Companies miss super target
By Eric Johnston | theage.com.au | 12 October
Super headache from investment losses.
Australia's top companies face a $6 billion-plus black hole in unfunded pension liabilities, with market turmoil over the past year causing investment losses on defined benefit schemes to deepen.
But some — including Rio Tinto, Telstra and even Woolworths — which were preparing to pump hundreds of millions of dollars into their out-of-money programs over the next year, could be given some relief on the level of cash injections needed following signs of recovery in global stock and bond markets.
"The funding deficits will now be a lot smaller from where they were at June 30 because the sharemarkets have rebounded so strongly," said Matthew Burgess, a director at Russell Investments, a superannuation advisory firm.
Telstra could emerge as one of the biggest beneficiaries of a market recovery after the communications giant previously warned it could be forced to tip some $500 million into its $2.8 billion defined benefit pension fund over the next year.
At the end of June, Telstra's defined benefits fund was sitting on a $406 million deficit, a sharp turnaround from the previous year where the pension program had was more than $180 million in surplus assets.
An analysis of the full-year accounts of the nation's top 50 companies reveals defined benefit superannuation schemes have sunk into a $6.3 billion loss over the past 12 months, compared with a $255.7 million surplus this time last year.
Most funds have about 50 per cent of assets tied in equities; the rest are broken between bonds, cash and property.
Martin Stevenson, a partner at Mercer, said a rebound in markets in recent months had eased the pressure on funds but a "vast majority" of companies that operated defined benefit funds were still expected to make additional contributions over the coming year.
"Some of these results were at the real depth of the market downturn and things have improved, although we are still heavily in negative territory from July last year," Mr Stevenson said.
However, the results have been skewed by Rio Tinto, which took on some $US13.1 billion of defined benefit obligations following the acquisition of Canadian aluminium giant Alcan two years ago.
Rio, which has yet to update the position of its defined benefit scheme, warned earlier this year that the deficit had blown out to more than US$3.9 billion.
Defined benefit schemes guarantee a fixed retirement payout regardless of investment performance. Payouts are usually calculated on a combination of years of employment and salary at retirement.
Australian companies largely closed out their defined benefit schemes last decade, which has helped them avoid the rising liabilities of their global rivals.
"On a number of (Australian) defined benefit funds, the magnitude of the deficiency might be large but it's relatively small in relation to the assets of the company," Mr Stevenson said.
Best placed is Commonwealth Bank, which has seen its $3.5 billion defined benefit fund remain in surplus despite steep losses on asset values.
At the end of June, CBA's program was sitting on a net surplus of $409 million, compared with $1.47 billion in excess funds a year ago.
When a funding shortfall arises, the actuary and fund adviser will work out a timetable to bring the fund back into surplus over a number of years.
News Ltd last year tipped a further $US214 million into its $US2.69 billion defined benefits scheme. But with a deficit of $US483 million, the media heavyweight was looking at further contributions this year.
Elsewhere, Qantas has pledged to pour a further $66 million into its $2 billion pension fund over the next three years, to help narrow a $173 million deficit.
The BusinessDay analysis of pension funds does not include ANZ, National Australia Bank or Westpac.
Pay day: Corporate Australia's biggest defined pension plans
|
|
Defined benefit obligation June 30
$m
|
Plan (deficit)/ surplus
$m
|
| Rio Tinto ($US) |
13,100* |
(3910) |
| Telstra |
2847 |
(406) |
| News Ltd ($US) |
2690 |
(483) |
| CBA |
3512 |
409 |
| Woolworths |
1536 |
(92) |
| Qantas |
2098 |
(173) |
| Bluescope Steel |
1052 |
(261) |
*As at December 20, 2008
First published by TheAge.com.au on October 12 2009
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