Reserve Bank of Australia Annual Report 2011

Accounting Valuation
For financial statement purposes, the financial positions of the superannuation schemes are valued in
accordance with AASB 119. Under AASB 119, accrued benefits are determined by discounting future benefits
payable to current fund members at the yield on government bonds of similar maturity on the reporting date.
The approach under AASB 119, in contrast with the results of the actuaries’ triennial valuations noted above,
does not take into account that the assets held by the superannuation schemes to fund future benefits have
generally earned a higher rate of return on average than government bonds.
The principal actuarial assumptions for the AASB 119 valuation used in the case of the OSF were a discount
rate of 5.38 per cent (5.27 per cent in 2009/10), future salary increases of 3.5 per cent (3.5 per cent in 2009/10),
future pension increases of 3.5 per cent (3.5 per cent in 2009/10) and an assumed return on plan assets of
8.5 per cent (8.5 per cent in 2009/10). The actual return on plan assets of the OSF for 2010/11 was 8.1 per cent
(10.6 per cent in 2009/10). The assumptions used for the UK Pension Scheme were a discount rate of 5.4 per
cent (5.3 per cent in 2009/10), future salary increases of 5.65 per cent (5.25 per cent in 2009/10), future pension
increases of 3.65 per cent (3.25 per cent in 2009/10) and an assumed return on plan assets of 4.1 per cent
(4.4 per cent in 2009/10). The actual return on plan assets of the UK Pension Scheme for 2010/11 was 10.0 per
cent (6.1 per cent in 2009/10). The expected overall rates of return are based on the actuaries’ models of returns
for major asset classes and reflect the historic rates of return and volatility for each class and correlations across
asset classes.
Details of the funds are as shown on the following pages. In the case of the OSF, these details relate only to the
defined benefit component of the fund; defined contribution accumulation balances, on which the Bank has
no actuarial risk, are excluded. This has no effect on the measurement of the surpluses in the OSF. At 30 June
2011 accumulation balances in the OSF totalled $165.4 million ($150.5 million as at 30 June 2010).
Asset Distribution as at 30 June
% of fund assets
OSF
UK Pension Scheme
2011 2010 2011 2010
Cash and short-term securities 6.3 4.5 1.6 –
Fixed interest securities 7.2 7.0 – –
Indexed securities 1.5 2.2 91.9 94.3
Domestic shares 42.7 40.2 6.5 5.7
Foreign shares 3.8 4.1 – –
Property
Direct 4.3 4.6 – –
Indirect 15.9 16.6 – –
Private equity and alternative investments 18.3 20.8 – –
Total 100 100 100 100
94 Reserve bank of Australia