Kevin O'Sullivan, UniSuper - Transformation in the super industry and the implications for...

November 2014

Transformation, superannuation and higher education

Kevin O’Sullivan

Chief Executive Officer, UniSuper

Disclaimer

This presentation includes general information and general advice which may not

be suited to your circumstances, as they have not been taken into account.

We will be outlining some of UniSuper’s products, holdings and views on the

market. These can change at any time.

Details of strategies and particular companies which UniSuper invests in are

provided for informational purposes only.

This is not advice and we are not recommending these for inclusion in personal

portfolios, as they may not be suited to your overall circumstances.

Transformation, superannuation & higher education 2

Agenda


Current status of super for university employees

A bit about UniSuper

Provision of defined benefit superannuation

Changes within the super industry and impact on universities and their

employees

Changes within universities and UniSuper’s response (or impact on it)

Status of super for universities and their employees


Super contributions (% of pay): Employer Employee

Casuals SG (9.5%) -

Non-casuals 17% 7%

Vast majority of employees join UniSuper

Non casuals default into Defined Benefits

− Can opt to move to Accumulation in first 24 months

About UniSuper

Greater retirement outcomes for

members from the Higher Education

& Research sector

$45bn funds under management

& 440,000+ member accounts* – one

of 10 largest in Australia

In-house asset management

& administration

Over 500 staff

Range of investment options

& valuable defined benefits

Low fees

5*At October 2014

Transformation, superannuation & higher education

Members and assets


No of members Assets ($ Billion)

Defined Benefit 78,000 16

Accumulation

Non-casual actives

Casual actives

‘Inactives’

20,000

144,000

179,000

24

Pensions 19,000 5

Total 440,000+ member accounts 45

Relative performance to June 2014

7

Past performance is not an indicator of future performance.

7

Option 1 year 3 years 5 years 10 years

High Growth Q2 Q1 Q1 Q1

Growth Q1 Q1 Q2 Q1

Balanced Q1 Q1 Q1 Q1

Conservative Balanced Q1 Q1 Q1 Q1

Capital Stable Q1 Q1 Q1 Q1

Australian Shares Q2 Q1 Q2 n.a.

International Shares Q1 Q2 Q1 n.a.


UniSuper’s low fees

8 8

$50,000 balance $250,000 balance

Total annual fees for Balanced

Option$420 $1,640

Relative to Balanced options of

other major super funds *14th / 100 8th / 100

* Chant West April 2014 data



Provision of Defined Benefit Superannuation

Closure of DB funds over time


Many reasons for closures:

Funding risk

Accounting implications

Super Guarantee and legislative momentum

Do these apply to universities?

Employers have fixed contributions, but …


This is well manageable, with:

Strong investment management of DB assets (liability aware, fortress

assets)

DBD portfolio features ‘fortress assets’

12

Karrinyup

Shopping Centre

APA Karrinyup Shopping Centre Eastern Distributor

Sydney AirportBrisbane AirportVictorian Comprehensive

Cancer Centre


http://www.google.com.au/url?sa=i&rct=j&q=&esrc=s&frm=1&source=images&cd=&cad=rja&uact=8&docid=d6nrsZFSfe1xpM&tbnid=udDwq1qRMjUg3M:&ved=0CAUQjRw&url=http://www.theaustralian.com.au/business/property/unisuper-to-spend-again-after-karrinyup-shopping-centre-buy/story-fn9656lz-1226722252971&ei=7UtXU42zDI3pkgXL3YC4Cw&bvm=bv.65177938,d.dGI&psig=AFQjCNG_kkhTCLViD8w79FxfuPSys-EDug&ust=1398316387737382

http://www.google.com.au/url?sa=i&rct=j&q=&esrc=s&frm=1&source=images&cd=&cad=rja&uact=8&docid=d6nrsZFSfe1xpM&tbnid=udDwq1qRMjUg3M:&ved=0CAUQjRw&url=http://www.theaustralian.com.au/business/property/unisuper-to-spend-again-after-karrinyup-shopping-centre-buy/story-fn9656lz-1226722252971&ei=7UtXU42zDI3pkgXL3YC4Cw&bvm=bv.65177938,d.dGI&psig=AFQjCNG_kkhTCLViD8w79FxfuPSys-EDug&ust=1398316387737382




assets)

Prudent conservatism

Typically long periods of membership

No need for short term rectification of shortfalls






assets)

Prudent conservatism

Typically long periods of membership

No need for short term rectification of shortfalls

And members receive two key advantages of Defined Benefit arrangements …

Protection & predictability

15

Protection from investment market downturns

During and post one of the worst economic downturns such as the GFC

– defined benefits were paid in full

Increased ability to predict future benefits

Assists retirement planning as a salary-based formula is not directly exposed

to market downturns

No DBD member has ever lost any capital


Change to accruals from 1 January 2015

Expected rate of future investment earnings is much lower

than in the past

Expected cost of future accruals (~22.5% of salaries)

exceeds

Future DB contributions (21% of salaries)

As funding levels improve, DBD investment strategy will

become more conservative



Changes within the superannuation industry and their impact on universities & their employees

Super industry changes


Legislative change (MySuper, Stronger Super, FOFA, …)




Digital revolution

Greater focus on fees

Provision of financial advice

Multiple ‘digital projects’ underway


Improved electronic uploading of

super details from universities’

payroll files into UniSuper’s

systems

Greater straight through

processing

All will deliver significant efficiency

gains and cost reductions

Recent enhancements for members

Member statement enhancementsBenefit projections

Showing benefits as income amounts

Online tools and calculators (self-help):Retirement adequacy

Pension income

Transition to Retirement

Investment

Contributions

21Transformation, superannuation & higher education

More face to face advisers


Better promotion of our

unconflicted advice model

Strong growth in number of

members receiving financial

advice

Increased number of advisers

Also introduced on campus

consultants




Digital revolution



Greater member activism




Digital revolution




Managing number of insurance claims

Recent insurance changes

Moved to external insurance cover for Accumulation members, with

only minor increases, and in some cases, decreases in premiums

Introduced greater flexibility for Accumulation 2 members:

−Can opt out of insurance cover

−Can increase or decrease their cover

−Can mix and match type of cover that’s best for them

25 25Transformation, superannuation & higher education




Digital revolution




Managing insurance claims experience

Growth in SMSFs




Digital revolution





Growth in SMSFs

Drive for improved post-retirement solutions




Digital revolution





Growth in SMSFs

Drive for improved post-retirement solutions

Financial System Inquiry


Changes in higher education and UniSuper’s response (or impact on it)

Relevant changes in higher education


Greater casualisation of workforce

Casuals within UniSuper

Casuals are members of the Accumulation Division

Over 75,000 members with <$1,500 in their account

With changes in legislation (MySuper), small balances can now be eroded

by fees ($115 p.a.)

We’re implementing a solution to transfer low account balances to an

“Eligible Rollover Fund” (ERF)

We’ll sweep low account balances regularly

Greater casualisation could reduce number of new non-casual members

joining the Defined Benefit Division





Reduced Government funding





Greater focus on ESG

What our members say …






What some of our members want …


15 investment choice options


Fiduciary Duty

UniSuper’s broad ESG approach

Active ownershipInvestment specific

activitiesCollaboration

Proxy voting

Company

engagement

Member

engagement

Company reviews

Fund manager

reviews

Engagement with

specific ‘activist’

parties

Working with other

investors (e.g.

peers)

All ‘stakeholders’

Government &

regulators


Additional actions UniSuper has taken

• Sustainable Growth option launched2001

• Sustainable Balanced option launched2007

• Divested from tobacco companies2011

• Global Environmental Opportunities option launched2012

• Cornerstone investor in the first ever “green bond” issue in Australia

2014

• Divested from fossil fuel exploration and production, weapons, gambling and alcohol across our sustainable options

2014


What criteria should the Trustee consider in responding?

Investment fundamentals have to be foremost

Can also consider other criteria – but only if to do so is in members’

financial interests

There is no clearly established case for broad scale divestment


We also come to the attention of non-members







Greater demand for flexibility






Greater demand for flexibility

Lack of awareness of super among employees

On Campus Consultants


Ten On Campus Consultants (OCCs) at 20 universities

Services include on-boarding new staff, seminars, product information

(DB), general advice and rollover assistance

Positive feedback from uni representatives and members

Currently trialling video-conferencing for regional areas

We plan to have up to 18 OCCs by the end of 2015

In summary


Change continues apace both in the higher education sector and in the

super industry

UniSuper will continue to work with employers in the higher education

sector to deliver services and products to adapt accordingly

Thank you

Date post:	23-Jun-2015
Category:	Education
Upload:	informa-australia
View:	376 times
Download:	0 times