Qantas 2015 Annual Report Download - page 80

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QANTAS ANNUAL REPORT 2015
31. SUPERANNUATION
The Qantas Superannuation Plan (QSP) is a hybrid defined benefit/defined contribution fund with multiple divisions that commenced
operation in June 1939. In addition to the QSP, there are a number of small overseas defined benefit plans.
The Qantas Group makes contributions to defined benefit plans that provide defined benefit amounts for employees upon
retirement. Under the plans, employees are entitled to retirement benefits determined, at least in part, by reference to a formula
based on years of membership and salary levels.
The defined benefit plans are legally separated from the Qantas Group. Responsibility for governance of the plans, including
investment decisions and plan rules, rests solely with the Trustee of the plan. The Trustee of the QSP is a corporate trustee which has
a board comprising five company-appointed directors and five member-elected directors.
The QSP’s defined benefit plan exposes the Group to a number of risks, the most significant of which are detailed below:
–Investment risk: historically the investment strategy of the QSP’s defined benefit plan was to invest in a significant proportion of
growth assets to match the growth in the plan liabilities. If the plan assets underperform by more than expected, the Group may be
required to provide additional funding to the plan. In April 2013, Qantas and the Trustee of the QSP adopted a plan to progressively
de-risk the defined benefit investment portfolio as the plan’s funding position improves over time.
–Interest rate risk: changes in bond yields, such as a decrease in corporate bond yields, will increase defined benefit liabilities
through the discount rate assumed.
–Inflation risk: the defined benefit liabilities are linked to salary inflation, and higher inflation will lead to higher liabilities.
(A) FUNDING
Employer contributions to the defined benefit plans are based on recommendations by the plans’ actuaries. It is estimated that
$96million of normal employer contributions will be paid by the Qantas Group to its defined benefit plans in 2015/2016.
In May 2013, a revised additional funding plan (effective from 1 July 2013), which addresses the requirements of APRA Prudential
Standards, was agreed with the Trustee of the QSP. The determination of Qantas’ additional employer contributions under the
funding plan is triggered where the Defined Benefit Vested Benefits Index (DB VBI) is below 100 per cent. The DB VBI is the ratio of
the QSP’s assets attributable to the defined benefit liabilities to the total defined benefit amount that the QSP would be required to
pay if all members were to voluntarily leave the plan on the funding valuation date. The additional funding plan also triggers further
contributions being made where the amount of any retrenchment benefit paid from the plan is in excess of the funded benefit at the
time of payment. Qantas contributed an additional $14 million to the QSP during the year ended 30 June 2015 (2014: $8 million).
The QSP’s financial position is monitored by the Trustee each quarter. The actuary recommends the amounts of additional
contributions to be made each quarter, as required under the agreed additional funding plan.
(B) MOVEMENT IN NET DEFINED BENEFIT (ASSET)/LIABILITY
Qantas Group
Present Value
of Obligation
$M
Fair Value of
Plan Assets
$M
Net Defined Benefit
(Asset)/ Liability
$M
2015 2014 2015 2014 2015 2014
Balance as at 1 July 2,172 2,223 (2,405) (2,339) (233) (116)
Included in the Consolidated Income Statement
Current service cost 135 140 – – 135 140
Past service cost1536 – – 5 36
Interest expense/(income) 97 117 (104) (118) (7) (1)
Contributions by plan participants – – (23) (23) (23) (23)
Total amount included in manpower and staff related
expenditure 237 293 (127) (141) 110 152
Included in the Consolidated Statement of Comprehensive
Income
Remeasurements:
–Return on plan assets, excluding interest income – – (94) (101) (94) (101)
–Loss/(gain) from change in demographic assumptions 2(34) – – 2 (34)
–Loss from change in financial assumptions 81 51 – – 81 51
–Experience gains (43) (76) – – (43) (76)
–Exchange differences on foreign plans 19 7(20) (6) (1) 1
Total amount recognised in other comprehensive income 59 (52) (114) (107) (55) (159)
Contributions by employer – – (107) (110) (107) (110)
Benefit payments (344) (292) 344 292 – –
Balance as at 30 June 2,124 2,172 (2,409) (2,405) (285) (233)
1 Past service cost of $5 million (2014: $36 million) for defined benefit curtailment expenses relates to a significant reduction in employees covered by the QSP’s defined benefit plan as a
result of transformation initiatives.