Secret Government plans for the merger of the Local Government Superannuation Scheme (LGSS) and the Energy Industries Superannuation Scheme (EISS) have been brought to a halt following action by the USU. "The State Government must not play games with $7.5 billion dollars of life savings owned by tens of thousands of ordinary workers in the NSW local government and energy industries," says USU General Secretary Ben Kruse. "While superannuation reform is necessary, it must occur in a way which is transparent and adopts best practice governance structures to reduce costs and obtain the best possible result for members." Secret Plans Uncovered Plans for the proposed merger came to the attention of the Union late last week when it was discovered that NSW Treasury officials had been in negotiations with Richard Powis, CEO of the superannuation administration company, FuturePlus since June 2009. Arrangements for the merger had apparently reached such an advanced stage that the Government was on the verge of proclaiming gazettal of the merged entity. This was despite the total absence of consultation between the Government and USU superannuation board members and there being no consultation with USU officials. At the time of writing this update the Union has still not been granted access to the constitution of the proposed new entity and remains unable to properly assess the merits of the Government proposal.
USU Executive Action On discovering the plan the USU demanded the attendance of State Treasury Officials at the Union Executive meeting on Friday 11 December. At this meeting Treasury officials confirmed they had "assumed" that industry Unions and superannuation companies had agreed to the merger proposal on the basis of representations made to them by the Chairs of the Boards. The USU has now made it clear there is no agreement concerning the merger of LGSS and EISS and that any discussions concerning proposals for superannuation reform must occur in a way which is open and transparent. In response to USU demands the State Treasury has now confirmed that the merger is off the agenda pending a full consultation process.
The USU Executive has called for the resignation of FuturePlus CEO, Richard Powis.
Mr Powis presently operates as CEO of three companies, FuturePlus, EISS and Chiefly Financial Services.
His role is impossibly conflicted, a situation that can no longer be tolerated.
USU KPMG Superannuation Review The USU has promoted the reform of local government and energy superannuation arrangements for some time. As the result of the global financial crisis superannuation issues have come under increased scrutiny and in October 2009 the Union commissioned a review to initiate reforms promoting best practice superannuation arrangements in the local government and energy industries. Of particular concern are the corporate structure of the FuturePlus group of companies, conflicts of interest at the Board level, together with efficiency and cost issues associated with the present servicing and administration arrangements. The USU engaged specialist superannuation consultants, KPMG, to conduct the review.
Recommendations The KPMG report, Strategic Review of EISS and LGSS Incorporating their Ownership Interests in FuturePlus, Chifley Financial Services and LGFS, is now available and makes a range of recommendations assisting the Union in negotiating with industry and government stakeholders to ensure the best outcome for members. In summary the report identifies the following key recommendations:
The separation of conflicts of interest with respect to the CEO of FuturePlus and EISS
The appointment of independent board members, including independent chairpersons
The removal of distractions from the core business of LGSS and EISS (including consideration of the future role of Chifley and LGFS)
Clarification of FuturePlus' governance structure
Review of administration agreements
Review of remuneration structures reducing degree of duplication of costs
Consideration of consolidation of the schemes, ie. proposed merger
Retired members meet with General Secretary Ben Kruse on 14 December 2009 and demand the Government bring a halt to the merger.
The Way Forward The USU will now initiate discussions with the Government and industry stakeholders. The Union is not opposed in principle to the creation of a merged scheme. However, any such proposal must be transparent, stand up to scrutiny and comply with the principles for reform identified in the USU Superannuation Review and be in our members' interests. The Union is now urgently awaiting receipt of details concerning the Government's merger proposal. Upon receipt of this information the Union will commission a supplementary experts report assessing the merits of the proposed model, and then respond.
In the meantime the Union has demanded that the Government proposal remain on hold. Further, the Union has advised the super schemes to hold off on major commercial or structural decisions that could affect the merger proposal.
