Actuarial Review - Willis Towers Watson · Next Valuation The next valuation date should be no later than 30 June 2021, to be completed by 31 December 2021. Vested Benefits coverage

Actuarial Review

Report as at 30 June 2018

Jamestrong Packaging Australia

Superannuation Fund

21 December 2018

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

Jamestrong Packaging Australia Superannuation Fund i

21 December 2016

Table of Contents

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

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

Section 3 : Assets ...................................................................................................................................6

Section 4 : Valuation Method, Fund Experience and Actuarial Assumptions .................................9

Section 5 : Solvency and Funding Measures ................................................................................... 13

Section 6 : Contribution Recommendations .................................................................................... 17

Section 7 : Sensitivity Analysis and Material Risks ......................................................................... 21

Appendix A : Summary of the Main Defined Benefit Provisions of the Fund ............................... 22

Appendix B : Details of Membership ................................................................................................. 25

Appendix C : Changes in Membership .............................................................................................. 26

Appendix D : Valuation Method and Assumptions .......................................................................... 27

Appendix E : Actuarial statement ...................................................................................................... 30

ii Jamestrong Packaging Australia Superannuation Fund

Willis Towers Watson Confidential

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Jamestrong Packaging Australia Superannuation Fund 1

21 December 2016

Section 1: Purpose and Summary

This report sets out the results of the actuarial review of the Jamestrong Packaging Australia Superannuation Fund (“the Fund”) as at 30 June 2018 (“the Valuation Date”).

For most of its members, the Fund provides “defined benefits” which are determined primarily based on Salary and period of membership. A regular actuarial review is necessary for the Fund to:

■ examine the sufficiency of the assets in relation to members’ accrued defined 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; and

■ meet legislative requirements. This actuarial review has been conducted in order to meet the Trustee’s obligations in accordance with Prudential Standard SPS160 (SPS160) issued under section 34C of the Superannuation Industry (Supervision) Act (SIS Act) which came into effect from 1 July 2013.

This report has been prepared in accordance with Professional Standard 400, dated June 2017, issued by the Institute of Actuaries of Australia.

This report has been prepared for the Trustee of the Fund, in my capacity as Fund Actuary. The previous valuation was conducted by me, on behalf of Towers Watson Australia Pty Ltd, as at 30 June 2016 and the results were set out in a report dated 21 December 2016.

Reliance statement and data

This report is provided subject to the terms set out herein and in our engagement letter dated 7 September 2007 and the accompanying Terms and Conditions of Engagement. 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, 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 in this regard. The Trustee should draw the provisions of this paragraph to the attention of its auditors 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.

In my 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.

2 Jamestrong Packaging Australia Superannuation Fund


Company Contributions

We recommend that the Company contributes to the Fund as follows:

■ From 1 July 2018 to 31 December 2018, 10.6% of contributory members’ superannuation salary;

■ From 1 January 2019 to 30 June 2022, 5% of contributory members’ superannuation salary; and

■ 17.5% of contributory members’ superannuation salary, thereafter.

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

■ Superannuation Guarantee contributions for non-contributory members of the Fund;

■ Any deemed member contributions;

■ Any salary sacrifice contributions; and

■ Superannuation Guarantee contributions of 9.5% (or such other amount as required to satisfy SG legislation) of bonuses and other payments that form part of Ordinary Time Earnings but are not included in superannuation salary.

Financial Position

Vested Benefits

Vested benefits are the benefits payable if all Members voluntarily resigned from service. As at the Valuation Date, the Fund’s net assets were sufficient to cover the vested benefits of all Members of the Fund. The ratio of the Fund’s assets to the vested benefits in respect of Defined Benefit entitlements only was 111.2% at the Valuation Date and the Fund was therefore in a satisfactory financial position.

Assuming:

■ the benefits described in the Trust Deed remain unchanged;

■ member contributions continue to be paid at the rates specified in the Trust Deed; and

■ Company contributions are paid at the recommended rate; and

■ the future experience of the Fund is in accordance with the actuarial assumptions made at the Valuation Date, including the actual expenses and insurance premiums,

then the net assets of the Fund should remain in excess of the vested benefits up to 30 June 2021. On this basis, the financial position of the Fund is expected to remain satisfactory.

Present Value of Accrued Benefits

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

The Fund’s net assets were sufficient 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 assets to the present value of accrued benefits in respect of Defined Benefit entitlements only was 110.3% at the Valuation Date.


21 December 2016

Superannuation Guarantee

The Company’s Superannuation Guarantee obligation is either fully or partly met for all Members by the minimum benefits provided under the Fund. This Fund’s current Benefit Certificate is dated 31 July 2015 and this is effective at the Valuation date. All necessary Funding and Solvency Certificates (FSC) were obtained during the period since the last valuation.

The purpose of an FSC is to specify the required Company contributions needed to fund the minimum benefits in the Fund used to offset the Company’s Superannuation Guarantee charge. Pursuant to the SIS Act, a superannuation fund is “solvent” if the net value of its assets exceeds the minimum Superannuation Guarantee benefits. At the Valuation Date, the Fund was solvent with a Minimum Benefits Index of 117.2% in respect of Defined Benefit entitlements only. Based on the actuarial assumptions, we see no reason why an actuary will not be able to certify the solvency of the Fund in three years’ time on this basis.

Shortfall Limit

As required under SPS160, the Trustee has set the Shortfall Limit for the Fund at 99%. Given the current investment strategy, I consider this Shortfall Limit is appropriate for the Fund.

Investments

The Trustee has developed formal objectives and guidelines for the investment of the Fund’s assets. These objectives and guidelines were most recently summarised in the Fund’s “Investment Governance Framework” dated 13 December 2017, which outlined the long term strategic asset allocation of the Fund.

At the Valuation Date, the strategic asset allocation of the Fund was to have the assets supporting the Fund’s defined benefit liabilities invested 70% in growth assets such as shares and property.

The current strategic asset allocation is considered suitable to the Fund’s liabilities in respect of membership at the Valuation Date. The Trustee regularly monitors the investment managers’ performance and we recommend that this continues.

Insurance

The Fund’s assets were sufficient to meet the aggregate death and total permanent disablement benefits for all members if this was to become payable at the Valuation Date. Therefore, the current insurance arrangements are considered adequate and we recommend no changes to insurance arrangements.

The temporary disablement benefit is fully insured, hence the amount of insurance is not influenced by the level of the Fund’s assets.

Regulatory Requirements

SPS160 requires certain specific information to be included in actuarial reports. A summary of this information is included in Appendix E to this report. Note that this is a summary only and, although the Trustee may choose to provide this summary to any members who request details of the actuarial valuation, members are entitled to request a copy of the full report.



Next Valuation

The next valuation date should be no later than 30 June 2021, to be completed by 31 December 2021. Vested Benefits coverage should continue to be monitored quarterly.

Dated 21 December 2018

Andrew West Fellow of the Institute of Actuaries of Australia

Willis Towers Watson

Level 4, 555 Bourke Street

Melbourne, VIC 3000, Australia

Towers Watson Australia Pty Ltd ABN 45 002 415 349 AFSL 229921 DO: CH |TR: AW |ER: CJP |CR: CJP


21 December 2016

Section 2: Background and Data

The Fund was established on 1 November 2007. The first actuarial valuation of the Fund was therefore undertaken as at 1 November 2007. The actuarial valuation date was aligned to coincide with that of the Fund’s 1 July annual administration review date in 2010.

The Fund is run in accordance with the Trust Deed dated 5 October 2007 with subsequent amendments. A summary of the main provisions of the Trust Deed, incorporating all amendments made to date, is included as Appendix A to this report.

The Fund is a regulated complying superannuation fund as defined in the SIS Act and is therefore eligible for concessional taxation treatment. The Trustee of the Fund is Towers Watson Superannuation Pty Ltd, a company licensed by APRA to operate as a superannuation fund trustee.

Sources of Information

We have relied on the administrative records at the Valuation Date, as stored on the Australian Administration Services Pty Limit.

ed administration system. We have relied on the audited accounts of the Fund for the two years ending 30 June 2018. We have also relied on investment information from the Fund’s investment consultant. Where possible the information provided has been checked for reasonableness and is considered suitable for the purposes of this investigation.

Data

The Fund’s membership details are summarised in Appendix B. In brief, there were 60 active members as at the Valuation Date, of which 45 were contributory with total salaries of $4.1 million. There were another 12 members who were eligible to opt into the Defined Benefit section of the Fund, but who, as at the Valuation Date, had elected to receive accumulation benefits. In addition, 3 members have reached their normal retirement age and, as required by the rules of the Fund, have had their defined benefits converted to accumulation style benefits.

The Fund also has one child pensioner.

A reconciliation of the active 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.

The average attained age of Defined Benefit Members has increased from 52.9 years to 54.7 years. The average completed membership of Defined Benefit Members has also increased from 25.3 years to 27.0 years. The salaries of Defined Benefit Members who were present at the previous valuation over the period since the last valuation have increased on average by 2.9% p.a.



Section 3: Assets

Financial statements

We have been supplied with the audited financial statements covering the twelve month periods to 30 June 2017 and 30 June 2018.

Net Assets

The net assets at the Valuation Date attributable to the Members of the Fund, based on the fair value of the assets held with each of the Fund’s investment managers (as required under Professional Standard 404) is as follows:

Assets held in respect of: Net Assets at 30 June 2018

Defined benefits $17,401,000

Accumulation benefits $8,507,000

Total Fund Assets1 $ 25,908,000

1 This asset figure is net of the operational risk financial requirement (ORFR) reserve of $84,971 at 30 June 2018.

A breakdown of assets in respect of accumulation benefits of Members at the Valuation Date is set out below:

Accumulation Benefits

Defined Benefit Members’ additional accumulation component $3,124,000

Non-contributory Defined Benefit Members’ accumulation component $2,136,000

Late Retirement Members $3,247,000

TOTAL $8,507,000

This valuation report will exclude assets and liabilities in respect of accumulation benefits. Therefore, the net assets in respect of the Fund’s Defined Benefits obligations used for the purposes of this valuation is therefore $17,401,000.

Accumulation benefits – Member Investment Choice

Defined Benefit members currently have the choice of five pre-packaged investment options in which to invest their additional accumulation accounts.

Pre-packaged options:

■ Cash;

■ Conservative;

■ Active Balanced;

■ Assertive; and

■ Assertive Plus.


21 December 2016

Under investment choice, the returns credited to each option directly reflect the investment earnings of the option, net of fees and tax and therefore the assets and liabilities are closely matched. No reserves are maintained to smooth returns credited to Members.

Nature of Defined Benefit Liabilities

The level of the Defined Benefit liabilities does not bear the same direct relationship with the assets as exists with accumulation liabilities.

Although most Defined Benefit Members have minimum benefits which are expressed as an accumulation benefit, the core Defined Benefit liabilities reflect 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.

The Company therefore bears the investment risk because the level of its contributions depends on the level of investment returns achieved.

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

i. secure attractive long-term investment returns, and

ii. 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 in this situation occurs if potential fluctuations in asset values cause the total asset value to fall below the level of Vested Benefits, placing the Fund in an unsatisfactory financial position.

Where members have benefits which are (in whole or part) accumulation in nature, the amounts credited to those accounts is equal to the net actual investment returns on the Fund’s defined benefit assets. There is no smoothing of credited returns which would necessitate additional fluctuation reserves.

Defined Benefits – Investment Objectives and Guidelines

The Trustee’s principal investment objectives for the Defined Benefit Section at the Valuation Date are:

a. To outperform, after fees and taxes, CPI + 3% p.a. over rolling 5 year periods.

b. To outperform a SuperRatings Crediting Rate Survey* over rolling 3 year periods. *All Fund Median return of the SuperRatings Crediting Rate Survey – Balanced (60 – 76)

c. To limit the probability of achieving a negative return over moving 1 year periods to approximately 1 year in 4.

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

In order to meet the investment objectives set for the Defined Benefits Section, the Trustee has adopted a specific long term benchmark allocation to each asset class.

The table below shows the strategic asset allocation for the Defined Benefits Section at the Valuation Date.

Asset Class Strategic Asset Allocation Target at 30 June 2018

Australian Shares 34%

International Shares* 23%

Property 10%

Growth Alternatives 3%

Defensive Alternatives 7%

Diversified Fixed Interest 17%

Cash 6%

Total 100%

* The Fund’s neutral currency matching position is to hedge 40% of International Shares exposure to the Australian dollar.

Suitability of Investment Strategy

The Defined Benefit categories within the Fund are all closed to new members. The age profile of these categories will gradually increase. At the Valuation Date, the average age of the Fund’s Defined Benefit Members, excluding non-contributory Defined Benefit Members, was 55 years, so the investment timeframe remains relatively long-term at present.

On the basis that Vested Benefits coverage and funding requirements will be reviewed at 1 July each year, we consider the current investment strategy to be appropriate. However, given the reducing and aging membership, the Trustee may want to consider a more conservative investment strategy.

Considerations Relating to Lifetime Pensions

The Fund has sufficient liquidity to make pension payments from regular cashflows.

I consider the assets held by the Fund to be suitable for meeting the future expected benefit payments for the one child pension member of the Fund. The child’s pension is due to ceases upon the child reaching age 20 (in two years’ time), it is therefore not necessary to consider the risk of longevity in respect of the child’s pension.

Suitability of Crediting Rate Policy

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


21 December 2016

Section 4: Valuation Method, Fund Experience and Actuarial Assumptions

To carry out an actuarial valuation, it is necessary to decide on:

■ the valuation method to be adopted;

■ the value of the assets for the purposes of long term assessment; and

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

Valuation Method

For the purposes of this actuarial review, we have maintained the use of the Attained Age Normal (AAN) method. Given the Fund is closed to new members, we consider this method to be suitable for determining the long term future cost of providing the benefits.

The first step in determining a recommended Company contribution rate is to determine the present value of future defined benefits and contributions payable under the Fund.

The benefits are valued separately for each member by projecting, on the review assumptions, the amount of each benefit (whether payable on resignation, death, disablement or retirement) in each future year. These calculated benefit amounts are multiplied by the assumed probability that they will become payable and discounted to the Valuation Date to determine their present value.

In a similar manner, the contributions are projected for future years, multiplied by the probability that they will actually become payable and then discounted to the Valuation Date to determine their present value.

Having calculated the present value of future benefits and contributions, the next step is to determine the long term Company contribution rate which is the uniform rate of contribution which would be necessary, on the assumptions made, to fully finance all of the Fund’s future liabilities, as well as meet its shorter term solvency commitments.

The result of this process at the Valuation Date is set out in Section 6.

Actuarial Value of Assets

For the purposes of this valuation, we have used the net assets at the Valuation Date as set out in Section 3.

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 valuation assumptions and major items of experience over the last two years is given in the following paragraphs.



Investment Return

The investment returns over the period from 1 July 2016 to 30 June 2018 in respect of the defined benefit assets of the Fund were as follows:

Period Investment Return

1 July 2016 to 30 June 2017 9.5%

1 July 2017 to 30 June 2018 8.5%

Average over the period 9.0% p.a.

For this valuation, we have kept the long term future investment return assumption at 4.5% p.a. (net of expenses and taxes). This has been based on our modelling of future investment returns for a similarly structured investment portfolio.

Salary Inflation

The average rate of growth of Salaries for Members who were present in the Fund at 30 June 2016 and at the Valuation Date was approximately 2.9% p.a.

For this valuation, we have kept the salary inflation assumption at 3.0% p.a.

In setting this assumption we have considered the past experience of these Members, the Company’s outlook on salary increases, and our long term view of future inflation rates. All of this analysis suggested that the previous assumption remains appropriate.

Over the long term, it is the “gap” between the investment return (net of tax) and salary inflation assumption that is important when valuing member’s liabilities. In this valuation the “gap” stays at 1.5% p.a. Over the review period the actual “gap” was 6.1% 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 valuation of the Fund as at 30 June 2016.

The small size of the Fund’s Defined Benefit Section does not allow us to develop statistically significant results based on actual experience for this group.

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

The death and disability rates are unchanged from those assumptions used at the last valuation. These are consistent with the insurance premiums charged by the Fund’s group insurer. A summary of these rates can be found in Appendix D.

The small size of the Fund’s Defined Benefit Section does not allow us to develop statistically significant results based on actual experience for this group.


21 December 2016

Children’s Pensions

There is currently one child pension in payment. At 30 June 2018, the annual amount of the pension was $16,391. This was increased by 4.1% effective 1 August 2018 and we have assumed it will increase by a further 2% on 1 August 2019. We have also assumed the pension ceases on 26 June 2020 (the date the child pensioner reaches age 20).

For active members we have valued the long term expected cost of providing children’s pension emerging in the future using the following assumptions:

■ All members have two children, the first born when the member is aged 29 and the second born when the member is aged 32;

■ The pensions are indexed with CPI (assumed to be 2.0% p.a.); and

■ No allowance is made for child mortality (i.e. it is assumed that all children are alive at age 20).

The cost of providing the children’s pension benefits is determined assuming the same member mortality rates used for the lump sum death benefits provided by the Fund. The resulting cost is included in the Company’s long-term contribution rate.

Expenses and Insurance Premiums

Total expenses over the two years have averaged $272,000 per annum. At the date of the last valuation, the assumption for expenses was $225,000 per annum. The greater than expected expenses over the period since the last valuation will have had a negative effect on the financial position of the Fund.

In light of the higher level of expenses in recent periods, we have assumed long term expenses in the future of $275,000 per annum. This includes an allowance for premiums required to insure the Fund’s salary continuation benefits.

Insurance premiums for Death and TPD cover have been allowed for in the normal cost of benefits based on applying the Fund’s actual insurance premium rates to the future service component of these benefits in the valuation.

Adequacy of Insurance

The Fund provides death and disablement benefits for members of the Fund. The death and TPD benefits are insured with MetLife.

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

The current level of lump sum Death and TPD insurance in respect of Defined Benefit Members is calculated as:

Insured Benefit

= Death/TPD Benefit – Accrued Retirement Benefit (category 2)

= Death/TPD Benefit – Early Retirement Benefit (category 3)



The following table shows the adequacy of the total Fund’s insurance cover:

30 June 2018

Lump Sum Death and Disablement Benefits (A) $27,620,000

Less Aggregate Group Life Insurance (B) $3,868,000

Fund’s Exposure (A – B) $23,752,000

Less Fund’s Net Assets1 $25,908,000

Excess/(Shortfall) $2,156,000

1 Assets are net of the Operational Risk Financial Requirement (ORFR) reserve.

The Fund’s Net Assets and group life insurance cover was therefore $2,156,000 greater than its potential lump sum Death and TPD exposure at the Valuation Date. We recommend no changes to insurance arrangements.

Salary continuance insurance benefits are fully insured with MetLife, and can therefore be considered adequately secured.

The future estimated cost of providing children’s pension benefits has been incorporated into the recommended Company long-term contribution rate. There is currently one child pension in payment. If any further pensions were to become payable, their payment will be met from any excess lump sum insurance proceeds and the Fund’s assets.

Summary of Valuation Assumptions

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


21 December 2016

Section 5: Solvency and Funding Measures

There are several methods used to assess the current financial situation of the Fund.

Vested Benefits

Under Australian superannuation law, 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 (VBI) is a test of the Fund’s solvency if all Members voluntarily resigned (if not eligible for early retirement) or retired (if eligible for early retirement) on the valuation date.

The following table shows the VBI as at the Valuation Date.

30 June 2018 Defined Benefits

Only*

30 June 2018 All Benefits


Only*


Net Value of Assets $17,401,000 $25,908,0001 $15,789,000 $23,338,000

Vested Benefits $15,642,000 $24,149,000 $13,983,000 $21,532,000

Surplus/(Deficit) $1,759,000 $1,759,000 $1,806,000 $1,806,000

Vested Benefits Index

111.2% 107.3% 112.9% 108.4%

* The “Defined Benefits Only” figures illustrate the financial position of the Fund in respect of the Defined Benefit Members and excludes Defined Benefit Members’ additional accumulation accounts, Late Retirees’ benefits and the non-contributing members’ benefits which are treated as accumulation in nature.


As at the Valuation Date, the Fund had a VBI of 111.2% in respect of Defined Benefits only and was in a satisfactory financial position.

The reduction in the Defined Benefits Only VBI is due primarily to the contributions paid being less than required to fund the accrual of members’ benefits and the administration fees and insurance premiums of the Fund, as expected. This has been partially offset by favourable investment earnings exceeding those assumed at the last review.

Actuarial Value of Accrued Retirement Benefits

The Actuarial Value of Accrued Benefits (AVAB) represents the value in today’s dollars of future benefits based on membership completed to the valuation date, allowing for future salary increases, investment earnings and expected incidence of payment.

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

A fully funded position is represented by a ratio of 100%.



The following table shows the AVABI at the Valuation Date:


Only *



Only *



Actuarial Value of Accrued Benefits

$15,780,000 $24,287,000 $14,035,000 $21,584,000

Surplus/(Deficit) $1,621,000 $1,621,000 $1,754,000 $1,754,000

Actuarial Value of Accrued Benefits Index

110.3% 106.7% 112.5% 108.1%

* The “Defined Benefits Only” figures illustrate the financial position of the Fund in respect of the Defined Benefit Members and excludes Defined Benefit Members’ additional accumulation accounts, Late Retirees’ benefits and the non-contributing members’ benefits which are treated as accumulation in nature.


As at the Valuation Date, the Defined Benefit Section of the Fund had an AVABI of 110.3%.

The Defined Benefits Only AVABI has weakened over the valuation period for the same reasons as the VBI (above).

Benefits Payable on Retrenchment

The retrenchment benefit for most Members are the same as their vested benefits. Therefore, the Fund’s assets were sufficient to cover retrenchment benefits as at the Valuation Date.

Minimum Requisite Benefits

Minimum Requisite Benefits (MRBs referred to as Minimum Benefits in SPS160) are the minimum benefits that employers are required to provide in order to meet the requirements of Superannuation Guarantee legislation.

All Defined Benefit Members have minimum requisite benefits in accumulation form. The Members’ vested benefits are at least equal to their Superannuation Guarantee Minimum Requisite Benefits, and in some cases Fund benefits are higher than this amount.


21 December 2016

A comparison of assets and MRBs as at the Valuation Date for the Fund is as follows:


Only*



Only*



Superannuation Guarantee MRBs

$14,850,000 $23,357,000 $13,125,000 $20,674,000

Surplus/(Deficit) $2,551,000 $2,551,000 $2,664,000 $2,664,000

Ratio of net assets to Superannuation Guarantee MRBs

117.2% 110.9% 120.3% 112.9%

* The “Defined Benefits Only” figures illustrate the financial position of the Fund in respect of the Defined Benefit Members and excludes Defined Benefit Members’ additional accumulation accounts, Late Retirees’ benefits and the non-contributing members’ benefits which are treated as having an accumulation in nature.


Pursuant to the SIS Act, the Fund was “technically solvent” at the Valuation Date, as the Fund’s assets exceeded the Minimum Requisite Benefits.

Shortfall Limit

As required under SPS160 the Trustee has set the Shortfall Limit for the Fund as 99%. 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.”

I consider the Shortfall Limit of 99% is appropriate given the nature of the defined benefit assets.

Benefits Payable on Fund Termination

According to the Trust Deed, the Employers may terminate contributions by giving notice in writing to the Trustee. The assets then available are allocated between the Members by the Trustee, after obtaining the advice of the Actuary and having regard to regulatory requirements.

It follows therefore that in accordance with the Fund rules, the termination benefits would be covered by the Fund’s assets. In addition, the termination of the Fund provisions do not require a minimum benefit to be paid but to apply assets in an order of priority.

Therefore, the Fund assets were sufficient to meet those benefits required under the Trust Deed had the Fund Terminated at the Valuation Date.

Statement of opinion pursuant to SPS160 (previously SIS Regulation 9.31(1)(ba))

SPS160 23(h) requires a statement on whether there is a “high degree of probability” that the Fund will be able to pay its pension liabilities as required under the Fund’s Trust Deed.

Given the strong financial position of the Fund at the Valuation Date and the size and temporary nature of the one child pension in payment, I believe there is a high degree of probability that the Fund will be able to pay its pension liabilities as required under the Fund’s Trust Deed.



Summary

The Fund was in a satisfactory financial position at the Valuation Date with the Fund’s assets being greater than both vested benefits and accrued benefits.

The investment experience of the Fund between Valuation Date and the date of signing this report is expected to have been unfavourable and weakened the financial position of the Fund slightly during that time.

Since 30 June 2018, 11 defined benefit members have ceased service and been paid their benefits from the Fund. This has reduced the Contributory defined benefit membership to 34.

I have taken this experience into consideration when preparing the recommendations set out in this report.


21 December 2016

Section 6: Contribution Recommendations

The funding indices shown in Section 5 relate to the financial position at the Valuation 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 discussed in Section 4 and assumptions set out in Appendix D. The results of the valuation are summarised in this Section.

Long Term Contribution Rates (before adjustments for current surplus/deficits)

As described in Section 5, the total value of accrued defined benefits of $15.8 million represent the present value of all expected future benefits in respect of defined benefit membership accrued up to the valuation date. We have similarly calculated the present value of all expected future Defined Benefits in respect of expected membership after the Valuation Date (“future service defined benefits”).

The amount of long term Company contributions needed is calculated as the present value of Future Service Defined Benefits less the present value of expected future member contributions.

Total $

Present value of future service benefits on

Retirement 2,099,000

Death 110,000

Permanent Disablement 155,000

Leaving Service 25,000

Future Service Liability to be funded by future contributions 2,389,000

Less: Compulsory member contributions (post-tax) (720,000)

Future Service Liability to be funded by future Company contributions (A) 1,669,000

Value of a 1% employer contribution (B) 198,000

Required employer contributions (A)/(B) 8.4%

Allowance for expected cost of Children’s Pensions 0.1%

Allowance for contribution tax 1.5%

Long term employer contribution rate to fund Future Service Liability 10.0%

Under the Attained Age Normal method, the long term cost of these benefits is 10.0% of Defined Benefit Members’ superannuation salaries. The long term contribution rate, including an allowance for administration expenses and salary continuance insurance premiums (estimated to be $275,000 per annum), is around 17.5% of Defined Benefit Members’ superannuation salaries.

Contributions of 9.5% (or such other amount as required to satisfy SG legislation) of bonuses and other payments that form part of Ordinary Time Earnings but are not included in superannuation salary are payable for all members in addition to the rate calculated above.

In determining this contribution rate we have allowed for the legislated increases in the SG contribution rate that apply to the Minimum Requisite Benefit that underpins the Fund benefits.



Adjustment for Surplus at 30 June 2018

As at 30 June 2018, the surplus (assets relative to Actuarial Value of Accrued Benefits) was $1.6 million. This surplus can be used to reduce the Company’s defined benefit contribution rate.

In discussions, the Company advised its preference to use some of this surplus to reduce its contributions in respect of defined benefit members in the short term, but acknowledged the need to retain some surplus as a buffer against adverse experience. The Company is aware that, following the period of reduced contributions, it will be expected to increase contributions to around the long-term contribution rate of 17.5% (including contributions to meet administration expenses and insurance premiums).

We consider that a reduction in the Company’s defined benefit contribution rate from 10.6% of salary to 5% of salary over the short term is appropriate.

Details of the resulting Company contribution rate and our projection of the expected change in financial position are set out below.

Recommended Company Contribution Rate

Allowing for the use of the Fund’s surplus as described above, we recommend that the Company contributes to the Fund as follows:



■ 17.5% of contributory members’ superannuation salary (includes contributions to meet administration expenses and insurance premiums), thereafter.







21 December 2016

Projection of Results

For Defined Benefits only, we have tested the impact of the adoption of the recommended Company contribution rates above, by projecting the cash flows of the Fund and the build-up of the Fund’s assets over the next five years, and comparing the Fund’s assets to the projected levels of the Vested Benefits.

The Vested Benefits Index is projected to remain above 100% over the next five years. A moderate level of surplus will therefore be retained to act as a buffer against adverse experience, particularly as the Fund membership continues to decline.

Impact of Non-Contributory Members

At the Valuation Date, there were 12 non-contributory members who were eligible to opt into the Defined Benefits category. As at the Valuation Date, these members have elected to receive accumulation benefits and are therefore excluded from the Defined Benefit results for the purpose of this report.

If substantial numbers of these members were to exercise their right to move into the Defined Benefit Section, then this could affect the overall cost of providing defined benefits in the Fund. This should be monitored. The actual outcome is dependent on the age and service profiles of members opting into or out of the Defined Benefit Section. If there is a significant net movement in such members between categories, the overall defined benefit cost should be reviewed.

111.2%112.7%

110.2%

108.2%

105.5%104.9%

100%

105%

110%

115%

120%

125%

30-06-18 30-06-19 30-06-20 30-06-21 30-06-22 30-06-23

Ves

ted

Ben

efit

Ind

ex (

VB

I)

Date

Projection of Defined Benefit Section VBI

VBI Projection (base assumption)



Post Review Experience

Investment returns between 1 July 2018 and 30 November 2018 have been lower than expected (-0.4% actual vs 1.9% expected). Most members’ defined benefits are in accumulation form so this experience is expected to have had only a small negative impact on the Fund’s financial position. We have considered the poor investment performance in determining the contribution program, however we have not adjusted the projection of the Vested Benefits Index over the next five years.

Since 30 June 2018, 11 defined benefit members have ceased service and been paid their benefits from the Fund. This has reduced the Contributory defined benefit membership to 34. We have allowed for this experience in the determining the contribution program and in projecting the coverage of Vested Benefits Index over the next five years.

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 quarterly reviews of the financial position of the Fund continue and also at any time if the Defined Benefit membership reduces significantly, in order to confirm that the Fund’s coverage of vested benefits does not deteriorate faster than anticipated as a result of the recommended contributions.

The next valuation date should be no later than 30 June 2021, to be completed by 31 December 2021.


21 December 2016

Section 7: 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 1.5% 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. 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

1.5% p.a. 2.5% p.a. 0.5% p.a.

Actuarial Value of Accrued Benefits Index

110.3% 110.3% 110.2%

Long Term Contribution Rate 10.0% 9.8% 10.4%

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

1. For this valuation I have adopted a salary inflation 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.

2. For this valuation I have adopted an investment return assumption (net of tax and investment management expenses) of 4.5% 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.

3. For this valuation and the future projection of the Fund’s financial position, I have assumed $275,000 p.a. for administration expenses and salary continuance insurance premiums are deducted from Fund surplus each year. If actual expenses are greater than this, then the funding position will worsen and increased Company contributions may be required.

4. For this valuation I have made allowance for the full legislated schedule of increases to the SG contribution rate. If the current or a future government repeal or delay the legislated increases then the recommended Company contribution rates may need to be reviewed.

I recommend that the Trustee monitors the Vested Benefits Index on a quarterly basis to ensure the contribution program recommended in this valuation remains appropriate.



Appendix A: Summary of the Main Defined Benefit Provisions of the Fund

Jamestrong Packaging Australia Superannuation Fund

The Fund was established as at 1 November 2007 under a Trust Deed dated 5 October 2007 as subsequently amended.

The Fund is a Complying Superannuation Fund as defined under the Superannuation Industry (Supervision) Act and is therefore eligible for concessional taxation treatment.

Reference should be made to the Trust Deed for a full statement of the Fund’s terms and conditions. The summary below contains the main features applicable to Defined Benefit members.

Classifications

■ Category 2 members – Previous Amcor members who joined from the Containers Packaging Benefits Plan.

■ Category 3 members – Previous Amcor members who joined from the Containers Packaging Superannuation Fund.

A.1 Retirement Age

Generally means 65th birthday for “Normal Retirement Date” and 55th birthday for “Early Retirement Date”.

A.2 Final Average Salary (or FAS)

The average of the highest annual salaries over any three year period in the last five years of membership.

A.3 Contributions & Accrual Rates

Category 2 and 3

Member contribution rate (post-tax) Accrual rate

3.5% 13.5%

4.5% 15%

5.0% 17.5%

Company: the balance of the cost required to provide members’ benefits on the advice of the actuary.

A.4 Normal Retirement, Early Retirement and Withdrawal Benefit

Category 2 and 3

Benefit = Accrual Rate × (Pre 95 Membership × Pre 95 Age Factor × FAS + Post 95 Membership × Post 95 Age Factor × FAS).


21 December 2016

where:

“Pre 95 Age Factor” – 70% plus 1.5% for each year and complete month over age 35, subject to a maximum of 100%.

“Post 95 Age Factor” – 80% plus 1% for each year and complete month over age 35, subject to a maximum of 100%.

“Pre 95 Membership” – the period from the member’s Date Joined Fund for Benefit Purposes to 30 June 1995.

“Post 95 Membership” – the period from 30 June 1995 to the date of calculation.

A.5 Death Benefit, Total and Permanent Disablement Benefit & Total and Temporary Disablement benefit

Category 2

Total and Temporary Disablement Benefit

Monthly benefit equal to the lesser of:

■ 1/12 of 75% of Salary; and

■ 1/12 of 12.5% of Total & Permanent Disablement Benefit

Death & Total and Permanent Disablement Benefit

Benefit = Accrual Rate × Total Potential Membership × Prospective FAS.

Category 3

Total and Temporary Disablement Benefit

As per Category 2.

Death & Total and Permanent Disablement Benefit

Benefit = Accrual Rate × Total Potential Membership × Salary.

All defined benefit categories

Children’s pensions

All defined benefit categories also provide a children’s pension (payable until age 20) equal to:

■ 20% of Prospective Benefit Salary, for youngest child; and

■ 15% of Prospective Benefit Salary, for each other child,

up to a maximum of 65% of Prospective Benefit Salary.

A.6 Additional Voluntary Contributions

Members may make additional voluntary contributions which are accumulated with investment earnings.



A.7 Rollover and Transfer Amounts

Any amounts rolled over or transferred in from another fund are accumulated with investment earnings and paid on leaving the Fund for any reason.

A.8 Superannuation Guarantee and other minimums applying

The Fund provides benefits in accordance with minimum “Superannuation Guarantee” benefits which are specified in the Fund’s current Benefit Certificate, dated 31 July 2015.

In addition to the Superannuation Guarantee, the above calculations are also subjected to other accumulation-style minimum formulae applied. Depending on the membership history of the individual, these may be higher or lower than the Superannuation Guarantee minimum benefit.


21 December 2016

Appendix B: Details of Membership

Membership at the Valuation Date

Headcount Total Salaries Average Salary Average Age Average Past Membership

45 $4,070,000 $90,400 54.7 years 27.0 years

The 45 Defined Benefit members are split between Category 2 (5 members) and Category 3 (40 members).

In addition to these 45 Defined Benefit Members there are also another 12 members who were eligible to opt into the Defined Benefits Section. As at the valuation date, these members have elected to receive accumulation benefits and are therefore excluded from the defined benefit results for the purpose of this report.

There are also another 3 members who have reached their normal retirement age and, as required by the rules of the Fund, have had their defined benefits converted to accumulation style benefits.

The Fund also has one child pensioner.

The Fund is closed to new entrants.



Appendix C: Changes in Membership

Changes in Defined Benefit membership for the Period from 30 June 2016 to 30 June 2018

Category Membership at 30 June 2018

Membership at 30 June 2016

Category 2 5 5

Category 3 40 46

Total 45 51

The Fund is closed to new entrants.


21 December 2016

Appendix D: Valuation Method and Assumptions

Valuation Date

The valuation date is 30 June 2018.

Asset Value

The net assets of the Fund was $25,908,000 at the Valuation Date, after deducting the Operational Risk Financial Requirement (ORFR) reserve of $85,000.

Investment Returns

4.5% p.a. compound (net of investment expenses and taxes).

Inflationary Salary Increase

3.0% p.a. compound.

Rates of Death & Total and Permanent Disability (TPD)

These rates have been based on the actual premium rates charged by the Fund’s insurer. Examples of rates at which members leave the Fund per year per 10,000 members are as follows:

Age Next Birthday Death TPD

25 7.5 1.2

30 6.5 2.0

35 7.3 3.0

40 9.9 5.8

45 15.3 12.9

50 24.2 26.4

55 37.9 52.2

60 59.4 93.3



Rates of Resignation

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

Age Next Birthday Number per year per 10,000 members

20 2,400

25 1,700

30 1,000

35 580

40 380

45 200

50 60

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

56-60 1,000

61 2,000

62 1,500

63 1,500

64 1,500

All employees are assumed to retire upon reaching age 65 years.

Rates of Retrenchment

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

Future Expense Allowance, SCI Insurance, Children’s Pension

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

We have assumed expenses and insurance costs equal to $275,000 per annum. This includes the premiums for SCI insurance.

Death and TPD insurance costs have been incorporated in the decrements.

Children’s pensions are payable when a Fund member dies or becomes disabled. These pensions are payable to the earlier of the child reaching age 20 or the date the member would have reached his or her normal retirement date.

The estimated long term cost of future children’s pension is difficult to determine, given the Fund holds no data on members’ eligible children. Therefore, we have made broad allowance of the estimated future cost of these pensions in the contribution rate by assuming that all Fund members had two children at age 29 and then age 32. The Fund’s death and disability premium rates are than applied to determine an estimated one year cost.


21 December 2016

Note that the actual cost of providing this benefit will always be different to our long term cost. The absence of any data held on members’ eligible children means that we are only able to base our long term costing on an assumed family profile. Actual family size and age profiles will be different.

New Entrants

The Fund’s Defined Benefit Section is closed to new entrants. Accordingly, no allowance has been made for new entrants in this valuation.

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.

Composition of Membership

There are some members who are eligible to opt into the Defined Benefits Section, but (as at the Valuation Date) only have accumulation benefits in the Fund.

It has been assumed that Members with such choice to opt in or out of the Defined Benefit section of the Fund remain in their current Category.

Note also that this review has recommended a single Company contribution rate to be applied to all Defined Benefit Members (regardless of category). Therefore, the resulting recommendation should be reviewed if there are substantial changes in the profile of the membership across the different Defined Benefit categories.



Appendix E: Actuarial statement

Actuarial Summary for the purposes of the Prudential Standard 160

The following statements are prepared for the purposes of Prudential Standard 160 (SPS160), under paragraph’s 23(a) to (h).

Background

The effective date of the most recent actuarial review of the Jamestrong Packaging Australia Superannuation Fund was 30 June 2018. The actuarial review was undertaken by Andrew West, Fellow of the Institute of Actuaries of Australia, on behalf of Towers Watson Australia Pty Ltd. The previous actuarial review of the Fund was prepared for the Trustee by Andrew West, as at 30 June 2016 (signed 21 December 2016).

This statement has been prepared for the Trustee of the Fund as part of the actuarial review.

Assets

The net assets of the Fund at 30 June 2018 (“the Valuation Date”) was $25,908,000, after deducting the Operational Risk Financial Requirement (ORFR) reserve of $85,000.

This value of assets at the Valuation Date was used to determine the recommended Company contribution rates and is also referred to as the “actuarial value” of the assets.

Vested Benefits

Vested benefits are the benefits to which members would be entitled if they voluntarily left service.

At the date of the actuarial investigation, the vested benefits and net assets of the Fund were:

Total Vested Benefits: $24,149,000

Net Value of Assets1: $25,908,000


The ratio of the net assets to total vested benefits was 107.3%, which indicates Vested Benefits were covered by net assets as at the date of the actuarial investigation and the Fund was in a satisfactory financial position.

The assets and Vested Benefits shown above include the value of accumulation liabilities of $8,507,000. The ratio of defined benefit assets relative to the value of Defined Benefit Vested Benefits (i.e. excluding the accumulation liabilities) was 111.2%.

Accrued Benefits

For accumulation liabilities, the value of accrued benefits equals the total account balance at the Valuation Date.


21 December 2016

For Defined Benefit members, the Accrued Benefits have been determined as the present value of expected future payments arising from membership completed as at the Valuation Date plus any additional accumulation benefits at face value. Accrued Benefits have not been subjected to a minimum of the vested benefit, either on an individual or group basis. Accrued Benefits have been determined in a manner consistent with Professional Standards and Guidance Notes issued by the Institute of Actuaries of Australia.

The past membership component of all benefits payable in the future from the Fund in respect of current membership are projected forward allowing for future salary increases and then discounted back to the Valuation Date at the assumed market related, risk adjusted discount rate.

The main assumptions used to determine the Accrued Benefits at the Valuation Date were:

■ market based, risk adjusted discount rate, net of tax and investment expenses: 4.5% p.a.

■ expected rate of salary inflation: 3.0% p.a.

Assumptions were also made about rates members would withdraw from service because of death, total and permanent disablement and resignation. Under these assumptions, the average expected future membership period of the members is approximately 8 years.

Using the above method, the total value of accrued benefits and the actuarial value of the Fund’s assets at the Valuation Date were:

Value of accrued benefits for defined benefit members $15,780,000

Value of accumulation liabilities (including defined $8,507,000 benefit members’ additional accumulation amounts)

Total Accrued Benefits: $24,287,000


1 Assets are net of the operational risk financial requirement (ORFR) reserve.

The ratio of the value of the assets to the value of the total Accrued Benefits was 106.7% which indicates Accrued Benefits were covered by net assets as at the Valuation Date.

The assets and Accrued Benefits shown above include the value of accumulation liabilities of $8,507,000. The ratio of the Defined Benefit assets to be value of Defined Benefit Accrued Benefits (excluding the accumulation liabilities) was 110.3%.

Based on the assumptions adopted for this review which I consider appropriate, at 30 June 2018 the value of assets of the Fund (excluding the amount held to meet the ORFR) is adequate to meet the liabilities in respect of the accrued benefits of the members of the Fund.



Minimum Requisite Benefits (MRB) Ratio

Under the Superannuation Guarantee (SG) legislation, employers are required to provide all employees with a benefit at least equal to the prescribed minimum benefit in order to avoid the SG charge. The Company has resolved to use this Fund to provide this minimum benefit. This minimum benefit is called the Minimum Requisite Benefit (MRB), and is defined in the Fund’s current actuarial Benefit Certificate, dated 31 July 2015. All benefits provided by the Fund must meet or exceed the MRB.

At the Valuation Date, the Minimum Requisite Benefits and net value of the Fund’s assets were:

Total Minimum Requisite Benefits: $23,357,000



The ratio of the net value of the Fund’s assets to total minimum requisite benefits was 110.9%, which indicates Minimum Requisite Benefits were covered by net assets as at the Valuation Date.

The assets and Minimum Requisite Benefits shown above include the value of accumulation liabilities of $8,507,000. The ratio of defined benefit assets relative to the value of Defined Benefit Minimum Requisite Benefits (i.e. excluding the accumulation liabilities) was 117.2% and the Fund was therefore technically solvent at the Valuation date.

Based on the actuarial assumptions, I see no reason why an actuary will not be able to certify the solvency of the Fund in three years’ time on this basis.

All necessary Funding and Solvency Certificates were obtained during the period since the last valuation.

Shortfall Limit

A shortfall limit is the extent to which a fund can be in an unsatisfactory financial position, where there is a reasonable expectation that the fund can be restored to a satisfactory financial position within one year.

The Fund’s shortfall limit has been set to a VBI of 99%. Hence, the Fund was above its shortfall limit at 30 June 2018 (with a VBI of 111.2% for the Defined Benefit section).

The Fund is not expected to breach its shortfall limit in the three years until the next Actuarial Review (based on the recommended contributions below and the assumptions adopted for this review). In my opinion, the shortfall limit for this Fund is appropriate and does not need to be reviewed.

Recommended Company Contributions

We recommend that the Company contributes to the Fund as follows:



■ 17.5% of contributory members’ superannuation salary, thereafter.




21 December 2016




Projection of Vested Benefits Ratio

For Defined Benefit Section members, we have tested the impact of the adoption of the recommended Company contribution rate above, by projecting the cash flows of the Fund and the build-up of the Fund’s assets over the next five years, and comparing the Fund’s assets to the projected levels of the Vested Benefits.

In order to determine whether the recommended contribution rates set out above are sufficient to maintain the financial position of the Fund in the short-term, we have projected the Vested Benefits Index of the Defined Benefit Section from 1 July 2018 to 30 June 2023 using the valuation assumptions set out in Appendix D.

In projecting the VBI, we have made allowance for:

■ the recommended Company contributions as set out above; and

■ known Defined Benefit exits since 1 July 2018.

The results of the projection are shown in the following graph.

111.2%112.7%

110.2%

108.2%

105.5%104.9%

100%

105%

110%

115%

120%

125%

30-06-18 30-06-19 30-06-20 30-06-21 30-06-22 30-06-23

Ves

ted

Ben

efit

Ind

ex (

VB

I)

Date

Projection of Defined Benefit Section VBI

VBI Projection (base assumption)



Financial Condition

In my opinion, the Fund was in a satisfactory financial condition at the date of the actuarial investigation. Assuming that:

■ the benefits provided by the Trust Deed remain unchanged;

■ Member contributions continue to be paid at the rates specified in the Trust Deed;

■ Company contributions are paid at the recommended rates shown above; and

■ the future experience of the Fund is in accordance with the actuarial assumptions made at the Valuation Date,

then the net assets of the Fund are expected to remain in excess of the Vested Benefits until beyond 30 June 2021. The Trustee will continue to monitor the financial position of the Fund on a quarterly basis.

In my opinion, as at 30 June 2018 there is a high degree of probability that the Fund will be able to pay pensions as required in the governing rules.

Dated 21 December 2018

Andrew West Fellow of the Institute of Actuaries of Australia

Willis Towers Watson

Level 4, 555 Bourke Street

Melbourne, VIC 3000, Australia

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

http://aptct.internal.towerswatson.com/clients/652875/BENAUSJAMES18/Documents/04.01_Actl_Valn/Deliverables/Actuarial Review 2018 WTW.docx