State Treasurer Troy Buswell has cited potential costs of up to $467 million as a key reason for killing off the privatisation of government employees' superannuation administrator GESB, ending two years of speculation about its future.
State Treasurer Troy Buswell has cited potential costs of up to $467 million as a key reason for killing off the privatisation of government employees' superannuation administrator GESB, ending two years of speculation about its future.
Mr Buswell has acted on the recommendation of an internal review and, for the first time, revealed the huge potential price tag for the proposed venture - a figure above any previous estimates.
The cost to government was one of the key obstacles to the mutualisation, which was halted at the 11th hour after concerns were raised by state Treasury. Another key issue was the tax implications for a large part of the membership.
Today Mr Buswell was unable to give a precise figure on what the mutualisation process cost to date, suggesting that it was in the tens of millions of dollars.
Much of this expenditure has been in advertising and marketing the GESB brand, establishing a financial advisory arm and in corporate structuring in preparation to join the private sector.
Mr Buswell said that stopping the mutualisation was the best outcome not just in terms of savings for the state but also protecting to interests of the members.
"We will make other changes internally to GESB so that it moves forward as a low-cost superannuation provider to the public sector of Western Australian," he said.
The Treasurer made note of the bipartisan support for the mutualisation under the previous government and acknowledged his predecessor Eric Ripper's move to stop the process in 2008 when the issue of cost and tax could not be resolved.
Mr Buswell said that while he had his differences with the board over the pay packet of GESB CEO Michele Dolin, she had done a good job and acted in accordance with the policy of government.
He said he would look to make the remuneration of GESB's CEO a responsibility of the Salaries and Allowances Tribunal, rather than the entity's board.
Troy Buswell's announcement and a statement from GESB are below:
The State Government has accepted the recommendations of a recent review into public sector superannuation to not proceed with the mutualisation of GESB, Treasurer Troy Buswell announced today.
The Government will instead deliver choice of superannuation funds to State public servants by retaining GESB within government and allowing public servants to opt out of GESB as they wish.
Choice for public servants is expected to be available within 12 to 18 months following the passage of relevant legislation through State Parliament.
"This decision to reverse the mutualisation of GESB will protect in full the retirement savings of existing and retired public servants," Mr Buswell said.
"Members who choose to remain with GESB will benefit from an efficient and focused low cost superannuation fund, without the financial risk that mutualisation would have presented.
"Members will be free to make their own judgement as to whether another superannuation fund is more appropriate to their needs.
"Giving members this choice of fund was the primary reason for bipartisan support for GESB reform in State Parliament in 2007.
"Most workers in Australia can choose their fund and West Australian public servants should have the same choice.
"Mutualisation itself was one of the many ways in which choice could have been delivered. However, the Whithear review has reported that:
'The mutualisation of GESB would not deliver an identifiable or tangible benefit to members.'
"The review reveals that if GESB had mutualised, GESB members would have been exposed to higher fees and a risk of greater tax liabilities, while mutualisation would have cost taxpayers up to $467 million.
"The Whithear Review validates the concerns of the then treasurer, Eric Ripper, who deferred mutualisation in June 2008 when it became clear that there were unresolved issues of concern.
"At various times between 2005 and 2009, GESB has argued that to be viable after mutualisation, it required reserves of up to $515 million to be gifted to it as seed capital.
This raised the question why taxpayers should be asked to fund the privatisation of a State asset.
"Whithear also reported that despite four years of negotiation between the State and the Commonwealth, thousands of West State members would have been at risk of paying Commonwealth superannuation taxes earlier as a result of a mutualised GESB losing its special protection under the Commonwealth Constitution."
The State Government has also decided to bring senior executive remuneration at GESB back within the jurisdiction of a Salaries and Allowances Tribunal.
The review has made a number of other recommendations relating to the internal operations of GESB.
The Government will now be working with GESB to continue its focus on the delivery of low cost, quality superannuation management services to public sector employees.
It is not intended that the Whithear Review will be released publicly at this stage as it contains significant commercial-in-confidence data. However, a copy of the review has been provided in confidence to the Leader of the Opposition.
GESB's statement is below:
The State Government today announced a revised policy approach by the Government to the reform of Public Sector superannuation in WA.
The key policy change is the proposed introduction of Choice of Fund for the WA public sector without the mutualisation of GESB.
In its announcement, the Government has indicated that there remained concerns about the impact of mutualisation in terms of issues such as taxation and reserves.
GESB supports Choice of Fund for public sector employees and will continue to work with the Government to introduce Choice.
GESB Chairman Phil Harvey said that GESB would work within the policy positions of the Government of the day, as it has always done, to provide the best possible outcomes for members.
"GESB's unswerving focus remains on serving the best interests of its members, as it
has been throughout the reform process," said Mr Harvey.
"Superannuation is a complex area and there are many competing imperatives. In the
coming months, GESB will be working with the Government to manage these issues and
to implement its policy decisions.
"We will continue to focus on what is best for members, and to protect and enhance their
financial interests through delivery of professional and efficient services."
