Thanks, Brad.

Brad Zaknich: Thanks Paul. We do have another one for you coming up. After last year's members meeting, GESB disclosed that it voted for Santos and Woodside's inadequate climate plans in 2022. Had GESB assessed these companies' climate plans and why does the fund believe they are worth supporting considering each company's oil and gas growth plans would see an increase in emissions of 40% by the end of the decade?

Paul Taylor: Yes. Thanks, Brad, and thanks for the question as well. Our proxy voting is undertaken by our appointed Investment Managers on behalf of GESB and we do believe that they are in the best place to assess the vast number of, I guess, possibly competing factors in what is in the best financial interest of members. So yes, we disclosed and said we are very transparent as an organisation where if you do ask for what our votes are we will reveal those votes to you.

It just flicked on another question there, but yes, in relation to those specific factors, as I said, we vote, well our Investment Managers vote on our behalf to what is in the best financial interest of members in line with our ESG policies and in line with our climate change commitments. As I said, we are committed to reducing the carbon intensity of our portfolios by 45%. To date we have been doing that and our portfolio decisions that are made on our behalf are certainly reflective of those.

Brad Zaknich: Thanks again, Paul. Next question. I would like to find out more about the insurance policies that we take up. How does GESB manage the process and deal with issues such as complaints and queries regarding discrimination in the process and if false statements are made by the assessors of the claim to not pay our claims? As a member, are we taking up true insurance policies or is the intent not to pay them out? I would also like to discuss this issue with senior members of GESB. Ben, I will let you take this one.

Ben Palmer: Thanks, Brad, and thanks for the question [Harj]. One of our core insurance principles is that the insurance we provide - well, there's a number of them. Firstly, we provide cover for all members of the WA public sector, that it represents value for money for all our members particularly over a lifetime of employment earnings and that it's insurance you can rely on most importantly.

In terms specifically of the questions, how do we deal - how do we manage processes and deal with issues and complaints? Well, we take a complaint as a member expressing any dissatisfaction with the service they have received whether that's simply in passing on the telephone, in a conversation with one of our consultants. We don't require the member to - we don't say do you wish to formally lodge a complaint? We log and treat every expression of dissatisfaction with the fund as a complaint.

Then we have a multistage process in terms of a front-line complaints resolution process which is then if the member is not satisfied with that outcome, it can be escalated to an internal review within a GESB team which is independent of the frontline process. If the member is still not comfortable with that outcome, it can be - we have opted into the Australian Financial Complaints Authority regime so members can escalate complaints after the fund has responded through to AFCA. So, that's our complaints process.

In terms of some of the elements of your question, true insurance policies, it really goes back to that principle of insurance you can rely on. I can absolutely categorically state that there is no intent to not pay an insurance benefit to which a member is entitled. I actually describe our insurance management and claims management process of trying to find avenues to pay an insurance claim as opposed to an avenue to try and find a way to not pay an insurance claim. I genuinely believe it's a very strong and differentiating feature of how GESB operates.

In the office here in Perth, I sit adjacent to our insurance product specialist and anything that doesn't look right either from an assessor's - from the information we are receiving from the assessors or from the outcome of the insurance claim, even from a perspective of this, does this sit comfortably with the benefit and outcome we are trying to provide our members, we will review and we will get involved and we will challenge the assessors. We will engage with the insurer to ensure that the appropriate outcome is achieved.

Unfortunately, that doesn't mean all claims are paid. There are elements of cover that not all circumstances are eligible for a benefit, but our pay-out rates are extremely high by industry standards. As I said, we take complaints and claims management extremely seriously and we are very committed to providing good value for money insurance that you can rely on in a time of genuine need.

Brad Zaknich: Thanks, Ben. Next question. Another one for Paul. How is GESB faring in regards to other superannuation funds?

Paul Taylor: Great. Thanks, Brad, and thanks [George] for the question. Particularly a big thanks for George for sending it in advance which meant I could update my slide deck and my presentation to hopefully cover the majority of this question as well, so I hope you're online there, George. So yes, as I mentioned on the presentation, we have performed well against comparable superannuation funds. My GESB Super has outperformed, is at above average performance as has conservative plans. We have obviously got a lot of different schemes and sometimes they are hard to compare against other superannuation funds just because of their different tax structures, et cetera, so not always a like for like comparison.

I did touch on the sector returns across our main sector in each of those, well, five of those sectors are available in my plan or Mix Your plan options, so anyone with those Mix Your plan options as I said have got very strong performance against the market. Probably, as I said, I'm sort of making assumption there that your question relates to performance. I also touched on fees as well and how we have fared against other superannuation funds in relation to fees obviously being very strong as well in the sense that the fees are well and truly below average as well.

So, getting above average returns with below average fees is really what we are aiming for strategically and we think if we can consistently perform above average over regular time periods and over the very long term the compounding impact of that will be very strong and you will very strong long-term outcomes. Thank you.

Brad Zaknich: Thanks again, Paul, and we will have another one for you though. My West State Super, GESB's biggest option, has almost 10% of its share investments in companies with the biggest fossil fuel expansion plans such as Woodside, Santos, Exxon and Chevron. These plans are at complete odds with the Paris Climate goals and will accelerate global heating to three degrees with catastrophic consequences for life on this planet. Will GESB walk away from these climate wrecking investments in recognition that they do not serve member interest and will blow the carbon budget wide open.

Paul Taylor: Okay, thanks, Brad. So yes, I think a lot of this has been addressed with the answer to the earlier question. As I mentioned, we've got a net zero carbon emission target by 2050 and an interim target by 2030. We don't have any plans at this stage to divest those companies. There’s sort of reasons why we would divest. It goes back to the framework about how we make decisions, so if they no longer became in the best financial interests of members and our Investment Managers came to the view that they weren't in the best financial interests of members, then clearly then divestment could occur.

I guess the other reason why they could occur is if they just became totally inconsistent with our ability to reach the interim target and the 2030 target and the 2050 target as well. If it got to the stage where it just wasn't possible then clearly that would be an avenue as well. As I mentioned before, we have got a sustainable balanced plan where it can almost occur by stealth in a sense that if members do switch to that option, then that will be accelerated because we would sell down more of those shares because that sustainable balanced plan does not - has much tighter criteria around those fossil fuel investments.

As I mentioned before, the idea of divestment won't necessarily change much from our perspective what we do. We take a multipronged attack in terms of engagement with these organisations through proxy voting and ultimately divestment is an option, but as I said, until those factors bear out that we do have exposure to such companies at this stage.

Ben Palmer: If I may add, the carbon transition strategy that we have in place is consistent with the Paris goals. Our core investment approach with climate is consistent with the Paris Agreement. I think a key difference, as I see it, from our core approach with that carbon reduction roadmap that Paul has detailed the great progress we have made on that to date, that takes a whole of portfolio approach or lens and we do feel that's appropriate for many of our members and the core of our membership.

The difference in the sustainable balanced plan is that takes a more stringent view and does apply some exclusions to those more highly emitting companies. As a fiduciary we give our members - we understand that there's a range of needs and preferences in our membership and to allow our members, the beneficiaries of these funds, the ability to express that preference we have the sustainable balanced option. I think it's an important point to note that our core approach does align with the Paris Agreement. We do go as far as having interim targets, 2050 is a long time away and that's why we have established interim targets for 2030 reduction and we are achieving ahead of that transition timeline.

It is important to note, one is a whole of portfolio approach where the plan is certainly to get to that carbon neutrality, it's consistent with Paris Agreement. The other sustainable balanced option does give that option for members who would really like to see those exclusions expressed in their super savings.

Brad Zaknich: Thanks for the answers. We have another investment question, so, Paul, this is with you as well. Why is it that WA doesn't support members to use their super funds to purchase investment properties whilst other states do?

Paul Taylor: Thanks, Brad and yes, this question probably goes a bit beyond investment but more to our product design. I guess maybe just to recap that the way we operate, everything we do is for our members. We aren't here to make a profit. We don't provide any dividends to government. We are here purely for our members. If our members demand something, we will look at it and if it is in the best financial interest of our members then we can implement it. A good example of that is the sustainable balanced plan.

We haven't to date had any demand from my knowledge to create such a plan. I think administratively it would be quite difficult if it was only for a small number of members, but we are here to, as I said, support current and former public servants and to look after their superannuation. It's just something that we haven't had demand for in the past. I don't know if anyone wants to add on the panel here to that response?

Ben Pamer: I wasn't -apologies to the person who asked the question - I wasn't clear if that applied to an individual purchase or something like social or affordable housing which - so perhaps if you're still online perhaps feel free to lodge another question that may clarify that for us and we can respond to that. If not live now, through our website in the next few weeks.

Brad Zaknich: Thanks for that. Next question. What do you see as the future, the next 12 months, for bonds, fixed interest and investments? Paul.

Paul Taylor: Okay. I just have to get the crystal ball polished here, but the way we think about investments is really on that medium- to long-term view, that three-to-five-year view. Fixed interest obviously is an investment which has undergone a period where yields have increased significantly over the past three years. It's now at a level where long-term bond yields are in the order of 4.5%, shorter term yields fairly similar as well. Over the long term that's our general expectation. The current prevailing yield is often a pretty good indicator of what the longer-term performance will be.

On the shorter term, obviously 12 months is a fairly short space of time to assess the performance of a fixed interest investment. You could touch on a few key points around if inflation is a lot higher then what is anticipated? It is anticipated to decline but if inflation stays stickier than normal then there clearly is a risk that bond yields do increase from here and vice versa, if inflation does continue to come down then that could be beneficial to bond returns.

The way I'd encourage you to think about it is that 12 months is a short space of time. Whether you're already retired or whether you're still working trying to accumulate, often there is a much greater than a 12 month time period to which to assess things. Because if it is just a 12 month, if you literally only have a 12 month time horizon, then cash investment is generally what would be more stable. So yes, from a medium to long term perspective, those sort of yield returns that I mentioned before is broadly in line with what we would expect.

Brad Zaknich: Thanks again, Paul. I've got a question for Ben here, it's about insurances. Do automatic contributions towards insurance provide value to members? What percentage of premiums for total and permanent disability and others get paid out to members who make claims?

Ben Palmer: Thanks, Brad, and thanks to [Matthew] for the question. The question refers to automatic contributions towards insurance. I'll interpret that to mean that our members when they join the fund are subject to meeting eligibility criteria. Generally, the vast majority who do meet that criteria are issued with default cover by default, as the name suggests, so that is automatic provision of cover. I think the first point to note is members are always free to opt out of that cover. At any time if you - we encourage you to be aware of and review the level and nature of cover that you have and if you feel that that's not appropriate for your needs then you always - our members have the option to quite easily opt out of the cover and switch that cover off and obviously stop the premiums coming out of their super account.

Does it provide value to members? Our view is strongly yes, it does provide value to members. We regularly review our insurance premium pricing against the benefits that we provide and the nature of the cover that we provide and that analysis demonstrates consistently that the insurance cover we provide compares well against other competitor funds in the industry and also represents value for money for our members. Clearly, we need to assess these things largely in aggregate. We do look at different cohorts on occupation types, gender, et cetera. There is a general rule of thumb in superannuation that 1% of a lifetime salary is an upper limit to what is a reasonable impost of insurance premiums. They're all the benchmarks and measures that we look at in determining that yes, we do believe that our insurance premiums represent value for money for members.

Clearly, value for money is dependent on - or to be value for money it needs to be insurance you can rely on, as I said earlier, which means that when you do genuinely need the insurance it's there and the benefit is available and is paid. I should also add that in the context of the automatic or default cover members can also change any element or pretty much any element of that default cover. You can always contact the fund, contact GESB and change, as I said, you can either opt out of the cover or you can increase it, you can adjust some of the parameters of your insurance cover. The default settings only apply to default cover that is not changed then by the member.

We will respond after this meeting with the percentage of TPD claims paid. I don't have that in front of me, I'm sorry. What I do know is we compare very favourably and our payout rates are higher than industry averages. I am confident in saying that our TPD payout rates are well into the 90s, high 90%, but I won't give you a number because I don't have in front of me but we will provide that in our response on the website in the coming weeks. Thanks for the question.

Brad Zaknich: Thanks, Ben, and I think this might be the last question. It's another investments question. Will earnings for cash account keep up with the bank deposit interest? Paul, that would be for you.

Paul Taylor: Thanks, Brad and thanks, [William] for the question. Probably the short answer is absolutely it should. I might just elaborate that a little bit more and I tried to touch on it with my earlier presentation as well is that there's a lot of different bank deposits out there but if you can roughly think of some sort of savings bank deposit, it might be earning in the order of 4.5% to 5%. The investments that we are, the cash investments, that we are investing are absolutely earning that and above that.

Just in terms of making sure there is a like for like comparison and instead of when we are presenting our returns say that our 12 month returns might only be in the order of 3% to 3.5%, but that's more of a - that's a backward-looking return. As I mentioned in my presentation that what you were getting from cash investments 12 months ago was closer to 1%, now it might be closer to 5%, so on average over the last 12 months you might have only got 3% from your bank deposits but then also 3% is what roughly the superannuation fund, our superannuation fund, cash returns delivered as well and I said, putting it another way, that our shorter term, what we're investing in certainly does do above those deposit rates.

The other caveat I'll mention is it depends on the scheme you're in as well, depending on your tax circumstances. If you are a GESB super member, tax is taken out of your account, tax on earnings, at 15%. Again, if you are comparing to a bank account which hasn't yet taken tax out, which obviously depends on your tax bracket, so it's probably not a like for like comparison. If you're a West State member, for example, or a retirement income member where the tax on those earnings is 0% during those phases, then that obviously is more of a like for like comparison. Just be mindful of those different time periods and also the tax circumstances, but certainly from our perspective the returns we're getting is extremely competitive and relative to what you can get from cash deposits. Thanks.

Brad Zaknich: Thanks, Paul, and that was the last of the - actually, here we go. Well done, Michelle. All right, one more question. Another question about the online retirement planning calculator. ASFA, for those who don't know it stands for Association of Super Funds of Australia, currently specifies a higher rate required in retirement than what the calculator specifies. Do you align the calculator with ASFA? Okay, I'll - do you want me to take it?

Ben Palmer: I'll have a go at that one.

Brad Zaknich: You can do that one.

Ben Palmer: We will - I think the answer to that is we're currently reviewing - so, our calculator is actually very complex, the engine that sits underneath it and again I would encourage people to go on the website and have a look. It's freely available to anyone to access and it does provide a high degree of flexibility in the parameters you can input to see how that is projected to impact your savings in retirement and longevity of your savings in retirement, et cetera.

Sorry for that little plug, Michelle, but to answer your question we are currently in the process - about annually we re-review the underlying assumptions and inputs to the calculator so I suspect it's simply a timing issue. It would certainly be our intent that those retirement standards in the calculator would align with ASFA generally widely recognised industry standards. I think the answer to that is it's simply a timing issue and we're going through the process currently of updating the inputs and assumptions in our calculator so I would expect that to feed through with the latest standards, retirement income standards adequacy from ASFA in the near future. Again, we will provide a more comprehensive response on the website in the coming weeks.

Brad Zaknich: Thanks, Ben. All right, that is the last of the questions so I would like to thank everyone for attending and participating in our Annual Member Meeting. It's been great to hear from so many of you and we hope you found it valuable hearing from our speakers tonight. As I've mentioned, please check our website for a recording of this meeting as well as the answer to any unanswered questions. I would like to remind you that our website is an excellent source of information, updates, news, tools and resources relating to your super and I encourage you to spend some time exploring it at gesb.wa.gov.au.

Once again, thank you for attending our 2023 Annual Member Meeting. Have a good evening.

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