The merger of sister funds Energy Industries Superannuation Scheme (EISS) and LGSS could not occur until both funds reach agreement in a fully consultative process, the NSW Treasury confirmed, following claims from the United Services Union (USU) that EISS and Treasury spent months planning to merge the funds – without informing LGSS.
The NSW Treasurer, Eric Roosendaal, recently confirmed to the USU that a merger would not happen “until the trustee boards of both schemes provide written advice that they support the merger”.
The statement, made in late December, followed the revelation that EISS and Treasury had – unbeknown to LGSS – made the case for a merged entity, including a calculation of potential cost savings and the recommendation that its board should include independent directors.
The USU and sources within LGSS said that a constitution for the proposed fund had also been written.
Richard Powis, chief executive officer of the $2 billion EISS, said the talks began in mid-2009, following a meeting between the funds in which the idea of a merger was put forward but dismissed.
“We gave [Treasury] documents on the concept, the savings that would be achieved, and how they would be achieved,” Powis said.
“Treasury was fully supportive of it. They had discussions with some of the unions and asked them for their opinion. The unions said they’d like full discussions and the whole process to be recommended [by the funds].”
The $5 billion LGSS was alerted to the discussions in December by Unions NSW, after Treasury engaged the representative body on the matter, while the USU stated it became aware of the talks on December 9 – one week before the matter was due to be raised in an executive council meeting of the NSW Treasury.
USU General secretary Ben Kruse immediately opposed the plan, dubbing it the ‘Treasury Super Hijack’, and stating that “any proposed merger or reform initiatives only be considered after full disclosure, consultation and agreement” between the funds.
Acting Treasurer John Hatzistergos then removed the merger proposal from the agenda of the December 16 executive council meeting. Two days later, the funds voted on the proposal: the board of EISS supported the merger, while the LGSS board voted it down.
Writing in a USU statement, Leo Kelly, LGSS chairman, stated: “Neither the board nor our stakeholders… have been consulted in any way [about] the proposed merger.