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Note 16:  GSF Liability

The GSF liabilities have been calculated by the Government Actuary as at 30 June 2005. The liabilities arise from closed schemes for past and present public sector employees (set out in the GSF Act 1956). A Projected Aggregate Funding Method, based on balance-date membership data, is used for the valuation. This method requires the benefits payable from the GSF in respect of past service to be estimated and then discounted back to the valuation date.

The GSF net unfunded liability included in the 30 June 2005 Crown financial statements was $11,431 million. This was an increase of $1,264 million compared with 30 June 2004.

The 2005 movement in the net unfunded liability of $1,264 million reflects an increase in the gross liability of $1,410 million and an increase in net assets of $146 million.

The main drivers of the movement in the net unfunded liability are changes to the economic assumptions since 30 June 2004 and actual GSF experience to 30 June 2005.

The changes in underlying assumptions accounts for $1,240 million of the movement. The significant change in valuation assumptions is the decrease in the average after-tax discount rate to 3.8% (4.4% at 30 June 2004) accounting for $953 million of the movement and demographic changes accounting for $287 million. The other principal long-term financial assumptions used in the calculation remained unchanged, which were an inflation rate of 2.0% and an annual salary increases rate, before any promotional effects, of 3.0%. The remainder of the change is due to actual fund experience.

Forecast Actual
Original Budget $m Estimated Actual $m 30 June 2005 $m 30 June 2004 $m
GSF Liability and Asset Information
Gross GSF Liability
14,071 13,542 Opening gross liability 13,542 13,857
(57) 1,404 Net projected change 1,410 (315)
14,014 14,946 Closing Gross Liability 14,952 13,542
Less Net Assets Available to the GSF Scheme
3,313 3,375 Opening asset value 3,375 3,182
Net projected change:
224 281 - Investment valuation changes 279 315
(137) (134) - Contributions and other income less membership payments (133) (122)
87 147 Total projected change 146 193
3,400 3,522 Closing Net Asset Values 3,521 3,375
Net Unfunded Liability of the GSF Schemes
10,758 10,167 Opening unfunded liability 10,167 10,675
(144) 1,257 Net projected change 1,264 (508)
10,614 11,424 Net Unfunded Liability 11,431 10,167
Reconciliation of the movement in Unfunded Liability between years
Actual
30 June 2005 $m 30 June 2004 $m
Opening balance 10,167 10,675
Expected service cost 208 215
Expected interest cost 548 452
Change in underlying valuation assumptions 1,240 (480)
Experience losses and asset losses (110) (109)
Expected return on assets (199) (186)
Change in data 227 215
Expected contributions (650) (615)
Closing Balance 11,431 10,167
Note 16: GSF Liability (continued)
30 June 2005 $m 30 June 2004 $m
Liabilities to Pensioners
Pensioners 8,700 7,949
Deferred pensioners 871 713
Liabilities to Contributors
General Government Superannuation Fund members 3,897 3,528
Police 897 794
Armed Forces 428 409
Judges 59 58
Prison Services 41 40
Islands 43 37
Members of Parliament 16 14
Total Liabilities in respect of Past Services 14,952 13,542
Less Assets available to schemes 3,521 3,375
Total Net Pension Liabilities 11,431 10,167
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