Hello unit pricing, goodbye crediting rates

Unit pricingUnderstanding why your super balance goes up and down is more than just checking fees, contributions and insurance premiums. It is also knowing how – and when – your super fund calculates and applies investment earnings to your super savings and what those returns are.

Traditionally we have used crediting rates to apply investment earnings to your account. However, on the 26 March 2018 we will be moving to daily unit pricing, which is the methodology used by many super funds and investment trusts. This means we will be reporting daily unit prices in place of weekly and month-end crediting rates.

What is unit pricing?

Unit prices provide an estimated snapshot of what your super or pension investment option is worth at a specific point in time.

Like shares, unit prices move up and down each day, in line with the investment earnings for that investment option. Unit prices increase when investment earnings are positive and exceed the investment fees and investment-related tax for the relevant investment option. Unit prices will decrease when investment earnings are negative or less than fees and tax for the relevant option. All investment earnings are thus reflected in the unit price of each investment option.

For example, if you have a super balance of $10,000 and the unit price for the Balanced option is $1.00, you will have 10,000 units. At the end of the financial year, if you still have 10,000 units and if the unit price has increased to $1.10, you will have an account balance of $11,000. We will be using unit pricing or ‘unitisation' to work out the changing dollar value of your super account on a daily basis. We are implementing unit pricing as an efficient way of fairly assigning a share of the value of an investment option between all the members who have selected that option.

How does unit pricing work?

Any contributions into your super account ‘buy' a number of units in your chosen investment option based on the daily unit price when the contribution is received by us. The opposite happens, however, if any money is deducted, or you receive a pension payment. Any deductions from your account (including administration fees) ‘sell' a number of units in your chosen investment option for the value chosen based on the daily unit price when the request is received by us.

How does this benefit you?

Unit prices will give you more up-to-date information about your account balance.

When you change investment options, rather than having to wait for the next weekly crediting rate to be published, you'll be able to see your investment change and the relevant unit price allocated within two business days.

If you make a request to change investments before 4pm AEST/AEDT, your account will be invested in your new investment choice using the unit price allocated that day. Requests received after 4pm AEST/AEDT on a business day, or on weekends or public holidays, will be invested using the unit price allocated for the next available business day (which will appear within two business days after that).

When you check your balance online, it does not reflect today's valuations in the underlying assets as this is not calculated until the end of the business day. For instance, if the Australian share market rises 1% today, it will be one-to-two business days before you will see this reflected in the unit price applicable for today.

Annual returns and unit prices

You may notice a slight difference between your balance and unit price you see on your online account, versus the official annual returns that will be printed on your LUCRF Super statement. Although these variations are usually small, they can be confusing.
These small differences are captured when we calculate the monthly and annual returns a few days after the end of each month, meaning our published returns are more reflective of the month or year's market movements.

Any questions?

Please call us on 1300 130 780.