Whilst the results of the actuarial review to 31 December 2008 were reassuring, the Trustee recognised that although it’s not expected, if markets continue to perform below long-term expectations, it is possible that the DBD’s assets may become insufficient to pay members’ benefits in full.

As such, as a precautionary measure, the Trustee has formally advised all DBD and DBD pension members that the process described in Clause 34 of the Trust Deed has commenced.

The Clause 34 process provides the Trustee with a set process for responding to a situation where the Trustee forms the view that the Fund’s financial position “is or may be insufficient to provide benefits payable under the Deed”.

This process involves three actuarial investigations of the DBD over a period of at least four years, the first causing the clause to be invoked and two further investigations to fully understand the ongoing financial position of the DBD.

If, at the end of this period, and after the third actuarial investigation, the DBD is considered to have insufficient assets, the Trustee will be required to reduce members’ benefits on a fair and equitable basis.

As a result of the Trustee’s decision, there will now be a period of at least four years (starting from June 2009) during which the DBD will be closely monitored and two further formal actuarial reviews will be conducted.

It’s important to understand that there are no current plans to reduce the benefits of DBD members.

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, it is unlikely that there would be any impact on members’ benefits.

So, whilst we feel it is important for all members to understand this scenario, we would like to reiterate that the decision to initiate Clause 34 is a precautionary step. It merely prepares UniSuper for a circumstance that may occur, but is currently considered unlikely. The Trustee believes that at the end of the period it is likely that no action will be required.

Some members may recall that this process was initiated in 2002/03. In practice, however, UniSuper never needed to reduce benefits because of the subsequent market recovery.

We understand that the current investment market conditions are unsettling to some members. However, UniSuper remains committed to ensuring the long-term financial health of the DBD and to delivering your full benefit entitlements.

We will keep you informed of any future developments as we seek to prudently manage your retirement savings through this difficult market period.
 

 

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