ComSuper has announced it will outsource the administration functions of the 70,000-member Public Sector Superannuation Accumulation Plan (PSSap).
In a statement released last week, Lindsay Tanner, Minister for Finance and Deregulation, said outsourcing the administration of PSSap should be completed by 2011 and save $5 million each year.
But ComSuper will retain responsibility for a string of public sector defined benefit (DB) plans serving approximately 600,000 members, chiefly the Public Sector Superannuation Scheme, Commonwealth Superannuation Scheme, MilitarySuper and the Defence Force Retirement and Death Benefit Scheme, in addition to older schemes such as the Defence Force Retirement Benefits Board, the 1922 scheme and the PNG scheme.
Tanner stated that outsourcing the administration of the PSSap would enable ComSuper to focus on improving the administration of the defined benefit schemes.
Peter Beck, chief executive officer of Pillar Administration, said the government’s decision to carve out the administration of PSSap only from ComSuper’s responsibilities was somewhat surprising.
“Our understanding was the part they really needed to do some work on was the DB side. We would have thought that this would have gone out to tender,” Beck said.
Pillar, which is owned by the NSW Government, is the administrator of the $38 billion NSW State Super, a defined benefit fund.
“DB is harder than defined contribution (DC). Every benefit is effectively a calculation. Accumulation is like adding interest all the time with contributions into an account. It is like a bank account. But there can be many formulae in DB, because different people have different benefits.”
Consequently, DB administration is more costly. Perhaps in reflection of this, the government stated it would invest $22.4 million of the expected savings made from the outsourcing in ComSuper’s IT infrastructure and defined benefit administration systems. It expected these investments should, once they become effective, save about $3 million each year.