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DBD Update

An important update on UniSuper’s Defined Benefit Division

These pages are designed to keep you up-to-date with the financial health of the Defined Benefit Division (DBD) and provide you with important information and updates.

UniSuper has initiated Clause 34 of the Trust Deed

Following the Fund Actuary’s formal triennial review of the DBD as at 31 December 2008, UniSuper has, as a precautionary measure, initiated, Clause 34 of its Trust Deed.

Clause 34 provides a process for the Trustee to respond to prolonged market downturns and maintain the ongoing health of the DBD. Ultimately, if the Trustee considers it necessary, this Clause provides a mechanism to reduce members’ benefits.

Importantly though, UniSuper can assure you that your DBD account and/or pension continues to accrue and be paid in accordance with the Fund’s design and there are no current plans to reduce any member’s benefits.

Actuarial review of the DBD now complete

As set out in the Trust Deed, a formal actuarial review of the DBD is conducted every three years. This review makes a full assessment of the DBD’s financial position and its ability to pay members’ benefits as they become due. 

The Fund’s Actuary has now completed his review of the financial position of the DBD as at 31 December 2008. The report was considered by UniSuper’s Trustee in June 2009 and showed the DBD’s financial position as it stood at the end of December 2008 and its expected position over future years.

Reassuringly, the Actuary confirmed that on best estimates, the DBD’s assets and future contributions are expected to be sufficient to meet current and future benefit payments.
 
As at 31 December 2008, we estimate:
More recently, at 31 March 2010, UniSuper estimates that the ABI and VBI were 107.9% and
94.3% respectively.

Why has Clause 34 been initiated?

Whilst the results of the actuarial review were reassuring, the Trustee recognised that although it's not expected, if markets continue to average below long-term expectations, it is possible that the DBD’s assets may become insufficient to pay members’ benefits in full.

As such, the Trustee is now in the process of formally advising all DBD members that it has formed this view and that the process set out in Clause 34 of the Trust Deed has commenced.

As a result of the Trustee’s decision, there will now be a period of at least four years during which the DBD will be closely monitored and two further formal actuarial reviews will be conducted. If, at the end of this period, there has been further deterioration in the funding position, the Trustee may be required to reduce benefits on a fair and equitable basis.
 
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Some important points about the DBD

  • Despite market volatility, all of our members' benefits are continuing to accrue and be paid in accordance with the Fund's design and there are no current plans to reduce any members' benefits.
  • As a precautionary measure, the Trustee has invoked Clause 34 of the UniSuper Trust Deed. This Clause prepares UniSuper for an extreme circumstance that may occur, but is considered unlikely at this time.
  • Although the Trustee has formed the view that there is an increased risk that assets may become insufficient, we would like to reiterate that benefits would only be reduced in extreme circumstances. For instance, if the ABI and VBI remain at current levels or only marginally decline during the monitoring period (lasting at least four-years), it is unlikely that there would be any impact on members’ benefits.

 

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