actuarial valuation as at 1 january 2018 · valuation date, the net assets of the fund are...

Citibank Australia Staff Superannuation Fund

Actuarial Valuation as at 1 January 2018

26 June 2018

Citibank Australia Staff Superannuation Fund i

26 June 2018

Table of Contents

Section 1 : Purpose and Summary .......................................................................................................1

Section 2 : Background and Data .........................................................................................................5

Section 3 : Assets and Investment Strategy ........................................................................................7

Section 4 : Valuation Method, Fund Experience and Actuarial Assumptions ...............................12

Section 5 : Insurance Arrangements ..................................................................................................16

Section 6 : Solvency and Funding Status Measures ........................................................................17

Section 7 : Valuation Contribution Results .......................................................................................21

Section 8 : Sensitivity Analysis and Material Risks ..........................................................................24

Appendix A : Summary of Benefits as at 1 January 2018 .........................................................26

Appendix B : Details of Membership ............................................................................................30

Appendix C : Changes in Membership .........................................................................................31

Appendix D : Consolidated Revenue Account ............................................................................32

Appendix E : Valuation Method and Assumptions .....................................................................33

Appendix F : Statements required under Regulation 23 of SPS 160 ........................................36

ii Citibank Australia Staff Superannuation Fund

Willis Towers Watson Confidential

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Citibank Australia Staff Superannuation Fund 1

26 June 2018

Section 1: Purpose and Summary The Citibank Australia Staff Superannuation Fund provides benefits to employee members which are of “defined benefit” type where retirement benefits are defined by salary and period of membership. With such a fund, a regular actuarial review is necessary to:

■ examine the sufficiency of the assets in relation to members’ accrued benefit entitlements;

■ determine the Company contribution rate required to ensure that the Fund maintains a satisfactory financial position;

■ examine the suitability of the Fund’s insurance and investment arrangements;

■ satisfy Clause 6 of the Trust Deed which requires that the Trustee must obtain an actuarial investigation report at intervals of not more than three years, and

■ meet legislative and prudential standard requirements, in particular paragraph 23 of Prudential Standard 160 Defined Benefit Matters (“SPS 160”).

This report has been prepared in accordance with Professional Standard 400, dated July 2018, issued by the Institute of Actuaries of Australia. The previous valuation, which I conducted, was carried out at 1 January 2015 with the results set out in a report dated 28 September 2015.

Reliance statement and data

This report is provided subject to the terms set out herein and in the Superannuation Administration and Consulting Retainer Agreement between Towers Watson Australia Pty Ltd (“Towers Watson”) and Citibank Australia Staff Superannuation Pty Ltd (“Trustee”) dated 20 May 2003. This report is provided solely for the Trustee's use and for the specific purposes indicated above. It may not be suitable for use in any other context or for any other purpose.

Except where we expressly agree in writing, this report should not be disclosed or provided to any third party, other than as provided below. In the absence of such consent and an express assumption of responsibility, no responsibility whatsoever is accepted by us for any consequences arising from any third party relying on this report or any advice relating to its contents.

The Trustee may make a copy of this report available to its auditors, the Company and to any person to whom the Trustee may be required to provide a copy under relevant legislation, but we make no representation as to the suitability of this report for any purpose other than that for which it was originally provided and accept no responsibility or liability to the Trustee's auditors or the Company in this regard. The Trustee should draw the provisions of this paragraph to the attention of its auditors and the Company when passing this report to them.

In preparing this valuation, we have relied upon information and data provided to us orally and in writing by the Trustee and other persons or organisations designated by the Trustee. We have relied on all the data and information provided, including Fund provisions, membership data and asset information, as being complete and accurate. We have not independently verified the accuracy or completeness of the data or information provided, but we have performed limited checks for consistency. The data and information we have relied upon is shown in Section 2.

2 Citibank Australia Staff Superannuation Fund


In our opinion, all calculations are in accordance with requirements of applicable legislative requirements, and the procedures followed and the results presented conform with applicable actuarial standards of practice.

Company Contributions

In the absence of any special circumstances and in line with the Funding Policy (discussed in Section 4), the table below sets out a suggested basis at which the Company can contribute to the Fund:

Period Superannuation Guarantee

Contributions*

Expense and Insurance Allowance

Defined Benefit Funding

Total

1 January 2018 to 31 December 2018

Nil Nil Nil Nil

1 January 2019 onwards Nil Nil Nil Nil

* Superannuation Guarantee contributions are paid on 91.32% of Fixed Annual Remuneration (FAR).

In addition to the above, the Company should also contribute:

■ 9.5% of such other earnings as are included in Ordinary Time Earnings (as defined in the Superannuation Guarantee (Administration) Act), capped at 9.5% of the SG Maximum Super Contribution Base, and

■ any amounts made by members on a salary sacrifice basis.

The funding position, and in particular the coverage of vested benefits by Fund assets, should continue to be monitored quarterly and each year at 31 December and more frequently if required. Supplementary contributions may be required should the funding position become unsatisfactory.

Funding Status Measures

Vested Benefits

Vested benefits are the benefits payable if all Members voluntarily resigned from service. As at the valuation date, the net assets of the Fund are sufficient to cover the vested benefits. The ratio of the Fund’s total net assets to total vested benefits is 110.6% at 1 January 2018. The ratio of the Fund’s net assets supporting defined benefits to the Vested defined benefits was 124.3%.

Assuming:

a. the benefits described in the Trust Deed remain unchanged

b. Company contributions are paid at the recommended rate

c. the future experience of the Fund is in accordance with the assumptions made in this actuarial valuation,

then the assets of the Fund should remain in excess of the vested benefits up to 1 January 2021. On this basis, the financial position of the Fund is expected to remain satisfactory.


26 June 2018

Present Value of Accrued Benefits

The present value of accrued benefits is the actuarial value (using the assumptions and methodology detailed in this report) of the expected future benefits payable from the Fund to the current members and their dependents in respect of Fund membership completed up to the date of the actuarial investigation.

The Fund’s net assets are adequate to cover the present value of the accrued benefits of all members of the Fund at the valuation date. The ratio of the Fund’s total net assets to the total present value of accrued benefits is 109.6%. The ratio of the Fund’s net assets supporting defined benefits to the present value of accrued defined benefits was 121.6%.

From time to time the value of the Fund’s assets may be greater than, or less than, the present value of accrued benefits. These excesses, or shortfalls, arise when the actual experience of the Fund differs from the assumptions used to determine contribution rates.

Minimum Requisite Benefits

The Fund is “solvent” if the net realisable value of the assets of the Fund exceeds the Minimum Requisite Benefits (MRB).

As at the valuation date the net assets of the Fund exceeded the MRBs and the Fund was in a solvent financial position. The ratio of the Fund’s net assets to the total MRB was 113.2%. At the previous valuation, this ratio was 118.9%.

Shortfall Limit

As required under SPS 160 the Trustee has set the Shortfall Limit for the Fund at 98%. Given the current investment strategy, we consider this Shortfall Limit is appropriate for the Fund.

Superannuation Guarantee

The Company’s Superannuation Guarantee obligation is fully met for all Members by the minimum benefits provided under the Fund. The required Benefit Certificate is dated 10 October 2014.

A Funding and Solvency Certificate dated 11 May 2018 has been issued to the Trustee corresponding to the above mentioned Benefit Certificate. The purpose of this certificate is to specify the required Company contributions needed to fund the MRBs used to offset the Superannuation Guarantee charge. All necessary funding and solvency certificates have been issued to the Trustee during the three years to 1 January 2018. A superannuation fund is “solvent” if the net value of its assets exceeds the minimum Superannuation Guarantee benefits. At 1 January 2018, the Fund is solvent and based on the actuarial assumptions, we see no reason why it would be unlikely that an actuary will not be able to certify the solvency of the Fund in three years’ time.



Investments

The Trustee has developed formal objectives and a policy for the investment of the Fund’s assets. These objectives and policies are summarised in the Investment Governance Framework dated 7 June 2018.

At 1 January 2018, the Fund’s defined benefit liabilities in excess of the underlying accumulation accounts of defined benefit members were invested in the Fund’s Balanced option. The long term benchmark asset allocation of this option is 67.5% in growth assets such as shares and property, 7.5% in alternative assets and 25% in income assets such as cash and bonds.

The current investment mix is considered suitable to the Fund’s liabilities in respect of defined benefit membership at 1 January 2018.

The Trustee regularly monitors the investment managers’ performance and we recommend that this continues.

Insurance

In comparison with the Fund’s net assets the total amount of insurance protection against death and total and permanent disablement benefits is adequate as at 1 January 2018. We will continue to monitor this situation when the annual administration review is performed each year.

A temporary disablement benefit is provided to Citibank employees outside the Fund and hence the amount of insurance is not influenced by the level of the Fund’s assets.

Next Valuation

The next valuation should be held no later than 1 January 2021. Vested Benefits coverage should continue to be monitored at least annually and more frequently if warranted.

Brad Jeffrey Fellow of The Institute of Actuaries of Australia as RSE Actuary to the Citibank Australia Staff Superannuation Fund Review: Richard Saverimuttu 26 June 2018

Towers Watson Australia Pty Ltd Level 16, 123 Pitt Street Sydney NSW 2000 Australia T +61 2 9253 4000

Towers Watson Australia Pty Ltd ABN 45 002 415 349 AFSL 229921

http://aptct.internal.towerswatson.com/clients/649304/BENAUSCiti2018/Documents/04.01_Actl_Valn/Citi Valuation Report 2018_final.docx


26 June 2018

Section 2: Background and Data The Fund was initially established in accordance with the Trust Deed dated 29 September 1950. The Fund operates in accordance with the Trust Deed as amended from time to time.

The Fund is a regulated complying superannuation fund under the SIS Act and for taxation purposes.

The Fund is closed to new defined benefit members.

A summary of the main Fund benefits is included as Appendix A to this report.

Previous Recommendations

Company contributions paid to the Fund over the three year period ending 31 December 2017 have been in line with the recommendations of the Actuary as follows:


Contributions*



Total


9.5% Nil Nil 9.5%






Changes to benefits since the last valuation of the Fund

There have been no changes to the benefits of the Fund since the last actuarial valuation.

It should be noted that the Superannuation Guarantee (SG) rate, being the minimum rate of superannuation employers must provide for its employees is set to increase from its current rate of 9.5% to 12.0% over the period 1 July 2021 to 1 July 2025.

The SG rate has previously increased from 9.0% to 9.25% at 1 July 2013 and to 9.5% from 1 July 2014. As a result of the increase from 9.0% to 9.25% the Company increased SG contributions in respect of employees in the Fund by increasing the superannuation component of FAR and reducing the cash component (where applicable), thereby maintaining FAR.



As a result of the increase from 9.25% to 9.5% the Company increased SG contributions to the Fund by increasing FAR for affected employees.

The definition of Fund Salary used in the calculation of defined benefits was not changed as a result of the increases in the SG rate.

Sources of Information

We have relied on the administrative records at 1 January 2018, as currently stored on the Link Super administration system.

We have relied on the audited accounts from KPMG for the three years ending 1 January 2018 together with information set out in the Fund’s annual report in each of these years. We have also relied on investment information from the Fund’s investment managers.

Where possible the information provided has been checked for reasonableness and is considered suitable for the purposes of this investigation.

Data

The membership details are summarised in Appendix B. In brief there were 171 Members as at 1 January 2018, of which 91 were active Defined Benefit Members with total Fund salaries of $13,725,953.

The Fund does not have any lifetime pensioners.

A comparison of the active Defined Benefit membership between the last valuation date and this valuation date is enclosed as Appendix C to this report.

We have checked a sample of the membership data for internal consistency and are satisfied as to the accuracy of this sample.

Since the previous valuation, the average attained age of active Defined Benefit Members has increased from 51.6 years to 53.4 years. The average completed membership of active Defined Benefit Members has also increased from 20.3 years to 22.9 years.

There were 91 active Defined Benefit members of the Fund at the valuation date who were present at the previous valuation. Their Fund salaries over the period since the last valuation have increased on average by 2.9% p.a.


26 June 2018

Section 3: Assets and Investment Strategy Accounts

We have been supplied with audited accounts covering the twelve month periods to 31 December 2015, 31 December 2016 and 31 December 2017. These accounts have been combined to produce the consolidated accounting statement for the period 1 January 2015 to 31 December 2017 shown in Appendix D to this report.

We have reconciled the statistical data on exits provided for the purposes of this valuation with the amounts appearing in the accounts for benefit payment purposes and have checked all the larger benefit payments to ensure that these were being calculated in accordance with the provisions of the Trust Deed.

The Fund’s accounts show that the Employer has been contributing in accordance with the recommendations of the last valuation report and the Funding Policy.

Market Value of Net Assets

The breakdown of the market value of the Fund’s total assets by investment manager at 1 January 2018 is summarised below.

Market Value of Assets at 1 January 2018 $

BlackRock Investment Management (Australia) Limited – Australian Government Inflation-Linked Bond Fund 3,895,883

BlackRock Investment Management (Australia) Limited – Cash Fund 2,241,985

BlackRock Investment Management (Australia) Limited – Indexed Hedged International Equity Fund 2,746,323

MFS Institutional Advisors Inc – MFS Fully Hedged Global Equity Trust 6,680,689

Macquarie Investment Management Limited – True Index Australian Fixed Interest Fund 7,711,559

Northcape Capital Pty Ltd – Core Australian Shares Fund 10,404,592

Schroder Investment Management Australia Limited – Australian Equity Fund 10,343,695

BlackRock Investment Management (Australia) Limited – Wholesale Indexed International Equity Fund 10,618,197

Macquarie Investment Management Limited – ArrowStreet Global Equity Fund 6,611,816

Resolution Capital Limited - Global Property Securities Fund Class B 4,217,337

BlackRock Investment Management (Australia) Limited – Global Bond Index Fund 3,856,010

Perpetual Trust Services Limited - Karara Australian Equities Fund 10,286,393

Towers Watson Investment Management Limited - Diversifying Strategies Fund 4,376,141

Current Assets 2,243,685

Current Liabilities (509,805)

Net Assets before deducting the ORFR 85,724,501

Operational Risk Financial Reserve (ORFR) (252,434)

Market Value of Total Net Assets 85,472,067



The market value of the Fund’s total assets are based on redemption unit prices. The Market Value of the Net Assets are the net assets available to meet the Fund’s liabilities including Defined Contribution liabilities as used in determining the contribution recommendations and Funding Status Measures at the valuation date.

The Trustee does maintain an operational risk financial reserve as shown in the table above.

Accumulation benefits – Member Investment Choice

Members currently have the following 8 investment options in which to invest their accounts:

■ Cash Deposit

■ Bonds Plus

■ Balanced

■ Australian Shares

■ International Shares

■ Property

■ Diversified Shares, and

■ Fixed Interest.

The Trustee credits members’ accounts with actual investment returns (net of fees and taxes) from the underlying assets. I consider this crediting rate policy to be suitable.

Nature of Defined Benefit Liabilities

The level of the pure Defined Benefit liabilities does not bear the same direct relationship with the defined benefit assets as exists with accumulation liabilities (where the assets and liabilities are generally matched).

The Defined Benefit liabilities reflect membership and salary growth, whereas the supporting assets depend on a range of factors including:

i. the level of Company contributions, and

ii. the level of investment returns.

In this case it is the Company which bears the investment risk as the level of contributions required depends on the level of investment returns achieved.


26 June 2018

An investment strategy for the Defined Benefit Section which is framed to take a long-term view will often adopt relatively high levels of equity investment in order:

i. to secure attractive long term investment returns, and

iii. to provide an opportunity for capital appreciation and dividend growth, which gives some protection against inflation (as benefits are linked to Salary growth which is also influenced by inflation).

The main constraint is that potential fluctuations in asset values mean the total asset value could fall below the level of Vested Benefits, placing the Fund in an unsatisfactory financial position.

While the impact of a sudden sharp fall in asset values can be limited by maintaining a buffer of assets over and above the level of vested benefits, the level of the buffer may never be sufficiently high to safeguard against all possible investment outcomes. However, the buffer should be at a level where the risk of the asset values falling below the level of vested benefits under a particular investment strategy is acceptable to the Trustee and the Company.

In this regard, a lower buffer may be acceptable where the Company is willing and able to accept short-term variations in contributions as part of underwriting the defined benefits of the Fund. In this case, short-term variations in company contributions may result from:

i. reducing a buffer that has grown too large, or

iv. rebuilding a buffer that has fallen or become negative.

An alternative for a plan which does not have a sufficient asset buffer above the level of Vested Benefits is to adopt a more conservative investment strategy. While this may reduce short-term fluctuations in asset values, it is also likely to reduce long-term returns and hence result in increased company contributions in the long-term.

In summary, a balance needs to be achieved between these short-term and long-term considerations in funding the defined benefit liabilities.

Defined Benefits – Investment Objectives and Guidelines

The assets supporting the accumulation accounts of defined benefit members are invested in the options chosen by the members. Each option has its own return and risk objectives.

The assets supporting the balance of the defined benefits liabilities in excess of the underlying accumulation accounts are invested in the Fund’s Balanced option. The Trustee’s principal investment objectives for this option are:



a. Real Return Objective

■ Achieve a return (after tax and investment fees) that exceeds inflation (as measured by the increase in CPI) by at least 3% p.a. over moving ten year periods.

d. Downside Risk Objective

■ Limit the chance of achieving a negative return over moving one year periods to approximately five years in twenty.

We have taken account of the investment objectives of the Fund and the investment guidelines under which the Fund’s investment managers operate in setting our actuarial assumptions in Section 4 of this report.

Investment Strategy

The table below shows the benchmark asset allocation for the Defined Benefits assets over the valuation period, allowing for the investment options chosen by members for their underlying accumulation accounts.

Asset Class Benchmark Asset Allocation as at 1

January 2016

Benchmark Asset Allocation as at 1

January 2017

Benchmark Asset Allocation as at 1

January 2018

Australian Shares 34.8% 34.7% 35.0%

Overseas Shares 32.2% 32.8% 33.1%

Property 5.1% 5.1% 5.0%

Diversity 6.2% 6.0% 5.9%

Fixed Interest 21.2% 20.7% 20.4%

Cash and Liquid Assets 0.6% 0.8% 0.6%

Total 100.0% 100.0% 100.0%

Suitability of Investment Strategy

The defined benefit categories within the Fund are now all closed to new members. The age profile of these categories will gradually increase. At 1 January 2018 the average age of employee members was 53.4 years old, so the investment timeframe is still relatively long-term at present.

At the valuation date, the Fund did hold a buffer of assets in excess of the defined benefit liabilities, which meant that the assets were sufficient to cover the Fund’s vested benefits.

On the basis that Vested Benefits and accrued benefits coverage and funding requirements will continue to be reviewed quarterly and at 1 January each year, I consider the current investment strategy to be suitable.


26 June 2018

Each investment option in the fund has its own specific long term asset allocation. As mentioned, the assets supporting defined benefit liabilities are composed of the underlying member accumulation accounts which are invested in the options chosen by members and an aggregate amount invested in the Fund’s Balanced option. To the extent that members vary the investment choice of their underlying accumulation accounts, this can vary the benchmark asset allocation of the Fund’s defined benefit assets.



Section 4: Valuation Method, Fund Experience and Actuarial Assumptions To carry out an actuarial valuation for defined benefit liabilities, it is necessary to decide on:

■ the valuation method to be adopted, and

■ the assumptions as to the factors which will affect the cost of the benefits to be provided by the Fund in the future

The information in this Section 4 relates to the defined benefit section of the Fund.

Valuation Method

Attained age method

The funding method adopted at the previous valuation was the Attained Age method. This funding method remains appropriate for the Fund and we have retained it for this valuation.

The calculation of the Employer contribution by this method consists of two parts.

The first part is the “normal cost”. The total normal cost is expressed as a level % of expected future salaries and is equal to the sum of:

■ the cost based on actuarial assumptions of the benefits accruing to the members in respect of all future membership following the valuation date, plus

■ the cost of insurance premiums, administration and taxation expenses.

The second part is the Employer contribution required to amortise any surplus or deficiency at the valuation date.

The surplus or deficiency in respect of completed membership is then calculated as the difference between:

■ the actuarial value of the Fund’s assets attributable to the defined benefit section, and

■ the present value of all benefits accrued to the date of the valuation in respect of defined benefit section members based on the valuation assumptions adopted.

The total Employer contribution for the year is the Employer’s normal cost less (plus) any amortisation of surplus (deficit). However, the contribution rate required to maintain vested benefits coverage above 100% in three years’ time based on the valuation assumptions has also been considered.


26 June 2018

Funding Policy

In addition to determining the long term Company contribution rate, we also determine whether there are additional contribution requirements necessary to satisfy the Funding Policy, which has been agreed between the Company and Trustee. The current Funding Policy dated August 2012 states that the Company’s contribution rate will be set as follows:

1. If the ratio of the net market value of Defined Benefit assets to the total amount of Defined Benefit Vested Benefits (VBI) is between 102% and 110% (the “Reviewable Range”) inclusive, the Company will contribute to the Fund at the rate as determined in accordance with the funding method used in most recent actuarial valuation (the “standard” rate).

4. If the VBI falls below 102%, the Trustee, after considering the advice of the Actuary, will consider the need to request the Company make additional contributions with the objective of restoring the VBI to within the Reviewable Range within 3 years.

5. If the VBI falls below 98% (the “Shortfall Limit”), the Company will make additional contributions in respect of any exits from the Fund aiming to at least maintain the financial position. The Company will also make such further contributions above the standard rate, as agreed with the Trustee on the advice of the Actuary, to return the VBI to within the Reviewable Range within 3 years.

6. If the VBI exceeds the Reviewable Range the Principal Employer may request that the Trustee ask the Actuary to conduct a review to reassess the recommended contribution rate with a view to reducing or suspending company contributions for a specified period. Suspension shall last no longer than required for the VBI to return to a level within the Reviewable Range.

The “standard” company rate is currently determined as:

■ 9.5% of 91.32% of Fixed Annual Remuneration (where 91.32% of Fixed Annual Remuneration is capped at the SG Maximum Earnings Base), plus

■ an additional percentage of Fixed Annual Remuneration set to meet insurance costs, expenses and the cost of the defined benefit guarantee. At the last valuation this amount was 4.0% of Fixed Annual Remuneration, however these contributions have been suspended from 1 January 2014 due to the strong financial position of the Fund.

Fund Experience and Valuation Assumptions

It is important when setting the valuation assumptions to examine the experience of the Fund to see whether the previous assumptions have been borne out in practice. A summary of the major items of experience over the last three years is given in the following paragraphs.



Investment Return

The assumption for investment returns at the last valuation was 6.0% p.a. The Fund’s investment returns over the three years to 1 January 2018 in respect of the Fund’s Balanced option (which holds the majority of the assets supporting the Defined Benefit liabilities of the Fund) have been as follows:

Year Ending 31 December Investment Return

2015 3.1%

2016 8.6%

2017 10.7%

Average over the 3 years 7.4% p.a.

The average investment return was 1.4% p.a. higher than the assumed rate. This outperformance has had a positive effect on the Fund’s financial position.

For this valuation, we have adopted a lower long term future investment return equal to 5% p.a. (net of expenses and taxes). This assumption is consistent with the Trustee’s investment objectives and strategy.

Salary Growth

The assumed rate of salary growth was 3.5% p.a. at the last valuation. The average rate of growth of Fund Salaries for members who were present at both the last and current valuation dates was 2.9% p.a. The actual increase in salary growth is 0.6% p.a. lower than the assumed rate. This has reduced the accrued liabilities of the Fund by more than expected. In view of the experience to date and discussions with the Employer, we have reduced the previous assumed rate to 3.0% p.a. for salary growth.

Over the long term, it is the “gap” between the investment return (net of tax) and salary growth assumption that is important when valuing member’s liabilities. In the last valuation, the “gap” was 2.5% p.a. In this valuation we have reduced the “gap” to 2.0% p.a. Over the review period the actual “gap” was 4.5% p.a. which has had a positive impact on the Fund’s financial position.

Rates at which Members Leave Service and Retire

We have retained the assumptions used at the previous valuation. Statistically significant results based on actual experience are not available from a fund of this size.

Rates at which Members Leave due to Death or Total and Permanent Disablement (TPD)

In view of the small size of the Fund membership we have retained the long-term assumptions from the previous valuation which were based on the underlying death and disablement rates under the Fund’s group life policy.


26 June 2018

New Members

The Fund has been closed to new entrants since 2003.

Expenses and Insurance Premiums

In the last valuation, the assumed expenses incurred in running the Fund were equal to 2.3% of Members’ Salaries.

We have increased our assumed long term rate of expenses to 3.8% of Members’ Salaries in line with the Fund’s experience, a decline in the total payroll of the membership and expected expenses going forward.

Our previous assumption for group life insurance costs was 0.9% of salaries. We have increased our assumption at this valuation to 1.1% in line with experience and a decline in the total payroll of the membership.

Summary of Valuation Assumptions

A summary of our valuation assumptions is set out in Appendix E to this report.



Section 5: Insurance Arrangements Adequacy of Insurance

The insurance coverage of the Fund is considered adequate if the net assets of the Fund are sufficient to cover the Death and Total and Permanent Disablement (TPD) benefits of the Fund after any insured components have been allowed for.

The current level of insurance in respect of Defined Benefit Members is calculated as:

Insured Benefit = Death and TPD Benefit less Accrued Retirement Benefit

The following table shows the adequacy of the Fund’s insurance cover at 1 January 2018:

Amount $

Lump Sum Death and Disablement Benefits (A) 134,300,015

Less Aggregate Group Life Insurance (B) 57,036,450

Fund’s Exposure (A – B) 77,263,565

Fund’s Net Assets 85,472,067

The Net Assets as at 1 January 2018 of $85,472,067 are sufficient to meet the Fund’s Exposure of $77,263,565. The current insurance arrangements are considered adequate and no changes are recommended.


26 June 2018

Section 6: Solvency and Funding Status Measures There are several methods used to assess the current financial situation (i.e. funding status measures) of the Fund. These measures are dealt with below.

Vested Benefits

Pursuant to superannuation law and SPS 160, a fund is in a “satisfactory” financial position if the assets of the fund cover the Vested Benefit entitlements of the members of the fund.

The Vested Benefits represent the benefit entitlements of Members should they voluntarily leave the Fund. The Vested Benefits Index is a test of the Fund’s solvency if all Members voluntarily resigned or retired on the review date.

The following table shows the progression of the Vested Benefits Index over the review period.

Last Valuation Defined Benefits

Only*

This Valuation Defined Benefits

Only*

Last Valuation All

Benefits

This Valuation All

Benefits

Net Assets $47,921,830 $41,983,151 $85,984,915 $85,472,067

Vested Benefits $38,251,649 $33,774,649 $76,314,735 $77,263,565

Vested Benefits Index 125.3% 124.3% 112.7% 110.6%

* The “Defined Benefits Only” figures illustrate the financial position of the Fund in respect of the Defined Benefit liabilities. As a result, an amount in respect of Retained Benefit, Allocated Pension, Spouse and Family Law members as well as additional accumulation accounts (after allowance for surcharge and family law offset accounts) of defined benefit members has been excluded from the Net Assets and the Vested Benefits respectively.

As at 1 January 2018, the net assets of the Fund exceeded the Vested Benefits and the Fund was in a satisfactory financial position. The ratio of the Fund’s net assets supporting defined benefits to the Vested defined benefits was 124.3%. At the previous valuation, this ratio was 125.3%. The ratio has declined, as anticipated, primarily due to the contribution holiday which is currently in effect i.e. the funding of long term defined benefits and Superannuation Guarantee contributions has been suspended for several years.

Actuarial Value of Accrued Benefits

An indication of the funding status of the Fund is given by the ratio of the Fund’s net assets to the Actuarial Value of Accrued Benefits (AVAB). This is called the Actuarial Value of Accrued Benefits Index (AVABI).



AVAB represents the value in today’s dollars of future benefits based on membership completed to the review date, allowing for future salary increases, investment earnings and expected incidence of payment. “Accrued Benefits” has the meaning given in Regulation 9.27 of the SIS Regulations.

It is important that the Actuarial Value of Accrued Benefits Ratio is not used to compare the level of funding between superannuation funds but is used as a measure to assess the funding status of a superannuation fund from time to time. Different superannuation funds can be expected to have different Actuarial Value of Accrued Benefits Ratios depending on the age and employment history of the members.

A fully secured position is represented by a ratio of 100.0%. At this level, if the Fund were closed to new entrants and no further benefits were allowed to accrue to current members, assets would be sufficient to meet all future benefit payments if the actuarial assumptions are borne out in practice.

The following table shows the progression of the Actuarial Value of Accrued Benefits Index over the review period.


Only*


Only*

Last Valuation All

Benefits

This Valuation All

Benefits

Net Assets $47,921,830 $41,983,151 $85,984,915 $85,472,067

Actuarial Value of Accrued Benefits

$39,263,381 $34,519,954 $77,326,467 $78,008,870

Actuarial Value of Accrued Benefits Index

122.1% 121.6% 111.2% 109.6%

* The “Defined Benefits Only” figures illustrate the financial position of the Fund in respect of the Defined Benefit liabilities. As a result, an amount in respect of Retained Benefit, Allocated Pension, Spouse and Family Law members as well as additional accumulation accounts (after allowance for surcharge and family law offset accounts) of defined benefit members has been excluded from the Net Assets and the Actuarial Value of Accrued Benefits respectively.

As at 1 January 2018, the net assets of the Fund (excluding any amount held to meet the ORFR) are adequate to cover the Actuarial Value of Accrued Benefits.

Minimum Benefits

The company’s Superannuation Guarantee (SG) obligation is either fully or partly met for all members by the minimum benefits provided under the Fund. The required Benefit Certificate is dated 10 October 2014.

A Funding and Solvency Certificate dated 10 October 2014 has been issued to the Trustee corresponding to the above mentioned Benefit Certificate (this Certificate will be updated in conjunction with this valuation). The purpose of this certificate is to specify the required company contributions needed to fund the minimum benefits used to offset the SG charge.


26 June 2018

The Fund is “solvent” if the net assets of the Fund exceed the Minimum Requisite Benefits (MRB) of all members of service.

The following table shows the progression of the Minimum Benefits Index over the review period:


Only*


Only*

Last Valuation All

Benefits

This Valuation All

Benefits

Net Assets $47,921,830 $41,983,151 $85,984,915 $85,472,067

Minimum Benefits $34,237,485 $32,024,366 $72,300,571 $75,513,282

Minimum Benefits Index 140.0% 131.1% 118.9% 113.2%

* The “Defined Benefits Only” figures illustrate the financial position of the Fund in respect of the Defined Benefit liabilities. As a result, an amount in respect of Retained Benefit, Allocated Pension, Spouse and Family Law members as well as additional accumulation accounts (after allowance for surcharge and family law offset accounts) of defined benefit members has been excluded from the Net Assets and the Minimum Benefits respectively.

As at 1 January 2018, the net assets of the Fund exceeded the Minimum Benefits and the Fund was in a solvent financial position. The ratio of the Fund’s net assets supporting defined benefits to the minimum defined benefits was 131.1%. At the previous valuation, this ratio was 140.0%.

Shortfall Limit

As required under SPS 160 the Trustee has set the Shortfall Limit for the Fund as 98%. The shortfall limit is defined in paragraph 10 of SPS 160 as:

“… the extent to which an RSE licensee considers that a fund can be in an unsatisfactory financial position with the RSE licensee still being able to reasonably expect that, because of corrections to temporary negative market fluctuations in the value of fund assets, the fund can be restored to a satisfactory financial position within one year.”

Should the financial position of the Fund breach the Shortfall Limit, additional interim Actuarial investigations will be required with rectification plans to be put in place to address the unsatisfactory financial position.

We consider the Shortfall Limit is appropriate given the nature of the defined benefit assets.

Benefits Payable on Termination of the Fund

On termination of the Fund, the Trust Deed states that assets should be applied in the following order:

1. to meet all expenses and liabilities of the Fund,

2. to meet, in respect of each Member:

a. any benefit which was payable prior to the termination date, or



b. if a. does not apply, a benefit of the minimum level required to ensure that the Company does not incur any superannuation guarantee charge,

3. to increase each Member’s benefit under 2b. to the benefit that would be payable if the Member voluntarily left service on the termination date, and

4. to increase each Member’s benefit under 3. to their Retirement Benefit.

The termination provisions do not require a minimum benefit to be paid but to apply assets in an order of priority. A minimum of the Vested Benefit should be available. The Fund’s assets were sufficient to meet Vested Benefits at the valuation date.

Summary

The levels of the funding measures have declined primarily due to the contribution holiday which is currently in effect.


26 June 2018

Section 7: Valuation Contribution Results It should be emphasised that the funding measures shown in Section 6 relate to the current position at the review date. A projection of the Fund is required to assess the adequacy of Company contribution rates to provide defined benefits in the future.

Such a projection has been carried out using the funding method and assumptions discussed in Section 4 and set out in Appendix E. The results of the valuation are summarised in this Section.

Long Term Contribution Rates

Having examined the Fund on the basis of its position if it were to be terminated, we now move to examine the Defined Benefit Section of the Fund as a going concern. The following table summarises the results of the valuation at 1 January 2018, based on the assumptions and funding method as outlined in Appendix E.

Summary of Valuation Results at 1 January 2018 Defined Benefits Only

Present discounted value of benefits in respect of already completed membership

34,519,954

Less Fund Assets (actuarial value) 41,983,151

Actuarial Surplus on Accrued Benefits 7,463,197

Present discounted value of benefits in respect of benefits in respect of future membership (including contributions tax, and cost of Insurance and Expenses)

12,633,812

Total to be met from Future Company Contributions 5,170,615

Present Value of future FAR for employed DB members 107,127,000

Total Contribution Rate as % of FAR 4.8%

The future benefit payments from the Fund have been subdivided between those payable in respect of Membership which has already been completed, whose value is contrasted against the value of the assets of the Fund, and those which will accrue in the future which are appropriately met from future member and Company contributions.

With regards to Membership already completed, the results show that the Fund assets are more than the present value of accrued benefits.

The long term required Company contribution rate at 1 January 2018 produced by the Attained Age Method is 4.8% of Defined Benefit Member’s FAR. This result is higher than the calculation in the previous valuation.

The main reason for the increase in contribution rate is the increase in the allowance for Insurance and Expense costs.



Company Contributions

An actuarial valuation is essentially a budgetary exercise, as there are various ways in which the funding of future liabilities can take place. Over the life of the Fund, inputs to the Fund (basically contributions and investment income) must match its outputs (basically benefits and costs). Because, in relation to defined benefit liabilities, it is not possible to predict the extent of future investment income or benefits, Company contributions will be required at varying rates throughout the life of the Fund. The rate at which the Fund’s assets are built up to meet its future liabilities can be quickened or slowed, depending upon the Company’s and Trustee’s attitude to the level of assets required at any point in time to meet its accrued liabilities.

The Company and Trustee have agreed a Funding Policy, as discussed in Section 4, which outlines the Company’s and Trustee’s current intentions. This policy influences the pace at which the Company makes contributions to the Fund.

In the absence of any special circumstances and in line with the Funding Policy, the table below sets out a suggested basis at which the Company can contribute to the Fund:


Contributions*



Total


Nil Nil Nil Nil






These contribution rates include an allowance for administration and insurance expenses, as well as tax on Company contributions.

The funding position, and in particular the coverage of vested benefits by Fund assets, should continue to be monitored quarterly and each year at 31 December and more frequently if required. Additional supplementary contributions may be required should the funding position become unsatisfactory.

Projection of Results

In respect of Defined Benefits only, we have tested the impact of the adoption of the above Company contribution rates, by projecting the cash flows of the Fund and the build-up of the Fund’s assets over


26 June 2018

the next five years, and comparing the Fund’s assets to the projected levels of the Vested Benefits and Actuarial Value of Accrued Benefits.

In performing the projections below we have used the assumptions outlined in Appendix E.

Projection Date

Fund Assets $’000s

Vested Benefits$’000s

DB Only VBI %

Accrued Benefits $’000s

DB Only AVABI

%

1 January 2018 41,983 33,775 124.3 34,520 121.6

1 January 2019 38,293 31,688 120.8 31,911 120.0

1 January 2020 36,818 31,685 116.2 31,747 116.0

1 January 2021 34,498 30,659 112.5 30,673 112.5

1 January 2022 31,551 28,684 110.0 28,684 110.0

Therefore, the projection shows a gradual decrease in the Vested Benefits Index to 110% at 1 January 2022. The value of assets is adequate to meet the vested benefits over next 3 years.

If the recommended Company contribution basis shown in this Section is adopted, then I expect the Vested Benefits Index (VBI) to decrease but remain above 100% over the 3 years to 1 January 2021, assuming the valuation assumptions are borne out in practice.

Future Review

The financial status of the Fund is sensitive to actual financial experience (principally, investment returns and salary increases) and membership movements. We therefore recommend that a check is placed on the Vested Benefits Index each quarter and also as at each annual review date, and also at any time if the Defined Benefit membership reduces significantly, in order to confirm that the Fund maintains coverage of vested benefits.

The next actuarial valuation is due at 1 January 2021.



Section 8: Sensitivity Analysis and Material Risks Sensitivity Analysis

For the purpose of this investigation the “gap” between the investment return (net of tax) and salary inflation assumption is 2.0% p.a. Other assumptions could be used and the table below shows the impact of varying the “gap” between these assumptions on the Fund’s financial position and long term contribution rate.

Scenario 1 shows the results if the Fund achieved an investment return in the 75th percentile over the expected lifetime of the fund. Scenario 2 shows the results if the Fund achieved an investment return in the 25th percentile over the expected lifetime of the Fund.

No changes have been made to the demographic assumptions adopted for this valuation in the scenarios below.

This Valuation Basis Scenario 1 Scenario 2

“gap” between investment return and salary inflation assumptions

2.0% p.a. 3.0% p.a. 1.0% p.a.

Actuarial Value of Accrued Benefits Index (DB Only)

121.6% 122.8% 119.6%

Long Term Contribution Rate 4.8% 3.5% 6.6%

It should be noted that the variations selected in the sensitivity analysis above do not indicate upper or lower bounds of all possible outcomes. Further analysis can be carried out if required.

Material Risks

Salary Growth

For this valuation I have adopted a salary growth assumption of 3.0% p.a. However, if actual salary increases are greater than this, with all other actuarial assumptions borne out, then the funding position (Vested Benefits Index) will worsen and increased Company contributions may be required. Further analysis can be carried out if required.

Investment Returns

For this valuation I have adopted an investment return assumption (net of tax and investment management expenses) of 5% p.a. However if actual investment returns are less than this, with all other actuarial assumptions borne out, then the funding position (Vested Benefits Index) will worsen and increased company contributions may be required.


26 June 2018

Impact of investment choice

The Trustee has chosen an investment strategy for the assets supporting the defined benefit liabilities in excess of defined benefit members’ accounts. This strategy is set out in Section 3.

As discussed in Section 3, Defined Benefit Members can choose to invest their defined benefit accounts within the range of investment options provided by the Fund. The true underlying asset allocation for defined benefit assets is therefore dependant on members’ investment choice. The resulting allocation after allowing for members’ investment choices may potentially differ from the current assets allocation.

It is noted that changes in the underlying asset allocation for defined benefit assets, including member investment choices, were analysed in the Asset Liability Modelling (ALM) exercise conducted effective 1 January 2016. It was observed that the allocation to growth assets implied by members’ investment choices has been quite stable since investment choice was introduced in 2001.

The results of the ALM exercise also indicated that despite the contribution holiday, the DB Fund is likely to still be in a strong financial position in the next few years. This conclusion is supported by the findings in this valuation.

Currently, only around 23% of total defined benefit assets are invested in an option other than the Balanced option. The overall allocation is also roughly in line with the Balanced Option. This is therefore not a material concern currently, however it may be become an issue should a large enough portion of members exercise investment choice.

We recommend that the next ALM take place no later than effective 1 January 2021. In the interim, we also recommend that that at each review date, the Trustee measure:

■ the percentage of defined benefit assets invested in options other than Balanced Option; and

■ the overall asset allocation of defined benefit assets, allowing for members’ investment choice,

with any significant deviations in the underlying asset allocation prompting an assessment of the impact on the Fund’s financial position.

Any change to the investment strategy that impacts future expected return on assets supporting the defined benefit liabilities will potentially have a material impact on the financial position of the Fund. If the Trustee is considering changing the investment strategy, we recommend that we be asked to assess the potential impact on the financial position of the Fund and future Company contribution requirements.



Appendix A: Summary of Benefits as at 1 January 2018

Eligibility

The Fund is closed to new Members.

Contributions

Members are not required to contribute to the Fund, but may elect to make Voluntary Member Contributions. The Company contributes the balance of the cost of the benefits which covers:

■ the contributions allocated to the Company Account,

■ the insurance and administration costs in respect of all Members, and

■ the cost of providing the defined benefits.

Definitions

“Additional Company Account” means the Additional Company Account established under the rules in existence on 30 June 2000, and which ceased to exist on 1 July 2000.

“Basic Member Account” means the Basic Member Account established under the rules in existence on 30 June 2000, and which ceased to exist on 1 July 2000.

“Core Company Account” means the Core Company Account established under the rules in existence on 30 June 2000, and which ceased to exist on 1 July 2000.

“Death Multiple at 30 June 2000” means the multiple of Salary calculated for the purposes of determining the amount payable under the rules in existence on 30 June 2000, and which ceased to exist on 1 July 2000, on the death of a Member as though the Member had died on 30 June 2000.

“Executive” means a Member who has been classified by the Member’s Company, at its sole discretion, as an Executive for the purposes of the Member’s Membership.

“Final Average Salary” means in relation to a Member the average of the three highest consecutive Fund Salaries advised in respect of the Member relating to the ten Review Dates occurring immediately prior to the Member’s date of leaving employment.

“Fixed Annual Remuneration” means the total annual remuneration at which the Member is employed, including the value of their Superannuation Guarantee contributions.

“Fund Salary” means the salary determined for superannuation purposes by the Company.


26 June 2018

“Membership” means the most recent period of service during which the Member was a Member of the Fund (in years and complete months).

“Post 30 June 2000 Retirement Multiple” means the number calculated as 10% times period of Membership after 1 July 2000, plus an additional 3% times the period of Membership after 1 July 2000 during which the Member was classified as an Executive.

“Pre 1 July 2000 Retirement Multiple” means the multiple accrued for retirement purposes under the rules in existence on 30 June 2000, and which ceased to exist on 1 July 2000, in respect of Membership up to and including 30 June 2000.

“Supplementary Member Account” means the Supplementary Member Account established under the rules in existence on 30 June 2000, and which ceased to exist on 1 July 2000.

“Voluntary Insurance Benefit” means the amount produced by the scale established by the Trustee under any insurance policy in respect of Members pursuant to Rule 5(2). This scale may, at the discretion of the Trustee, be amended or withdrawn at any time by the Trustee.

“Voluntary Member Account” means the Voluntary Member Account established under the rules in existence on 30 June 2000, and which ceased to exist on 1 July 2000.

Accounts

The following accounts are maintained as required for each Member of the Fund:

■ A Pre 1 July 2000 Member Account which is credited with an opening balance at 1 July 2000 equal to the Member’s Basic Member Account as at 30 June 2000 (if any), and accrues with interest.

■ A Pre 1 July 2000 Company Account which is credited with an opening balance at 1 July 2000 equal to the sum of the Member’s Core Company Account as at 30 June 2000 and the Member’s Additional Company Account as at 30 June 2000 (if any), and accrues with interest.

■ A Member Account which is credited with an opening balance at 1 July 2000 equal to the sum of the Member’s Voluntary Member Account as at 30 June 2000 (if any) and the Member’s Supplementary Member Account as at 30 June 2000 (if any), and credited with the Voluntary Member Contributions (plus any additional Company contributions required to satisfy the Superannuation Guarantee) from 1 July 2000 (if any), less an allowance for tax (if applicable), and rollovers from 1 July 2000 (if any), and accrues with interest.



■ A Company Account which is credited with Company contributions at the rate of 9% of Fund Salary from 1 July 2000 to 30 June 2005, 9% of 91.74% of Fixed Annual Remuneration from 1 July 2006 to 30 June 2013, 9.25% of 91.53% of fixed annual remuneration from 1 July 2013 to 30 June 2014 and 9.50% of 91.32% of fixed annual remuneration, capped at the prevailing SG rate of the Superannuation Guarantee Maximum Earnings Base, from 1 July 2005, less an allowance for tax and insurance premiums (if applicable), and accrues with interest.

■ A Surcharge Account which is credited with any surcharge tax paid by the Fund on behalf of the Member, and accrues with interest.

Normal and Early Retirement Benefit

On retirement of a Member between ages 55 and 70 or between ages 50 and 55 with 15 years’ service, the Member is entitled to a lump sum benefit equal to:

■ the greater of:

1. the Member’s Pre 1 July 2000 Retirement Multiple times the Member’s Final Average Salary, and

2. the sum of the Member’s Pre 1 July 2000 Member Account (if any) and the Member’s Pre 1 July 2000 Company Account, plus

■ the greater of:

1. the Member’s Post 30 June 2000 Retirement Multiple times the Member’s Final Average Salary, and

2. the Member’s Company Account, plus

■ the Member’s Member Account (if any), less

■ the Member’s Surcharge Account (if any).

Late Retirement Benefit

On retirement of a Member after age 70, the Member is entitled to a lump sum benefit equal to:

■ the Member’s Retirement Benefit calculated at age 65 increased with interest to the actual date of retirement, plus

■ the accumulated value of any Voluntary Member Contributions made after age 70, less tax (if applicable), plus

■ the accumulated value of any Company Contributions made after age 70, less tax, less

■ the accumulated value of any surcharge tax paid by the Fund on behalf of the Member after age 70.


26 June 2018

Death Benefit

On the death in service of a Member prior to age 65, a lump sum benefit is payable equal to:

■ the greater of:

1. the Member’s Death Multiple at 30 June 2000 times the Member’s Fixed Annual Remuneration at the date of death, and

2. the sum of:

a. the Member’s Pre 1 July 2000 Member Account (if any),

b. the Member’s Pre 1 July 2000 Company Account,

c. the Member’s Company Account, and

d. four times the Member’s Fixed Annual Remuneration at the date of death, plus

■ the Member’s Voluntary Insurance Benefit (if any), plus



On the death in service of a Member after age 65, a lump sum benefit is payable equal to the Retirement Benefit.

Total and Permanent Disablement Benefit

If a Member becomes totally and permanently disabled while in the service of the Company, a lump sum benefit is payable equal to the amount that would have been payable if the Member had died on the date at which they became totally and permanently disabled.

Leaving Service Benefit

If a Member leaves the service of the Company for any other reason, a lump sum benefit is payable equal to:

■ the Member’s Pre 1 July 2000 Member Account (if any), plus

■ the Member’s Pre 1 July 2000 Company Account, plus

■ the Member’s Company Account, plus





Appendix B: Details of Membership Membership as at 1 January 2018

Division Number of Members

Total Salaries

Average Salaries Average Age

Average Completed Membership

Corporate 27 4,252,816 157,512 52.27 21.82

Consumer 52 6,986,759 134,361 54.40 23.63

Citicorp 12 2,486,378 207,198 51.27 22.46

Total 91 13,725,953 150,835 53.35 22.94

Other Members

In addition to the above active membership, the Fund also have 3 Frozen Defined Benefit members, 68 Retained Benefit members, 5 Account Based Pension members, 2 Spouse members, 1 Family Law member and 1 Insurance Only member.

Approaching Retirements

In the next three years, 10 Members are expected to reach their Normal Retirement Date. The total of their defined benefit retirement benefits, at 1 January 2018 is $5,956,453.

As at 1 January 2018, there are 5 defined benefit Members who have passed their Normal Retirement Date. Their defined benefit retirement benefits as at 1 January 2018 were $3,519,445.


26 June 2018

Appendix C: Changes in Membership Changes in Active Membership for the Period 1 January 2015 to 1 January 2018

Category Membership at 1 January 2015

Membership at 1 January 2018

Consumer 73 52

Corporate 42 27

Citicorp 14 12

Total 129 91



Appendix D: Consolidated Revenue Account Consolidated Revenue Account for the period 1 January 2015 to 1 January 2018

$

Net Assets as at 1 January 2015 86,223,832

Plus:

Member contributions 143,699

Company contributions 3,579,951

Government Co-contributions 0

Transfers in from other plans 1,167,235

Group Life insurance claims 616,115

Other 62,101

Investment return – including unrealised changes in market value of assets and direct investment expenses

19,558,577

Less:

Benefit payments 21,816,077

Surcharge Tax -3,116

Expenses 2,352,603

Insurance costs 540,248

Income tax expense 921,197

Net Asset Value as at 1 January 2018 85,724,501

Less: Operational Risk Financial Reserve (ORFR) 252,434

Net Assets available to meet Liabilities 85,472,067


26 June 2018

Appendix E: Valuation Method and Assumptions

Valuation Method

Attained Age Normal

Asset Value

Market value taken from audited accounts at the valuation date.

Investment Returns

5% p.a. compound (net of investment expenses and taxes)

Salary Growth

3.0% p.a. compound

Rates of Mortality, Total and Permanent Disability (TPD), and Leaving Service

Examples of rates at which members leave the Fund per year per 10,000 members:

Age Next Birthday Death TPD Leaving Service

25 5 1 2,175

30 5 1 1,650

35 6 1 1,320

40 9 3 990

45 14 7 660

50 24 16 330

55 43 34 Nil

60 74 70 Nil



Rates of Early Retirement

The number of members reaching a given age who are expected to retire are as follows:

Age Next Birthday Number per year per 10,000 members

55 1,000

56 500

57 500

58 500

59 500

60 2,000

61 500

62 500

63 1,000

64 1,000

65 10,000

Rates of Retrenchment

A retrenchment rate of nil per 10,000 members has been assumed.

Future Expense Allowance

Investment expenses are allowed for in the investment returns shown above which are assumed to be net of investment expenses.

Administration expenses equal to 3.8% of Salaries have been allowed for.

Group life insurance costs equal to 1.1% of Salaries have been allowed for in determining deductible expenses for tax purposes.

New Entrants

No allowance for new entrants.

Taxes

Tax on investment income is allowed for in the Investment Returns shown above.

Tax on contributions has been allowed for as 15% of Company contributions reduced by allowable deductions (administration and insurance costs). No allowance has been made for GST or Reduced Input Tax Credits.


26 June 2018

Surcharge Tax and Excess Contributions Tax

No allowance has been made for the Surcharge Tax and Excess Contributions Tax as the Trustee offsets any tax payable by the Fund against the benefits of the relevant Members, if the Member does not reimburse the Fund for the tax payable.

Composition of Membership

It has been assumed that Members remain in their current Category.

It has also been assumed that the same proportion of current membership remains in each defined benefit category as at present in determining a single Company contribution rate.



Appendix F: Statements required under Regulation 23 of SPS 160

The statements required under paragraphs 23(a) to (h) of SPS 160 for regular investigations are set out below. Note, these are provided in relation to the Plan’s defined benefit liabilities only.

1 Plan Assets

The net market value of the Plan’s assets attributable to the defined benefit liabilities at 1 January 2018 was $41,983,151. This amount is the amount disclosed in the Plan Accounts excluding assets attributable to accumulation members or the accumulation balances of defined benefit members as well as any Operational Risk Financial Requirement.

This value of assets at 1 January 2018 was used to determine the recommended Company contribution rates and assess the funding status measures and is also referred to as the “actuarial value” of the assets.

2 Projection of Vested Benefits

The projected likely future financial position of the defined benefit category of the Plan during the three years following the valuation date and based on my best estimate assumptions is as follows:

Date Assets ($’000s)

Vested Benefits ($’000s)

Vested Benefits Index (%)

1 January 2018 41,983 33,775 124.3

1 January 2019 38,293 31,688 120.8

1 January 2020 36,818 31,685 116.2

1 January 2021 34,498 30,659 112.5

3 Accrued Benefits

In my opinion, the value of the assets of the defined benefit members of the Plan (excluding any amount held to meet the ORFR) at 1 January 2018 was adequate to meet the liabilities in respect of the accrued benefits of defined benefit members of the Plan (measured as the value of members’ accrued entitlements using the valuation assumptions). We consider that the assumptions and valuation methods set out in this report are appropriate for determining the accrued liability.

4 Vested Benefits

At 1 January 2018 the Plan was in a satisfactory financial position, as defined in SPS 160. In my opinion the Plan does not need to be treated as being in an unsatisfactory financial position. The shortfall limit does not need to be reviewed.


26 June 2018

5 Minimum Benefits

At 1 January 2018 the value of the minimum benefits of the defined benefit members of the Plan was $32,024,366, which was less than the defined benefit assets at that date. Minimum benefits are as defined in Regulation 5.04 of the Superannuation Industry (Supervision) Regulations.

The coverage of the MRBs for all defined benefit members of the Plan as at 1 January 2018 was 131.1%, and for all Plan members (including accumulation members) was 113.2%.

6 Funding and Solvency Certificates

Funding and Solvency Certificates for the Plan covering the period from 1 January 2015 to 1 January 2018 have been obtained. The Plan was solvent, as defined in the Superannuation Industry (Supervision) Regulations at 1 January 2018. In my opinion, the solvency of the Plan will be able to be certified in any other Funding and Solvency Certificate required under the Regulations during the three year period to1 January 2021.

7 Recommended Company Contributions

In the absence of any special circumstances and in line with the Funding Policy, the table below sets out a suggested basis at which the Company can contribute to the Fund:


Contributions*



Total


Nil Nil Nil Nil






These contribution rates include an allowance for administration and insurance expenses, as well as tax on Company contributions.



The funding position, and in particular the coverage of vested benefits by Fund assets, should continue to be monitored quarterly and each year at 31 December and more frequently if required. Additional supplementary contributions may be required should the funding position become unsatisfactory.

Brad Jeffrey Fellow of The Institute of Actuaries of Australia as RSE Actuary to the Citibank Australia Staff Superannuation Fund Review: Richard Saverimuttu 26 June 2018

Towers Watson Australia Pty Ltd Level 16, 123 Pitt Street Sydney NSW 2000 Australia T +61 2 9253 4000

Towers Watson Australia Pty Ltd ABN 45 002 415 349 AFSL 229921

http://aptct.internal.towerswatson.com/clients/649304/BENAUSCiti2018/Documents/04.01_Actl_Valn/Citi Valuation Report 2018_final.docx