Manager unexpectedly quits new state savings scheme

GRT was, along with AMP, Axa, and ASB Group Investments, selected to supply superannuation to the state sector employees seven weeks ago.

Yesterday the trust’s chairman John Irwin told Good Returns that a series of unforseen changes "have impacted on the costs involved for providers and altered the assumptions upon which the GRT’s original proposal was based.

The GRT’s withdrawal is a shock move, especially so soon after the four suppliers were announced. The abruptness of the move can be gauged by the fact that Associate Finance Minister David Cunliffe was unaware of it when he spoke at the Super Summit in Wellington, yesterday, and named GRT along with the other three providers as taking part in the scheme.

It was only an interjection from the floor that made Cunliffe aware that GRT had pulled out.

What Cunliffe did let slip though was that the government has only guaranteed its subsidy of the scheme for the next two years, and that if insufficient numbers take part the government may cut its commitment.

The GRT was set up in 1992 by the State Services Commission as a not-for-profit specialist state sector superannuation provider, following the closure of the longstanding Government Superannuation Fund.

Eighteen months ago it was selected as sole-provider of a primary teachers’ retirement scheme which was intended as a pilot for the wider state sector scheme the trust has just pulled out of.

The GRT will also be sole provider for secondary teachers’ superannuation, an add-on to the primary teachers’ offering.

Industry sources suggest the GRT baulked when confronted with the costs of marketing the state sector scheme in competition with the other providers, and that the costs, along with pressure to keep the fees low, made its participation untenable.

There is also a widespread belief that the other three firms are to some extent using their offerings to state sector employees as a loss leader for other products, and that GRT, with its much narrower base, lacks the financial flexibility to do that.

There are no intentions to open up the scheme to another fourth participant, State Services spokeswoman Karen Jones told Good Returns.

The scheme is due to start on July 1: public servants will be supplied with material about options for the savings scheme from mid-May.

Rob Hosking is a Wellington-based freelance writer specialising in political, economic and IT related issues.

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