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Impact on defined benefit
Change in
assumption
Increase in
assumption
Decrease in
assumption
2016
2015
2016
2015
$’000
$’000
$’000
$’000
Discount rate
1.0%
4,209 3,343 (5,196)
(4,092)
Salary growth rate
0.5% (1,248)
(1,174)
1,190 1,118
Rate of CPI increase
0.5% (1,096)
(669)
1,000
608
Pensioner mortality rate
5.0%
175
105 (420)
(110)
The defined benefit obligation has been
recalculated by changing the assumptions
as outlined above, whilst retaining all other
assumptions.
(v) Risk exposure
There are a number of risks to which the Fund
exposes the Employer. The more significant
risks relating to the defined benefits are:
•
•
Investment risk - The risk that investment
returns will be lower than assumed
and the Employer will need to increase
contributions to offset this shortfall.
•
•
Longevity risk - The risk that pensioners
live longer than assumed, increasing future
pensions.
•
•
Pension indexation risk - The risk that
pensions will increase at a rate greater
than assumed, increasing future pensions.
•
•
Salary growth risk - The risk that wages or
salaries (on which future benefit amounts
for active members will be based) will rise
more rapidly than assumed, increasing
defined benefit amounts and thereby
requiring additional employer contributions.
•
•
Legislative risk - The risk is that legislative
changes could be made which increase the
cost of providing the defined benefits.
The defined benefit fund assets are invested
with independent fund managers and have
a diversified asset mix. The Fund has no
significant concentration of investment risk
or liquidity risk.
(vi) Defined benefit liability and
employer contributions
In accordance with the Occupational
Superannuation Standards Regulations
and Australian Accounting Standard 25
“Financial Reporting by Superannuation Plans”
funding arrangements are reviewed at least
every three years following the release of
the triennial actuarial review and was last
reviewed following completion of the triennial
review as at 30 June 2015. Contribution
rates are set after discussions between the
employer, STC and NSW Treasury.
The next triennial review is at 30 June 2018,
the report is expected to be released by the
end of 2018.
Funding positions are reviewed annually and
funding arrangements may be adjusted as
required after each annual review.
Expected contributions to defined benefit
plans for the year ending 30 June 2017 are
$1.4m. Following the triennial review of the
Defined Benefit Fund as at 30 June 2015 it
was determined that ARTC had an estimated
funding shortfall of approximately 12% that
the Trustees are endeavouring to recover
over the 3 year period from 1 July 2016 to 30
June 2019. The impact is that the employer
contribution will increase to $1.4m p.a. for
each of the next 3 years and be subject to
ongoing review.
The weighted average duration of the defined
benefit obligation is 16.8 years (2015:12.2 years).
(iv) Actuarial assumptions and sensitivity
NOTE 8 (CONTINUED)
NON-FINANCIAL ASSETS AND LIABILITIES
(f) Non-current liabilities - Defined benefit plans (continued)
76