Telstra 2010 Annual Report Download - page 175

Telstra Corporation Limited and controlled entities
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Notes to the Financial Statements (continued)
(f) Principal actuarial assumptions (continued)
For Telstra Super we have used the 10-year Australian government
bond rate as it has the closest term from the Australian bond
market to match the term of the defined benefit obligations. We
have not made any adjustment to reflect the difference between
the term of the bonds and the estimated term of liabilities due to
the observation that the current government bond yield curve is
reasonably flat, implying that the yields from government bonds
with a term less than 10 years are expected to be very similar to
the extrapolated bond yields with a term of 12 to 13 years.
For the HK CSL Retirement Scheme we have extrapolated the 7
year and 10 year yields of the Hong Kong Exchange Fund Notes to
16 years to match the term of the defined benefit obligations.
(iii) Our assumption for the salary inflation rate for Telstra Super is
4% which is reflective of our long term expectation for salary
increases. The salary inflation rate for HK CSL Retirement Scheme
is 2.5% in fiscal 2011, 2.75% in fiscal 2012 and 3.25% in fiscal
2013 and 4.0% thereafter which reflects the long term
expectations for salary increases.
(g) Employer contributions
Telstra Super
The funding deed we have with Telstra Super requires contributions
to be made when the average vested benefits index (VBI) in
respect of the defined benefit membership (the ratio of defined
benefit plan assets to defined benefit members’ vested benefits) of
a calendar quarter falls to 103% or below. For the quarter ended
30 June 2010, the VBI was 86% (30 June 2009: 82%). In
accordance with the funding deed we have paid contributions
totalling $460 million for the year ended 30 June 2010 (30 June
2009: $260 million). This includes employer contributions to the
accumulation divisions and employee pre and post-tax salary
sacrifice contributions, which are excluded from the employer
contributions in the reconciliations above. The current contribution
rate for the defined benefit divisions of Telstra Super, effective June
2010, is 27% (June 2009: 27%).
The vested benefits, which forms the basis for determining our
contribution levels under the funding deed, represents the total
amount that Telstra Super would be required to pay if all defined
benefit members were to voluntarily leave the fund on the
valuation date. The VBI assesses the short term financial position
of the plan. On the other hand the liability recognised in the
statement of financial position is based on the projected benefit
obligation (PBO), which represents the present value of employees’
benefits assuming that employees will continue to work and be part
of the fund until their exit. The PBO takes into account future
increases in an employee’s salary and provides a longer term
financial position of the plan.
We will continue to monitor the performance of Telstra Super and
reassess our employer contributions in light of actuarial
recommendations. We expect to contribute approximately $460
million in fiscal 2011.
HK CSL Retirement Scheme
The contributions payable to the defined benefit divisions are
determined by the actuary using the attained age normal funding
actuarial valuation method.
Employer contributions made to the HK CSL Retirement Scheme for
the financial year ended 30 June 2010 was $2 million (2009: $2
million). We expect to contribute $2 million to our HK CSL
Retirement Scheme in fiscal 2011.
Annual actuarial investigations are currently undertaken for this
scheme by Mercer Hong Kong Limited.
24. Post employment benefits (continued)