Switching out of the Smoothed Bonus Portfolio

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If you have elected to invest in the Smoothed Bonus Portfolio, you may incur a penalty if you switch your money out of this portfolio before you have been invested here continuously for at least 5 years.

This does NOT apply if you are receiving a benefit payment as a consequence of leaving the UCTRF (other than if a UCTRF Living Annuitant wishes to transfer their funds to a Living Annuity with another pension provider: this switching condition also applies at that time).

If you wish to switch out of the Smoothed Bonus Portfolio before you have been invested here continuously for 5 years, the amount you will receive is the lesser of:

  • The total balance of your vested and non-vested accounts;
  • The market value of the underlying assets based on the actual investment return earned on your money (after deducting the cost of the guarantee, shareholder charges and the investment management fee, as determined by MMH.)

In effect, this means that if the investment returns have been poor and you wish to switch out before you have invested in this portfolio for 5 continuous years, you will be credited with the actual investment performance (as determined by MMH) rather than the smoothed return. If you wish to switch out after 5 years’ continuous investment in this portfolio, then you will receive the total balance in your vested and non-vested accounts. (Note, however, as explained above, that MMH has the right to remove non-vested balances in certain circumstances.)

For any lump sum invested in the Smoothed Bonus Portfolio, the 5-year period referred to above runs separately for the lump sum from the date it is invested. Note that a lump sum is defined as any lump sum amount invested that is in excess of 20% of the member’s balance at the start of the calendar year.

MMH may restrict the maximum amount that can be switched out of this portfolio by all members of the UCTRF to 25% of the market value of the portfolio in any 1-year period, and 40% of the market value of the portfolio over any 2-year period.

These provisions exist to prevent what is called “anti-selection” against the portfolio. As a fairly extreme example of possible anti-selection, an astute investor could switch into the Smoothed Bonus Portfolio at the top of the market. He/she would thus benefit from the higher smoothed returns declared and then switch out at the bottom of the market. Such an investor would draw on the “bonus smoothing reserves” of the Smoothed Bonus Portfolio without ever contributing to them.

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