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Note 26: Retirement Plan Liabilities (continued)

Sensitivity Analysis

The present value of the GSF obligation is sensitive to underlying assumptions such as the discount rate, inflation rates and expected salary increases. These assumptions are closely linked. For example, a change to the discount rate may have implications on the inflation rate used. Therefore, when calculating the present value of pension payments it is unlikely that an assumption will change in isolation.

If the discount rate was to change in isolation, this would impact the measurement of GSF obligation as per the table below:

Sensitivity of assumptions
Change Impact on obligation
Actual
30 June
2012
$m 		30 June
2011
$m

Sensitivity of assumptions

 
Discount rate + 1% (1,785) (1,236)
- 1% 2,175 1,480

The plan's assets are exposed to share price risks arising from its holding of equity instruments. Equity instruments are reported at fair value. Movements in share prices therefore directly translate into movements in the value of the share investment portfolio.

The sensitivity analysis below has been determined based on GSF's exposure to share price risks at the reporting date.

Sensitivity analysis
Change in share prices Impact on operating balance Impact on net worth
Actual Actual
30 June
2012
$m 		30 June
2011
$m 		30 June
2012
$m 		30 June
2011
$m
Strengthen/weaken by 10% 144 159 144 159

The plan's sensitivity to share prices has not changed significantly from the previous year.

Historical Analysis

Actual gains and losses comprise experience adjustments (the effects of differences between the previous actuarial assumptions and what has actually occurred in the year) and the effects of changes in actuarial assumptions on valuation date. The history of the present value of the unfunded defined benefit obligation and experience adjustments is as follows:

Historical Analysis
Actual
30 June
2012
$m 		30 June
2011
$m 		30 June
2010
$m 		30 June
2009
$m
Present value of defined benefit obligation 16,557 13,311 12,881 11,792
Fair value of plan assets (3,018) (3,159) (2,945) (2,804)
Present value of unfunded defined benefit obligation 13,539 10,152 9,936 8,988
Experience adjustment - increase/(decrease) in plan liabilities 28 388 286 79
Experience adjustment - increase/(decrease) in plan assets (210) 159 117 (806)
Total experience adjustments - (losses)/gains (238) (229) (169) (885)
Changes in actuarial assumptions (3,658) (345) (1,062) 190
Actuarial (losses)/gains recognised in the year (3,896) (574) (1,231) (695)

Undiscounted defined benefit obligation

The reported GSF defined benefit obligation of $16,557 million (2011: $13,311 million) represents the net present value of estimated cash flows associated with this obligation. The following table represents the timing of future undiscounted cash flows for entitlements to 30 June 2012. These estimated cash flows include the effects of assumed future inflation.

Undiscounted defined benefit obligation
30 June
2012
$m 		30 June
2011
$m
No later than 1 year 913 866
Later than 1 year and no later than 2 years 910 875
Later than 2 years and no later than 5 years 2,818 2,655
Later than 5 years and no later than 10 years 4,900 4,489
Later than 10 years and no later than 15 years 4,908 4,371
Later than 15 years and no later than 20 years 4,634 4,001
Later than 20 years and no later than 25 years 4,119 3,400
Later than 25 years and no later than 30 years 3,396 2,607
Later than 30 years and no later than 35 years 2,587 1,804
Later than 35 years and no later than 40 years 1,799 1,121
Later than 40 years and no later than 45 years 1,132 620
Later than 45 years and no later than 50 years 631 298
Later than 50 years 440 168
Undiscounted defined benefit obligation 33,187 27,275
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