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Note 26: Retirement Plan Liabilities

Note 26: Retirement Plan Liabilities
Forecast
30 June 2012 		Actual
Budget 11
$m 		Budget 12
$m 		30 June
2012
$m 		30 June
2011
$m
8,891 11,883 Government Superannuation Fund (GSF) 13,539 10,152
4 3 Other funds -  4
8,895 11,886 Total retirement plan liabilities 13,539 10,156

By source

  
8,892 11,884 Core Crown 13,548 10,154
1 1 Crown entities 2 1
1 -  State-owned enterprises (10) 1
1 1 Inter-segment eliminations (1) - 
8,895 11,886 Total retirement plan liabilities 13,539 10,156

The Government operates a defined benefit superannuation plan for qualifying employees who are members of the Government Superannuation Fund (GSF). The members' entitlements are defined in the Government Superannuation Fund Act 1956. Contributing members make regular payments to GSF and in return, on retirement, receive a defined level of income. GSF is closed to employees who were not members at 1 July 1992.

The GSF obligation has been calculated by GSF's actuary as at 30 June 2012. A Projected Unit Credit 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.

Amounts recognised in the statement of financial position in respect of GSF are as follows:

Note 26: Retirement Plan Liabilities (continued)
Actual
30 June
2012
$m 		30 June
2011
$m

Net GSF Obligation

 
Present value of defined benefit obligation 16,557 13,311
Fair value of plan assets (3,018) (3,159)
Present value of unfunded defined benefit obligation 13,539 10,152

Present value of defined benefit obligation

 
Opening defined benefit obligation 13,311 12,881
Expected current service cost 92 111
Expected unwind of discount rate 367 448
Actuarial losses/(gains) 3,686 733
Benefits paid (897) (863)
Other (2) 1
Closing defined benefit obligation 16,557 13,311

Fair value of plan assets

 
Opening fair value of plan assets 3,159 2,945
Expected return on plan assets 194 177
Actuarial gains/(losses) (210) 159
Funding of benefits paid by Government 699 663
Contributions from other entities 23 23
Contributions from members 50 54
Benefits paid (897) (863)
Other -  1
Closing fair value of plan assets 3,018 3,159

Amounts recognised in the statement of financial performance in respect of GSF are as follows:

Note 26: Retirement Plan Liabilities (continued)
Forecast
30 June 2012 		Actual
Budget 11
$m 		Budget 12
$m 		30 June
2012
$m 		30 June
2011
$m

Personnel Expenses

 
Expected current service cost 92 111
Expected unwind of discount rate on GSF obligation 367 448
Expected return on plan assets (194) (177)
Contributions from members and funding employers (73) (77)
    Past service cost -  - 
302 190 Total included in personnel expenses 192 305

Net (Gains)/Losses on Non-Financial Instruments

 
-  2,212 Actuarial losses recognised in the year 3,896 574
302 2,402 Total GSF expense 4,088 879

The Government expects to make a contribution of $705 million to GSF in the year ending 30 June 2013.

In addition to its obligations to past and present employees, because GSF is liable for income tax, the Crown will be required to make additional contributions equivalent to the tax on future investment income.

The principal assumptions used for the purposes of the GSF actuarial valuations are as follows:

Note 26: Retirement Plan Liabilities (continued)
Actual
30 June
2012
% 		30 June
2011
%

Summary of assumptions

 

For following year

 
Discount rate 2.4% 2.8%
Expected return on plan assets 6.3% 6.0%
Expected rate of salary increases 3.0% 3.0%
Expected rate of inflation 2.1% 3.0%

Beyond next year

 
Discount rates between 2 and 22 years 2.5% to 5.9% 3.8% to 6.2%
Discount rate from 23 years onwards 6.0% 6.0%
Expected return on plan assets 6.3% 6.0%
Expected rate of salary increases 3.0% 3.0%
Expected rate of inflation for 2 years 2.4% 2.5%
Expected rate of inflation from 3 years onwards 2.5% 2.5%

The defined benefit obligation increased in the year to 30 June 2012 by $3,246 million, mainly due to a reduction in the discount rate and an increased allowance for mortality improvement.

The major categories of GSF plan assets at 30 June are as follows:

Note 26: Retirement Plan Liabilities (continued)
Actual
30 June
2012
$m 		30 June
2011
$m
Equity instruments 1,441 1,587
Other debt instruments 690 707
Property 137 150
Other 750 715
Fair value of plan assets 3,018 3,159

The expected rate of return on the plan assets of 6.25% (2011: 6.00%) has been calculated by taking the expected long term returns from each asset class, reduced by tax and investment expenses (using the current rates of tax and investment expenses).

The actual return on plan assets for the year ended 30 June 2012 was -0.54%, or -$16 million (2011: 11.63% or $336 million).

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