As a Defined Benefit Division pension member, your pension payments are calculated using a formula and indexed to inflation for the rest of your life. This means that your individual pension is generally not subject to market volatility. However, the defined benefit pension funds are pooled and invested in a portfolio that is exposed to market risks.

When you first took up your Defined Benefit Division Pension, your final superannuation account balance was pooled with those of other indexed pensioners and contributing Defined Benefit Division members (that is, members of our defined benefit superannuation plan). This pool is known collectively as the Defined Benefit Division (DBD).

In order to meet the future benefit and pension payments of our members, the DBD pool of assets is 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, ensuring that sufficient funds are available to pay the benefits and pensions of individual members as they fall due.

As we have experienced over the past 18 months, 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 pay members’ pensions.

Typically, investment markets don’t have any impact on the Defined Benefit Division pensions. Indeed, throughout UniSuper’s 26-year history, investment market performance has never affected UniSuper’s ability to pay its members’ pensions. Similarly, investment market performance has never affected UniSuper’s defined benefit superannuation account holders.

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 its liabilities. If this happens, the Trustee may be required to reduce the benefits of all DBD members on a fair and equitable basis. In practice, this scenario is considered unlikely.

It’s important to understand that there is no immediate change to your pension as a result of UniSuper initiating Clause 34. Nor are there any current plans to reduce the benefits of DB pensioners or contributing 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 (lasting at least four-years), 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 initiating Clause 34 has been taken as 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 monitoring period it is likely that no action will be required.

 

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