Individual Retirement Plan - Partners in building your financial future

Last year's returns - to 30 June 2009
For more details about the IRP's investment performance over the last year to 30 June 2009 click here to read or print off a copy of the Plan's 2009 Annual Report.

For the year to 30 June 2009, all three of the IRP’s Funds posted negative results. The Funds have varying degrees of exposure to shares and property (both domestic and overseas), which were hit hard by the global sharemarket downturn. So significant was the downturn that even the Stable Fund, with minimal exposure to shares and none to property, was negatively impacted.

The upturn seen since March went some way to improve the year to 30 June 2009 returns (although was not enough to boost the year end return to the positives). However, this positive run has continued into the year and members, particularly those in the IRP Balanced and IRP Growth Funds, will be pleased to see that the recovery appears to continue and interim returns have generally been positive. However, recovery has been patchy and experts warn that just as the global financial crisis has been unpredictable, recovery will be too.

Net Returns (after tax, fees and expenses) for year to 30 June 2009

Stable Fund	Balanced Fund	Growth Fund
-2.40% p.a.	-10.69% p.a.	-17.42% p.a.

Equivalent Gross Returns (before tax, fees and expenses) for year to 30 June 2009

Stable Fund	Balanced Fund	Growth Fund
0.6% p.a.	-9.0% p.a.	-16.3% p.a.

It is important to note that these returns are determined assuming funds have been invested for the full year (from 1 July 2008 to 30 June 2009). For individual members, returns may differ from this, depending on the timing of their contributions invested during the year.

The actual net investment return credited to your member account balances is based on monthly declared returns (see the table entitled 'Monthly Declared Returns (% per month)') and the balances in your accounts each month.

Gross Returns over 3 and 5 year periods (to 30 June 2009)
The following graphs compare the IRP’s Managed Funds’ gross returns (before tax and fees) with those of other managed funds for the past three and five years to 30 June 2009 as reported in the 30 June 2009 Aon Investment Update.

Competitors' returns have been sourced from the 30 June 2009 AON Investment Update.

The charts above show that the IRP Funds have produced competitive returns over both periods. While the performances of all three investment Funds have been a little below the Aon survey median and average returns over five years, the shorter-term three year period has been very pleasing, with all Funds providing returns above both Aon’s median and average manager returns.

Monthly Declared Returns (% per month)

	July 09	Aug 09	Sept 09	Oct 09	Nov 09	Dec 09	Jan 10	Feb 10	Mar 10	April 10	May 10	June 10	July 10
Stable	2.62	1.73	1.04	0.05	0.80	0.53	0.30	0.63	1.48	0.55	-1.05	-0.33	1.12
Balanced	4.03	3.18	1.47	-0.95	1.36	1.33	-0.69	1.00	2.61	0.75	-2.89	-1.29	2.29
Growth	5.04	4.20	1.98	-1.95	1.78	2.34	-1.99	1.23	4.08	0.66	-4.80	-2.35	3.31

These net returns take into account the investment returns achieved by the Mercer Investment Trust's New Zealand 'specialist investment managers', plus any interest on your and other members' contributions that are held in the IRP's bank account (before being invested), less tax and the IRP's expenses. Tax is deducted at 30%, while Plan expenses include audit and bank fees, legal and accounting advice and the preparation of annual reports and other member communications.

The above returns are determined by how the different investment sectors perform and how the managers react within those markets. Each of the IRP's three Managed Funds (Stable, Balanced and Growth) are invested in differing combinations of these investment sectors - see the investment options section for more details.

Performance Comparison
The IRP's performance in the past year - and its performance over longer timeframes - indicate that its returns continue to be competitive with other similar superannuation schemes.

Market surveys of similar investment funds demonstrate how competitive our investment returns are.

Click here to see graphs of our performance:

IRP gross performance against other managers for three and five years ended 30 June 2009
IRP net performance against other managers for one, three and five years ended 30 June 2009
IRP net annual returns credited to Members' Accounts each year

Net returns over the past year, three and five years
Compare the IRP’s Managed Funds' net returns (after tax at 30%, management fees and Plan expenses) with other managers as reported in the Eriksen & Associates Survey (a quarterly market survey of investment managers produced by Eriksen & Associates - an independent investment consultancy firm). Again this emphasises the competitiveness of the IRP's returns - over the longer term, three and five years.

The IRP's returns compared with other managed funds to 30 June 2009 (net of tax* and expenses)
	1 year (% p.a.)	3 years (% p.a.)	5 years (% p.a.)
IRP Stable Fund	-2.4	1.7	3.9
Eriksen Conservative Funds Average	0.0	2.3	3.7
IRP Balanced Fund	-10.7	-2.4	2.3
Eriksen Balanced Funds Average	-11.5	-3.2	1.8
IRP Growth Fund	-17.4	-6.0	0.8
Eriksen Growth Funds Average	-17.21	-6.9	0.3

*Adjusted for tax at 33% up to 31 March 2008 and 30% thereafter.

Source: Eriksen & Associates Ltd, Master Trust Survey Results to 30 June 2009.

Past returns and long-term performance
The following returns have been applied to all members' accounts as at the respective 30 June year-end. They are net returns after tax, the Plan's management fees and Plan expenses.

Net annual returns credited to IRP members accounts for each of the last 10 years (% per annum after tax and fees, and as at 30 June)
IRP Fund	2000	2001	2002	2003	2004	2005	2006	2007	2008	2009
Stable Balanced Growth	6.06 7.65 10.90	2.10 -0.55 -2.71	0.23 -5.05 -9.51	4.05 1.22 -1.38	5.28 8.47 11.55	7.45 7.53 9.21	7.01 12.01 15.12	6.15 8.83 11.45	1.64 -4.35 -9.89	-2.40 -10.69 -17.42

Long - term performance
The average annual net returns (credited to members’ accounts) over the last seven and ten years respectively have been:

IRP Fund	7 years % p.a.	10 years % p.a.
Stable	4.1	3.7
Balanced	3.0	2.3
Growth	2.0	1.1

What actually happened last year?

There were very few “safe havens” for investors last year. Almost all assets, apart from government backed fixed interest securities and very high quality cash type assets, struggled in the tumultuous financial markets.

Returns from the Plan’s investments in international shares were very weak for the first three quarters of the Plan year, as major share markets fell sharply in response to negative economic news. Mid-March finally brought some improvement when better than expected profit results and a surprise upturn in US housing activity saw returns rise.

While the global effects of the recession were still apparent for the remainder of the Plan year, increased confidence in share markets and investors’ willingness to take on more risk saw the improved returns from the Plan’s international share investments continue.

Trans Tasman shares generally followed the trend of overseas sharemarkets but rebounded more strongly over the June quarter largely due to a very strong performance from the Australian sharemarket.

Both Trans-Tasman and international property returns suffered, caught between rising borrowing costs and global financial market volatility. Major factors influencing returns were high levels of debt in many listed funds, a poor economic outlook (which impacts on vacancies and rent levels) and an absence of buyers.

International fixed interest investments also provided mixed returns. Initially investors preferred government bonds (loan securities issued by governments) because of concerns about the solvency of some corporate bond issuers but this was reversed in the second half of the Plan year as corporate bonds came back into favour because of concerns that governments may need to increase their bonds issue to finance the massive costs of economic stimulatory measures (so reducing the value of existing bonds). Despite this, the Plan’s returns from its investments in international fixed interest were sound.

New Zealand fixed interest produced good returns for the first half of the year but weakened later as longer-term interest rates rose.

Cash provided reasonable returns, starting well but weakening later as short-term interest rates hit record lows.

Looking ahead

Are You in the Right Fund?
It is good practice to occasionally review whether you are in the "right" Fund for your particular circumstances. In doing so you need to decide which investment objectives are the most important for you:

if you want higher long-term returns, you will need to be comfortable with increasing risk (negative returns) in an environment where lower market returns will occur.
if you want to minimise the chance of negative returns, you will need to consider a more defensive strategy. Remember, as the year to 30 June 2009 has shown, no Fund is immune to negative returns.

In reviewing your choice of Fund, it's also important to avoid the temptation of making frequent changes in response to investment market movements - you can lose momentum and lose sight of your long-term goal.

The Retirement Commission's Sorted website has a lot of really good information to help you work through what types of investments suit you best - check out the investing section. You might also like to complete one of the questionnaires designed to help you determine what your risk profile.