Document ID: chunk:federal_register_of_legislation:F2024L00075:reg:38:p16
Version: federal_register_of_legislation:F2024L00075
Segment Type: reg
Provision Reference: reg 38 (pt 16/76)
Character Range: 72985–76551

the defined benefit member liabilities in each of its four defined benefit plans.  The Plan uses sensitivity analysis to monitor the potential impact of changes to key variables about which assumptions need to be made.  The Plan has identified two assumptions (discount rate and rate of salary adjustment) for which changes are reasonably possible that would have a material impact on the amount of the liabilities.

The assumed discount rate for the four plans has been determined by reference to the investment returns expected on the investment portfolio that reflects the opportunities reasonably available to the Plan in investment markets, which also reflects the Plan's actual investments and investment strategy in respect of defined benefit member liabilities.  The assumed discount rate is the same for each of the four defined benefit plans.

Defined member benefits in each of the Plan's four plans are based on an average of each member's salary at specified anniversary dates in each of the last three years of their expected membership of their plan.  The assumed annual salary adjustments for each of the entity's four plans has been determined by reference to the Wage Price Index produced by the Australian Bureau of Statistics and in consultation with the employer-sponsors.  The rate is the same for each of the ABC, OPQ and RST defined benefit plans.  XYZ members are in an industry that is expected to experience generally higher than average salary adjustments.

The other variables about which assumptions have been made in measuring defined benefit member liabilities and for which changes are not considered reasonably possible, or for which reasonably possible changes would not be expected to have a material effect, include pension index rates, mortality rates and resignations.

The following are sensitivity calculations on a univariate basis for the discount rate and rate of salary adjustment assumptions for the XYZ defined benefit plan and for the ABC, OPQ and RST defined benefit plans in aggregate.

                         Assumed at reporting date  Reasonably possible change  Amount of (increase) decrease in member benefit liability – $000
Assumption for XYZ plan
Discount rate            5.0%                       +0.5%                       2,280
                                                    –0.5%                       (2,549)
Salary adjustment rate   4.0%                       +1.0%                       (3,001)
                                                    –1.0%                       3,350

Assumption for ABC, OPQ and RST plans  Assumed at reporting date  Reasonably possible change  Amount of (increase) decrease in member benefit liability – $000
Discount rate                          5.0%                       +0.5%                       4,378
                                                                  –0.5%                       (4,809)
Salary adjustment rate                 3.0%                       +1.0%                       (5,762)
                                                                  –1.0%                       6,143

     Note C – Operational risk reserve

The Trustee has assessed an operational risk reserve of approximately 0.25% of funds under management as appropriate for the Plan in respect of both defined contribution member interests and defined benefit member interests.

 Operational risk reserve         $000

 Defined contribution membership  5,657
 Defined benefit membership       20,238
                                  25,895

     Note D