NOTE 06
NON-FINANCIAL ASSETS AND LIABILITIES
(CONTINUED)
Impact on defined benefit
Change in
assumption
Increase in
assumption
Decrease in
assumption
2015
2014
2015
2014
$’000
$’000
$’000
$’000
Discount rate
1.0% (3,343)
(3,724)
(4,092)
4,548
Salary growth rate
0.5%
1,174 1,368 (1,118)
(1,300)
Rate of CPI increase
0.5%
669
697 (608)
(633)
Pensioner mortality rate
5.0%
(105)
(102)
110
108
The defined benefit obligation has been recalcu-
lated 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
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
2012. Contribution rates are set after
discussions between the employer, STC
and NSW Treasury.
The next triennial review is at 30 June 2015,
the report is expected to be released by the
end of 2015.
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 2015 are
$0.676m.
The weighted average duration of the
defined benefit obligation is years 12.2 years
(2014: 12.3 years).
(g) Non-current liabilities - Defined benefit plans (continued)
(iv) Actuarial assumptions and sensitivity
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