To:
members)
From:
Subject:
Date:
All University of Queensland Academic and General Staff (UniSuper
Clive Gaunt – Elected UQ academic staff representative on UniSuper
Consultative Committee
Ross Cardiff – Elected UQ general staff representative on UniSuper
Consultative Committee
UNISUPER - Report on November Consultative Committee Meeting
December 2003
Dear Colleagues,
Recently we attended the UniSuper Consultative Committee meeting as your
representative. Below is an overview of what we saw as issues of importance to UQ
staff that were addressed at or arose from the meeting.
Changes to Trust Deed
The formal function of the Consultative Committee is to advise the Trustee on matters
concerning the Trust Deed – the Trust Deed being the legal document that governs the
operation of UniSuper. At the meeting, a number of Trust Deed amendments were
made – several of them being quite technical in nature. The following matters arose
during the course of the meeting which we feel may be of interest to members.
1. Binding death benefits
UniSuper will implement binding death nominations in 2004. Essentially, this allows
members to nominate who is to receive their benefit in the event of their death. This
nomination lapses after three years and must be renewed. It was suggested at the
meeting that this may be of particular interest to same-sex couples. We suggest you
contact UniSuper directly if this affects you.
2. Impact of work interruption on Average Service Fraction (ASF)
If you are a member of the Defined Benefit Plan (DBP) your benefit at retirement is
calculated using a formulae that includes a number called the Average Service
Fraction (ASF). The maximum value for this number is 1, and this will be the number
used for members who have always worked full time. However, this number will
reduce if your work life has been interrupted by things such as:
 Leave without pay (eg. Industrial action)
 Move to part-time employment
Apparently, it is possible for members to raise the ASF back toward 1 by making the
contributions that would otherwise have been made by their employer if the
interruption had not occurred. However, there is a 12 month time limit in which to do
this. We suggest you contact Michael Hamer (UQ Superannuation Officer) if this is
relevant to you.
Financial Planning (written by Ross Cardiff)
At the completion of the meeting I attended a workshop on Financial Planning.
Unisuper is in the final stages of selecting a group of Financial Planning firms who
will be able to advise Unisuper members on their strategy in retirement. These
planners, when announced, will be available in multiple locations around Australia
and are likely to involve several external organisations.
This is part of a three tier approach to members financial planning. The first tier is the
information available on the Unisuper website titled “Investor Education”. This can
be found at http://www.unisuper.com.au/education/choosing_a_strategy.cfm
The second tier is the recent introduction of the “Education and Advisory Services.”
There is a regional Co-ordinator available in Brisbane, Rhonda Maden. Her contact
details are:
Ph: (07) 3112 2388
Fax: (07) 3803 0207
Mob: 0400172403
Email: Rhonda.Maden@unisuper .com.au
This is not a financial planning service however it aims to fill the gap between the
information available on the web page and full financial planning.
Status of Defined Benefit Fund (written by Clive Gaunt)
Readers of the UniSuper 2003 Annual Report (pages 43, 48-49) will have noted a
report by the Fund’s Actuary (Towers Perrin), that as at Dec 31, 2002 the market
value of DBP fund assets ($4,523 million) was less than the amount required to pay
members ($5,207 million) if all members voluntarily left the service on 31 December
2001. Under this actuarial approach (called ‘Vested Benefits’), only 86.9% of benefits
could be funded by available assets as at the end of 2002. [It should be noted that a
rise in investment markets since December 2002 has seen an improvement in this
ratio.]
The alternative ‘Accrued Benefits’ approach shows a ratio of assets to accrued
benefits of 104.5%. This approach “measure the amount of assets expected to be
required to pay members’ benefits in respect of membership before 31 December
2002 as they fall due”. In other words, using a range of assumptions about future
member benefits payable and investment returns achieved, the actuaries believe that
there will be sufficient funds available to meet the payment obligations of the fund.
Clearly, the more conservative approach is to require that the Vested Benefits ratio
exceed 100%. However, the Actuaries have taken the view that because of the large
employer base the Accrued Benefits approach is ‘more relevant’ than the Vested
Benefits approach. The actuaries have advised the Trustee that there is a 50%
probability that the Vested Benefit index will return to 100% in eight years time.
Because of the unsatisfactory state of the fund as defined by relevant legislation, the
process contained in Clause 34 (a) has been triggered which requires two further
actuarial reviews over the next four years. If those reviews demonstrate the need, the
Trustee may ‘request’ additional contributions from employers and employees.
This situation raises, in my mind, two questions:
1. Is it (even remotely) possible that defined benefit members may not receive their
defined benefit in full at the time of leaving the fund?
I don’t know the answer to this question, but my guess is that there is a very
small, but non-zero, chance of this occurring. For example, if investment
markets were to enter a prolonged period of poor performance and top-up
contributions were not forthcoming from employers and employees, there would
simply not be sufficient funds to pay the defined benefit of all future exiting
members. Accordingly, the view that many of us have, that a defined benefit is
as good as government guaranteed, may need some revision.
2. Is the investment strategy employed for the defined benefit fund the most
appropriate one?
Following the consultative committee meeting, I attended a very informative
presentation by the UniSuper investment team. At this session I queried the
aggressive investment strategy (‘Growth’ – formerly ‘Trustee’s Selection’)
employed for the defined benefit fund. I asked whether a relatively high risk
investment strategy was appropriate given the view of many members that
their benefit is risk-free or guaranteed. Given this, I also questioned
Unisuper’s move to allocate 10% of the Australian Shares exposure to
long/short (hedge funds) investment strategies. In response, the UniSuper
investment manager indicated that he believed the strategy was appropriate
given the long-term nature of the fund’s liabilities and the historical long-run
performance of investment markets.
We hope that this letter has served to keep you better informed about, what maybe
one of your most significant assets. Please feel free to contact either of us if you have
any questions regarding the preceding discussion, or if you have issues with UniSuper
that you are having trouble resolving. We should point out that UniSuper
(www.unisuper.com.au) is ready to help you with questions about your
superannuation. In addition, the UQ Superannuation Officer, Michael Hamer, is
available to assist you (contact details below).
Clive Gaunt, 56580
c.gaunt@business.uq.edu.au
Ross Cardiff, 53319
r.Cardiff@law.uq.edu.au
Michael Hamer (Superannuation Officer), 53444
michael.hamer@uq.edu.au