members
DBD and the investment markets
UniSuper’s DBD has successfully helped members prepare, plan and live a comfortable retirement for more than 25 years.
Over the past 18 months, some of the great features of the DBD have been well demonstrated. During this time, benefits have continued to grow and be paid in line with the Fund’s design, despite investment returns for the majority of asset classes being dramatically negative.
Because members’ DBD benefits are based on a formula, the defined benefit component of their super or pension is generally protected from the volatility of investment markets. However, if future investment returns continue to average below long-term expectations, then it is possible that the assets of the DBD pooled fund may be insufficient to meet defined benefit liabilities.
If this happens, your benefit and that of other DBD members may be reduced on a fair and equitable basis determined by the Trustee.
How the Defined Benefit Division is managed
As a member of the UniSuper DBD, your final benefit is determined by a formula that takes into account your age, length of service, contribution levels, employment status and final salary.
All contributions that are made to it by employers and members are pooled together and invested by UniSuper in a diverse portfolio of shares, property, bonds and cash, similar to UniSuper’s Balanced investment option.
This portfolio is designed to grow over time so that sufficient funds are available to pay the benefits of individual members as they fall due – which can be either as a lump sum or a Defined Benefit Pension depending on when you joined.
As we have recently experienced, these investments can and do experience occasional periods of negative returns. On the other hand, they also regularly deliver returns over and above those needed to meet the DBD’s liabilities. This was the case during the four-year period from 2003 to mid-2007 and it effectively meant that the Fund earned a significant buffer, which has helped protect it against much of the investment market volatility we are now experiencing.
A challenging investment environment
The recent global financial conditions have had a significant impact on super funds everywhere. In 2008, 38.7% was wiped off global share markets, and 40.4% was lost on the local share market.
This performance has had an immediate impact on UniSuper’s accumulation super and account-based pension products. And, because of the extent of the losses, it has also had a marked impact on UniSuper’s pool of DBD assets.
In 2009 we have seen some signs of improvement. However, the investment outlook is changing from day to day, and the only thing we can predict with much certainty is that investment markets are likely to continue to be volatile in the short-term.
Unfortunately, if the recent poor performance in the investment markets continues for several years, then it is possible that the assets of the DBD pooled fund may be insufficient to meet defined benefit liabilities.
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This information is general information only and is not intended to be advice. It has been prepared without taking account of your objectives, financial situation or needs. Before deciding to acquire or hold an interest in any UniSuper product, you should consider whether it is appropriate for you and consider the relevant product disclosure document, which is available from your employer or UniSuper.
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