B6 – Beneficiary Fund

1. THE FUND

The Fund has 2,579 Members of which 1,151 are ‘actives’ and a further 1,428 are pensioners. This is a very mature fund with a membership base that has more than half of its membership as pensioners.

2. THE BOARD AND CHIEF EXECUTIVE OFFICER

As advised in the paper to the 13th Assembly, the Trustees decided to reduce the size of the Board to eight. So to achieve an orderly Board renewal, Robert Hoskin, Robert Key, Margaret Burns and Anne Honey, with a combined 65 years of experience and service to the Fund, retired in December 2012.

Pam McAlister, a superannuation lawyer was appointed by the Assembly and Alice McCleary (SA Member Representative) joined the Board in December 2012.

Rick Williams resigned in November 2013, and was replaced by Robert Locke as a WA Member Representative.

Graham Dunstan resigned in December 2014, and Colin Grenfell retired in March 2015. This reduced the number of Trustees to 6.

3. BACKGROUND

The Uniting Church in Australia Beneficiary Fund (the Fund) was established by the Inaugural Assembly of the Uniting Church in Australia (the Church) pursuant to Regulation 3.1.6(d) and the Fund was deemed to be an Assembly Agency.

The Fund provides benefits to retiring Ministers, predominantly in the form of a pension payable for life (commutable to a lump sum, at the election of the Member). The amount of the pension is determined using a formula based on years of service and Notional Stipend at retirement, and has in the past been indexed or partly indexed for inflation each year, depending on the financial health of the Fund. The Notional Stipend is calculated by the Actuary by taking into account the average stipends paid by all Synods and after considering the financial health of the Fund.

Benefits are payable on retirement, resignation, death, and disablement.

All Defined Benefits are guaranteed by the Church and any shortfall in funding is underwritten by the Church. The Ministers know what their projected retirement will be worth, irrespective of market volatility so they can plan their retirement with a degree of confidence. The Fund also provides Accumulation benefits which make up a small but growing number of Members. Accumulation Members bear the risk of any adverse investment return (and benefit from any out-performance of investments).

4. INVESTMENT PORTFOLIO

There have only been minor changes to the Fund’s investment portfolio since the last report to the Assembly in 2012. The key changes being:

  • In 2012 the Fund invested into two diversified growth funds whereby the managers have a very diversified portfolio, not unlike the Fund itself.
  • The Fund continues to carefully assess the currency exposures to its foreign denominated investments, and this has resulted in significant changes to currency hedging as the $A changes value when compared to other currencies. The Fund is currently completely unhedged and is therefore subject to the currency swings of the $A relative to other currencies.
  • The Fund exited the direct equities holding in listed property and infrastructure to invest in managed trusts in this sector.

5. CURRENT FINANCIAL STATUS

The financial status of a Defined Benefit superannuation fund is measured by its Vested Benefits Index (VBI). This represents the total Defined Benefit assets over the Defined Benefit liabilities.

Recent investment performance has been favourable with the 1 year results for the Defined Benefit section being 7.6% and the 3 year results being 10.8% pa. This has enabled the Fund to have a pension increase of 4.75% (effective from 1 July 2014), against a CPI increase of only 2.7%. This release of reserves is based on the Pension Increase Policy that limits the amount of the pension increase to what the Fund can afford while maintaining its financial health. The pension increase, effective from 1 July 2015 will be 1.65%, which is marginally short of CPI of 1.7%

6. NEW DEFINED BENEFIT CATEGORY

As advised during the presentation to the 13th Assembly, the Fund was progressing a proposal to open a new Defined Benefit section, to be known as Category 6 and this would be open to all new members as well as giving an opportunity to existing members of Category 5 (being Accumulation) to join.

The proposal that went to the Church in August 2012 included the results of financial modelling so as to ensure that the new Category 6 did not impose additional risk on the Church.

This section now has 109 members.

7. OUTSOURCING TO MERCER SUPERANNUTION TRUST

The major change to the Fund over the last few years, and since the 13th Assembly is at recent Assembly Standing Committee meetings, the Fund Trustees have been progressively advising and seeking approval, ultimately leading to a decision to outsource the Fund to Mercer.

This has been a very big decision for the Trustee and the Church, whereby the Trustees looked at the ongoing reporting and compliance obligations, the rising unit cost of fund administration in a small fund with declining membership and the membership expectation of maintaining the pastoral care imperative of the Fund.

With those specifications in mind, the Trustee undertook a study, assisted by the Fund Actuary, and with the involvement from members of the Church, to investigate whether the Fund could be more efficiently administered by an external administrator.

After a significant amount of work over a long period of time, a preferred candidate was identified and substantial due diligence was undertaken leading to the confirmation of Mercer to be responsible for the ongoing administration of the Fund. The Trustees were already familiar with Mercer who had been the Investment Advisor to the Fund, for some years. An aspect that was identified as being particularly appealing to the Trustees in the Mercer proposal was the identification of a Minister Care Advocate, which would be located in each mainland Capital City.

The Fund will transition its investment portfolio and member administration to Mercer on 30 June 2015, by way of a successor fund transfer, which means that members and pensioners are transferred to the new arrangements without necessarily seeking their prior approval. The consequence of this is that an evaluation will need to be made by the lawyers and actuaries to ensure an equivalency of rights. This means that members’ rights are protected and will be the same as they had previously been, although some minor pluses and minuses may have occurred. In the outsourcing of the Fund to Mercer, the whole of Trustee responsibilities cease.

Going forward, Mercer becomes the Trustee and hence manages the Fund, which in turn becomes a sub-plan of the Mercer Superannuation Trust. The Church is represented by a Policy Committee which will have 4 of the existing 6 Trustees so as to ensure the views of the Church are understood. However, a major change that has occurred is that Mercer is responsible for the day to day management of the sub-plan. A Claims Committee and an Employer Committee will exist to ensure the rights of the various parties are maintained. One aspect of the Beneficiary Fund which was identified as an integral part of the former fund’s ethos was the self-insurance arrangements which ensured members were assessed for various disablement issues in an equitable way. This is planned to continue for the defined benefit members.

At the time of writing this brief summary of what has happened and what is about to happen, the actual transition had not occurred, but at the time of the presentation to the 14th Assembly, the transition will have occurred and the attention will be focussed on ensuring all of the implementation targets are being met.

One aspect of the program that has been central to the considerations of the review is that the Church is still committed theologically to the concept of providing income support for life. The proof of this is the opening of Category 6 which enables Ordained Ministers to have a life pension, subject to the years of service. Category 5 being a lump sum accumulation offering did not provide that commitment.

The Trustees acknowledge and thank the work and commitment of the Beneficiary Fund staff who have worked diligently on behalf of the members, pensioners and the Church during this important transition.

Ian Glenny Chief Executive Officer
Jim Mein Chair

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