Ever noticed your super balance going up and down, even when you haven’t made any changes? It’s not just about fees, contributions, or insurance premiums – it’s also about how your super fund calculates investment earnings.
Super funds use one of two methods to allocate investment earnings: unit pricing or crediting rates. While industry super funds have traditionally used crediting rates, most funds now use unit pricing, which works similarly to buying and selling shares in a company.
How Unit Pricing Works
Every investment option in your super fund has a unit price, which reflects the total value of the assets held in that option. As the value of those assets changes, so does the unit price.
- If investment assets increase in value, the unit price goes up.
- If investment assets decrease, the unit price goes down.
When you or your employer make a contribution, you’re buying units in your chosen investment option at that day’s price. When money is withdrawn – for fees, insurance, or a switch to another fund – units are sold at that day’s price.
Why Your Online Balance Might Be Outdated
Your super fund calculates unit prices at the end of each business day, based on market values. So, when you check your balance online, it may be a day behind the actual value.
This is especially important to remember when switching investment options – you’ll receive the unit price from the day your request is processed, not the day you submitted it.
Buy and Sell Unit Prices - What’s the Difference?
Some super funds use different prices for buying and selling units:
- Buy price: The price applied when contributions are made.
- Sell price: The price applied when units are sold for fees, withdrawals, or investment switches.
The difference between these two prices is called the buy/sell spread, which covers the costs of buying and selling assets within the fund.
How Some Super Funds Minimise Costs
Instead of a buy/sell spread, some super funds spread transaction costs across all members by including them in the fund’s investment management fees.
For example, if total member contributions for the day match total withdrawals, the fund doesn’t need to sell any assets. Instead, units are reallocated between members, reducing costs. This approach keeps expenses lower and benefits everyone in the fund.
Here’s What You Should Know:
- Your super balance moves with market performance, just like shares do.
- The number of units you hold depends on the unit price at the time of purchase.
- Some super funds apply buy and sell unit prices, which can affect your balance.
- Your online balance may be a day behind due to how unit prices are calculated.
- Always check how your super fund applies unit pricing before making investment changes.
By understanding how your super fund calculates investment earnings, you’ll have more confidence in your retirement savings and a clearer picture of what’s really happening behind the numbers.
For more guidance, please speak with a licensed adviser, or your super fund provider.
