Telstra Group has come critically close to ending its ‘contributions holiday’ in regard to Telstra Super, after the fund’s assets dipped to only one percentage point above where the sponsor is obliged to top it up.
Telstra Super last week dismissed market speculation that the defined benefit fund had received a $200 million top-up from Telstra Group during July’s bear market, saying its sponsor remained on contributions holiday. The prudential regulator requires defined benefit funds to maintain an actuarial-calculated measure of liabilities, called the Vested Benefits Index (VBI), which must be above 103 per cent for the employer-sponsor to claim a contributions holiday. In Telstra Group’s annual report released last Wednesday, Telstra Super’s VBI was 104 per cent at June 30 2008. It was the lowest level the VBI has been since Telstra Group began reporting this measurement for its superannuation scheme. It first reported its VBI in June 2005 as 111 per cent. It rose to 115 per cent in 2006, and in last year’s annual report it was 118 per cent. Telstra Super’s spokesperson James Coyle refused to give the VBI level as of yesterday because it was “commercially sensitive information”. “Telstra hasn’t come off its contribution holiday, at present,” Coyle said. “There’s a quarterly assessment and as at June 30 it was at 104 per cent. There’s nothing further to comment.” According to the annual report, the defined benefit component of the $10.5 billion fund was $3.2 billion at June 30, while Telstra’s obligation was $3.05 billion. The defined benefit fund has decreased from $4.34 billion at 30 June 2007 because of both financial markets and member transfers out of the defined benefit plan. “The actual return on defined benefit plan assets was -5.7 per cent for the 2007 financial year,” the report said. The defined benefit fund started the 2008 financial year with 43 per cent exposure to “equity instruments”. At 30 June 2008, 33 per cent of the fund was still in this asset class. Since June 30, the Australian share market has fallen a further 4.7 per cent, while the MSCI World ex-Australia index ($A) returned -1.7 per cent in July, according to Mercer’s sector surveys.
Future Fund chief investment officer Ben Samild said that FY24 has been a great year for alpha creation, thanks to strong returns in equities and, unusually, across multiple hedge fund strategies all at the same time. He reflected the past few years have been “a difficult time to be an asset owner and to generate positive returns for risk assets” but the Future Fund is tracking well of its long-term mandate.
Simon Hoyle and Darcy SongSeptember 4, 2024
