Newsletter No. 59 February 2005
Also available as: ISU Newsletter No. 59 [275 kB PDF]
Within this newsletter…
1. Comment on the Reporting of Crediting Rates
Paragraph (m) of the Superannuation Schemes Act 2004 required that, if any benefits payable under the scheme are based on the investment returns of the scheme assets, there is a statement in the annual report of the crediting rate or the rates that applied during the year.
Whilst the wording is not precise in detail, we are finding that most annual reports contain sufficient information to meet the spirit of the legislation.
2. Checklist for Actuarial Reports
I have liaised with the New Zealand Society of Actuaries to develop a checklist for compliance with the New Zealand Actuarial Professional Standard 2 (PS2), a copy of which I would appreciate receiving when future valuations are lodged.
This co-ordinates the checklists used by the main consulting firms and will be of use by the actuary, the peer reviewer and the Government Actuary's office.
A copy is attached in the Appendix.
3. Statistics for Registered Superannuation Schemes
Tables 1 and 2 attached provide an update of appendices 3 and 5 in last years Annual Report to the Minister.
Comparing the figures in the attached Tables with the relative figures in the appendices to the 30 June 2004 Report:
- Table 1 shows that the number of registered superannuation schemes continues to fall (from 675 down to 624). The fall can in part be attributed to the continuing movement of employer schemes to multi-employer schemes to reduce compliance costs, and in part to a continuing trend of terminations.
- Table 2 identifies that there is also a continuing decline in membership within private sector employer sponsored schemes. Membership now stands at 243,970 compared with 246,376 in the 2004 report, and 310,741 in 1990.
- Figures in Table 2 for Employer (1) include data from the multi-employer superannuation schemes operated by various institutions.
- The statistics do not yet include any data on the latest State Sector Scheme
4. State Sector Act 1988 Changes
The State Sector Amendment Act (No.2) 2004 was enacted on 16 December 2004 and came into effect on 25 January 2005.
Part of this amendment Act repealed sections 84 to 84D inclusive and substituted new sections 84 to 84B.
The effect of the amendments has been to remove the requirement for the Government Actuary to confirm that schemes comply with the requirements of section 84B and charge for that service. The section 84B requirements have also been modified and a definition of "contribute" has been added.
A new Section 84B(2) is a saving provision that covers all state sector employees in schemes which were compliant on 25 January 2005.
Scheme trustees, administrators and advisors need to note that-
- the Government Actuary no longer has responsibility regarding confirmation of compliance with s84B;
- the requirements under section 84B have been modified for new members post 25 January 2005 and therefore previously compliant schemes may no longer meet the new requirements for new members unless their trust deeds are amended; and,
- state sector employers will now need to consider seeking their own advice as to whether any particular registered superannuation scheme now meets the amended requirements of section 84B.
David Benison
Government Actuary
Table 1: Registered Superannuation Schemes - Accounts Summary and Membership Analysis
|
In force on scheme balance dates in the 12 months:
|
Included in (b):
|
| to 31 Dec 1990 (a) |
to 31 Jan 2005 (b) |
Prior period reports (c) |
Terminating schemes (d) |
| Number of Schemes |
2,863 |
624 |
158 |
23 |
| Accounts Summary ($millions) |
|
|
|
|
| Opening Balance |
11,044 |
15,422 |
3,795 |
34 |
| Add: |
|
|
|
|
| Contributions |
908 |
1 ,811 |
484 |
3 |
| Investment Accrual |
578 |
1,741 |
327 |
3 |
| Transfers In |
0 |
339 |
99 |
0 |
| Other Income |
330 |
1 |
0 |
0 |
| Less: |
|
|
|
|
| Pension Payments |
227 |
230 |
17 |
0 |
| Retirement Lump Sums |
481 |
694 |
191 |
0 |
| Deaths/Disablements |
49 |
70 |
9 |
0 |
| Redundancies |
0 |
93 |
19 |
1 |
| Transfers Out |
0 |
276 |
30 |
3 |
| Other Exits |
764 |
1,008 |
369 |
16 |
| Administration Expenses |
112 |
139 |
50 |
0 |
| Insurance Premiums |
106 |
24 |
5 |
0 |
| Taxation |
90 |
118 |
15 |
0 |
| Closing Balance |
11,032 |
16,662 |
4,002 |
18 |
| Current Members |
|
|
|
|
| At start of year |
511,940 |
639,573 |
201,883 |
608 |
| Add: |
|
|
|
|
| New members |
62,406 |
38,538 |
13,293 |
34 |
| Transfers In |
6,765 |
4,849 |
1,115 |
0 |
| Less: |
|
|
|
|
| Retirements |
13,684 |
19,354 |
6,638 |
5 |
| Deaths/Disablements |
2,132 |
1,836 |
421 |
1 |
| Transfers Out |
14,171 |
5,798 |
579 |
78 |
| Redundancies |
0 |
1,986 |
432 |
25 |
| Other Exits |
42,929 |
39,710 |
14,368 |
211 |
| At end of year |
508,195 |
614,276 |
193,853 |
322 |
| Other Members with preserved benefits |
3,411 |
1,653 |
115 |
1 |
| Current Pensioners |
35,747 |
27,476 |
1,746 |
10 |
| Total Members and Pensioners |
547,353 |
643,405 |
195,714 |
333 |
Notes
- The data in column (b) includes data for schemes which are presumed current but which have not forwarded their annual reports for the balance date falling in the 12 months ending 31/1/2005; refer column (c).
- The data in column (b) includes the latest data for schemes which we have been informed will terminate after the balance date falling in the 12 months ending 31/1/2005; refer column (d), which may include some cases in column (c).
- The data has been obtained from annual reports made by the trustees of superannuation schemes "registered" under the Superannuation Schemes Act 1989 to the members and pensioners of those schemes. Data in respect of the Government Superannuation Fund is not included.
- Some registered superannuation schemes are "master" schemes, whose members are trustees of other registered superannuation schemes. To avoid double counting, master schemes are excluded from this data.
- Some registered superannuation schemes are "multiple class" schemes, whose members may be trustees of other registered superannuation schemes. Some double counting may therefore exist.
- Accounts Summary
The figures for Investment Accrual, Administration Expenses and Taxation are understated: for many schemes the investment figure has been reported net of some expense charge and/or taxation.
Beginning in November 1994, amounts transferred in or out from other superannuation schemes, and amounts paid out on redundancy, have been recorded by the Office separately from the amounts paid on resignation, to the extent that reporting by scheme trustees makes the distinction. The figure of "Other Exits" comprises amounts paid on resignation, and in respect of reports filed before November 1994, amounts paid on redundancy and amounts transferred to other superannuation schemes. Similarly, the figure for "Other Income" includes amounts transferred in from other superannuation schemes in respect of reports filed before November 1994.
- Membership
Some double counting may exist in the figures for numbers of members and pensioners: some persons may contribute to, and draw pensions from, different schemes.
"Transfers In" and "Transfers Out" refer to persons transferring membership between schemes. These figures do not seem to have been reported correctly. "Other Exits" includes resignation and, in respect of reports filed before November 1994, redundancy.
Table 2: Registered Superannuation Schemes - Analysis by Nature of Scheme
Nature of scheme |
Number of Schemes
|
Total Assets
|
Total Membership
|
| 2005 |
1990 |
2005 $m |
1990 $m |
2005 |
1990 |
| Private |
42 |
508 |
31 |
58 |
54 |
550 |
| Employer (1) |
453 |
2,242 |
9,398 |
9,508 |
243,970 |
310,741 |
| Employer (2) |
8 |
0 |
566 |
0 |
26,312 |
0 |
| Retail |
121 |
113 |
6,668 |
1,466 |
373,069 |
236,062 |
| Total |
624 |
2,863 |
16,662 |
11,032 |
643,405 |
547,353 |
| Investment Only Schemes |
26 |
2 |
10,591 |
55 |
518 |
100 |
Notes
- "Private" schemes are schemes set up by individuals for themselves and their immediate family. "Employer (1)" schemes are schemes sponsored by private sector employers and all NPF employer sponsored schemes.
"Employer (2)" schemes provide superannuation arrangements as alternatives to the Government Superannuation Fund, which are sponsored by public sector employers and subject to the requirements of section 848 of the State Sector Act 1988.
"Retail" schemes are schemes where membership is made available to the general public.
"Investment Only schemes" (referred to as Master Schemes in previous years) are schemes whose members are trustees of other registered superannuation schemes.
- The data has been obtained from annual reports made by the trustees of superannuation schemes "registered" under the Superannuation Schemes Act 1989 to the members and beneficiaries of those schemes.
- Some totals may not add exactly, due to rounding.
Appendix: PS2 Checklist for Actuarial Report
[This is the text contained in the checklist. The actual form, with the proper layout, can be printed from the PDF version]
General
Scheme name
Valuation date
AS Number
Person who prepared report
Peer reviewed by
Application
1.1 This Professional Standard is dated 31st March 2003.
2.1 This Standard applies to actuarial reports prepared for the purposes of the Superannuation Schemes Act 1989 (the Act) or any subsequent re-enactment of that Act, where the date as at which the investigation report is made is on or after 31 March 2003.
2.1 Report presented within 7 months of valuation date? [Yes/No]
2.2 The actuary must comply with this Standard in full except in exceptional circumstances, when the actuary is convinced, on reasonable grounds, that full compliance with the Standard would be inappropriate. If the actuary does not comply in full, the actuary must specify the extent and reasons for any non-compliance in the certification in paragraph 9.1.
2.2 Areas of non-compliance with PS2 and reasons [Para/Page]
2.3 This Standard applies whether an actuary is acting as an individual, as a partner, as a director in a corporate body or in the course of employment.
Identification
3.1.1 Scheme name [Para/Page]
3.1.2 To whom the report is addressed [Para/Page]
3.1.3 Purpose(s) of investigation and report (e.g. examine financial position and recommend future contribution rate) [Para/Page]
3.1.4 Valuation date and immediately preceding valuation date [Para/Page]
3.1.5 Conflicts of interest [Para/Page]
3.1.6 Name, professional qualifications, signature of Actuary [Para/Page]
3.1.7 Date report signed [Para/Page]
The Trust Deed
4.1.1 Dates of latest trust deed and any subsequent amendments [Para/Page]
4.1.2 Material provisions relating to benefits and contributions [Para/Page]
4.1.2 Benefits paid if scheme is wound up [Para/Page]
Data Used in the Investigation
5.1.1 Source of membership data [Para/Page]
5.1.2 Summary of data for each category of member [Para/Page]
5.1.3 Reconcile number of members this valuation with immediately preceding valuation [Para/Page]
5.1.4 Actuary's view on sufficiency and reliability of the membership data [Para/Page]
5.4.1 Source of assets and revenue data [Para/Page]
5.4.2 Summary of the investment strategy of the scheme [Para/Page]
5.4.3 Description of assets and names of investment managers [Para/Page]
5.4.4 Reconcile value of assets at this valuation and immediately preceding valuation and principal income and outgo between. [Para/Page]
5.4.5 Comment on investment strategy appropriateness considering form and incidence of expected liabilities. [Para/Page]
5.4.6 Assets being invested according to investment strategy [Para/Page]
5.4.7 Any material risks posed by the assets [Para/Page]
5.4.8 Actuary's view on sufficiency and reliability of assets and revenue data. [Para/Page]
5.4.9 Contingent liabilities included/excluded in asset values. [Para/Page]
5.10.1 Contribution rates recommended by the Actuary and the rates actually paid since the last investigation. [Para/Page]
5.10.2 Any discrepancy between trust deed and trustee's practice, which has a material bearing. [Para/Page]
5.10.3 Material developments in the scheme since the immediately preceding valuation date. [Para/Page]
5.10.4 External events material to the scheme since the immediately preceding valuation date. [Para/Page]
5.10.5 If significant, average annual rate of increase in salary. [Para/Page]
5.10.6 Average annual rate of investment earnings and method of calculation. [Para/Page]
5.10.7 Average annual rate of administration expenses and method of calculation. [Para/Page]
5.10.8 Comment on how investment expenses have been allowed for. [Para/Page]
5.10.9 If significant, impact of interest rate applied being different from interest rate earned. [Para/Page]
5.11 Comment (and recommend expert opinion be sought) if Actuary aware of any problem that may affect financial condition of scheme. [Para/Page]
Actuarial Valuation Method
6.1.1 State funding objectives and valuation method used to achieve objectives. [Para/Page]
6.1.2 State implications of funding objectives and method on stability of future contribution rates and funding levels. [Para/Page]
6.1.3 State whether any change in funding objectives and/or funding method since immediately preceding investigation and effect that these have had. [Para/Page]
Actuarial Assumptions
7.1.1 Assumptions made in valuing liabilities, including assumption for administration and investment expenses. [Para/Page]
7.1.2 Describe benefits valued, difference between that and vested benefit values, and asset allocation on wind-up. [Para/Page]
7.1.3 If past discretionary pension increases, assumption as to future extent [Para/Page]
7.1.4 Statement of most financially significant assumptions and how they were derived. If investment earnings, relationship between assumption and current investment strategy and allowances for expenses and taxation. If pension mortality, provision for mortality improvement. [Para/Page]
7.1.5 Method and assumptions made in valuing assets. [Para/Page]
7.1.6 Comment on compatibility of bases used in valuing assets and liabilities. [Para/Page]
7.2 Statement of changes to benefits and assumptions since last valuation, reasons why and explanation of financial effects. [Para/Page]
Results of the Investigation
8.1.1 Compare present value of accrued benefits with actuarial value of assets. [Para/Page]
8.1.2 Statement whether accrued relationship is likely to change before next investigation. [Para/Page]
8.1.3 Summary of value of benefits, administration expenses, member contributions, employer' contributions and assets. [Para/Page]
8.2 Financial effect of changes in assumptions on value of accrued benefits since immediately preceding investigation. [Para/Page]
8.5.1 Compare present value of vested benefits with actuarial value of assets. [Para/Page]
8.5.2 Statement whether vested relationship is expected to change before next investigation. [Para/Page]
8.7 Sufficiency of assets on windup, specifically for: pensioners, those entitled to a pension and those entitled to a lump sum, commenting on relationship between benefit and wind-up entitlements on purchase. [Para/Page]
8.15 Material developments, external events since valuation date that may affect financial position. [Para/Page]
8.16 Recommendation of date of next investigation and circumstances for earlier investigation. [Para/Page]
8.17.1 Determined contribution rate(s) until next investigation. [Para/Page]
8.17.2 Recommended contribution rate(s) until next investigation. If future changes implied, indicate extent and timing of changes. [Para/Page]
8.17.3 State whether contribution rates include or exclude Specified Superannuation Contribution Withholding Tax (SSCWT) or any similar tax. [Para/Page]
8.19 Adequacy or otherwise of arrangements for losses arising from death and disability payments. [Para/Page]
Certification
9.1 Statement "This report was prepared in accordance with Professional Standard Number 2 - Actuarial Reporting for Superannuation Schemes -issued by the New Zealand Society of Actuaries. The valuation method and the financial, economic and demographic assumptions have been determined in accordance with the professional judgement of the actuary preparing the report." [Para/Page]