03/07/2008 - 15:44

Treasurer mute on GESB concerns

03/07/2008 - 15:44

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Two days after stopping the pseudo privatisation of the state's $9 billion superannuation fund, treasurer Eric Ripper and his government have yet to reveal significant detail on why they acted at the last minute.

Treasurer mute on GESB concerns

Two days after stopping the pseudo privatisation of the state's $9 billion superannuation fund, treasurer Eric Ripper and his government have yet to reveal significant detail on why they acted at the last minute.

On advice from the state's Treasury, Mr Ripper on Monday halted the mutualisation of funds managed by GESB, the overseer of superannuation for almost 300,000 Western Australians with around $9 billion under management.

Among his concerns regarding the restructure is the control of surplus funds thought to amount to hundreds of millions of dollars, possibly as much as $345 million.

Following almost a year of preparation, the treasurer's June 30 decision was made the day before the former Government Employees Superannuation Board was to be restructured giving public sector employees fully fledged membership of the funds to which they have contributed.

The scale of this undertaking - in many ways like a privatisation without a cash payment to the government - was quite daunting, yet GESB has stated that the decision to stop the process was not related to any lack of preparation on its part.

The change not only stopped the transfer of GESB to member ownership and Commonwealth regulation, it also halted major service changes at the fund manager which have been promoted heavily in recent months, including via media advertising.

GESB is understood to have spent around $573,000 in the 11 months to May, split across radio, press and magazines. In 2006-07 it spent $557,011 with media buying agency Media Decisions.

Under the restructure plan, members of funds managed by GESB would have had more choice, such as allowing them to choose their own administrator, like private sector employees. In addition, GESB was to be able to take in new business from non-public-sector employees.

The official line from GESB is that the mutualisation has been delayed for at least four months due to unresolved legal and financial matters.

However, the treasurer's office has revealed it had a number of issues with the plan.

A spokesman for the treasurer has confirmed that one of those concerns was about how surplus funds from one fund - the Gold State Super defined benefit scheme - may be transferred across to the restructured GESB entity.

Gold State Super, which has some 21,000 members and $1.8 billion in net assets, will not be mutualised as part of the restructure and will remain the sole responsibility of the government.

The main government sector union, the Community & Public Sector Union / Civil Service Association of WA, has also been concerned about the transition of surpluses - namely about $345 million - across to the new GESB structure.

Below is the set of questions (with responses) I asked the treasurer's office on Tuesday when news of the decision to stop the mutualisation process was revealed. I was asked to submit questions by email (an increasingly common and objectionable practice). What I got (regrettably) was answers by email.

 

Mark Pownall: I'd like to better understand what financial and legal matters have stopped the transition of GESB to a mutual structure.

Treasurer's office: First and foremost we will move prudently and never put members funds at risk.

 

MP: Was the government and/or all government agencies other than GESB ready for the transition?

Treasurer's office: No. GESB and the Department of Treasury and Finance have worked very hard at making the transition happen. Unfortunately, a number of financial and structural issues were unable to be resolved to the necessary extent to ensure the transition was in the interest of all members and the public interest more broadly.

 

MP: Was there any concern from the govt or treasury about the transition?

Treasurer's office: Yes

 

MP: Is this delay linked to a looming election?

Treasurer's office: It is in no way impacted by the electoral cycle but is based on independent advice to the Government.

 

MP: Has the govt or treasury had any representations from members, or their representatives (namely the unions) opposing the mutualisation or concerned about any aspects of it.

Treasurer's office: We have received correspondence from the CPSU.

 

MP: I wrote in March that there were concerns about surpluses of the Gold State Super fund being transferred over to the mutualised group (when Gold State was not going to be) ... has this been raised as a specific objection in terms of the amount of money involved?

Treasurer's office: That was one of a number of issues that were unable to be satisfactorily resolved.

 

MP: Did Treasury or the govt make a decision to stop the transition on June 30 (or even this morning)?

Treasurer's office: The Under Treasurer advised the Treasurer on 30 June 2008 not to execute the legal documentation to effect the transition. The Treasurer accepted that advice.

 

The responses above were received at the last minute with a looming deadline on Tuesday. Numerous calls and emails have since remained unanswered, including the email below which was swiftly dispatched on Tuesday, July 1 just after receiving the responses published above.

Mark Pownall: "I'm now past deadline but for first thing tomorrow I'll ask the obvious - what other concerns were there?

Also, I have the size of the surplus where (part of) the concerns lie at $345m. Does that equate with the Treasurer's advice? If not what quantum are we talking about?

And ... what happens now?"

There has been no response to this via email or telephone that I am aware of.

Imagine if the privatisation of Alinta or the disaggregation of Western Power stopped on the eve of these momentous events?

Here we have the proposed emergence of a major new competitor in the national superannuation sector, overseeing the savings of a huge proportion of the WA population, and there is barely a whisper on what stopped that in its tracks at the last minute.

No-one is suggesting it was not a prudent decision to put the brakes on the mutualisation, but many people would like to know why.

STANDING BY BUSINESS. TRUSTED BY BUSINESS.

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