Plans to privatise the NSW government’s super fund administrator Pillar have hit a competition issue

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The NSW government’s plan to privatise its superannuation administrator Pillar and extract up to $200 million in cash has hit competition problems.

The consumer watchdog, the ACCC (Australian Competition and Consumer Commission) says the possible acquisition of Pillar by Link Administration Holdings, Australia’s largest super administrator, is likely to substantially lessen competition.

Shares in Link fell 6% to $7.68 on the news.

The sale is part of the NSW government’s $30 billion asset recycling. In August, the federal government blocked Chinese bidders for Ausgrid, which supplies power to the Sydney area and parts of NSW, on national security grounds. Since then a local consortium of superannuation funds has expressed interest.

And now the ACC says the superannuation administrator deal is likely to result in lower service levels or higher prices which will ultimately be passed on to fund members.

Link and Pillar both supply administration services to superannuation funds in Australia. They are the only two providers that currently service larger funds.

“The ACCC is concerned that the possible acquisition will remove the only alternative superannuation administration services provider with the demonstrated capacity to supply administration services to larger funds in competition with Link,” says ACCC chairman Rod Sims.

“Consequently, there would be one dominant administration provider facing limited competitive constraint in the outsourced market.”

The ACCC is inviting further submissions from interested parties. The watchdog’s final decision is expected by December 15.

Link says it’s reviewing the ACCC’s statement of issues.

“Link Group has a compelling proposition for the state of NSW which would fully address the requirements of the enabling legislation and the sale process,” the company said.

Link provides services to 10 million superannuation member accounts through its businesses Link Super and Australian Administration Services.

Pillar, with assets totalling more than $100 billion, is a NSW state-owned corporation, administering 1.1 million superannuation member accounts mainly at government superannuation funds, pension funds and defined benefit schemes.