Govt warned on choice of super unintended consequences

28 January 2020

The Government’s new choice of superannuation fund legislation has failed to take account of situations such as the open defined benefit arrangements offered by universities sector industry fund, UniSuper.

The big industry fund has warned the Senate Economics Legislation Committee that the Government’s legislation risks having significant detrimental impacts on its open defined benefit arrangements.

“Almost all permanent employees in the higher education sector are enrolled in UniSuper’s open defined benefit division upon joining the sector and receive contributions at rates which significantly exceed the Superannuation Guarantee rate,” it said.

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“UniSuper is one of the only – if not the only – open, private sector defined benefit fund. We believe that the bill would impact UniSuper and our members inf a way in which very few other funds would be affected. We are keen to ensure the avoidance of detrimental impacts for UniSuper members and the security of their retirement savings,” the fund’s submission said.

It said that in pooled arrangements such as defined benefit schemes, the decisions of some members could impact many members and that changes to the number and characteristics of new members to a defined benefit scheme, particularly changes to the age and career earnings profile of new members, could have flow-on consequences.

“UniSuper has neither a government or employer guarantee to cover funding shortfalls, nor recourse to additional employer contributions,” the submission said. “As a result, the risk of adverse outcomes from changes to experience would ultimately be borne by fund members.”

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2 points

Most Employees at the unis don't have choice of fund or the marketing is so aggressive that they believe they don't have choice of fund.

Sounds like a ponzi scheme if the decisions of some members could impact many others. That's their quote!

Let it happen. Those academics are all very smart people who can build our nation. They are all experts are researching things. I am confident that their representatives will do the work to ensure the fund performs. We have to stop this idea of looking after the other people, and let the trustees do their jobs.

When the Fed Govt bans UniSuper advisers being paid salaries & $40,000 BONUSES for charging intra-fund advice commissions to provide personal advice (that most UniSuper members never receive & cannot opt out of), I will take some notice. Until then, tough.

3rd Point - UniSuper had an ‘actuarial issue’ around 4 or 5 years ago where they were forced to make changes to the DB scheme’s final payout figure because they were broke. Plenty of staff are still shitty about that.

Yes, unisuper were not flavour of the month back then.

Sounds like UniSuper is desperately scrambling for survival; they know if the member numbers drop especially without new ones coming on board, then eventually when ageing members go to pension stage or leave, their house of cards will tumble.

Sorry but these comments are ill informed. I'm not involved with the fund but the benefits were not reduced even after the impacts of the GFC and the performance of Unisuper is very very good.

Unisuper are a protected entity.
When you start working at a University you are forced to become a member of Unisuper thanks to the EBA. What happened to freedom to choose?

To be in the defined benefit scheme you have to pay an extra 1-7% from you salary into your superannuation. (This can be slightly more if paid pretax.)
Something those on lower incomes can not always afford. Especially if you have a HECS or HELP debt.
Many universities do not offer defined benefit to the lower paid workers.
If you can't afford to pay the extra from your salary and need to pull out of the defined benefit you cannot enter into it at a later date.
If you're in the defined benefit but have to leave the Uni system for what ever reason you lose the defined benefit and all the money goes to your accumulation.
You can’t choose how you invest defined benefit super. So if you want to avoid unsavoury investments you're out of luck.
If anyone believes Unisuper actually care about their members they are deluded.
Unisuper are just worried they might lose their Goose that lays golden eggs and they might have to forgo their over generous salaries.
People seem to forget whilst superannuation funds are there to help us build a retirement "nest egg" their primary goal is to milk their members of as much money as they can. Some funds are better at hiding what they are doing.
You only need to go to a major conference for the superannuation industry to see how much money they like to splash around and waste. Money that should be going to the Super members.

I had a new client come in last year asking for advice on what to do with a large cheque they were about to receive. I asked why a chq and was told Uni Super told them that's all they do. I told the client to wait. I had to educate the claims team (they guy who had been there for 20 years and 'learnt something new today') that they could pay a pension and our client would be in a much better position. And we're expecting super funds to pick up the advice gap in the future?

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