Mr Dixon raised concerns about the future viability of UniSuper’s DBD in a booklet a released in December titled An uncertain future: Exploring the issues and options facing UniSuper Defined Benefit fund members.
In the booklet, Mr Dixon said that all members – whether young or old – have no guarantees they will receive “all of the purported ‘defined benefits’ promised to them”.
“UniSuper has recognised this, stating that it is considering a name change for the DBD, with one of the options being a ‘target benefit’ scheme,” he said.
In response to Mr Dixon’s booklet, UniSuper chief executive Kevin O'Sullivan told InvestorDaily that because Dixon Advisory is a provider of superannuation products “the question that must be asked is does the author of this ebook carry a conflict of interest?”
But Mr Dixon rejected the claim, pointing out that Dixon Advisory (which provides advice on self-managed superannuation funds) does not receive business from UniSuper members.
“They’ve been telling the unions that I [wrote the booklet] to get business for Dixon Advisory, which is rubbish,” said Mr Dixon.
“It’s all about equity and fairness, and a scheme that was designed in 1982 is totally inappropriate today,” he said.
Unlike other ‘normal’ pension funds, excess returns by the DBD are spread across all of UniSuper’s funds rather than stored away to “ensure the payment of benefits in leaner years”, he said.
“UniSuper is the only provider of lifetime indexed pensions that is not required to have a [capital] reserve … it beats me why APRA allows them to do that,” said Mr Dixon.
The DBD also has a bias against younger members, said Mr Dixon, with those aged 40 or under set to receive annual benefits equal to 18 per cent of their final average salary – whilst members who are 65 or older accrue annual benefits equal to 23 per cent of their final average salary.
“What this does is preserve all the benefits of all the vice chancellors. In fact, one of them said to me ‘I don’t really care, I just want to get out of the fund as quickly as I can’,” said Mr Dixon.
It would be more equitable to have a constant rate of accrual from 1 July 2015 (when trustee-enacted changes to the way benefits are calculated begin), he said.
UniSuper is also less than transparent when it comes to comparing the Accumulation 2 funds with the DBD, said Mr Dixon.
“They don't mention the fact in the product disclosure statement that the [full] benefits may not be paid [to DBD members],” he said.
As it currently stands, UniSuper members who are part of the DBD have 24 months to move into the Accumulation 2 fund, said Mr Dixon.
“They really should be using the Accumulation 2 fund as the default fund and giving members the option to join the DBD fund if they want to,” he said.
