From 1 July 2019, UniSaver will move to daily unit pricing. This article explains how it works, how it differs from the current system, and the benefits it brings to members.
Moving from a weekly crediting rate
At the moment, we apply a weekly crediting rate, which is an estimate that reflects the shift in value of the scheme's investments as the result of investment gains or losses. At the end of the month, we declare an interim return based on actual gains or losses and adjust members' accounts accordingly. This system is not ideal because:
- it can result in significant shifts in account balances from week to week when investment markets are volatile
- when paying benefits, we have to calculate earnings since the last declared monthly rate at an estimated rate. Striking a rate that is fair to all members can be challenging during times of increased volatility
- we cannot - again, in fairness to all members - action investment switches until after the previous month's rate is declared and the required adjustments are made.
Introducing daily unit pricing will resolve these issues. We already have daily pricing at the scheme’s underlying investment funds level. The change will extend that daily pricing to enable the scheme itself to strike daily prices that can be used to value members' accounts.
How unit pricing works
A unit represents a share in a particular investment option. While your units don’t give you legal ownership of the investment option’s assets, they do give you the right to returns from those assets. On day one, units will be valued at $1.00. So, for each dollar you have invested in a particular investment option on that day you will be allocated one unit. At the end of each trading day, we will declare a unit price for each option. Just like a share price. When your contributions are paid into the scheme, you will be allocated additional units based on that day's unit price. Similarly, when you apply for a benefit, you will redeem units to the value of your withdrawal based on that day's unit price. Units will also be redeemed when you switch between investment options (when units will be redeemed in your existing investment option(s) and new units issued in your new investment option(s)) and when fees and expenses are paid directly from your accounts.
The benefits of daily unit pricing
Daily unit pricing is simply a more robust and equitable way of allocating investment earnings. It smooths out the ups and downs resulting from a weekly estimated crediting rate which is adjusted monthly based on actual results. It means investment switches can be made on any business day, so if you make a change we can action it within a few days. It also simplifies the annual review process. There will be no need to suspend benefit payments as we currently do for a week or more during the annual review process and your annual benefit statement will be available sooner.
What changes will you see?
When you view your investments balance online, you will see a unit price, number of units as well as a dollar value for your holding in each investment option. The same goes for your annual benefit statement. We will still advise rates of return for each investment option as we do now.