DBD Update

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The long-term financial position of the DBD is an absolute priority for us at UniSuper.

This section of the website is designed to help you understand the DBD and Clause 34, as well as keep you updated with the latest news and information. Clause 34 does not apply to UniSuper's Accumulation members, Flexi Pension members or to any accumulation component held by DBD members.

While the DBD and Clause 34 of the Trust Deed can seem complicated, UniSuper always strives to communicate with our members clearly and transparently. We have tried to answer the most common questions members have asked on this topic in these pages.

We would welcome your feedback on the information we have provided here.

Please note that the news articles below are ‘point in time’ information and are correct at the date of publication.

 

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24 October 2014 - Latest VBI and ABI

UniSuper publishes quarterly estimates of the Vested Benefits Index (VBI) and Accrued Benefits Index (ABI). These are the key actuarial measures we use to monitor the financial position of the DBD at any point in time. You can read more about these measures and how we monitor the DBD in the section Monitoring the DBD.

It is important to note that the ABI and VBI are based on various assumptions regarding future investment earnings and future salary growth, which will change from time to time. In addition, you should be aware that the VBI and ABI fluctuate constantly, predominantly depending on how investment markets are performing.

The following estimates were made as at 30 June 2014:

Vested Benefits Index (VBI) –    101.70%
Accrued Benefits Index (ABI) –  114.70%

It is also important to note that these figures are provisional estimates at this time and are subject to final confirmation within the 30 June 2014 Actuarial report, which is due to be presented to the UniSuper Board by December 2014.

Taking this into consideration, we are pleased with the DBD’s continued strong performance and resulting improvement in funding measures.

Furthermore, initial estimates at mid-October show that the VBI and ABI are likely to have approximately remained at the levels shown above, demonstrating the resilience of the DBD’s dynamic asset strategy throughout the recent market downturn.

When the UniSuper Board has received the 30 June 2014 Actuarial report, we will update members by displaying the following on our website:

  • finalised 30 June 2014 VBI / ABI figures; and
  • estimated 30 September 2014 VBI / ABI figures.

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23 MAY 2014 - Latest VBI and ABI

UniSuper publishes quarterly estimates of the Vested Benefits Index (VBI) and Accrued Benefits Index (ABI). These are the key actuarial measures we use to monitor the financial position of the DBD at any point in time. You can read more about these measures and how we monitor the DBD in the section Monitoring the DBD

The ABI and VBI are based on various assumptions like future investment earnings and future salary growth, which will change from time to time. In addition, you should be aware that the VBI and ABI fluctuate constantly, depending on such factors as the performance of investment markets. 

The following estimates were made as at 31 March 2014:

Vested Benefits Index (VBI) – 100.9%
Accrued Benefits Index (ABI) – 112.2%

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18 February 2014 - Latest VBI and ABI

UniSuper publishes quarterly estimates of the Vested Benefits Index (VBI) and Accrued Benefits Index (ABI). These are the key actuarial measures we use to monitor the financial position of the DBD at any point in time. You can read more about these measures and how we monitor the DBD in the section Monitoring the DBD

The ABI and VBI are based on various assumptions like future investment earnings and future salary growth, which will change from time to time. In addition, you should be aware that the VBI and ABI fluctuate constantly, depending on such factors as the performance of investment markets. 

The following estimates were made as at 31 December 2013:

Vested Benefits Index (VBI) – 100.4%
Accrued Benefits Index (ABI) – 112.4%

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28 November 2013 - New Clause 34 monitoring period triggered

Following the Actuarial report conducted as at 30 June 2013, and in line with the rules set out in Clause 34 of the Trust Deed, another monitoring period has been triggered for UniSuper’s Defined Benefit Division (DBD).

Under Clause 34 of the Trust Deed, a monitoring period is triggered if the ABI is below 100% or if the VBI is below 95%. You can find out more about the ABI and VBI by visiting Monitoring the DBD.

The following measures were determined as at 30 June 2013 (the date on which the Actuary’sreport was based):

Vested Benefits Index (VBI) – 94.7%
Accrued Benefits Index (ABI) – 106%

Since then, these measures have improved with the ABI was estimated to be 111.6% and the VBI estimated to be 99.9% as at 8 November 2013. 

While we’re pleased with the improved measures, the Board requires an appropriate amount of time to closely monitor the DBD’s financial position, to enable funding to recover over a reasonable period and to make prudent decisions in the best interests of all DBD members. 

UniSuper now has three monitoring periods in progress; one triggered in 2011 and the second in 2012. This new monitoring period will conclude on 30 June 2017. 

Note: Clause 34 of the Trust Deed does not apply to accumulation-style super, such as accumulation benefits and Flexi Pensions.

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22 November 2013 - Latest VBI and ABI

UniSuper publishes quarterly updates of the Vested Benefits Index (VBI) and Accrued Benefits Index (ABI). 

These are the key actuarial measures we use to monitor the financial position of the DBD at any point in time. You can read more about these measures and how we monitor the DBD in the section Monitoring the DBD

The ABI and VBI are based on various assumptions regarding things like future investment earnings and future salary growth, which will change from time to time. In addition, you should be aware that the VBI and ABI fluctuate constantly, predominantly depending on how investment markets are performing.

The following measures estimated as at 30 September 2013 were:

Vested Benefits Index (VBI) – 98%
Accrued Benefits Index (ABI) – 109.7%

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22 November 2013 - End of 2012/13 financial year VBI and ABI

UniSuper publishes quarterly updates of the Vested Benefits Index (VBI) and Accrued Benefits Index (ABI). 

These are the key actuarial measures we use to monitor the financial position of the DBD at any point in time. You can read more about these measures and how we monitor the DBD in the section Monitoring the DBD

The ABI and VBI are based on various assumptions regarding things like future investment earnings and future salary growth, which will change from time to time. In addition, you should be aware that the VBI and ABI fluctuate constantly, predominantly depending on how investment markets are performing.

The following measures determined as at 30 June 2013 were:

Vested Benefits Index (VBI) – 94.7%
Accrued Benefits Index (ABI) – 106%

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5 AUGUST 2013 – UNISUPER BOARD MAKES DECISION UNDER CLAUSE 34

UniSuper’s Board has now made a decision under Clause 34 of the Trust Deed. 

Its decision means that:

  • Benefits that DBD members have accrued to date will not be affected.
  • A change will be made to the way future benefits will accrue.

The change will not take effect until 1 January 2015. 

Important: Accumulation, Flexi Pension, Defined Benefit Indexed Pension and Commercial Rate Indexed Pension members are not affected by this change.

The change will affect the Benefit Salary part of the DBD formula, with salaries to be averaged over five years (instead of three) and no longer indexed by CPI to the date of the benefit calculation.

A detailed explanation of the change, including several examples of the effects and a full explanation about why the Board made this decision can be found here. You can also watch a video explaining the changes here.

The change that the Board has decided on will provide greater confidence that members’ benefits can continue to be paid, fairly and equitably into the future, while preserving the benefits that they have accrued to date. 

UniSuper is currently writing to all DBD members to advise them of this update and will continue updating this website as any new information becomes available.

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9 MAY 2013 – LATEST VBI AND ABI

UniSuper publishes quarterly estimates of the Vested Benefits Index (VBI) and Accrued Benefits Index (ABI). These are the key actuarial measures we use to monitor the financial position of the DBD at any point in time. You can read more about these measures and how we monitor the DBD in the section Monitoring the DBD

It is important to note that the ABI and VBI are based on various assumptions regarding things like future investment earnings and future salary growth, which will change from time to time. In addition, you should be aware that the VBI and ABI fluctuate constantly, predominantly depending on how investment markets are performing.

The following estimates were made as at 31 March 2013:

Vested Benefits Index (VBI) – 94.6%
Accrued Benefits Index (ABI) – 105.2%

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4 March 2013 – UniSuper Board defers decision under Clause 34

The Board has received and reviewed the Actuary’s report into the financial position of the DBD following the end of that monitoring period.  From the date of receiving the actuarial report on 15 February 2013, the Board has six months to decide whether to reduce benefits under Clause 34 of the Trust Deed. 

 

The Board has decided it is prudent to retain the option of making a decision under Clause 34 of the Trust Deed and will therefore continue monitoring the financial position of the DBD and defer its decision for up to six months.

 

The Board is obviously pleased with the increase in the indices (see “Latest VBI and ABI” below), which has resulted from improvements in investment markets in recent months.  However, close monitoring will continue given the volatile market experience of the past four years.

 

If the Board decides that benefit reductions are needed, its expectation based on the current financial position of the DBD is that benefits accruing in the future may need to be changed.  This means that it is likely that the benefits members have accrued to date would not be affected.  Of course it’s too early to express a view about what might happen at the end of the other two monitoring periods which conclude on 30 June 2015 and 30 June 2016.  

 

You can find more information about the difference between past and future benefits here.

 

Alongside improvements to the long-term financial position of the DBD, the Board believes that there are aspects of the DBD that may require modification.  These modifications would ensure the DBD’s continued relevance to the higher education and research sectors.  To this end, the Board intends to consult with key stakeholders, including the Consultative Committee, employers and unions, over the next six months.

 

UniSuper is currently writing to all DBD members to advise them of this update and will continue updating this website as new information becomes available.

 

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4 March 2013 – Latest VBI and ABI

UniSuper publishes quarterly estimates of the Vested Benefits Index (VBI) and Accrued Benefits Index (ABI).  These are the key actuarial measures we use to monitor the financial position of the DBD at any point in time. You can read more about these measures and how we monitor the DBD in Monitoring the DBD.

 

As at 1 January 2013 the Vested Benefits Index was 91.4% and the Accrued Benefits Index was 102.0%. These indices have improved since that date. As at 1 February 2013, the Vested Benefits Index was estimated to be 94% and the Accrued Benefits Index was estimated to be 105%.  

 

It is important to note that the ABI and VBI are based on various assumptions regarding things like future investment earnings and future salary growth, which will change from time to time.  In addition, you should be aware that the VBI and ABI fluctuate constantly, predominantly depending on how investment markets are performing.

 

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1 January 2013 - 2009 Clause 34 Monitoring period now concluded

The Clause 34 monitoring period which was triggered in June 2009 in respect of the December 2008 actuarial report came to a close on 31 December 2012. The Fund’s actuary will now conduct a further review of the financial position of the DBD. No action can be taken under Clause 34 until after the Board has received a report of this review.  A decision whether or not benefit reductions are needed must be taken within six months of receiving the report from the actuary. The ABI and VBI at 31 December 2012 will not be available until the actuary produces the report and presents it to the Board. Members should check this page for any new information regarding Clause 34 and the DBD. Of course once the Board has made a decision whether or not benefit reductions are required under Clause 34, we will write to all DBD members and provide full details.

 

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26 November 2012 – Clause 34 monitoring period triggered

Following the Actuarial Review conducted as at 30 June 2012, and in line with the rules set out in Clause 34 of the Trust Deed, a further monitoring period has been triggered for UniSuper’s defined benefit division (DBD).

 

Under Clause 34 of the Trust Deed, a monitoring period is triggered if the ABI is below 100% or if the VBI is below 95%. You can find out more about the ABI and VBI here.

 

The following estimates were made as at 30 June 2012 (the date on which the Actuary’s report was based):

 

Vested Benefits Index (VBI) – 85.3%
Accrued Benefits Index (ABI) – 92.8%

 

Since then, these measures have improved slightly with the ABI at 95.7% and the VBI at 88.0% as at 19 November 2012. However, there has still been considerable volatility in these funding measures throughout this time as a result of market movements.

 

A number of factors have contributed to the need to trigger this latest monitoring period, including:

 

  • Recent investment performance has been lower than predicted as a result of a fall in global investment markets. Reduced expectations of future investment returns have also adversely affected funding levels.
  • Salary growth within the higher education sector has been higher than expected.
  • Past benefits changes and improvements have contributed to the current funding position.
  • The life expectancy of our membership has increased since the DBD was launched.

UniSuper now has three monitoring periods in progress; the first was triggered in 2009 and the second in 2011.

 

The monitoring period triggered in 2009 is due to conclude on 31 December this year. UniSuper will receive the Actuary’s report early next year, and the Board will then decide whether or not benefit reductions are required. UniSuper is undertaking detailed contingency planning to prepare for a number of possible options once the Board makes its decision.

 

Note: Clause 34 of the Trust Deed does not apply to accumulation-style super, such as accumulation benefits and Flexi Pensions.

 

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25 October 2012 - Contingency planning continues

As the monitoring period due to expire at the end of December draws to a close, the Board and Management of UniSuper are continuing extensive contingency planning to ensure they are ready to act regardless of what the decision may be.  This involves investigating a range of options. 

 

The possible options if benefit reductions are needed page provides an overview of some of the approaches the Board may take to reducing benefits, if this is deemed necessary once the Board receives a report from the actuary after the end of the monitoring period.  At the same time, UniSuper is investigating the possibility of additional contributions as an alternative to benefit reductions, should some action need to be taken.  In the best interests of members and in line with APRA’s requirements, UniSuper will engage with employers regarding the possibility of making additional contributions on behalf of members.  If the financial position of the DBD is unsatisfactory once the current monitoring period concludes, an agreement by employers to make additional contributions could help improve the funding position of the DBD and either prevent, or reduce the level of, any benefit reductions that might otherwise be required.

 

It’s essential to note that no decision has been made to reduce benefits.  UniSuper is carefully watching the level of the DBD’s ABI and VBI, as well as taking advice about, and planning for, a range of possible outcomes. As always, UniSuper has the best interests of all members as its paramount consideration and this matter is our highest priority.
  

 

 

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27 August 2012 – Recent changes to actuarial assumptions

UniSuper's Actuary conducts a valuation of the defined benefit division at least once every three years. At this time, the Actuary has to ensure that the assumptions underpinning his calculation of the ABI and VBI are appropriate. These assumptions include:

 

  • Expected future rates of member resignation, retirement, death and disablement
  • Expected future economic experience including salary inflation, price inflation and investment returns

The Actuary changed the assumptions relating to the expectation of future investment performance as part of his valuation as at 30 June 2012 and this has had a significant impact on the ABI and VBI.

 

Why has the Actuary changed the future investment returns assumption?

Ongoing uncertainty in relation to the global economy has seen investors seeking safer places to invest and, as a result, Australian Government long term bond yields ('long bonds') have fallen dramatically. Long term Government bond yields are considered to represent the 'risk free' rate of return, and expected returns on other assets such as property and equities are typically based on a margin over the long bond yield. Annual yields on long bonds have been roughly 6% over the past two decades, but are now at historic lows of about 3%. The Actuary has determined that a significant fall in the long bond yield has warranted a reduction in the expected returns of all asset classes. Assumptions relating to expected returns are very important as benefits to be paid in the future will be provided by UniSuper's current assets and the future investment earnings on those assets. Although actuarial assumptions have changed in the past, this recent change is significant and has led to material reductions in the VBI and ABI.

In addition to the changes in the actuarially determined investment return assumptions, the DBD's actual investment returns over the June quarter had an impact on the ABI and VBI.
 

 

How does this affect the Board's decision-making?

The ABI and VBI are measures, at a point in time, of the financial position of the DBD and can change quite quickly. For example, since the current estimates (see 'Latest ABI and VBI' below) were made as at 30 June, investment markets have improved considerably. This has had a positive impact on the ABI and VBI, although we can't know precisely the effect (as there are a number of inputs other than investment performance, and these are only updated on a quarterly basis).

However, as at 18 September 2012, the VBI is likely to have increased to approximately 88% and the ABI to approximately 95.5%.

It is desirable to have an ABI greater than 100% to provide a level of comfort that DBD members' accrued benefits can be met by the assets of the DBD. The higher the ABI, the greater the level of confidence that assets will be able to provide for future benefit payments.

A VBI of less than 100% may not, in itself, be a cause for concern, as there is little chance that all members resign or retire on one date. However, the lower the VBI, the greater the risk that the DBD would be unable to provide the benefits of members and pensioners. As with the ABI, a higher VBI level means a higher level of confidence that assets will be able to provide for future benefit payments.

In considering the need to reduce benefits under Clause 34 of the Trust Deed, the Board will consider not just the measures at the time of its deliberations, but may also consider potential changes to those measures in the future. For example, if the measures were expected to increase over time, there might be no need for benefit reductions, or benefit reductions could be lower than might otherwise be the case.

Changes to the ABI and VBI do not mean that there are fewer assets in the DBD or that the asset values of the DBD have fallen. It simply reflects the Actuary's current view of how investments are likely to perform in the future.

It is very important to note that no decision regarding benefit reductions will be taken based on the VBI and ABI as at 30 June 2012 and that the Actuary will review the actuarial assumptions again before conducting an actuarial valuation for the purposes of Clause 34.

 

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27 August 2012 – Latest VBI and ABI

UniSuper publishes quarterly estimates of the Vested Benefits Index (VBI) and Accrued Benefits Index (ABI). These are the key actuarial measures we use to monitor the financial position of the DBD at any point in time. You can read more about these measures and how we monitor the DBD in Monitoring the DBD.

 

It is important to note that the ABI and VBI are based on various assumptions regarding things like future investment earnings and future salary growth, which will change from time to time. A change was made as at 30 June 2012 which impacted the VBI and ABI. You can read more about this above. In addition, you should be aware that the VBI and ABI fluctuate constantly, predominantly depending on how investment markets are performing.

For example, since the estimates below were made as at 30 June, investment markets have improved considerably. This has had a positive impact on the ABI and VBI, although we can't know precisely the effect (as there are a number of inputs other than investment performance, and these are only updated on a quarterly basis).

However, as at 18 September 2012, the VBI is likely to have increased to approximately 88% and the ABI to approximately 95.5%. We will update the website with the quarterly estimates at the end of the current quarter.

The following estimates were made as at 30 June 2012:

 

Vested Benefits Index (VBI) – 85.3%
Accrued Benefits Index (ABI) – 92.8%