How Smoothing Works

If you invest money in the Income Fund, Balanced Fund, or Shari’ah Fund, you will be credited exactly with the investment return earned on the underlying assets (after deducting the investment manager’s fee.)

The money you invest in the Smoothed Bonus Fund will be credited with the monthly bonus declared by the Insurer (MMI Group) net of all fees and gross of the policy fee of 0.25%.

In declaring this bonus, the Insurer “smoothes” the investment returns earned on the underlying assets over time (5-year rolling periods) to deliver on an inflation target of CPI plus 4% after fees. This means that part of the investment return arising from the very good years will be held back and then released in the years when performance is weaker.

It is important to understand that over the long term, the bonuses declared by the Insurer will reflect the return earned on the underlying assets (after allowing for the cost of the guarantee (see below), shareholder charges and investment fees). It is this feature, together with the asset allocation, that gives you some protection against Inflation Risk.

Smoothed Bonus Fund investments made under the Life Stage Model

There are important differences to the operation of the Smoothed Bonus Fund for members whose UCTRF investments are partly invested in the Smoothed Bonus Fund under the Life Stage Model. A detailed explanation of these differences is set out in the Investment Guide. The operation of the Smoothed Bonus Fund for Life Stage members will be similar to that described above, and it is unlikely that members will be aware of the difference.


What happens when I exit the UCTRF?

When you exit the UCTRF (i.e. receive a benefit) you will receive the full balance in your vesting and non-vesting accounts. Effectively, this means that your non-vested account "vests" when you leave the UCTRF.

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