The actuaries to the Commonwealth’s defined benefit superannuation schemes have completed the 2020 Long Term Cost Reports (LTCRs). The reports estimate the long-term cost of providing superannuation benefits to members and monitor progress of the future financial position for the schemes based on updated data and trends. LTCRs for each of the Australian Government civilian defined benefit superannuation schemes are prepared by scheme actuaries every three years.
The 2020 Public Sector Superannuation Scheme (PSS) and the Commonwealth Superannuation Scheme (CSS) LTCR identifies that the unfunded liability for these schemes will continue to grow over the medium-term, peaking at $182.9 billion in 2033-34 before declining to $60.8 billion by 2060. The liability represents the present value of member superannuation entitlements in respect of service rendered, less the value of assets held by the schemes. The actuarial estimates of the liability reflect the full nominal cost of the schemes, as if member entitlements were required to be paid immediately rather than over the long term. The projected decline in liability by 2060 is largely due to contributors leaving the workforce, and deferred and preserved members commencing a pension or receiving a lump sum benefit. The CSS closed to new members from 1 July 1990, and the PSS was closed to new members from 1 July 2005.
The 2020 LTCR estimates that the total unfunded liability of the PSS and the CSS as at 30 June 2022 will be $158.5 billion in present value terms, an increase of $3.7 billion compared to $154.8 billion estimated in the 2017 LTCR. This increase between LTCRs is largely driven by changes in factors including pension take-up, rates of involuntary retirement, and a range of other membership behaviours varying from those previously observed.
Expected nominal outlays under the PSS and CSS schemes are estimated to be $6.3 billion in 2021-22 and are projected to increase during the next 20 to 25 years, peaking at $12.7 billion between 2044 to 2048. Nominal outlays for the PSS and CSS schemes are then projected to decline to $8.8 billion by 2060.
The Future Fund is a financial asset fund, set up to strengthen the Commonwealth's long-term financial position by making provision for these unfunded superannuation liabilities.
