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    Coat of ArmsMedia Release
    Treasurer and Minister for Trade and Investment
    The Honourable Curtis Pitt

    Actuary’s review highlights strength of defined benefit scheme

    Treasurer and Minister for Trade and Investment
    The Honourable Curtis Pitt

    Friday, May 05, 2017

    Actuary’s review highlights strength of defined benefit scheme

    A review of the state’s defined benefit scheme by the State Actuary has concluded the repatriation of excess employer contributions should continue.

    In the 2016-17 State Budget Treasurer Curtis Pitt announced plans to return a portion of the scheme’s surplus to taxpayers by using $2 billion of the over-contributions for job-creating infrastructure projects and a further $2 billion to pay down debt over the forward estimates.

    “The State Actuary’s review found the scheme remains in a very strong position, with Queensland unique among Australian jurisdictions in fully funding our defined benefit scheme — the same as all other state super liabilities,” Mr Pitt said.

    “The review found the repatriation of a portion of the surplus should continue as well as the five-year suspension of employer contributions outlined in the 2015 State Budget.

    “The State Actuary found the defined benefit scheme was in ‘a very healthy position’ even allowing for the conservative assessment of future expected investment returns used in the review.”

    Mr Pitt said it was important to remember when considering the repatriation of a portion of the surplus funds that — as the State Actuary and QSuper itself — have previously pointed out, the surplus was not members’ funds but excess contributions by the government as employer.

    “The surplus belongs to taxpayers and it is appropriate to make better use of such surplus capital to generate jobs and pay down debt given the strong position of the scheme, the fully funded nature of Queensland’s public sector super, and the legislative guarantee of payouts,” Mr Pitt said.

    “The LNP will once again claim there is a ‘raid’ on members’ super, which just shows how little they know of how the scheme works — even former Treasurer Tim Nicholls is too lazy to acknowledge the facts and prefers untruthful scaremongering.

    “The LNP’s baseless claims also highlight the fact they need to tell Queenslanders how they would fill the $4 billion budget black hole created by their rejection of the repatriation of surplus funds for job-generating infrastructure and debt pay-down.

    “If they continue to reject the better use of these taxpayer-owned funds, they should declare what jobs they will cut, what frontline services they will scrap, and what assets they will sell to fill their budget black hole.”

    The State Actuary’s review found:

    • The repatriation of a portion of the surplus should continue as well as the five-year suspension of employer contributions outlined in the 2015 State Budget
    • The defined benefit scheme was in “a very healthy position” even allowing for the conservative assessment of future expected investment returns used in the review
    • The excess contributions by the government as employer had resulted in a surplus of $9.15 billion at 30 June 2016 on a funding basisT
    • That compared with a surplus of $10.06 billion at 30 June 2015 with the difference attributed to lower investment returns, and a change in the actuarial valuation basis.
    • Returns for the total defined benefit assets portfolio for the nine months to March 2017 were estimated at 7.49 per cent — a stronger return than the long-term earning rate of 5.0 per cent per annum used to develop projections in the investigation
    • The overall funding position is expected to be broadly maintained from the “already strong position” shown in the review
    • Even on the stricter accounting basis there was a surplus of $2.07 billion although there was “no requirement or practice to fund DB schemes to the levels indicated by the accounting basis”

    The review noted the government’s fiscal principle to fully fund its super liabilities and that over-funding of the scheme should be minimised and funding should be managed in the spirit of APRA funding and solvency standards applying to corporate DB schemes.

    The review was the first annual examination of the scheme by the State Actuary and the first undertaken in accordance with the APRA funding and solvency framework in line with the new fiscal principle.

    Consistent with an APRA framework, the State Actuary recommended a shortfall limit of 90 per cent and a target surplus buffer of 120 per cent of vested benefits for the scheme to manage risks associated with annual or short-term market return fluctuations.

    The review identified a 1-in-3 chance that the VBI would fall below 100 per cent in 2020 — the end of the suspension of employers contributions — meaning the scheme was more likely to remain within the target levels than not.

    The projected VBI is expected to remain well within these trigger points over the Budget horizon and no requirement to provide a contribution or a trigger for further repatriations has been identified.

    By increasing the frequency of actuarial investigations to once a year the government will strengthen governance around the scheme.

    Any recommendations by State Actuary reviews will be taken into account in each State Budget.

    The report is available online at:

    https://qsuper.qld.gov.au/~/media/PDFs/QSuper-public/Publications/Annual-report/actuarialreport2016.ashx?la=en

     

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