Super schemes face $10bn shortfall
FINANCIAL REVIEW | MONDAY 23 FEBRUARY 2009
Sally Patten
Companies will be forced to pump hundreds of millions of dollars into defined benefit superannuation schemes, as plunging sharemarkets and falling interest rates blow a $10 billion hole in employee funds.
A study by investment consultant Watson Wyatt has found that, as of June last year, 27 listed companies including Telstra, Commonwealth Bank Of Australia and AMP - had a combined deficit of $4 billion in their defined benefit schemes, which guarantee employees fixed payouts on retirement regardless of any movements in financial markets.
That deficit is four times the size recorded in June 2006, and it has since blown out further, given the 16.4 per cent fall in the value of balanced superannuation funds in the seven months to January 31.
Unofficial estimates now put it as high as $10 billion.
In addition to falling share prices, bond rates have also dropped, increasing the size of the liabilities.
“It is reasonable to say that quite a number of schemes require cash injections,” Watson Wyatt’s Australian head, Andrew Boal, said.
“The companies we have been talking to are looking to inject more cash,” he said, adding that those that could afford to top up their funds would do so “reasonably robustly”.
Defined benefit funds, which typically provide a lump sum based on years of service and final salary, account for about 8 percent of total superannuation assets in Australia.
