What are unit pricing and crediting rates and why do they matter?

In this guide

How do super funds calculate investment earnings?
What is unit pricing?
How does unit pricing work?
Doing the math: Calculating unit prices
What is a crediting rate?
Getting your money: Applying the crediting rate
What happens if I switch investment options?
Annual returns and online balances: Where’s the difference?

Understanding why your super balance goes up and down – and comparing the performance of your super fund with other funds – is about more than just checking fees, super contributions and insurance premiums.

It’s also knowing how – and when – your super fund calculates and applies investment earnings to the balance of your super account.

But there are two different ways super funds allocate investment earnings to your account, so check out SuperGuide’s simple explanation to learn more.

For information about comparing super funds, read SuperGuide articles:

How do super funds calculate investment earnings?

There is no right or wrong way to allocate investment earnings, but super funds tend to use two methods:

Unit pricing
Crediting rate

Traditionally, industry super funds used crediting rates to apply investment earnings to their members’ accounts, but many have now moved to unit pricing, which is the method used by most retail super funds.

What is unit pricing?

Super funds use unit pricing or ‘unitisation’ to work out the changing dollar value of your super account.

Need to know: Like shares in a listed company, units in each investment option within a super fund fluctuate in value according to their daily unit price.

If the investment returns for the investment option go up, the unit price also goes up, but if the investment returns go down, so does the unit price.

The number of units you receive depends on how much you contribute and the unit price of the investment option you have selected.

Case study

Aaron decides to contribute $10,000 to his super fund.

On the day his super fund receives his contribution, the unit price for his selected investment option (Growth) is $1 per unit. So, Aaron receives 10,000 units in the Growth option ($10,000 ÷ 1.00 = 10,000 units).

If the unit price that day had only been $0.95 per unit, Aaron would have received 10,526 units in the Growth investment option ($10,000 ÷ 0.95 = 10,526 units).

How does unit pricing work?

Super funds calculate unit prices in several ways, with some offering daily unit prices and others only calculating their unit prices once a week.

To find out how often your super fund calculates its unit prices, check out the fund’s website or the product disclosure statement (PDS) you received when you joined the fund.

When you or your employer make a super contribution into your super fund account, you are allocated additional units based on the unit price applying for the day the super contribution is received by the super fund. The opposite happens, however, if you withdraw money from your super account, or a payment is made from your super account.

Need to know: Making an investment switch request

When you check your account balance online, it will not reflect that day’s unit price, as this is not calculated until after the end of the business day.

The account balance listed online is based on a declared unit price, which may be at least one business day behind.

When you submit a request to switch investment option, funds apply the unit price set for the day the request is received. If unit prices fall or rise before the change is made, the price fluctuation does not affect your request. You receive the declared unit price for the day your request is lodged.

Always check how your super fund calculates unit prices and how they are applied BEFORE requesting an investment switch.

Doing the math: Calculating unit prices

Most super funds use a multi-step process to calculate unit prices:

At the end of each business day, the fund receives data on the day’s transactions and the value of the investment assets from its investment managers. The fund then verifies and collates this information.
Costs (such as fees paid to the investment manager and any tax payable) are deducted to establish a ‘net asset value’.
To determine the unit price for each investment option, the ‘net asset value’ is divided by the number of units currently issued for that investment option.
The new unit price is multiplied by the number of units allocated to your account to give its current estimated value.

If the super fund uses weekly unit pricing, this process usually takes place from the end of the business day on Friday, with the new weekly unit price applied to members’ accounts in the middle of the following week.

Need to know: Super funds have both a buy unit price and a sell unit price:

Buy unit price is used when you or your employer make a contribution into your account.
Sell unit price is used when money is withdrawn from your account for an investment switch or to pay a direct fee.

The difference between these two prices forms the buy/sell spread. For more information about buy/sell spreads, see SuperGuide article Super fees: What are buy/sell spread costs?

What is a crediting rate?

A crediting rate – or investment return – is a percentage return your super fund decides members in each investment option have earned over a set time period.

Crediting rates vary throughout the year to reflect changes in investment markets – similar to the way unit prices fluctuate – and this will increase and decrease your account balance.

Each investment option has a different crediting rate to reflect how the assets in that investment option have performed.

Your super fund calculates the annual or declared crediting rate for each investment option at the end of the financial year. It represents the annual investment return less all relevant costs (such as investment manager fees) and tax.

Getting your money: Applying the crediting rate

While it’s easy to see the annual crediting rate on your member statement as at 30 June, things are a little more confusing at other times.

During the rest of the year, super funds calculate an interim crediting rate, and this may be daily or weekly. Interim crediting rates can also be positive or negative depending on the performance of your chosen investment option.

Good to know: The estimated account balance you see online for your super account is based on an interim crediting rate, but this is only notionally allocated to your account balance.

The actual investment earnings the fund has earned are normally only allocated to your account balance at the end of the financial year, or when you make a withdrawal or transfer out of the fund.

What happens if I switch investment options?

In some super funds, if you apply to switch to another investment option your fund applies the interim or daily crediting rate to your account balance for the period you were invested in that investment option.

This interim crediting rate may be more or less than the final annual crediting rate applied to the investment option.

Need to know: Every super fund has different rules on how it applies interim and final crediting rates to your super account.

If you decide to make an investment switch or exit your super fund, check these rules or seek advice before submitting a request. This is important, as it can affect your account balance.

For more information about switching investment options, read SuperGuide articles:

Annual returns and online balances: Where’s the difference?

Many fund members are puzzled by apparent differences between the online account balance and the one on their annual statement. Although this variation is usually small, it is confusing.

The difference usually occurs because funds calculate their daily (or weekly) unit prices and interim crediting rates on the most recent valuation for the assets in each investment option.

While the prices of listed assets (such as Australian shares) are available at the end of each business day, valuations for unlisted assets like property and infrastructure are not available daily. These assets are usually only valued quarterly or once every six months, so funds use previous values until updated pricing is available.

For more about listed and unlisted assets, see SuperGuide: