A reminder about Clause 34 changes taking effect 1 January 2015

20 Nov 2014

In July 2013 UniSuper’s Board made the decision to change the way Defined Benefit Division (DBD) members’ benefits will be calculated from 1 January 2015 to help protect the future financial position of the DBD. We communicated this decision to members in August 2013.

We’ve been regularly sharing with members the Fund’s performance and financial position. Our Board continues to monitor closely the DBD’s financial position and publishes the key actuarial measures used to monitor the its financial position every quarter on our dedicate DBD Update page.  

Important information on why the change is happening

The DBD has a track record of enduring challenging economic times, in part due to pooling the approx. $16 billion asset base across almost 80,000 members.

Its key advantages include protection from investment market downturns and greater ability for members to predict their future benefits. Over three decades and many economic cycles, no reduction has ever been made to a DBD member’s accrued benefit, even during and after the Global Financial Crisis. Many other Australians have not been so fortunate.

However, a changing investment market outlook has influenced the anticipated cost of providing these defined benefits. Increased life expectancy and changes to salary growth are additional factors that influence this anticipated cost. The Board must take expectations of these factors into account when managing the Fund’s future sustainability.

While the key actuarial measures of the DBD’s financial position have returned to healthy levels, the bottom line is that over the long term, without the change applying from 1 January 2015, the cost of providing benefits is expected to exceed the amount of money that will be coming into the fund. It’s for that reason the Board has decided it is prudent to change the way members’ benefits will be calculated from 1 January 2015. 

No change to benefits accrued up to 1 January 2015

Importantly, there will be no change to the way benefits accrued up to 1 January 2015 are calculated. 

What is changing?

As a DBD member your final benefit is primarily determined by a formula that takes into account your age, length of service, contribution levels, employment status and Benefit Salary. 

The 1 January 2015 change will affect the Benefit Salary part of the formula. 

At present, your Benefit Salary is averaged over the last three years of employment and indexed to changes in CPI. If you have worked for less than three years, it is averaged over the time you have been employed as a contributing member.

After 1 January 2015, your Benefit Salary applying to service after that date will be averaged over the last five years of employment (instead of the current three years) and not indexed with changes to the Consumer Price Index (CPI).

You can visit our dedicated DBD Update page for several examples of how defined benefits will be calculated from 1 January 2015.

Note that your Death, Total and Permanent Disablement, and Temporary Incapacity benefits may also be affected by the changes because they are also calculated by reference to Benefit Salary.  For more information about this, please visit our dedicated DBD Update webpage.

Also note if you are already in deferral, disabled or temporarily incapacitated at 31 December 2014, the effect on your benefit may be different. If this applies to you please call us on 1800 331 685.

You don’t need to do anything. This change will occur automatically. You can keep track of your estimated benefit on MemberOnline or by checking your regular Benefit statements. Note that the Clause 34 changes will not be reflected in benefits quoted in the Benefit statements to be sent in early 2015 as they only relate to the period to 31 December 2014. 

If you have an accumulation component, you can also manage that through MemberOnline, including keeping track of your investments and switching options.

And remember that we’re here to help if you have any questions or need further information.