Commonwealth Bank funds Councils' Vision Super shortfall

The Commonwealth Bank has won a tender to provide debt financing for 42 Victorian councils caught up in funding shortfalls in Vision Super's defined benefit (DB) scheme.

It is the latest development for the Municipal Association of Victoria's (MAV's) defined benefit taskforce, set up following the record $453 million shortfall in Vision's DB scheme last year, with $396.9 million payable by the councils.

Ernst and Young, who were commissioned to examine funding options available, concluded bond issue or a collaborative bank procurement structure would be beneficial to councils in paying the shortfall.

The initial process, which aims to reduce the council's borrowing costs by consolidating debt procurement and access to scale benefits, is an interim measure in lieu of a permanent funding structure in 2014, potentially through bond issue, MAV said.

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The MAV defined benefit taskforce was set up last year following an actuarial review which determined the record funding gap. It aims to return the DB scheme to an exempt public sector superannuation scheme, reduce repayment costs through access to borrowing through the Treasury Corporation of Victoria, or exempt payments made by councils from the Commonwealth Government contributions tax and State WorkCover premiums.