Fund Actuary

It is a statutory requirement that an actuarial review of a Defined Benefit superannuation fund must be undertaken at least every three years.

The Fund Actuary must report on the financial condition of the fund with respect to the assets held by the fund and the liability to pay benefits at the time of the actuarial review.

In a Defined Benefit fund the employer may be required to made a contribution to the fund, however if the fund has a significant surplus, the employer may enjoy an extended “contribution holiday”.

The Annual Reports to Members for the year ending 30 June 1987, 1988, 1989 and 1990 stated that the Fund Actuary at the time was Richard Mitchell F.I.A.A. of Mercer Campbell Cook & Knight, with an actuarial review being conducted in 1988.

The 1991 Annual Report confirmed that Mr Mitchell had established his of firm – R.S. Mitchell & Co Pty Ltd. The company was registered on 16 July 1990 with ACN 007 446 255. This company was deregistered on 18 January 2012.

The 2005 Annual Report confirmed that Mitchell & Co Pty Ltd was still the Fund Actuary in 2005.

The actuarial review for 30 June 2008 was conducted by Mr Nick Callil F.I.A.A. of Towers Watson Australia Pty Ltd and is dated 20 March 2009.

The last actuarial review conducted for 30 June 2011 was conducted by Mr Nick Callil F.I.A.A. of Towers Watson Australia Pty Ltd and is dated 10 April 2012.

A copy of this Actuarial Report can be downloaded here:

Actuarial report

The 2011 Actuarial Report

In this report the following is stated:

The Fund’s Sponsor (Foster’s) demerged on 9 May 2011 into two separate entities: Foster’s Group Limited (GGL) and Treasury Wine Estates Australia Limited (TWE). Consequently the Fund is comprised of two sections – one in respect of members who are employed by FGL and the other in respect of members who are employed by TWE.

However this statement is not correct. The employee’s superannuation fund is not a subsidiary company of the sponsoring Employer. The demerger of TWE simply made TWE a participating employer of the scheme and there was no actual “splitting” of the Defined Benefit fund as such.

Members of an accumulation fund have their own investment account in their own name so these investment accounts can be classified into two categories depending on the employer.The report notes that “the Fund is governed by a Trust Deed dated 23 December 1913 as amended from time to time.”

The report confirms that there were 231 members of the Division 2 Defined Benefit Fund on 30 June 2008 and that the number had fallen to 148 by 30 June 2011. The average age of the Defined Benefit Members had increased from 50.2 years to 52.8 years over this period with average years of service increasing from 17.3 years to 23.5 years.

Average salary for these members was recorded as increasing from $98,000 per annum to $100,000 over this period. However the “salary” referred to in the Actuarial Report is “cash salary” which is used as the basis for benefit payments. Actual salary includes member contributions to superannuation and a component of salary paid on an annual basis. The genuine Deeds of the trust make no mention of “cash salary” of allow the Trustee to make any deductions from total salary which is the quid pro quo for services rendered.

Average Weekly Earnings on 1 July 2011 was $1019.30 per week, therefore average “cash salary” recorded in the Actuarial Report is approximately double Average Weekly Earning as recorded by the Australian Bureau of Statistics.

Actual salary in more likely to be in the range of $125,000 to $140,000

Therefore the typical pension benefit at 30 June 2011 for Defined Benefit members was at least $44,500 per annum {based on the lower amount of “cash salary”}.

The capital value of this benefit for an employee retrenched at the age of 52.8 would be approximately $1.6 million for a married male employee and $1.4 million for a single or divorced male employee. This is based on a quote from The Challenger Life Company dated 26 February 2013

Assuming 60% married and 40% single or divorce and with 148 Members as of 30 June 2011, the vested pension benefits for Defined Benefit Fund members would be approximately $231 million {with a figure of around $300 million being more realistic if actual salary is used}.

However the assets in the common asset pool of the Defined Benefit Fund amount to only $53 million as of 30 June 2011, which represents only 23% of the amount required to fund the genuine life pension benefit {Assets for the Defined Benefit common asset pool were $52,992,000 as of 30 June 2011}.

Nick Callil has determined a vested benefit liability of only $53.6 million based on the fraudulent “Jarrett Deed” and its purported lump sum benefit formula, which was slightly amended in 1993.This is an average of $362,000 per member still in the service.

The use of the “Jarrett Deed” is confirmed in Appendix A where the following lump sum benefit assumption is used:

A member’s benefit multiple is 17.75% for each year of membership, with a maximum benefit multiple of 7. The Employer contributes on the advice of the Actuary, at a rate sufficient to meet the cost of all benefits and expenses.

The “Jarrett Deed” did not repeal (or attempt to repeal) the pension entitlements of Regulation 29 and Regulation 30A. The “Jarrett Deed” however purportedly introduced a lump sum benefit based on 15% for each year of membership and this was later increased to 17.75% for membership after 1 July 1993.

Jonathon Evans at the Professional Indemnity Forum Conference, Cambridge, July 2009, in his paper “Actuaries’ Liabilities” on page 3 stated:

“Actuaries, in my experience, are often insufficiently alive to the possibility that there are prior legal issues which need to be addressed before they begin crunching numbers and calculating the effect on benefits.”

This matter is a case in point.

The genuine benefit is a life pension based on the following formula:

[Years of Service]/[Age when Leaving Service] times [Final Average Salary]

where [Final Average Salary] is the average of the last three years of service.

The following letters were sent to the Actuaries Institute as well as to Mr Nick Callil so that we would have to opportunity to amended his two actuarial reports.

Foreshadowing Letter 28 July 2014

Foreshadowing Letter 29 July 2014

Mr Callil has not taken advantage of the opportunity to amend his Actuarial Reports even thought he has been provided with knowledge of the fraudulent Breach of Trust that occurred in the occupational pension trust that he provided two actuarial reports for.

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This tab updated on 8 June 2015