While some funding issues have been identified, Australian sponsors of defined benefit funds appear less likely to face the desperate plight of some of their international counterparts who have been forced to make massive additional contributions to their schemes to meet their liabilities.
The Australian Prudential Regulation Authority (APRA) has been monitoring the situation locally and requested information on the issue from trustees back in September.
“The deadline for responses was the end of November but unfortunately that date coincided with the lodgements funds had to make by the end of October. Some have responded but some required more work to be performed by their actuaries so we have relaxed the deadline,” says APRA general manager Ramani Venkatramani.
Nonetheless, preliminary findings from the requests indicate there are funding issues.
“The situation is not as bad as the US or UK, but having said that, the fall in market values warns us that there is an issue that has to be addressed by the employer.”
PricewaterhouseCoopers’ actuary David Knox concurs with the view that the situation in Australia is not as bad as in the US.
“Under the superannuation guarantee, there are stronger funding requirements in Australia than in the US. Therefore, before funds invested in the share market, most funds in Australia were fully funded. That wasn’t the case in the US,” says Knox.
