Department of Foreign Affairs and Trade
Notes to and Forming Part of the Financial Statements

Note 28: Administered – Defined Benefit Pension Schemes

  2015 2014
  $’000 $’000
The amounts recognised in the Administered Schedule of Assets and Liabilities are as follows:
Present value of funded obligations 58,043 44,074
Fair value of plan assets (41,886) (30,669)
16,157 13,405
Present value of unfunded obligations 55,751 44,592
Net liability in schedule of administered assets and liabilities 71,908 57,997
Movements in the net liability recognised in the Administered Schedule of Assets and Liabilities as follows:
Net liability at the start of the year 57,997 49,152
Exchange differences on foreign plans 10,878 453
Net expense recognised in the Administered Schedule of Comprehensive Income 3,998 2,524
Net actuarial losses 7,108 9,479
Contributions by employers (8,073) (3,611)
Net liability at the end of the year 71,908 57,997
Reconciliation of opening and closing balance of the defined benefit obligation:
Opening liability 88,666 76,459
Exchange differences on foreign plans 14,955 3,110
Service cost 1,359 1,365
Interest cost 4,119 3,013
Contributions by plan participants (funded schemes) 80 72
Actuarial (gains) / losses due to experience (163) 2,651
Actuarial losses due to changes in financial assumptions 1,739 3,731
Actuarial losses due to changes in demographic assumptions 7,062 1,809
Benefits paid (4,024) (3,544)
Closing liability 113,793 88,666
Reconciliation of opening and closing balance of the fair value of plan assets:
Opening assets 30,669 27,307
Exchange differences on foreign plans 4,078 2,657
Expected return on plan assets 1,480 (557)
Contributions by plan participants (funded schemes) 80 72
Contributions by employer 5,478 1,349
Actuarial losses 1,530 1,123
Benefits paid (1,429) (1,282)
Closing liability 41,886 30,669
         
The amounts recognised in the Administered Schedule of Comprehensive Income are as follows:
Current service cost 1,359 1,365
Net interest on net defined benefit (asset)/liability 2,639 2,159
Total included ’employee benefit expense account’ 3,998 3,524
           
Amounts recognised directly in administered equity
Financial year ended       2015 2014
      $’000 $’000
Actuarial (losses) (7,108) (9,479)
         
Cumulative amounts of gains and losses recognised in administered equity
Financial year ended       2015 2014
      $’000 $’000
Actuarial (losses) (38,437) (31,329)
         
Pension Scheme Assets
The fair value of scheme assets is represented by:
Financial year ended       2015 2014
      $’000 $’000
UK equities 0.0% 0.0%
Overseas equities 0.0% 0.0%
Long dated UK corporate bonds 12.3% 11.2%
Long dated UK gilts 10.8% 11.1%
Cash 0.3% 0.2%
Insured Pensioner 1.4% 1.7%
Investment in LIC India 2.4% 3.1%
Diversified Growth Fund 72.8% 72.7%
 
Fair Value of pension scheme assets        
The fair value of scheme assets does not include amounts relating to:
    – any of the Department’s (and the Australian Government’s) own financial instruments, and
    – any property occupied by, or other assets used by the Department (or the Australian Government).
 
Principal actuarial assumptions at the reporting date (expressed as weighted averages):
Financial year ended       2015 2014
      $’000 $’000
Discount rate at 30 June 3.58% 4.04%
Salary growth 3.29% 3.31%
Price inflation 3.09% 3.14%
Pension growth 0.99% 1.02%
 
Historical Information
Financial year ended 2015 2014 2013 2012 2011
$’000 $’000 $’000 $’000 $’000
Present value of defined benefit obligations (113,794) (88,666) (76,459) (64,347) (55,656)
Fair value of scheme assets 41,886 30,669 27,307 24,075 22,914
(Deficit) in the scheme (71,908) (57,997) (49,152) (40,272) (32,742)
Actuarial gains (losses) – net liabilities (4,698) (7,069) (5,133) (6,155) 28
Effect of exchange rate gains (losses) (10,877) (453) (3,380) (1,538) 7,134
 
Expected Employer Contributions
Financial year ended       2016 2015
      $’000 $’000
Expected employer contributions1 3,615 –
 
Notes
1. This represents the employer contributions, which are paid in the schemes’ fund.
 
Scheme information  
The Department administers on behalf of the Australian Government, defined benefit pension schemes for locally engaged staff across a number of agencies at posts in London and New Delhi, and also the North American Pension Scheme. All schemes, with the exception of the New Delhi Gratuity Scheme, have been closed to new employees and provide pensions that are linked to final salaries. Figures disclosed are based on formal actuarial reviews that are generally conducted triennially and reviewed and updated by the actuary on an annual basis. The New Delhi and London schemes are partially funded and the North American Pension Scheme is fully unfunded. Contributions for the North American Scheme are made to the Consolidated Revenue Fund, which will provide funding for the benefits payable under the scheme.
Weighted average maturity profile of defined benefit obligation
Financial year ended     2015
Weighted average duration of defined benefit obligation (years) 10.48
Sensitivity to assumptions
The Department’s defined benefit obligation at the reporting date has been determined using actuarial calculations that require assumptions about future events. The estimated sensitivity of the defined benefit obligation to each significant assumption shown below has been determined at an individual scheme level if each assumption were changed in isolation. In practice, the schemes are subject to multiple external experience items which may vary the defined benefit obligation over time. The methods and assumptions used in preparing these sensitivity results remain consistent with those used in previous reporting periods.
The estimated effects of variations in the principal actuarial assumptions on the Department’s defined benefit obligation at the reporting date are as follows:
         
Increase/(decrease) in defined benefit obligation
Financial year ended       2015
      $’000
Discount rate  
    Increase of 0.5% (8,014)
    Decrease of 0.5% 8,376
Future salary increases  
    Increase of 0.5% 510
Decrease of 0.5% (494)
Future inflation increases  
    Increase of 0.5% 7,745
    Decrease of 0.5% (7,489)