Indexed pensions

• Understand indexed pensions
• Commercial Rate Indexed Pension features at a glance
• Defined Benefit Indexed Pension features at a glance
• Pre-1998 members
• Get advice

You can receive regular income in retirement with our indexed pensions. 

If you need help choosing a UniSuper pension, talk to UniSuper Advice on
1300 331 685.

Understand indexed pensions

An indexed pension provides you with a regular monthly income indexed to CPI for the rest of your life without the need to manage your own investments.  (Note: UniSuper could decide to stop adjusting Defined Benefit Indexed Pensions in line with CPI for a period of time or they could be adjusted by less than CPI.)

Generally, you can’t make lump sum withdrawals from an indexed pension. Only in very limited circumstances can you commute it.

As a UniSuper member, you can choose from our:

• Commercial Rate Indexed Pension, and
• Defined Benefit Indexed Pension (only available to members who joined before 1 July 1998 and have remained a member continuously since that date).

Commercial Rate Indexed Pension features at a glance

You can choose from two UniSuper Commercial Rate Indexed Pensions:

• Joint Life Commercial Rate Indexed Pension, and
• Single Life Commercial Rate Indexed Pension. 

The main difference is what happens to your pension when you die. If you have a Joint Life Commercial Rate Indexed Pension, your spouse will receive a reversionary pension for as long as they live. A Single Life Commercial Rate Indexed Pension has the same features as the Joint Life option but doesn’t provide a reversionary pension. 

Features:

• Better than market rates,
• Indexed to CPI on 1 July each year (UniSuper could decide to stop adjusting Defined Benefit Indexed Pensions in line with CPI for a period of time or they could be adjusted by less than CPI),
• A guarantee period
• Monthly pension payments, and
• Income for the rest of your life.

Risks associated with managing the funding of UniSuper’s Defined Benefit Division (DBD)

If you start a Commercial Rate Indexed Pension, your pension entitlements are pooled together with those of other indexed pension and Defined Benefit Division (DBD) members. The DBD is designed on the basis that, in the long term, the investment returns are expected to be sufficient for the DBD to provide UniSuper’s defined benefits, although this isn’t guaranteed.

It is possible that contributions received, together with investment returns (which may be positive or negative), may prove inadequate to fund DBD benefits including Commercial Rate Indexed Pensions. 

It is also possible that, if the experience of the DBD in relation to factors including inflation and/or longevity is worse than expected, the DBD may be inadequate to fund benefits even if investment returns are as expected.

Insolvency risk

A defined benefit fund is subject to special funding and solvency rules under superannuation law.

If the Fund’s actuary discovers that they are unable to certify solvency in respect of minimum superannuation guarantee (SG) benefits, they are required to make a declaration of insolvency. If this occurs, UniSuper must initiate a program designed to restore solvency within five years or wind up the defined benefit fund. If UniSuper were to be wound up, there is a risk any monies payable to you, or on your behalf, would be less than the capital value of your pension.

You need to be aware that if UniSuper were declared to be insolvent that, in the case of Commercial Rate Indexed Pensions, pension payments could be reduced, pensions may not be indexed and/or the guarantee period could be shortened. 

For more information about the risks involved in starting a Commercial Rate Indexed Pension, read ‘Risks of Commercial Rate Indexed Pensions’ in the Your guide to pensions – Commercial Rate Indexed Pension PDS.

guarantee period

The guarantee period is the lesser of 10 years or your life expectancy at the date of commencement.

• Single Life
  If you die within the guarantee period, the residual amount will be paid to your estate as a lump sum. If you die after the guarantee period has elapsed, no residual benefit is payable.
• Joint Life
  If you die, your nominated spouse will receive 100% of your pension for the remainder of their life. If your nominated spouse is receiving the reversionary pension (after your death) and dies within the guarantee period, the residual amount will be paid to your spouse’s estate as a lump sum benefit. 

For more information read, ‘How the guarantee period works’ in Your guide to pensions - Commercial Rate Indexed Pension.

Defined Benefit Indexed Pension features at a glance

A Defined Benefit Indexed Pension is only available to members who joined the Defined Benefit Division before 1 July 1998 and have remained a continuous Defined Benefit Division member since that date.

To open a Defined Benefit Indexed Pension, you can use all or part of your defined benefit component. If you use only part of your defined benefit component, we’ll convert the remaining amount into an accumulation benefit (together with any accumulation component you may have) and transfer it to an Accumulation 1 account.

Find out more in:

• Your guide to pensions - Defined Benefit Indexed Pension
• Super options when you leave your job

Features:

• Indexed to CPI on 1 July each year (UniSuper could decide to stop adjusting Defined Benefit Indexed Pensions in line with CPI for a period of time or they could be adjusted by less than CPI),
• Based on a formula set out in the Trust Deed,
• Monthly pension payments,
• 100% exemption from the Centrelink and Department of Veterans’ Affairs assets tests, and
• Income for the rest of your life.

Risks associated with managing the funding of UniSuper’s Defined Benefit Division (DBD)

If you start a Defined Benefit Indexed Pension, your pension entitlements are pooled together with those of other indexed pension and Defined Benefit Division (DBD) members. The DBD is designed on the basis that, in the long term, the investment returns are expected to be sufficient for the DBD to provide UniSuper’s defined benefits, although this isn’t guaranteed.


It is possible that contributions received, together with investment returns (which may be positive or negative), may prove inadequate to fund DBD benefits including Defined Benefit Indexed Pensions. 

Insolvency risk

A defined benefit fund is subject to special funding and solvency rules under superannuation law.

If the Fund’s actuary discovers that they are unable to certify solvency in respect of minimum superannuation guarantee (SG) benefits, they are required to make a declaration of insolvency. If this occurs, UniSuper must initiate a program designed to restore solvency within five years or wind up the defined benefit fund. If UniSuper were to be wound up, there is a risk any monies payable to you, or on your behalf, would be less than the capital value of your pension.

You need to be aware that if UniSuper were declared to be insolvent that pension payments could be reduced or pensions may not be indexed.

For more information about the risks involved in starting a Defined Benefit Indexed Pension, read ‘Risks of Defined Benefit Indexed Pensions’ in the Your guide to pensions – Defined Benefit Indexed Pension PDS.

Clause 34

In the event of a funding shortfall, Clause 34 of UniSuper’s Trust Deed sets out a mechanism for dealing with the DBD of the Fund which may impact Defined Benefit Indexed Pensions, but doesn’t apply to Commercial Rate Indexed Pensions. If actuarial investigations determine the DBD has, or may have, insufficient assets to meet its liabilities, a monitoring period of at least four years is triggered during which the DBD will be closely monitored, and at the end of the monitoring period, the benefits of DBD members and Defined Benefit Indexed Pension members may be reduced.

There are currently three relevant four-year monitoring periods. 

• The first of these began in 2009 in respect of the 31 December 2008 actuarial review. This monitoring period ended on 31 December 2012. The Actuary is now producing a report for the Board based on the position of the DBD as at 31 December 2012. Once the Board receives this report, it will consider it and decide whether or not benefit reductions are required to help protect the long-term financial position of the DBD. Any decision will be made in the best interests of members. No decision has yet been made and cannot be made until the Board has received and considered the Actuary’s report.
• The second was triggered in 2011, in respect of the 30 June 2011 actuarial review, and is due to end on 30 June 2015.
• The latest was triggered in 2012, in respect of the 30 June 2012 actuarial review, and is due to end on 30 June 2016.

If you would like to know more about how we are monitoring the financial health of the DBD, please visit our DBDupdate page.

For more information about the risks involved in starting a Defined Benefit Indexed Pension, read ‘Risks of Defined Benefit Indexed Pensions’ in the Your guide to pensions – Defined Benefit Indexed Pension PDS.

Dependent and Disabled Child Pensions

If you have a dependent child at the time of your death, they may be entitled to receive a Dependent Child Pension from the Fund. The amount of this pension will depend on the number of dependent children you have at the time of your death and whether your spouse survives you. For more information read, ‘What is a Dependent Child Pension?’ in Your guide to pensions - Defined Benefit Indexed Pension PDS.

If you have a disabled child at the time of your death, that child may be entitled to receive a Disabled Child Pension from the Fund. This pension would generally be calculated as 20% of the pension you were receiving at the time of your death. For more information read, ‘What is a Disabled Child Pension?’ in Your guide to pensions - Defined Benefit Indexed Pension PDS.

Get advice

Talk to UniSuper Advice on 1300 331 685 to find out how they can help you.

UniSuper Helpline         1800 331 685
UniSuper Advice             1300 331 685