significant event notice

30 October 2023

Product Disclosure Changes - Super and Pension

We’re letting you know that we’ve made changes to our product disclosures to help you better understand what it means to invest with Australian Ethical Super. We’ve updated our Product Disclosure Statement (PDS) for our Superannuation and Pension product which can be found at www.australianethical.com.au/super/pds-forms/.

The changes include:

• further information on our ethical investment process with the issue of the Ethical Guide;
• changes to our investment objectives and time horizons;
• changes to asset allocations;
• updates to our tax disclosure; and
• updates to our fees and costs.

We’ve provided the details of the changes made below.

On 29 September 2023, we updated and reissued the PDS for our Superannuation and Pension product.

This includes the ‘Superannuation Additional Information Booklet’ (Super AIB), ‘Pension Additional Information Booklet’ (Pension AIB), and a new ‘Guide to our Ethical Investment Process’ (Ethical Guide), which all form part of the PDS.

Explaining our ethical investment process

We’ve updated our disclosure to help explain Australian Ethical’s investment process and the potential risks of ethical and sustainable investing; this includes the incorporation of our new Ethical Guide. The Ethical Guide is located under the Important Information section on the ‘Super and Pension forms and PDS’ page on our webpage otherwise, a copy is attached to this Notice.

Our new Ethical Guide outlines the ethical aspects of our investment process, with a focus on the Ethical Criteria we apply to potential investments. The Ethical Guide sets out important information about Australian Ethical’s consideration of environmental, social, and ethical factors including labour standards in the selection, retention, and realisation of investments and how exceptions apply (such as where a business may change after we invest, or we may become aware of new information about the company or issuer which was not identified in our previous research).

Our ethical evaluation process and Ethical Criteria are important because we implement the investment strategies for our investment options by targeting investments which are consistent with both:

1. our Ethical Criteria, and
2. the investment strategy and objectives of each investment option.

We’ve also specified the potential risks of investing with Australian Ethical within our disclosure documentation, noting that each of our product’s investment universes will generally be more limited than non-ethically, non-sustainably invested peers and the returns and volatility may be higher or lower than these peers over equivalent periods.

Members should read the PDS and Super AIB or Pension AIB for information about the investment strategy and objective of each option.

Changes to Investment Objectives

The investment objective of each investment option outlines the desired return each option aims to achieve and varies based on the investment mix and level of risk of the option. These objectives don’t predict how much money your investments will make, but they can give you an idea of the expected return of your investments. Following a review of investment market assumptions and the investment objectives of our options, we have made several updates as tabled below.

The addition of inflation linked objectives for the diversified investment options is aimed at providing greater clarity to members of the target returns for each option by providing members with a measurable target to assess any returns against. The changes to the equities and fixed-interest options seek to do the same by providing clear benchmarks for members to assess returns against.

Slight variances between the investment objectives of Superannuation investment options versus the corresponding Pension investment option are due to differing tax environments and differences in strategic asset allocation.

Change to recommended minimum investment timeframe

The minimum investment timeframe is the recommended amount of time that you should be invested in an option to meet the investment objective. Effective 29 September 2023, we have increased the recommended minimum investment timeframe for the following investment options:

1. Balanced (accumulation) option from 5 years to 8 years.
2. Balanced (pension) option from 5 years to 6 years.
3. Conservative option from 3 years to 4 years.
4. Growth option from 6 years to 9 years.

The longer investment timeframe provides a more accurate assessment of the period that each option is likely to achieve its investment objective.

Change to asset allocation ranges

An asset allocation range is the disclosed range that each option may hold investments within a specific class. Following a comprehensive review of the investment strategies of our investment options, we’ve made changes to the strategic asset allocation ranges effective 29 September 2023. These changes aim at improving investment outcomes for members by increasing our ability to meet the investment objective for each option.

Balanced (Accumulation)

High Growth

Changes to Tax related disclosure 

We have revised our disclosure of the tax implications of Superannuation and Pension to make it clearer to members. Please refer to Section 6 of the Super AIB and Pension AIB for more information.

Changes to fees and costs 

We’ve reviewed the fees and costs associated with our investments, as follows. We report our investment performance after fees, and you can see a breakdown of all the fees and costs incurred in your Annual Statement.

Indirect costs

Indirect costs form part of management fees and costs and include fees and expenses arising from any investment which qualifies as an interposed vehicle and certain ‘over-the-counter’ derivatives costs. They are calculated each year based on the previous 12 months, and represent the approximate amounts deducted from your investment to cover amounts that have reduced the return on your investment but are not charged as a fee. This includes costs associated with external asset managers. We have reviewed our indirect costs estimate for the last financial year and have tabled any changes to estimated indirect costs based on data as at 30 June 2023 below.

The increase in estimated indirect costs is a result of an increased allocation to Alternative assets, which incurs higher investment costs. Alternative investments can provide greater diversification and more consistent returns when added to a portfolio of traditional assets.

Please refer to Section 5: Fees and costs of the Super AIB and Pension AIB for more information.

Buy/Sell spreads  

The Buy/Sell spread is a fee to recover transaction costs incurred in relation to the purchase and sale of the assets of an investment option and is used to adjust the unit price. It is an additional cost to you and is incurred when you buy or sell a unit. We will use a Buy/Sell spread to recover transaction costs from you so that other members are not paying for the cost of your transaction. It is not a fee paid to us.

The Buy/Sell spreads for the Balanced and Growth options within both Superannuation and Pension have previously increased effective 1 July 2023. This increase is a result of a general increase in underlying transacting costs. The updated Buy/Sell spreads were included in the PDS that was reissued on 29 September 2023.

Please refer to Section 5: Fees and costs of the Super AIB and Pension AIB for more information.

Please note that the Super AIB reissued on 29 September 2023 contained a factual error that stated 0.01% of transaction costs for the Balanced (accumulation) option were not recovered by the Buy/Sell spread. All transaction costs for the Balanced (accumulation) option were recovered by the Buy/Sell spread.

This factual error has now been rectified as of 26 October 2023 at footnote 2 on page 25 within the Super AIB dated 29 September 2023 as follows:

The transaction costs incurred in the year to 30 June 2023 were fully recovered by the buy-sell spread except for the Australian Shares, Balanced (Accumulation) and Conservative options where 0.01% was not recovered and the High Growth option where 0.02% was not recovered.

Replaced with:

The transaction costs incurred in the year to 30 June 2023 were fully recovered by the buy-sell spread except for the Australian Shares and Conservative options where 0.01% was not recovered and the High Growth option where 0.02% was not recovered.

Here to help

If you have questions about these changes, please call us on 1800 021 227, Monday to Friday 8:30am to 5:30pm AEST.