CPIplus’ target return objective is designed to increase the consistency of investment returns while continuing to maintain the simplicity, flexibility, and liquidity of an account-based pension.
CPIplus is designed to offer long-term returns that are more certain and less volatile than those typically available by investing in growth assets such as shares, while offering higher returns than those generally available by investing in conservative assets, such as cash.
CPIplus return objective is set in advance for each return period, currently 12 months from 1 July, and is calculated using a formula, CPI + ‘n’, where CPI is based on the average consumer price index rate for the last two quarters (and is updated each quarter) and ‘n’ is a predetermined rate of return (compounded daily over the Return Period) determined by Hostplus each year as part of its annual investment strategy review.
By setting a return above CPI, CPIplus ensures that the returns generated exceed the level of inflation (as measured by CPI) hence minimising the impact of inflation on the real value of your investment returns.
The CPIplus return is credited daily, and the formula provides for a minimum daily return floor of zero, meaning that irrespective of movements in CPI, the daily return of CPIplus will not be negative – even if the CPI rate for that period was negative.
As the returns for CPIplus are set for specified Return Periods (usually a year), based on a predetermined formula, its returns, for any given Return Period, are not influenced by the returns on the underlying investments of the option. This means the returns of CPIplus are not adversely impacted by any potential underperformance of its underlying investments. Conversely, CPIplus returns are not affected by, or receive the benefit of, investment returns on underlying assets where these exceed the option's predetermined return.
CPIplus aims to deliver a low-risk, low-volatility investment option while continuing to maintain the simplicity, flexibility, and liquidity of an account-based pension.