Warning to Govt on unfunded liabilities
The relatively low earnings of the Future Fund in the current economic environment may set the Federal Government a new challenge — higher levels of unfunded superannuation liabilities, according to actuarial research house, Rice Warner.
According to Rice Warner, the performance of the Future Fund has meant that the Commonwealth's unfunded superannuation liability has remained relatively stable over the last few years, but this could now be at risk.
It said the projected earnings of the Future Fund in the current low-interest environment meant that the Commonwealth's net unfunded liability might keep growing.
"Based in part on Federal Budget papers, the shortfall between the Commonwealth's unfunded liability and the Future Fund's projected earnings is projected to rise unless the future fund earns a return of at least 4.8 per cent per annum from now to 2019," the Rice Warner analysis said.
It suggested that by 2019, the Commonwealth's gross unfunded liability (excluding the Future Fund) was expected to reach $193.7 billion — blowing out by $24.4 billion from 2015.
Rice Warner said a simple definition of an unfunded liability is a debt that cannot be repaid with the assets and earnings of assets allocated to that debt.
"Lower investment returns on the available assets mean that Australia's unfunded superannuation debt will grow unless government contributions to the funds are increased and/or investment returns are stronger than anticipated," it said.
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