Investment returns can be applied to member investments by way of unitisation, interest allocation or market value write-up.
Daily or monthly unit prices can be used. A batch process is run daily, which will automatically calculate the number of units purchased for each amount invested for a member per investment portfolio if the unit price applicable to the date of investment has been captured and authorised. An accounting transaction is generated to record the number of units purchased.
If a unit price has been changed an automatic recalculation of the number of units is done, and accounting transactions generated to reverse the original accounting transaction and record the correct number of units.
Similarly if the members' investments have been recorded with the incorrect date the correct can be captured and a re-calculation requested. A recalculation of the number of units is done using the unit price applicable for the correct date, and accounting transactions are generated to reverse the original accounting transaction and record the correct number of units.
Unit prices can be captured at a global level and applied to the members of all products using that investment medium, or can be captured for a product. To limit the number of unit prices that need to be captured, a different unit price can also be derived for each product from a single unit price captured at a global level.
Units are only calculated at a member level and not for the investments recorded at a fund level.
Note:
The number of units will be calculated using the unit price as at one of the following dates:
the transaction date.
the first working day after the transaction date.
the first working day prior to the transaction date.
The date to be used is determined by the pricing method defined for the investment medium.
Interest addition can be applied monthly, quarterly, bi-annually or annually.
Monthly
Where a monthly interest rate is applied a batch process is run at the end of each month, or when the interest rate has been captured, and interest is calculated. Interest is calculated from either the due date of the transaction or the actual transaction date, depending on the Product Rules, until the end of the month. Accounting transactions are generated to record the interest calculated.
If an interest rate is changed, a recalculation of the interest is done and an accounting transaction generated to record the adjustment.
Quarterly, Bi-Annually and Annually
For quarterly, bi-annually or annually declared interest rates, the interest allocation is requested online once the interest rate has been captured. An interim rate is used for benefit payments and benefit quotes in the period since the last interest calculation.
This can also be done for an interest rate declared monthly.
If an interest rate is changed and the interest has been calculated, an automatic re-calculation of the interest is done and a transaction created for the difference.
The first step in the processing of a benefit payment for which the member will be paid the value of his retirement fund investments (fund value), is to trigger the realisation of the member’s investments. In the first step in the realisation process an investment advice will be generated for each investment portfolio for the total amount to be disinvested per day.
In the second step in the realisation process, when the unit price applicable for the date of disinvestment has been captured and authorized, the value of the member's units are calculated per investment portfolio. Accounting transactions will be generated to record the disinvestments and to record amounts in the benefit and benefit payable accounts.
If investment is done on a net basis (contributions less an estimate for claims) no investment advices are generated. This is determined by the net investment indicator captured on the investment portfolio.
Note:
The calculation of the market value of the number of units realised will use the unit price with an effective date of one of the following dates:
the transaction date.
the first working day after the transaction date.
the first working day prior to the transaction date.
The date to be used is determined by the pricing method defined for the investment medium.
If a product provides member investment choice, investment switch instructions can be captured by the member via the internet or online by the administrator. Details of the member's current investments are provided, including the number of units and the current market value of the units.
A history of the unit prices for each portfolio is also available. A portfolio is selected for switching out of, and the percentage of the units to be switched is captured. Any number of the portfolios available for switching into can be selected, and the percentage allocation to each portfolio captured.
Any switching rules that may be applicable, e.g. notice periods, fixed switching dates, maximum or minimum percentages, etc., are applied. A switching process is run every day and the switch is processed automatically when all conditions have been fulfilled and the unit price has been captured and authorized for the investment portfolio being switched out of. A switching fee, where applicable, is deducted from the value of the units being switched.
Advices for the asset managers are produced automatically and accounting transactions are generated for the switch out (sell) leg and the switch in (buy) legs of the switch.
The calculation of the number of units purchased for the investment portfolios switched into is taken care of in the unitisation process described above.
Note:
If the pricing method defined for the investment medium is “Same Day”, then the unit price with an Effective Date equal to the Disinvestment Date will be used when calculating the market value of the number of units realized.
If the pricing method defined for the investment medium is “Forward”, then the unit price with an Effective Date equal to the next working day immediately after the Disinvestment Advice Date will be used when calculating the market value of the number of units realized.
If the pricing method defined for the investment medium is “Historic”, then the unit price with an Effective Date equal to the first working day prior to the Disinvestment Date will be used when calculating the market value of the number of units realized.
Amounts or units can be apportioned between members invested in an investment portfolio or across multiple portfolios. These amounts/units can be for expenses (investment management fees, etc.), or income (dividends for unit trust investments, reserves, etc.). The amount to be apportioned, the type of distribution (tax, management fee, surplus, dividend, arrear tax, reserves), the effective date of the apportionment and the investment portfolio(s) for which the apportionment must be done, are captured using the distribution detail.
Batch processes are scheduled to run daily, whereby any distribution details that have been captured for the current date, are picked up. The particular batch run is dependent on whether distribution is defined at a product or a portfolio level on the options that appear on the product sub-menu. The apportionment is processed according to the rules defined in the distribution structure set up in infrastructure maintenance.
The total of the number of units of all the members invested in the specified investment portfolio(s) as at the distribution date is determined and each member's portion calculated in proportion to the total units. The amount is either apportioned amongst only the live members, or the live and exited members, depending on the distribution structure.
For income, business transactions (BT’s) are created to record the amount or number of units allocated to each member. If the apportionment includes exited members, BT’s are created to transfer the members' portions to a reserve account.
For expenses, BT’s are created to record the units to be realised and an investment advice is created to advise the asset manager to disinvest the total number of units. If the apportionment includes exited members, BT’s are created to effectively write-off the member’s portions against a reserve account.
Note:
The unit price with an Effective Date equal to the Price Date captured on the Distribution Detail will be used when calculating the market value of the number of units realized.
Where a Price Date is not captured on the Distribution Detail, the latest price will be used.
Processes
Distribution
Product Launch Requirements
Additional Menu Options
For examples of accounting transactions (T-accounts), refer to
Supplements
Accounting Transaction Examples