Actuarial gains and losses might sound like something only actuaries and accountants should worry about, but these figures influence everything from your superannuation balance to the financial health of major Australian companies. With new accounting standards and regulatory tweaks on the horizon for 2025, understanding how actuarial gains or losses work—and why they matter—has never been more relevant.
What Are Actuarial Gains and Losses?
At its core, an actuarial gain or loss is the difference between what actuaries predict will happen (using models and assumptions) and what actually occurs. These differences often emerge in defined benefit super funds, pension plans, and large corporate liabilities. For example, if a super fund’s investments outperform expectations, that’s an actuarial gain; if retirees live longer than expected, the fund might face an actuarial loss due to higher-than-anticipated payouts.
Actuarial gains and losses typically arise from two main sources:
- Experience adjustments: When real-life outcomes differ from previous assumptions (e.g., investment returns, salary growth, or mortality rates).
- Changes in actuarial assumptions: When actuaries update their models based on new data or trends, like adjusting longevity forecasts due to medical advancements.
2025 Policy Changes: What’s New?
This year brings several updates impacting how actuarial gains and losses are reported and managed in Australia. The Australian Accounting Standards Board (AASB) has updated guidance to align with international norms under AASB 119 (Employee Benefits). Key shifts include:
- Immediate recognition: All actuarial gains and losses for defined benefit plans must be recognised in ‘Other Comprehensive Income’ rather than smoothed over several years.
- Transparency requirements: Super funds and listed companies must now provide more granular disclosures about the sources and impact of actuarial gains/losses in their annual reports.
- Impact on super balances: With the 2025 Superannuation Guarantee increase to 12%, more Australians are accumulating benefits in defined contribution and legacy defined benefit funds, making accurate reporting of actuarial gains and losses even more crucial.
For example, if a major corporate super fund finds its investment returns lagging behind assumptions due to global volatility, it must immediately record that shortfall as an actuarial loss, directly affecting reported equity and, potentially, employer contribution strategies.
Why Should Everyday Australians Care?
While actuarial gains and losses might seem distant from daily life, they can have real-world consequences for individuals and businesses alike:
- Superannuation outcomes: If your fund experiences recurring actuarial losses, it could impact the security or indexation of your retirement benefits, especially in older defined benefit schemes.
- Business performance: For companies with significant employee benefit obligations, large actuarial losses can reduce shareholder equity, impact dividend decisions, or even alter borrowing terms with lenders.
- Government and public sector: State and federal budgets are affected by actuarial adjustments to public service pensions and long-term liabilities. Recent 2025 budget papers highlight actuarial losses in public sector super as a factor in forward estimates.
Consider the case of a major university in Victoria, which saw an actuarial loss in 2024 due to lower-than-expected investment returns and updated longevity assumptions. This loss required immediate balance sheet recognition, prompting a review of contribution rates and funding strategies for staff pensions.
Managing Actuarial Volatility in 2025 and Beyond
With financial markets experiencing ongoing volatility and demographic shifts (such as increased life expectancy), actuarial gains and losses are likely to remain a moving target. Here’s how funds and employers are adapting:
- Enhanced stress testing: Super funds now conduct more frequent scenario analysis to anticipate potential swings in actuarial outcomes.
- Member communications: Funds are stepping up efforts to explain actuarial adjustments in plain language, helping members understand how these figures affect their benefits.
- Strategic asset allocation: To mitigate future actuarial losses, many funds are diversifying investments and updating assumptions more regularly to reflect current market realities.
For individuals, staying informed about your fund’s actuarial health—by reviewing annual statements and fund updates—can help you plan for retirement with greater confidence.
The Bottom Line
Actuarial gains and losses are more than technical figures—they’re a window into the health of super funds, pensions, and corporate obligations. With 2025’s policy changes demanding greater transparency and immediate recognition, Australians have more reason than ever to pay attention. Whether you’re planning your retirement, managing a business, or simply curious about the numbers behind your super statement, understanding actuarial gains and losses can help you make smarter financial decisions in a changing landscape.
