As part of the federal budget, Peter Costello provided an update on the “Future Fund”
by Ivan Fletcher, 10/05/2007

What is the ‘Future Fund’?

The Future Fund was established in 2005/06 to manage unfunded Government superannuation Liabilities for public servants, with many on ‘Defined Benefits’ Plans. 

In private industry ‘accumulation accounts’, superannuation money is collected via contributions and attributed to personal super accounts invested on your behalf, growing with your name attached to it. 

In comparison, the employee super entitlements in public service are driven by a formula, based on years of service, average salary through employment and at retirement a defined payout amount is derived. However, there is no corresponding super account to fund the payments.

The ‘Future Fund’ was created to fund these previously unfunded superannuation liabilities. The fund is essentially one big managed investment account, which generates and reinvests its earnings. It is estimated to grow to around $148 billion by 2019/20 and is projected to increase out to at least 2046/47. The Fund aims to meet its target by 2020, when payments can generally begin to be made.
 
How is it Funded?

The Fund has now received over $49 billion in contributions comprising $18 billion in seed capital, $13.6 billion from the 2005/06 Budget surplus, and $17.6 billion from the Telstra sale proceeds, bringing the expected balance with earnings at June 2007 to around $52 billion.

The Government will consider a transfer to the Fund from the 2006/07 Budget surplus once it is realised. The Government also expects to make a further contribution to the Fund from the third installment of Telstra sale proceeds.