Corporate super schemes appear sound
Moody's says actuaries should provide better transparency on the assumptions they use for super fund calculations.
Tuesday, June 24th 2003, 9:43PM
Moody's Investors Service says that despite the decline in global equity markets, no Australian or New Zealand corporate it rates currently reports material deficits -- to the extent that they could impact credit ratings
-- in their defined benefit superannuation funds, when compared to reported obligations.
In a just-released Special Comment, Moody's notes that defined benefit
superannuation funds have come under increased global scrutiny in recent years, primarily as a result of falling equity markets.
"This effect has important implications for the true debt levels of an
organisation as well as potential profit and cash flow implications for funding prolonged shortfalls," says the report, entitled "Australian
Pension Obligations -- No Material Issues for Rated Companies".
This report examines the superannuation obligations of 53 companies in
Australia and New Zealand.
The analysis relies on information available in annual reports of the
last 2 years, primarily from the notes to the accounts.
"Based on reported figures and sensitivity analysis, we see no immediate
credit risk implications for companies as related to the status of their defined benefit superannuation funds," Moody's associate analyst Peter Fullerton says.
"We are, however, constrained in our ability to assess and re-calculate
the benefit obligation, given the lack of disclosure of some of the variables used in this calculation. Consequently, there is an ongoing
reliance on management to ensure these obligations are accurately estimated."
Moody's says it will continue to monitor issuers for any material changes. Nevertheless, it notes, as a reassurance, that all the companies analysed use qualified actuaries to estimate their obligations.
However, it would be helpful if there were greater transparency around the assumptions used by the actuaries.
It also says that the general consensus is that equity markets will
recover and return to more normal long-term growth rates over time, so offsetting the need for the relevant organisations to channel additional funds to prop up their superannuation accounts.
"Our research has found no evidence of limiting contributions to pension
funds. It appears that the deficits occurring are primarily the result of falling equity markets," Fullerton says.
Commenting is closed
