ADMINISTRATION OF SUPERANNUATION

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Administration of Superannuation

Report No 3 - June 2004

What the examination is about.

This examination reviewed how effectively the Government Employees Superannuation Board (GESB) administers superannuation for public sector employees. It did so in terms of how well GESB manages its $3.7 billion investment portfolio, administration costs, the accuracy and timeliness of contributions and benefi ts for the 257 672 members and its relationship with government.

What the examination found...

GESB manages superannuation for its members and government satisfactorily. GESB's investment processes and management of its investment managers are robust with investment returns in recent years generally being around industry benchmarks. Further, GESB's system calculates member benefi ts correctly.

Two particular aspects, however, warrant further attention:

administration costs - GESB's administration costs per member have risen by 45 per cent in the past three years and are at the higher end when compared with other similar State public sector schemes. The increase has mainly resulted from the introduction of two new information technology (IT) systems and new products and services. It has been accentuated, however, by diffi culties GESB has experienced in getting the IT systems fully operational.
processing of contributions - the incidence of inaccuracies in contributions calculated by agencies remains high at 15 per cent for West State Super (WSS) and 22 per cent for Gold State Super (GSS). The impact on members' individual benefi ts, however, is small.

A further area identifi ed for review is the government's approach to its oversight of GESB. With the change of the predominant WSS in July 2001 to an accumulation type scheme where benefi ts are signifi cantly affected by investment returns as well as administration approaches and associated costs, a reappraisal of the oversight regime seems warranted. Members can now be expected to hold GESB accountable for investment returns and administration costs. At a minimum, the issue of government being responsible for the performance of GESB at the same time as providing prudential and regulatory oversight needs to be addressed.

What the examination recommended...

The examination recommended that GESB should focus on containing its administration costs, particularly costs associated with the implementation of IT systems and new products and services as well as streamlining the processing of contributions.

The examination also proposed that government should review its oversight approach for WSS to ensure that it is appropriate to protecting both its own and members' interests in an environment where benefi ts are no longer defi ned and underwritten by government. This should include an examination of options for clearer separation between its performance management and regulatory roles.

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