Daryl Dixon made the comments in a booklet released this week titled An uncertain future: Exploring the issues and options facing UniSuper Defined Benefit fund members.
UniSuper's defined benefit division (DBD) has been under pressure since it was revealed that employers (ie, universities) were refusing to guarantee future member benefits.
“[As soon as that became evident, UniSuper] should have taken action to close the DBD to new members and given existing members the option of leaving the fund,” said Mr Dixon.
“Presumably the reason [that didn't happen] is that the earnings on the contributions of younger members were, and still are, required to help fund the disproportionally larger benefits accruing to older members,” he said.
On 5 August 2013 the UniSuper board decided to reduce future member benefits from 1 January 2015 following a four-year monitoring period under Clause 34 of the Trust Deed.
From 1 January 2015, DBD member benefits will be calculated using a salary averaged over the final five years of work (it is currently averaged over three years). In addition, the salaries used to make the calculation will no longer be indexed to CPI.
UniSuper is currently in the midst of three additional four-year monitoring periods, set to expire on 30 June 2015, 30 June 2016 and 30 June 2016 – after which the board will have the opportunity to further reduce future benefits.
Mr Dixon questioned UniSuper's claim that the decision to change the way member benefits accrue from 1 January 2015 is “fair and equitable”.
“This change will have a larger impact on younger members who will have a longer period of fund membership after that date than older members,” he said.
As a result, younger UniSuper members will have to decide if they want to switch out of the DBD and into the Accumulation 2 fund, said Mr Dixon – something they only have 24 months to do after joining UniSuper.
“The potential for further benefit reductions under Clause 34 and the favouring of older members in the distribution of benefits are some of my major concerns with the DBD,” he said.
“Both are unheard of among other public sector defined benefit schemes,” said Mr Dixon.
Responding to the booklet, UniSuper chief executive Kevin O'Sullivan questioned Mr Dixon's motives.
“As a provider of superannuation products, the question that must be asked is does the author of this ebook carry a conflict of interest?” he asked.
Dixon Advisory is a financial advisory firm that specialises in self-managed superannuation funds.
Mr O'Sullivan also pointed out that employers are required to make contributions to the DBD at 17 per cent, and that benefits paid out to members are unaffected by the fluctuations of financial markets.
“UniSuper disagrees with some of [Mr Dixon's] findings and conclusions regarding the member impact with the post 1 January 2015 changes,” said Mr O'Sullivan.
“Even with the change, the resulting defined benefits remain attractive. The change will help ensure the DBD’s future sustainability for all members,” he said.
