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Unit pricing no panacea, says ButtlerWalker
Leading actuarial firm Buttler Walker has warned that superannuation funds should not be pushed into a daily unit pricing regime in circumstances where many funds have well constructed crediting rate policies.
In an analysis of the debate published this week, Buttler Walker said that while daily unit pricing was a legitimate role for many, especially the largest superannuation funds, and while Federal Budget changes had increased the pressure on funds to move in that direction, there were dangers and alternatives that needed to be considered.
It said that both unit pricing and crediting rates could produce fair and reasonable outcomes for members, but the key was to develop rigorous systems to reflect tax, expenses and valuations of assets, especially illiquid assets where there was no public ‘market value’.
The analysis said that daily unit pricing was not easy to set up and if things went wrong the cost of mistakes could be massive.
“Funds need to be satisfied that the cost of establishing and maintaining these systems will return sufficient value to members in terms of improved distribution of earnings and future cost reductions,” it said.
“In some cases, perhaps for small and medium-sized funds, it might be better to retain the existing crediting rate approach but invest time and some effort in thoroughly testing its operation against the same criteria that would be applied to a unit pricing approach,” the analysis said.
AUTHOR
Mike Taylor
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