A volatile global economy and longer-lived public servants means the ACT is on track to fall short of plugging an $8 billion hole in its superannuation liability by a 2030 deadline, amid renewed pressure to divest from holdings in unethical companies.
However, the unfunded portion of the superannuation liability in the current financial year is expected to fall to $4 billion in 2021-22, and will be fully funded by 2033.
The total liability for defined-benefit superannuation schemes, which the ACT took on with self government, is currently worth more than $13 billion, and will cost the budget bottom line into the 2080s.
Patrick McAuliffe, chief finance officer of the superannuation provision investment, told a budget estimates hearing last month the ACT government was on track to fully fund the liability, but the targets were "a bit short of the 2030 mark at the moment".
"I think that by 2033 we are at about 102 per cent funded. Give or take a little bit of a range, the funding plan is still on track. We will obviously have to keep monitoring that from year to year," Mr McAuliffe said.
The budget papers said the superannuation provision account investment's average return was 5.6 per cent a year over the last 25 financial years from 1996-97, which is above its investment return objective.
More than 60 per cent of the liability would be funded by the end of the forward estimates, despite an increase in the total liability from $10.1 billion in 2021-22 to $10.7 billion in 2024-25, budget papers showed.
Mr McAuliffe said the demographics of public servants within defined-benefit public service superannuation schemes and the government's investment return would affect the liability, which had been revised up in a three-year review.
"We have a much greater take-up of pensions, which means that we have to pay a liability for a longer time. We also have mortality rates; people are living longer. All of those factors will influence the liability," he said.
Budget papers show there are 6275 current ACT government employees actively contributing to now closed Commonwealth defined benefit superannuation schemes. There are more than 35,000 members in the ACT schemes.
A tripartisan Legislative Assembly committee said the ACT government should divest from gambling, weapons, fossil fuel and nuclear weapon industries shares in the superannuation provision account.
"The committee is of the view that ACT government's investor proxy framework should adhere to the same ethical standard expected by the community, and the government should therefore adopt the most ethical investment settings practicable in its policy," the committee's report into the ACT budget said.
Mr McAuliffe told a budget estimates hearing in October the government was moving to hold no fossil fuel reserves at all in its superannuation provision account.
"It is around 1 per cent of our total portfolio. There is not a lot there," Mr McAuliffe said.
Mr McAuliffe said investment screens had already excluded manufacturers of cluster munitions and landmine manufacturers, but the criteria had been expanded to cover other controversial weapons.
However, Treasurer Andrew Barr said investment exclusions could be a tricky area "because the predominance of the work of some companies, for example, is in the space industry and that is associated with launching satellites and precision platforms and systems".
"In theory, that could be utilised for targeting other things. We have to always be a little cautious around how and where we draw the line here," Mr Barr said.
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Gaming Minister Shane Rattenbury also committed during estimates to raise the issue of government-held shares in gambling companies with Mr Barr.
Mr Rattenbury said the shareholdings - which included shares in the owners of Caesars Palace, a prominent hotel and casino on the Las Vegas strip, along with a poker-machine manufacturer and online gambling developers - had escaped his attention.
"I don't think that is a place that we should be seeking to benefit from, from an investment portfolio point of view," Mr Rattenbury said.
The Chief Minister, Treasury and Economic Development directorate annual report from 2019-20 said the superannuation provision account included investments in "cash, money market securities, domestic and international bonds, domestic and international listed equities, private equity, property and infrastructure".
Mr McAuliffe told budget estimates the territory used MSCI, a New York City based finance company, to monitor the social responsibility of shares the territory holds.
"We are always looking at our frameworks and their underlying criteria. We will brief the Chief Minister on that all the time - what the criteria are and how companies are going. We do not go out and look for a particular company if it makes the news. We are hopeful, with our process, that it is being done for us in the back end," he said.
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