GESB surpluses mount

As much as $440 million in surpluses generated by member contributions to the Gold State Super pension fund could have been moved out of government reach under a $9 billion mutualisation plan halted by treasurer Eric Ripper last week.

The surprise decision to stop the transfer ownership of GESB - the former Government Employees Superannuation Board - to its 300,000 members on the eve of its long-planned transition was partly driven by state concerns about how surpluses generated by the funds would be used.

Under the transition plan, the massive Gold State Super fund with its 21,000 members would remain the responsibility of the government while most of the rest of the funds move across to a new structure owned by the membership, much like a private sector credit union or health fund.

Gold State Super is a defined benefit scheme under which the government promises members a given payout upon retirement. Members can contribute to boost that payout, but the payment is defined and not reliant on asset growth driven by markets as accumulation funds are.

If, as now, all these funds are government owned and controlled, that makes surpluses generated by member contributions to Gold State Super a moot point.

But with the structure about to split, leaving Gold State Super's liability entirely with government while the rest of the funds move into member ownership to create the 13th biggest fund manager in the country, questions have arisen about where hundreds of millions of Gold State Super surpluses have gone and what they are to be used for.

With the questions unanswered by government, WA Business News has sought to estimate the size of the surpluses by interrogating GESB's 2007 annual report and asking sources with an interest in the issue.

One way of estimating the size of the surplus is to take the $2.89 billion investment portfolio linked to the defined benefit scheme, $126 million in assets and reserves of the much smaller defined benefit Pension Scheme, as well as the Gold State Super liabilities ($1.8 billion) and reserves ($526 million) to arrive at $440 million for the year ending June 30.

Another way to look at it is to take total reserves of more than $1.02 billion and scheme reserves of $791.6 million to find a $229 million net surplus.

In addition, as part of the $791.6 million in scheme reserves, three general reserves totaling $127 million exist without any guidance as to where those funds came from.

The Community & Public Sector Union/Civil Service Association of WA has highlighted to the treasurer the $127 million in reserves listed above and $218 million (derived from a Mercer actuarial report) in unallocated surpluses from Gold State Super, which combine to $345 million, as its key concerns