Enhanced cash and negative returns

The Plan only offers one ‘cash’ style investment option, the Enhanced Cash Option. The Enhanced Cash Option is not a purely ‘cash’ option and is partly invested in various high quality low risk securities (predominately with highly rated banks and a small amount in top quality corporates/securitised assets) which can earn higher than a standard cash rate.

As it represents ‘Enhanced Cash’ it can experience negative returns from time to time. As cash rates are currently low, these fluctuations have been emphasised with the move to weekly crediting rates, as these fluctuations were previously ‘smoothed out’ out by the monthly crediting rates. The strategy, objective and level of risk of the Option has not changed. The earnings applicable to the Enhanced Cash Option differs from cash returns within savings accounts, which are set by the banks rather than the actual earnings every week. The Enhanced Cash Option will see small fluctuations in the pricing from week to week and this is generally a function of market liquidity and supply/demand which will influence pricing. By taking a small amount of pricing risk month to month, returns are enhanced for members over the investment horizon of the option (1 year).

29 April 2021