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Unfunded defined benefit funds

Last updated 29 August 2017

Members may be assessed for surcharge for the financial years 1997–2005.

Unfunded defined benefit funds must keep a surcharge debt account for each member that is assessed. This account needs to record the amount of surcharge assessed for the 1997–2005 financial years, and any voluntary payments a member makes.

The fund also needs to calculate and add interest to the outstanding balance of these surcharge debt accounts on 30 June each year using the 10-year Treasury bond rate. Interest ensures the value of the accumulated surcharge debt is maintained over time.

If a member makes a payment, the provider must:

  • credit the payment to the surcharge debt account
  • acknowledge receipt of the payment to the member
  • let the member know about the new balance of the surcharge debt account
  • forward the payment to us within one month of receipt.

For a member of an unfunded defined benefit fund that has been assessed to pay the surcharge, the actual liability is not payable until:

  • the member receives a lump sum, or begins receiving a pension or annuity, or
  • the member transfers contributions, or
  • a payment to a non-member spouse occurs due to marriage breakdown, or
  • a benefit is paid when a member dies.

The fund must pay the amount their member's surcharge debt account is in debit to us within one month from the day on which the member receives their benefit.

If a member has taken a lump sum or a pension before we issue a surcharge assessment, the member will be assessed and will need to pay the surcharge.

Fund members may make voluntary payments to reduce their surcharge debt accounts. However, we recommend they seek professional financial advice before doing so.