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Australia:Thousands at risk as super funds face $2.9b shortfall

About 15,000 serving and retired university workers in NSW face the loss of nest-egg payments worth $2.9 billion due to a dispute between state and federal governments.

The federal government is not meeting super payments to the 10 NSW universities because it has no agreement with the state about who should pay what.

The row has made universities nervous they might be handed the bill, leaving the universities of Sydney and NSW with unfunded super bills of more than $750 million each. The mainly retired workers are paid so-called “defined benefit” pensions from old state super funds – chiefly State Super and State Authorities Super – which closed to new members in the late 1980s and early 1990s.

The issue is pressing because the funds need extra cash to make $2.9 billion in forecast pension payments to retired workers. Accounts show at least one superannuation account ran out of money last year, requiring extra to be found to meet payouts.

The situation has prompted a warning from the actuary of the funds that unless the row is resolved, benefits cannot be paid when each university’s individual fund is exhausted. The dispute is not connected to the other super fund covering university workers, UniSuper, which last year revealed its defined benefit members faced a cut in retirement payouts.

The universities of Sydney and NSW say the federal government is committed to making the payments when the funds run out of money, pointing to statements including the cost being recognised in the national accounts. But Sydney University’s most recent accounts state: ”There is no formal agreement and therefore no guarantee regarding these specific amounts between the state government, the Commonwealth government and the university.”

The NSW Treasurer, Mike Baird, said the issue needed to be resolved quickly. ”It could potentially impact [on fund members] unless it’s addressed.” But he said workers’ benefits would not be reduced or lost. ”It will not happen … The only scenario that could eventuate is if the Commonwealth did not make its contributions, and I do not see that happening under any circumstances.”

A spokeswoman for the federal Minister for Tertiary Education, Chris Evans, said the Howard government had stopped super payments to NSW universities in 2003 because of a dispute about who should pay. “The Gillard government is committed to working with the NSW government to resolve this issue as soon as possible,” she said.

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