The Department of Finance has released data showing that the federal government’s unfunded superannuation liability topped $233.1 billion at the end of 2018-19, up $50 billion from $183.1 billion at the start of the financial year, due primarily to the cratering of interest rates. Meanwhile, the Future Fund’s assets rose to $165.7 billion in the year to September.
The Future Fund Act allows the government to begin withdrawing money from the sovereign wealth fund in 2020 to meet unfunded super liabilities, although the Coalition has renewed a 2017 commitment to not do so. From The Australian:
A spokeswoman for Senator Cormann said the discount rates applied to value the superannuation liability at June 30 last year were between 2.9 and 3.1 per cent. The discount rates applied as at June 30 this year were between 1.7 per cent and 1.9 per cent.
“The increase in unfunded superannuation liabilities to 30 June, 2019, compared with 30 June, 2018, largely reflects the impact of lower discount rates, which consistent with the Australian Accounting Standards are used to value the liability,” the spokeswoman said…
For discount rates, the Finance Department used relevant Australian Government Treasury Bond rates to calculate the “defined benefit obligation”.
The one shining light is that unfunded superannuation liabilities should soon peak. Interest rates are nearly at their absolute low, and so too are the discount rate applied. Further, the Commonwealth Superannuation Scheme and Public Sector Superannuation Scheme closed to new members in 1990 and 2005 respectively. Thus, the number of members should fall over time.